Today’s LA Times contained very disturbing news - it appears the city is ready to pull the trigger on privatizing parking.
The Mayor’s desperation to save his political reputation is driving our financial planning.
No matter how CAO Miguel Santana runs the numbers, the privatization of parking facilities and meters to close the current or near-term budget gap defies not only sound financial logic, but common sense as well.
Would you mortgage your home to buy an expensive car or a year-long vacation in Europe? Well, plenty of people did to some extent, and you see where that has gotten us.
It is foolhardy to use proceeds from the sale of long-term assets or revenue rights to for short-term benefits. Even with a reduction of the debt service associated with the parking structures, the proposed deal still amounts to diminished future net revenues.
The reserve fund is not an asset to be used frivolously. It is designed for use in emergencies – earthquakes, terrorism, etc. The city has already misappropriated it by using it as a band-aid to cover the wounds of irresponsible fiscal policy – self inflicted wounds. Phil Willon of the Times writes:
“If approved by the council and mayor, the transaction would allow the city to use a portion of its $189-million reserve fund to close this year’s budget shortfall and later replenish the reserve fund with the proceeds from the privatization of the garages.”
At least Santana is somewhat transparent in his admission that the deal would enable the city to use (or misappropriate) a portion of the remaining reserve fund to cover the current year’s deficit.
Negotiating a major capital transaction under duress is asking to get hosed. The effect would be the same from selling your house to fend off foreclosure. The seller is not going to get a good deal in a down market – and once it is done, it’s done.
I am forwarding this post to my Council Member (Paul Krekorian), along with a resolution opposing such deals passed by NC Valley Village last night (Jan 27th). I will ask him to oppose the deal and urge Bernard Parks to do so as well.
Let me leave you with this thought. I ran across it in a white paper prepared by the Collaboratory for Research on Global Projects at Stanford University (Working Paper #53, Sept 2009, by Brian Chase):
“…most of the upfront proceeds received from those P3 deals will likely be spent long before the 75- or 99-year concession terms expire, and public pressure to renegotiate these deals or even terminate them will grow—especially as higher user fees begin to kick in over the next several years and memories fade as to the initial benefits that were received.”
Paul Hatfield
Suzanne Lauer
I don’t think most people in City Hall know all of the various benefits of the proposed parking P3 and thereby they won’t be included in the values until AFTER the agreement and initial payments and by the other side – unless controlled by the agreement.
Has anyone gotten a digital of the draft agreement??
Street parking is one thing,
Parking lots have AIR RIGHTS – for use for building (e.g., Pershing Square) or sale to others
All residential street parking is another – SoPas and others have NO overnight city-wide parking without fee/permit
Preferential residential parking at progressive pricing
Enforcement and fines are also outsourced by various cities
Oversize parking in various Wilmington and industrial areas
If all are properly valued and maximum costs/windfall profit limits are included then maybe the P3 could work…
But having done P3s, think as Privates Plundering Public…
Oh BTW, how about a Parking Authority – it won’t have term limits and can be salaried without furloughs
So maybe this is the way other people are thinking it, and could be willing to pay the prices to get the “Parking”.
Tom
The city run by the current politicos and their lackeys who don’t have the foggiest idea of what they are doing should not be allowed to make any decisions to sell/lease the city’s assets that belong to everyone, now and the next generation. The Neighborhood Councils along with the Mayor are going after the low hanging fruit of pension reform. That is another issue. However, selling your assets is the dumbest thing anyone can do. I remember as a student at UCLA in the early 1980s, when many of the rental buildings around the campus going for thousands in rents were once owned by UCLA, who sold them for a pittance. The same institution was spending ten fold later in providing housing for the students. Too much of the country and LA is run for immediate benefits and solutions. I’m not an accountant, but even I seem to have more common sense than the people who always have the top positions in LA. I applaud you for what you are doing.
My suggestion is that we don’t panic, and for once, evaluate every city department, functions and organization and processes to make permanent efficient changes. Meanwhile, lay-off some employees that should not have been hired in the first place. Quick decsions being forced by the Mayor are short-term and idiotic at best and exteremely harmful for the city’s future. We know the marginal votes and public apathy that gets these folks elected, and by no means should we allow these marginal people to control our future.
You’ve touched all the bases. Will the Mayor listen?
If my memory is correct – Pershing Square was a privately run facility, paying rent to the City. At some point the City took over Pershing Square parking and found the income to be a lot more lucrative than what had been reported. If sources of income such as the parking are given away in order to fund the present crisis, where will the City get the funds for our future? Secondly, will the selling of Los Angeles really cover the debt that has been amassed by short term thinking?
Interestingly, the city is always incharge of parking revenues in losing ventures like the Kodak theatre in Hollywood. When it comes to helping their developer friends, the developer gets the revenues from the hotel and retail space & city from the underutilized parking structure. Check the numbers.