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  • Lviv Parking

    IMPROVING PUBLIC SERVICES, INFRASTRUCTURE, THE ENVIRONMENT AND THE ECONOMY THROUGH PUBLIC-PRIVATE PARTNERSHIPS

    SEPTEMBER 2015

    PILOT PPP CASE STUDY:

  • P3DP Case Study Series – Lviv Parking 1

    PILOT PPP CASE STUDY: URBAN TRANSPORT SECTOR

    Lviv Parking

    SEPTEMBER 2015

  • P3DP Case Study Series – Lviv Parking 2

    DISCLAIMER

    The findings, interpretations, and conclusions expressed in this Guidance Note are entirely those of the author and should not be attributed in any manner to the Public-Private Partnership Development Program (P3DP), FHI360, or the United States Agency for International Development (USAID), or to any of its partners. Neither P3DP nor FHI360 guarantees the accuracy of the information included in this publication and do not accept responsibility for any consequence of their use.

    Although the material in this publication is owned by P3DP, dissemination of this note with accreditation is encouraged.

    For questions about this document, please contact P3DP at [email protected] This and other P3DP publications can be found online in both English and Ukrainian at www.ppp-ukraine.org.

  • P3DP Case Study Series – Lviv Parking 3

    Table of Contents

    ABOUT THE PUBLIC-PRIVATE PARTNERSHIP DEVELOPMENT PROGRAM ..................................................... 4

    P3DP CASE STUDIES SERIES ........................................................................................................................... 5

    PROJECT SUMMARY ...................................................................................................................................... 6

    SECTOR SUMMARY ....................................................................................................................................... 6

    BACKGROUND ............................................................................................................................................... 7

    P3DP’S ROLE .................................................................................................................................................. 7

    CHALLENGES ................................................................................................................................................. 8

    OUTCOMES ................................................................................................................................................... 8

    LESSONS LEARNED ........................................................................................................................................ 9

  • P3DP Case Study Series – Lviv Parking 4

    ABOUT THE PUBLIC-PRIVATE PARTNERSHIP DEVELOPMENT PROGRAM

    The goal of the Ukrainian Public-Private Partnership Development Program (P3DP), implemented by FHI 360 and funded by the United States Agency for International Development (USAID), is to broaden the use of PPPs in Ukraine and expand the role of private sector finance, expertise, and modern technology to improve infrastructure, the quality of public services, and the environment. The program provides assistance to the Government of Ukraine at national, regional and municipal levels to improve the legal and institutional framework, enhances the capacity of individuals and organizations to design and engage in PPP activities, and supports the implementation of pilot PPP projects. Importantly, P3DP assistance is developing the capacity of government to work effectively with the private sector in building or rehabilitating infrastructure, improving or restoring public services, and developing the economy.

    Beginning operations in October 2010, the Program is pursuing the achievement of four interrelated, mutually-reinforcing objectives, each contributing to the development of PPPs in Ukraine in full alignment with USAID’s Country Development Cooperation Strategy for Ukraine:

    1. Create a Legal and Regulatory Framework Conducive to PPPs by improving legislation, regulations, and policies that support PPP initiatives at national and municipal levels.

    2. Strengthen the MOEDT’s Capacity to Guide and Support PPPs so that it serves as valuable resource for municipalities and government agencies seeking to improve the efficiency and quality of public services and infrastructure through private sector participation. The MOEDT coordinates much of its PPP support work through the recently established PPP Unit.

    3. Develop PPP awareness and capacity of municipalities to create and implement PPPs while improving local governance practices. Training, workshops, seminars, conferences, and study tours contribute to the growing body of knowledge on PPPs at the local level. P3DP also demonstrates how strategic communication programs that reach out to the general public and media provide valuable input during the PPP development process.

    4. Implement Pilot PPPs in key sectors by providing technical assistance to selected municipalities in all phases of development, from initial concept through the transparent, competitive tendering process. Practical experiences and lessons learned provide valuable feedback to further improve the PPP environment and processes in Ukraine.

