CITY HALL MEMO: GARAGE SALE IS ON AGAIN? - In February, the City Council voted unanimously to kill the fiscally irresponsible fire sale of nine of the City’s parking garages and their over 8,200 parking spaces. This was contrary to the consequences-be-damned Mayor’s strong support of the sale, otherwise known as the Public Private Partnership. (Link)
But once again, the issue of the sale of our parking garages has surfaced as the result of inquiries from fee grubbing investment banks and private equity firms trying to take advantage of the City’s financial distress by offering our Elected Elite upfront cash, cash being the most powerful aphrodisiac known to politicians.
In a May 4 Inter-Departmental memo (see below) to the Budget and Finance Committee of the City Council, Miguel Santana, the City Administrative Officer, indicated that his office had received several “unsolicited offers” with respect to the nine parking garages.
These offers included a proposal to sell the parking garages for an upfront payment of over $200 million, similar to the proposals that were rejected by the City Council. There are also convoluted Lease-Leaseback transactions that involve considerable financial engineering. But again, they all appear to involve upfront cash in return for the ability to operate the parking garages.
But such offers are hardly unsolicited. More than likely, there have been many back channel, off the record, not for attribution, back and forth conversations involving investment bankers, lawyers, consultants, city officials, Council Members, the Mayor, and their staffs and campaign consultants.
Santana also suggested that the City consider a management contract with an experienced private company to operate and manage the garages, accompanied by an upfront payment to pay off the parking related debt and upgrade the systems and technology.
As part of his recommendation, the City Administrative Officer suggested that the City Council address this issue in a CLOSED SESSION, in part because one the investment banks believed its offer contained proprietary and confidential information.
But closed sessions are totally unacceptable to the public, in large part because Angelenos do not trust City Hall to do what is in the best interests of the City or the impacted communities such as Hollywood, Downtown, and Westwood.
However, since February, there has been considerable progress, especially as it relates to including the local impacted communities in the discussions and decision making.
In Westwood, there have been constructive conversations between the Westwood community and its Council Member, Paul Koretz, to develop a “fair and productive parking rate plan and parking district.” It also includes the possible introduction of diagonal parking.
And according to Eric Garcetti, Hollywood is working on the idea of a parking district.
Garcetti also indicated that a transaction involving the parking garages is not true structural reform, but rather a “short-sighted, one-off idea” that is not in the best interests of our neighborhoods.
As we have recommended in the past, the City should retain an experienced and well capitalized management company to oversee the management of the parking garages; assist in the collection of the 10% Parking Tax from private operators; develop an operating, rate, technology, and capital investment plan for each facility; and assist in the refinancing of the garages and the Parking Fund.
This concept should also be expanded to include the City’s 38,000 on-street parking meters. (Link)
And most importantly, there should be no more closed sessions. We need an open and transparent process where the impacted communities and other citizens groups are intimately involved in the development of local plans for both the parking garages and on-street parking.
As for the memo to the Budget and Finance Committee, the City Council spoke in February against the fire sale of our parking garages. As such, the City Administrative Officer should dismiss these vulture investors and investment bankers and focus on working with the local communities to develop viable parking strategies and alternatives.
Insider City Hall Memo
CITY OF LOS ANGELES
May 4, 2011
To: Budget and Finance Committee
From: Miguel A. Santana, City Administrative Officer
Subject: PARKING ASSET OPTIONS
Since the Council took action to terminate the Public-Private Partnership (P3) for certain City parking structures in February 2011, this Office has received several unsolicited offers with respect to these assets. The following is a summary of those proposals.
Public-Private Partnership (P3) for Parking Revenue to City: over $200 million
We received a proposal from an investment bank offering an upfront payment of over $200 million in exchange for a long-term concession and lease agreement for the nine parking structures previously contemplated under the P3 parking project. The bank, in partnership with an experienced operator, would assume management and operation of the facilities, including technological and capital investments for a period of 50 years.
The City Attorney has advised that we cannot release the offer, absent explicit consent by the proposer, because the proposer has requested that it be kept proprietary and confidential. The proposer seeks to maintain its competitive position by keeping the offer confidential. If the Council wants to pursue further, instructions must be provided to schedule this item for closed session so the Council can provide this Office with negotiation instructions.
Lease-Leaseback Revenue to City: TBD
We received two offers for a lease-leaseback transaction. One proposal by an investment firm in partnership with an experienced operator specified a term of 20 to 35 years and provided that the City would retain operational control, including rate setting authority and usage. The firm would make an upfront lease payment in exchange for annual lease payments by City over the term of the agreement. The City would retain revenues in excess ·of lease payments.
The second proposal by an infrastructure firm specified a term of 15 to 30 years and provides that the firm purchases the buildings, but the City retains ownership of the land, with the title reverting to the City at the end of the term. The firm would lease the facility back to the City based on tax-exempt bond rates.
Lease-Leaseback Alternative Revenue to City: TBD
We received another offer for a transaction similar to a lease-leaseback transaction wherein the firm would pay the City an up-front inducement fee structured as debt and the City would make payment to the firm for management fees and debt service over a 25 year term. Revenues would be split 95 percent to the City, 5 percent to the firm. An experienced operator would be retained to manage and operate the structures.
The issue of currently outstanding debt and associated restrictions would need to be taken into consideration and may present obstacles that cannot be satisfactorily mitigated by some of these proposed transactions. Additional discussions would be needed to explore and further refine the terms and conditions of these proposed transactions, if the Council wishes to further pursue these offers. These offers would also be subject to a competitive bid process.
Management Contract Revenue to City: TBD
Another option would be a management contract for the City's parking structures. The City would contract with a Private Parking Operator to operate and manage all of the City's parking structures with either an upfront payment to payoff the debt, revenue sharing or a combination of both. Also contemplated is having this Operator upgrade the capital equipment with more efficient payment technology to reduce costs and increase revenue collection. This contract could also include meters and/or parking lots.
FISCAL IMPACT STATEMENT
Additional investigation and negotiations would be required in order to further assess the financial impacts of these offers.
If the Council determines that one of these proposals aligns with the Council's goals for optimizing the City's parking structures, direct the City Clerk to schedule a closed session hearing so that Council can provide the City Administrative Officer negotiation instructions.
(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: email@example.com) -cw
Vol 9 Issue 37
Pub: May 10, 2011