S&P - Public Finance Criteria (2007). - The Global Clearinghouse

Parking Revenue BondsParking Revenue BondsStandard & Poor’s Ratings Services maintains ratingson several types of public parking facilities,including downtown urban parking systems, individualparking garages, and commuter rail parkingfacilities. Parking operations are also evaluated inthe broader context of other enterprises includingmunicipalities, hospitals and universities. The levelof demand for a public parking facility is the keyfactor in evaluating its credit strength. A wellfocused,cohesive public policy by local governmenttoward parking can go a long way in establishingstrong demand. Those communities with a soundmaster plan that coordinates public-parking projectswith those of private systems generally havemore financially successful operations.Governmental limitations on competing privateparking are considered a credit strength, and havebeen achieved in some cases by zoning ordinancesor by limits on construction permits for new privateparking facilities. Some municipalities fail to take acomprehensive planning approach to parking.Often, the result is a patchwork of competing facilitiesthat may not efficiently serve the dynamic needsof a flourishing central business district or provideadequate security to bondholders.Where the pledge of revenues from parking operationsis the primary security, Standard & Poor’s viewsa parking system consisting of several off-streetgarages or lots, supplemented by metered curbsideparking and often parking fine revenues, as strongerthan one comprising a single site or a few facilities. Anextensive network of metered parking can serve as asolid financial anchor for a system, because operatingand maintenance costs are relatively low, and meteredparking often produces the highest profit margin in asystem. However, local governments frequently viewnew parking projects as an economic developmenttool—one that might attract a large retailer or hotelierto the community, which leads to the construction ofsingle-site, startup parking facilities.Standard & Poor’s considers start-up parkingfacilities as highly speculative. Because of the speculativenature of a single-site, start-up parking venture,it is extremely difficult for it to attain aninvestment-grade rating on its own merits.Standard & Poor’s even views existing single-sitefacilities with a history of successful operationswith some caution. The closing of a major retaileror other redevelopment efforts can have a profoundimpact on revenues generated by a single garage, oreven a small parking system, because the servicearea of a garage or lot typically extends only a fewblocks. Nonetheless, if a single-site parking projectsucceeds and develops a history of consistent profitability,then the facility could serve as a linchpinfor securing financing of additional projects.There are no minimum coverage levels for a particularparking facility rating. Large, diverse,monopolistic systems are generally able to achievehigher ratings with lower coverage levels thanmore limited systems. All other things being equal,higher coverage of debt service by net revenuesleads to a higher rating. However, a parking system’ssize and diversity, and a system’s ability toraise its parking rates, may outweigh coverage considerations.Standard & Poor’s views negativelyany limitations on a parking system’s rate-settingflexibility and ability to respond to marketdemand. Similarly, a proven track record of periodicand regular rate adjustments is viewed positively,demonstrating both the ability and willingness tomodify prices to meet minimum covenant levels ormanagement-identified debt service coverage levels.DemandBecause demand for parking is the paramount ratingconsideration, Standard & Poor’s ratingapproach focuses heavily on the underlying economicgrowth and employment base of the locale.Historical population, employment, and wealthlevels are examined. Trends in new office andretail building activity, as well as diversity of newgrowth, may be indicative of future demand. Thecurrent status of urban renewal plans or trends inbusiness relocations that could adversely affectparking is also important. Projected office buildingconstruction is not accorded significant importancein the rating process because these estimatescan be highly unreliable, and projected growthmay never occur.While statistics on municipalities are readilyavailable, parking demand for the immediate servicearea of an individual garage is difficult toobtain. Standard & Poor’s rating policy emphasizesexisting parking demand, as opposed to projecteddemand. Existing parking systems can obtain ratingsin the ‘BBB’ category or better, depending onthe historical level of parking revenues and othersources of security that may be pledged. If a garageis being expanded, the historical occupancy rate, orthe number of customers on waiting lists formonthly parking, should be available. Standard &www.standardandpoors.com151