Matt Adams is president of The Adams Consulting Group, a management/engineering consulting firm located in Atlanta, Georgia, specializing in the facility maintenance and management within higher education, school districts, and other institutions. He can be reached at matt@adams-grp.com.

In good economic times and bad, there is never enough funding available for institutions' growth plans. For state institutions, an opportunity comes once every five years or so to "go to the well" and secure funding for a new facility. At private institutions, new construction is closely linked to the capital campaigns and the subtle or overt influences of the giver.

In between these opportunities, funding demands are still present. The institutions typically look to borrow funds for new construction or renovations in lean- capital times. Borrowing is not always a good idea. Some states and boards strictly limit the debt capacity of their respective institutions. Debt does adversely affect the balance sheet of the institutions as well.

On a smaller scale, facility and business officers have investigated "off-balance sheet financing" for some projects. This approach is leading into large-scale project consideration. The possibilities of public/private partnerships formed to develop facilities in an off-balance sheet format are real. A recent project under consideration for the construction of a new parking deck provides a look into the evaluation process.

For any one of a host of reasons, a small college may decide to investigate non-traditional forms of financing for a new parking structure. The college has a clear need for the parking deck and a good location identified for it on the campus master plan. Land is in short supply near the center of campus so the deck must be of multi-story design. Specifically, the college now has 2,700 students, faculty, and staff. The current surface lots are uncovered and located a healthy distance away from the classroom buildings.

Initial feedback indicates that the campus population is very interested in close-in, covered parking. As such, the college feels comfortable estimating that at least 20 percent of the total drivers will use the deck on a first-come, first-served basis. In each region, construction costs will vary, but generally speaking using $9,500 per parking space is a good estimate for hard and soft construction costs. For this project, the estimated cost is (2,700 x 20%) x $9,500 or $5,130,000.

At this point, the college knows the following: there is a need for a close-in parking deck, there is a piece of land available for this structure, the costs of the structure is approximately $5.1 million, and the traditional forms of finance for this capital improvement are not available.

The college is now ready to look for potential private developers and parking lot operators with interest in such a project. In this economic climate, the size of the project has specific influence on the pool of potential private development partners. For example, an $8 million project is too small for the large real-estate investment trusts (REITs) that are in the parking business. There are national and regional parking management companies that welcome this size deal and are actively looking for college and school deals like the one described here. In addition, commercial developers within the particular state are very likely to have interest in such a project. Care is necessary to qualify potential partners without parking development experience. The developer does not have to manage the deck, but the management company must be identified and included in negotiations from the onset.

In the commercial development market of the late nineties, investors expect and get a 12 percent return on solid and safe projects. Many partners may not have done business with colleges and schools before. Some illustration of financial stability might be required.

Many developers are accustomed to purchasing and hence owning the land that they develop. Obviously, this is not an option for educational institutions. The alternative is a long-term lease of ten or twenty years. The costs to the developer and the project for the lease is a dollar per year. The budget for the deck is set and published.

Now the institution must negotiate or take bids for the return on investment for the deal and the operating costs for the life of the project. It is possible that some bidders may expect more than the 12 percent return due to a lack of equity in the deal. It is more likely that they will look to make this up in the profit of operating the deck. Here is how the numbers look for this example: The cost of capital for the project has little variability in the off-balance sheet format. The private partner must receive a fair return for the deal to take place. As institutions become more sophisticated in negotiating these deals, the rate of return for the partners may be reduced in return for certain guarantees or other vehicles that increase the credit worthiness of the project. Like any form of debt, the safer the investment the less the cost of money. In this example the basic cost to build and pay for the deck is $615,600 per year or $19 per campus person (2,700).

The operating costs and management fees can vary considerably. The National Parking Association, APPA's equivalent for the parking industry, publishes annual surveys on operating costs. The respondents are primarily private parking decks operated by management companies. Attendant labor is the largest operating expense for a deck, at more than 50 percent. The remaining charges include: maintenance, fees, insurance, accident claims, supplies, permits, telephones, taxes (some states have parking fee taxes), uniforms, management fees, utilities, and operating equipment replacement costs. Under close scrutiny, it appears that colleges and schools can expect to greatly reduce or eliminate some of the line-item expenses as a result of their tax-exempt status, preexisting insurance, security, maintenance staff, etc. Most colleges would also save by opting to have minimal staffing for a deck that is controlled by a parking sticker. In other words, the above referenced $13.83 per space in this example is likely conservative.

This project is ready to be built when the institution and the private partner agree that the project will cost $705,222 per year for 15 years. This total includes $615,600 in construction amortization and $89,622 operating costs each year. The question then becomes one of collection options. At one college recently, the student government voted overwhelmingly to spread the costs of a new deck to everyone equally in the form of increased parking sticker fees. The new deck would then be open to all on a first-come basis. In this example, the annual parking fee for this project is $19 plus $13.83 or $32.83 per month, or $393.96 per year.

This same student government polled its members and reported that the maximum acceptable cost per month for such improved parking was $50. One other option was to charge only those persons that used the deck. Under a parking sticker system, 150 percent of the total number of 540 spaces could be sold as stickers. This assumes that everyone does not show up at the same time. The costs per space per month under this option climbs to $72.55. A third option is to engage the school/college to supplement the project costs. In simplest terms this might take the form of $10 per month per space increase in management fees, resulting in a reduced charge of $22.83/month or $62.55/ month for the first two financing options.

The deck is designed and the capital and operating fees are negotiated with the private partner. No debt has been assumed by the institution. From the institution's perspective, payment obligations for the deck take two forms: faculty, staff, and student parking fees and possible second cash payments to supplement or make up any shortfall from reduced campus parking fee receipts. After 15 years, the ownership of the deck is transferred to the institution. To some this project is radical and to others it makes sense. In other public industries such as hospitals, for example, these public/private partnerships take place often. Private/public development partnerships will be accepted and undertaken by those institutions that simply need more options for facility expansion.