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We propose a novel “smart parking” system for an urban environment. The system assigns and reserves an optimal parking space based on the driver's cost function that combines proximity to destination and parking cost. Our approach solves a mixed-integer linear programming (MILP) problem at each decision point defined in a time-driven sequence. The solution of each MILP is an optimal allocation based on current state information and is updated at the next decision point with a guarantee that there is no resource reservation conflict and that no driver is ever assigned a resource with a cost function higher than this driver's current cost function value. Based on simulation results, compared with uncontrolled parking processes or state-of-the-art guidance-based systems, our system reduces the average time to find a parking space and the parking cost, whereas the overall parking capacity is more efficiently utilized. We also describe full implementation in a garage to test this system, where a new light system scheme is proposed to guarantee user reservations.