After Ohio State privatized campus parking operations in 2012, against the wishes of about 83 percent of Ohio State faculty members, I decided to provide periodic reports to the community on the true financial impact of this privatization deal. My last report came in a letter to The Lantern editor in late 2015.
It’s time for an update. Two things have not changed.
First, the Ohio State administration continues to treat the upfront $483 million payment it received from CampusParc as if it were a gift to Ohio State, rather than treating it as payment for giving CampusParc 50 years worth of net profits that Ohio State formerly made from parking operations.
You read that correctly: Ohio State used to make (tens of) millions of dollars in net annual earnings from parking operations. If this surprises you, perhaps it’s because Ohio State continues to hide — in an on-going public relations campaign to support its moves to privatize whatever public assets it can — the opportunity cost to Ohio State because all those parking earnings are now going to CampusParc for 50 years.
Second, the Ohio State administration continues to hide key financial information that would make possible a full accounting of the actual financial impact of the parking deal. Public records requests for this information continue to be met with “the information that you requested is considered [a] trade secret … and thus exempt from disclosure under the Ohio Public Records Act.”
Evidently, Ohio State would like to hope there is no public right to know whether this was a good deal. Yet an estimate of the financial impact remains possible based on information Ohio State revealed earlier in the process and information about investment performance of the Ohio State endowment that cannot be so easily hidden from public scrutiny.
So, essentially all that’s changed from my previous report are the specific numbers, which I have updated to include the two most recent fiscal years. Each year so far Ohio State has reported earning about $22 million in distributions from the endowment fund related to the parking deal proceeds, emphasizing in its public relations efforts how these funds have been distributed to various good causes around campus. Specifically, in fiscal year 2016 it was about $21.3 million, in fiscal year 2017 about $22.5 million, and in fiscal year 2018, because of a formula from the Board of Trustees, we already know it will be about $23.0 million.
As noted above, what Ohio State has utterly failed to report is the net earnings from parking operations it has handed over to CampusParc, which my estimates show far exceed the amounts above that have been received in endowment distributions. For fiscal year 2017, I project the earnings to be slightly more than $33 million. When these opportunity costs plus actual expenses related to monitoring CampusParc, etc., are taken into account, Ohio State has suffered increasing net losses on parking privatization. In my previous letter to the editor two years ago, I estimated the net loss for fiscal year 2015 to be about $6.3 million. (Slightly updated figures suggest the figure was more like $6.2 million.) I now estimate the net loss in fiscal year 2016 to have been about $9.7 million, and the net loss in fiscal year 2017 at about $11.5 million.
In other words, an updated analysis shows that when opportunity costs are included, the $22.5 million Ohio State will claim it has provided to good causes around campus this year because it privatized parking is about $11.5 million less than otherwise would have been available. That is, Ohio State would have had about 50 percent more money to distribute to those good causes if it had not privatized parking.
Sadly, the financial burden the Ohio State administration has set up for future Buckeyes and Ohio taxpayers in the recent energy infrastructure privatization deal will be much worse.
Ohio State is poised to borrow far more than $1.165 billion— that’s billion, with a “B.” This is the amount being advertised by Ohio State’s public relations machine as if it were the winning bidder’s gift to Ohio State rather than the loan it actually is. The deal really involves multiple loans that official Ohio State documents, obtained through public records requests, show could total more than $1.75 billion. These loans carry ridiculously high effective interest rates compared to what Ohio State would pay to borrow in the normal credit markets. And Ohio State will still be paying off these loans not just for the next 50 years but rather for 70 years. That’s a subject for another letter, though, if community members are interested in learning more about that financial shenanigans, too.
Bruce W. Weide
Professor Emeritus of Computer Science and Engineering