Parking report lacks conclusions

Private firm bid $452 million for facilities that could make city $2.4 billion over 50 years

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Pittsburgh's parking garages and meters likely will generate about $2.4 billion over the next 50 years, according to a report Friday designed to help city council decide whether it wants to lease the city's public parking system during that period for about $452 million.

Finance Scholars Group didn't offer an opinion about Mayor Luke Ravenstahl's lease plan, which he's urging council to accept by Nov. 1 as a way to infuse money into a pension plan at risk of state takeover at the end of the year.

In fact, the $250,000 study offered no clear-cut recommendations for addressing the pension crisis. But it did provide revenue projections for the garages and meters and insight into what a lease deal would be worth -- information some council members called critical for a coming vote on Mr. Ravenstahl's proposal.

"I think it was a very informative study, and there's a lot of information that we have now to be able to make a decision," said council President Darlene Harris, who pushed for the review as an outside check on Mr. Ravenstahl's proposal and alternative plans for solving the pension problem.

Mr. Ravenstahl still believes a lease is the best approach, his spokeswoman, Joanna Doven, said after the mayor's office briefly reviewed the study.

"I don't think this study is going to change anyone's mind" on council, she added, referring to members who have opposed the plan from the beginning.

On Monday, a consortium led by J.P. Morgan Asset Management offered about $452 million for the 50-year lease. That was the highest of three bids the city received.

Finance Scholars calculated that the garages and meters would generate about $2.4 billion over the 50 years, an estimate that reflected graduated rate increases and other new revenue opportunities that Mr. Ravenstahl included in his proposed lease to entice bidders.

The firm also estimated that the present-day value of those future revenues is about $401 million, but could be as little as $286.2 million or as high as $470.7 million. The consultants made that calculation based on inflation and investment risk, such as the possibility that advances in technology will diminish parking demand.

While the J.P. Morgan bid falls within that range, and well above the $401 million mark, consulting firm President Jeffrey Andrien cautioned against a direct comparison of numbers. He said his estimate was "more conservative than aggressive" and added that the city would realize less than $452 million on a lease after paying advisers and covering other costs.

He said his numbers should be a "framework" for evaluating the lease proposal and other options to address the pension crisis -- something that drew mixed reaction from council.

"I've had frameworks, but thank you very much," said a disappointed Councilwoman Theresa Kail-Smith, who hoped the firm would have firm recommendations.

Councilman Patrick Dowd agreed that the report "doesn't give us an answer" but said he was pleased with the consultants' insights on the lease plan and Mrs. Harris' proposal to float a pension bond instead.

The consultants also examined the potential of a state takeover of the fund, which Mr. Ravenstahl said would cause the city's annual pension payments to balloon by as much as $30 million, forcing tax hikes and service cuts.

The consultants expressed sympathy for council's predicament. "The question that the city's leaders are left to answer is, 'Which option is the lesser of the evils,' " the study said, adding that each option has pros and cons that "must be carefully considered."

Some council members have deep concerns about the lease, especially the impact that parking rate increases would have on neighborhood business districts. Some have questioned whether a state takeover would be as bad as the mayor suggests.

The city's annual pension obligation is $45 million, but the city is kicking in an extra $11 million this year. The consultants said the city, then, is already on the way to meeting $30 million in new payments but would face other disadvantages in a takeover, such as loss of control over pension benefits.

The consultants said drawbacks to a pension bond include transaction costs and high debt service in the issue's early years, while drawbacks to the lease proposal include transaction costs, potential reduction in parking fine revenue under ramped-up enforcement and restrictions on construction of new garages Downtown as part of the lease's no-compete provisions.

Mr. Ravenstahl wants to use $100 million of lease revenue to retire parking authority debt and $200 million for the pension fund. He has no firm plans for the other $120 million in the J.P. Morgan bid.

Councilman Ricky Burgess, a lease proponent, said the study reinforced his commitment to the plan. He said he wants to take $120 million in lease proceeds and use the money to stimulate investment in city neighborhoods, including some that might be hurt by parking rate increases.


Joe Smydo: jsmydo@post-gazette.com or 412-263-1548.


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