Parking Revenue Bonds ....................................................................................................
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tandard & Poor’s Ratings Services maintains rat-
ings on several types of public parking facilities,
including downtown urban parking systems, indi-
vidual parking garages, and commuter rail parking
facilities. Parking operations are also evaluated in
the broader context of other enterprises including
municipalities, hospitals and universities. The level
of demand for a public parking facility is the key
factor in evaluating its credit strength. A well-
focused, cohesive public policy by local government
toward parking can go a long way in establishing
strong demand. Those communities with a sound
master plan that coordinates public-parking proj-
ects with those of private systems generally have
more financially successful operations.
Governmental limitations on competing private
parking are considered a credit strength, and have
been achieved in some cases by zoning ordinances
or by limits on construction permits for new private
parking facilities. Some municipalities fail to take a
comprehensive planning approach to parking.
Often, the result is a patchwork of competing facili-
ties that may not efficiently serve the dynamic needs
of a flourishing central business district or provide
adequate security to bondholders.
Where the pledge of revenues from parking opera-
tions is the primary security, Standard & Poor’s views
a parking system consisting of several off-street
garages or lots, supplemented by metered curbside
parking and often parking fine revenues, as stronger
than one comprising a single site or a few facilities. An
extensive network of metered parking can serve as a
solid financial anchor for a system, because operating
and maintenance costs are relatively low, and metered
parking often produces the highest profit margin in a
system. However, local governments frequently view
new parking projects as an economic development
tool—one that might attract a large retailer or hotelier
to the community, which leads to the construction of
single-site, startup parking facilities.
Standard & Poor’s considers start-up parking
facilities as highly speculative. Because of the specu-
lative nature of a single-site, start-up parking ven-
ture, it is extremely difficult for it to attain an
investment-grade rating on its own merits.
Standard & Poor’s even views existing single-site
facilities with a history of successful operations
with some caution. The closing of a major retailer
or other redevelopment efforts can have a profound
impact on revenues generated by a single garage, or
even a small parking system, because the servicearea of a garage or lot typically extends only a few
blocks. Nonetheless, if a single-site parking project
succeeds and develops a history of consistent prof-
itability, then the facility could serve as a linchpin
for securing financing of additional projects.
There are no minimum coverage levels for a par-
ticular parking facility rating. Large, diverse,
monopolistic systems are generally able to achieve
higher ratings with lower coverage levels than
more limited systems. All other things being equal,
higher coverage of debt service by net revenues
leads to a higher rating. However, a parking sys-
tem’s size and diversity, and a system’s ability to
raise its parking rates, may outweigh coverage con-
siderations. Standard & Poor’s views negatively
any limitations on a parking system’s rate-setting
flexibility and ability to respond to market
demand. Similarly, a proven track record of period-
ic and regular rate adjustments is viewed positively,
demonstrating both the ability and willingness to
modify prices to meet minimum covenant levels or
management-identified debt service coverage levels.Demand
Because demand for parking is the paramount rat-
ing consideration, Standard & Poor’s rating
approach focuses heavily on the underlying eco-
nomic growth and employment base of the locale.
Historical population, employment, and wealth
levels are examined. Trends in new office and
retail building activity, as well as diversity of new
growth, may be indicative of future demand. The
current status of urban renewal plans or trends in
business relocations that could adversely affect
parking is also important. Projected office build-
ing construction is not accorded significant impor-
tance in the rating process because these estimates
can be highly unreliable, and projected growth
may never occur.
While statistics on municipalities are readily
available, parking demand for the immediate serv-
ice area of an individual garage is difficult to
obtain. Standard & Poor’s rating policy emphasizes
existing parking demand, as opposed to projected
demand. Existing parking systems can obtain rat-
ings in the ‘BBB’ category or better, depending on
the historical level of parking revenues and other
sources of security that may be pledged. If a garage
is being expanded, the historical occupancy rate, or
the number of customers on waiting lists for
monthly parking, should be available. Standard &