The most popular deals in the works are metered municipal street and garage parking spaces. One of the first was in Chicago where the city received $1.16 billion in 2008 to allow a consortium led by Morgan Stanley to run more than 36,000 metered parking spaces for 75 years. The city continues to set the rules and rates for the meters and collects parking fines. But the investors keep the revenues, which this year will more than triple the $20 million the city was collecting, according to credit rating firms.
After the deal, some drivers complained about price increases as well as meter malfunctions caused by the overwhelming number of quarters that suddenly were required.
Based on the new rates, the inspector general claimed the city was short-changed by about $1 billion.
“The investors will make their money back in 20 years and we are stuck for 50 more years making zero dollars,” says Scott Waguespack, an alderman who voted against the lease. A spokeswoman for Morgan Stanley declined to comment.
But if it turns out to be a bad deal, it can be fixed, right? Nope:
…if a city wants to use a parking lot property for something else years down the road, it can’t–the city is typically locked into parking for the lease’s life unless it compensates the new operator for the long term revenue loss.
In Pittsburgh, the mayor is proposing to lease out the parking system for an upfront sum of about $300 million over 50 years and funnel the money into the pension system.
Bill Peduto, a city councilman, is fighting the plan. The spaces generate $35 million annually, and considering that the concessionaires are proposing doubling rates, he says, the city will ultimately lose $3.5 billion over the life of the lease.
“Even with the money from a sale, we’ll have to put another $17 million annually into the pension fund–and we don’t have that,” Mr. Peduto says. He prefers raising parking rates slightly and floating a bond to stabilize the pension fund.
So why are municipalities making these awful deals? Desperation:
“We view these asset sales as 1-shots…that create structural budget imbalances in future years, but that may be necessary actions to bridge the time gap until revenue stabilization or growth returns,” says Robert Kurtter, a managing director at Moody’s.
The California legislature recently released a report by its analyst’s office entitled “Should the State Sell its Office Buildings?” California originally bought office buildings to save money, the report says. The cost of leasing them back “would exceed sales revenue,” it said, making the sales “poor fiscal policy.”
But “in the current budget environment,” it added, such deals are necessary to balance the budget.
These motherfuckers are just picking over the carcass. Some federal aid right about now would be really helpful. And I told you these budget shortfalls would happen over two years ago.
Nobody ever listens to the Mad Biologist…