  • P3DP Case Study Series – Lviv Parking 5

    P3DP CASE STUDIES SERIES

    P3DP assisted efforts of municipal leaders to introduce pilot PPP projects to improve infrastructure and public services. The practical insights and lessons learned through these experiences guided the work to improve Ukraine's PPP regulatory and legal environment and were fed into the Program’s training events. The efforts also resulted in creating replicable PPP models for improving infrastructure and public services.

    P3DP has created a series of case studies – each with complementing videos, sectoral briefs, guidance notes and other knowledge tools – to share these experiences and lessons learned for future PPP practitioners in Ukraine. The series includes:

    Parks & Recreation - Kyiv Hydropark Sports Facility - Simferopol City Park

    Municipal Waste Management

    - Ivano-Frankivsk and Vinnytsia SWM and Landfill Gas Energy Production

    Municipal Heating - Malyn Biofuel Heating

    Healthcare

    - Zaporizhia Health Care Facilities and Services

    Education - Kyiv Education Facility Maintenance and Management

    Urban Transportation

    - Lviv Parking Each case describes the problem being addressed, steps taken by municipalities with P3DP support to resolve the problem, the anticipated benefits, and the result. Key lessons learned and insights gained from pursuit of the pilot PPP projects are described.

    Government and city officials, private firms, and other stakeholders with an interest in developing PPPs will benefit from the many lessons of P3DP’s experience. Several Ukrainian municipalities are already adapting the processes, diagnostic tools, and contracts to replicate PPPs in key sectors of education, parks & recreation, municipal heating and solid waste management.

  • P3DP Case Study Series – Lviv Parking 6

    PROJECT SUMMARY

    Lviv Parking Management Sector: Urban Transportation Type: Design-Build-Finance-Operate (DBFO). Builds an underground parking facility in city center. Expected benefits:

    $11 - 25 million in investment expected; Ten jobs created; Congestion in city center reduced.

    Processes Completed:

    Feasibility study completed and reviewed by City Executive Committee;

    Market sounding materials completed and shared with potential bidders and City Council representatives;

    Environmental Scoping Statement completed;

    At the end of 2015, the City was conducting a geological and archeological study before proceeding further with the project.

    SECTOR SUMMARY

    With steady increases in the number of cars per capita and poor urban planning, driving in Ukrainian cities has become increasingly difficult, contributing to congestion, increased pollution, and reduced quality of life for Ukrainian citizens. The negative impact caused by inadequacy of public transportation infrastructure is magnified by the lack of parking facilities.

    Kyiv, Ukraine’s capital, offers a good basis for comparison with European cities to illustrate the problem. In major European cities, the number of parking spaces is approximately 16-17 percent of the number of inhabitants. Using this measure, Kyiv, with a population of about three million, should have about 500,000 parking spaces; however, it has only 250,000, about half of what it needs. Other Ukrainian cities are facing similar issues. Additional problems include low quality parking services, a lack of automatic parking equipment for entry and exit, and non-optimal parking locations.

    Given the constant increase in the number of cars in Ukrainian cities, construction and operation of municipal parking facilities are key tasks for local authorities. This provides an opportunity for private sector participation to provide higher quality, efficient parking services in Ukraine’s cities.

  • P3DP Case Study Series – Lviv Parking 7

    BACKGROUND

    The lack of parking spaces in central Lviv has led to serious traffic problems caused difficulties for drivers and pedestrians alike, as well as negatively impacting the environment and business. The city center of Lviv consists of numerous historic buildings and is important for the tourism industry. Traffic issues have significantly reduced the attractiveness of central Lviv, where cars often park on sidewalks or in areas not designated for parked vehicles.

    To address this problem, the Lviv city government explored the possibility of building a multi-level underground parking garage. Numerous issues, however, had to be addressed, most significantly the lack of funding available for the project. For that reason, the City sought to develop the project as a public-private partnership, which, if successful, would be Ukraine’s first parking management PPP.

    Additionally, the project would require revisions to parking legislation, better enforcement of parking regulations, and identification of a private sector partner to finance, build and operate the facility. Because the PPP model has not been tested in this sector, it could prove difficult to find a private partner willing to take on the risk of the project.

