Annex 4 Parking Measures by PPP

Concession Types

As parking is divided into on-street and off-street, several types of concession exist, as follows:

On-Street Parking Concession

For on-street parking, the only possible means of attracting private involvement is through a concession, since streets and sidewalks are considered municipal public property and are therefore usually subject to a Municipality’s property law (this is also the case for off-street parking facilities situated on municipal public property). Under such laws, municipalities have the right to concede particular rights over property for the initiation of trading activities. As such, a concession is the only legal means of granting rights to a proprietor, with the intent to use municipal public property for economic purposes. Typically, several legal possibilities exist for realizing such concessions, with the Municipality as the owner of the property, including: (i) initiation of activities by commercial entities with municipal property or by municipal enterprises; and (ii) issuance of concessions to private entities to perform such activities.

In granting concessions for on-street parking, it is possible for the city to be split up into concessionary zones, with on-street parking in different zones managed by different operators.

The main issue, which arises in a concession contract, is whether the concessionaire will have enough time to obtain a satisfactory return on investment made in the parking operation (such as the construction of parking facilities and garages). Considering the amount of investment that concessionaires will make, a 15-year concessionary period (or longer) is usually advised. In granting concessions for on-street parking only, the concessionary period may be significantly shorter, as the scope of required infrastructure investment is limited, thereby minimizing startup costs.

Off-Street Parking Concession

Since land is public and should be assigned for direct or indirect usage by all citizens, the property under the concession should directly benefit the concessionaire and indirectly benefit the Municipality through income. To use public property, the concessionaire must pay certain agreed fees in the contract. The concessionaire does not have the right to sell, concede, or in any other way transfer the object of the concession, nor can the concessionaire mortgage it or constitute rights of use etc.

The concessionaire is selected under a tender procedure. Therefore, the contract with a particular candidate is based on its ability to satisfy and meet the stated objectives. As such, should a selected concessionaire cease operation, a contract should be terminated, unless the Municipal Council consents to extend the contract with a successor to the concessionaire. By defining the minimum concession conditions in the contract, the Municipal Council may incorporate some provisions for the improvement of the property, as well as other related obligations. Improvements made by the concessionaire later become municipal property, with the concessionaire able to receive compensation (through a legal claim). The situation is similar for future construction undertaken by the concessionaire.

The concessionaire is the sole operator on the property, and third parties cannot perform the established obligations pursuant to the concession agreement. The Municipality, however, continues to retain rights to the property. The minimum rights are defined by a decision of the Municipal Council for the granting of a concession. The concessionaire must compensate the Municipality for the special exploitation rights and/or concession permits. The concession is non-transferable through complete/partial rights succession and/or inheritance. The concession right is valid for a specific period of time and may be extended by mutual consent of the concession parties and the Municipal Council (the decision-making body for the concession).

On-Street and Off-Street Parking Concession

A concession for both on- and off-street parking can be granted simultaneously, which presents a better opportunity for the concessionaire to recover the initial investment cost for construction of parking lots and resources, from income realized at on- and off-street locations. It simplifies management, provides incentives for coordination of on- and off-street capacity, ensures the control and better management of on-street spaces, while creating a demand for off-street spaces, and also contributes to financing the supply of such spaces. The positive cash flow from the on-street concessions could be used to subsidize the construction of off-street facilities. Clearly, a private concession would have to be operated under strict guidelines to ensure the proper use of on-street revenue. These might include open tendering for the off-street facilities, restrictions on the on- and off-street tariff levels, strict reporting requirements and auditing, penalties for delays in providing the off-street spaces, and possibly profit-sharing with the Municipality, should revenue exceed forecast. There would also need to be guarantees to protect the interest of investors: for instance the right to operate all parking spaces within the concession area and restrictions on the construction of competing capacity within the concession area and possibly in adjoining areas.

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