Cents and Sensibility

The city of Philadelphia is planning to sell the rights to all of its parking meters for 20 years to a private company. The idea is that in exchange for a lump sum, the city of Philadelphia would turn over the operation and revenue stream of its 40,000 parking spaces to a private operator. The deal will bring in a big amount of cash for a cash-strapped city and relieve it of the responsibility of maintaining meters – something it isn’t very good at. The city is planning to use a competitive bidding process with the highest bidder winning the contract. Additionally, the contract also requires a high-tech upgrade replacing the old coin-based meters with new machines that accept cash, cards and digital NFC payments, which is a service enhancement that should be incorporated in the bid. Your consulting firm has been hired by the company Parking GenNext to give a reasonable price to win the competitive bid, and help estimate whether the ROI is attractive. How would you go about estimating it?