    P3DP’S ROLE

    P3DP worked with the transportation department and the City’s Investment Department to implement the project through a PPP mechanism. The project required numerous studies before the transaction design could be developed. P3DP worked closely with the City and experts to prepare:

    A feasibility study; A cost and engineering design report; A financial model employing several scenarios, which helped P3DP determine acceptable tariff

    options and impact of different project durations; An environmental assessment.

    P3DP recommended a Design-Build-Finance-Operate (DBFO) PPP structure for this project and provided a tentative design for the facility.

    To attract potential investors and evaluate the market potential of the project, P3DP prepared a market sounding note to be used to communicate project details with possible bidders.

    A development with a positive impact on the project was the passage of new laws that impose fines for nonpayment of parking fees and allow towing of improperly parked cars. These will encourage use of parking facilities and makes the project more economically viable.

  • P3DP Case Study Series – Lviv Parking 8

    P3DP met city representatives in late 2014 and discussed further steps related to market sounding meetings and public outreach. The market sounding note package was distributed among potential investors and operators. P3DP also prepared a draft strategic communications plan and submitted it to city officials. P3DP has shared all PPP Project documents among local City Council deputies.

    In 2015, P3DP met with Olha Syvak, Lviv’s new Investment Officer, to review the status of the pilot PPP parking project. Syvak indicated that the City plans to move forward with the project contingent upon the findings of their archaeological and geological studies. Although the project was not tendered during the Program, the City now has the information and tools it needs to see the project through tender.

    CHALLENGES

    Lviv parking PPP possesses a number of issues:

    The city of Lviv has complex geological and historical underground structures with numerous historical items located underneath the city center;

    The City may be unable to implement parking policies. Drivers may therefore seek free parking spaces on the street, leaving the underground garage without revenue;

    Further necessary changes to legislation may be delayed or not take place, such as modifications to the Administrative Code and other laws;

    The private operator may fail to collect enough revenue to cover its costs; and The project may encounter opposition from the general public or specific NGOs.

    In addition to these project-specific issues, the City of Lviv was also impacted by the Maidan revolution of the 2013-14 winter. Political issues distracted the attention of officials from the City’s parking problems.

    OUTCOMES

    Although the project had not been tendered by the end of 2015, P3DP and the City made significant progress on preparing the PPP.

    Engineering consultants assessed project technical viability, and architects were consulted to minimize chances that shortlisted locations would contain historical objects or underground water flows;

  • P3DP Case Study Series – Lviv Parking 9

    P3DP monitored the results of the Lviv Municipality’s adoption of local resolutions implementing first steps in parking policies, such as collecting fees from users and disabling illegal parking sites. These were successful, suggesting that it will be possible to enforce parking regulations in the future;

    P3DP monitored legislative changes in urban parking by certain municipalities and ministries. These suggested that required changes are feasible;

    P3DP recommended that the PPP agreement include compensation mechanisms that obligate the public partner to provide payments should the private partner not collect enough revenue as a result of poor parking law enforcement practices or inability to prohibit parking in the surrounding area. It should also include subsidy and profit sharing mechanisms;

    P3DP created and shared with the city a stakeholder communication strategy to identify concerns of groups and highlight potential benefits of the project; and

    A preliminary environmental review was completed to highlight issues that need to be addressed by the city prior to moving ahead with the project.

    If the PPP is successfully implemented, the City can expect numerous benefits:

    The project may attract up to $20 million in private sector investment with ten new jobs created, depending on the size of the garage;

    Illegal parking will be eliminated in a radius of 200 meters from the facility; Traffic congestion will improve in the city center business environment while adding to

    pedestrian areas; On-ground parking for 200 bicycles will be created; and Lviv’s pilot method for controlling off-street parking while providing for-pay parking may be

    adopted by other Ukrainian cities. Many cities have expressed interest in learning from Lviv’s efforts to develop the pilot, even if it does not complete tendering.

    LESSONS LEARNED

    A strong and stable political environment is necessary to keep PPP projects on track. This project was delayed by political turbulence and changing priorities within the municipal government.

    Projects involving construction in historic areas require thorough technical studies and a significant public outreach effort, both of which can add to project implementation time.

    To attract potential private sector partners, a detailed feasibility study, financial model, and market outreach efforts is necessary.

    Legislative changes required for a PPP project’s success must be identified and acted upon early in the project.

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