The debt service coverage ratio (DSCR) is a facility’s net operating income divided by its annual debt service, the principal and interest owed on its loans or bonds. A DSCR of 1.0 means income exactly covers payments; higher numbers mean a cushion.
Lenders and bond covenants set a minimum DSCR, often in the range of 1.2 to 1.5 times for parking, because parking income can swing with the economy, events and travel patterns. The ratio limits how much a facility can borrow and can trigger reserve requirements or rate increases if coverage falls.
Why it matters in parking
- Sizing debt. The allowed loan is the amount whose payments keep DSCR above the minimum.
- Revenue bonds. Public parking systems often finance garages with bonds secured by parking revenue, with rate covenants tied to coverage. See municipal bonds.
- Stress testing. Projects should show coverage under lower occupancy and slower ramp-up, not just the base case. See pro forma.
- System pledges. A new garage financed against an entire parking system’s revenue can strain coverage if it underperforms.
The Parkonomics view
DSCR is the lender’s version of the question every owner should ask: if demand comes in lower than hoped, can the facility still pay its bills?
Related terms: Net Operating Income, Municipal Bonds, Pro Forma, Cap Rate, Financial Feasibility Study