$452 million bid offered for Pittsburgh's parking lease
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A group led by investment giant J.P. Morgan and LAZ Parking on Monday offered $452 million to operate city of Pittsburgh parking garages and meters for the next 50 years.
That number far exceeds the sum Mayor Luke Ravenstahl said was needed to make any lease viable and bail out a troubled city pension fund.
Mr. Ravenstahl proposed the half-century lease as a mechanism for infusing money into the pension fund and averting a threatened state takeover of the fund at year's end. He warned that the state would require dramatically higher annual pension payments that the city could make only by raising taxes, cutting services or both.
The mayor said the lease plan would be viable only if it generated at least $300 million -- $100 million to cover parking authority debt and $200 million for the pension fund.
"I'm really blown away and extremely excited by the [bid] number," he said Monday.
The other bid opened Monday was a $423 million offer from a group led by EQT Partners, which has offices in New York and overseas.
The mayor's office initially said the bid-opening would be private, prompting the Pittsburgh Post-Gazette to seek a court order Monday to make the proceedings public. Common Pleas Judge Alan Hertzberg denied the request.
The mayor's office then invited the media to the bid-opening and a news conference that followed but excluded the Post-Gazette.
Mr. Ravenstahl briefly met with Post-Gazette reporters after the news conference to announce the high bid.
He said he has tried to be as open as possible about the lease proposal, and he viewed the newspaper's legal effort as an attack on his administration's credibility.
City Councilman Bill Peduto was more restrained than the mayor about the apparent high bid. He and his colleagues would have to approve any deal to lease the parking assets.
"We now have a baseline which we can use to make an informed decision," he said of the offer, submitted under the name Pittsburgh Parking Partners.
Council would have a better idea of what the city's real options were after Friday, Mr. Peduto said. That is when it is scheduled to get a report from an outside consultant on the value of a parking contract.
Council President Darlene Harris said she planned to wait until Friday before making any comment on the parking bids.
The city pension fund is 27.5 percent funded. Mr. Ravenstahl said about $200 million would get the funding level to 50 percent, the threshold needed to avert a takeover.
While he and other officials had hoped to get more than $300 million for the lease, they had avoided saying how much more to keep the bidders guessing.
Mr. Ravenstahl said the additional revenue could be used to further boost the pension fund, finance the capital budget or fund other projects. He said deciding what to do with the added money would be a nice problem to have.
Reducing any of the planned increases in parking rates, however, was not an option, he said.
The winning bid was submitted by a group of investors advised by New York-based J.P. Morgan and by an affiliate of Connecticut-based LAZ Parking, which already manages a controversial 75-year lease of Chicago parking meters. That deal has drawn complaints from some Chicago residents and officials, who say it was pushed through without proper review and scrutiny.
The proposed offer would be valid until Nov. 1. The city would receive its funds in a single payment.
Mr. Ravenstahl said approval of the deal by Nov. 1 would provide enough time to transfer money into the pension fund and satisfy the state.
However, the proposal faces an uncertain future in council.
A key concern is that parking rate increases, which Mr. Ravenstahl included to make the deal attractive to bidders, would hurt neighborhood business districts. Council members also are concerned about criticism of LAZ's Chicago deal, in which critics, including the city's inspector general, said the city undervalued the lease, giving away too much future parking revenue.
Mr. Ravenstahl said he believes the higher-than-expected bid shows that a parking lease is far-and-away the best option for addressing the pension woes.
Mr. Peduto disagreed. "There are still several other options on the table," he said.
Council members fear that the proposed higher parking rates collected by a private company could cripple neighborhood businesses, he said.
As an alternative, council could look into the option of selling bonds to aid the pension plan, paying them off with future parking revenues, he said. Pittsburgh also might become a participant in a statewide pension program.
Finally, council could adopt a hybrid plan, drawing on several options, he said.
At a meeting Friday, council will release its own study on the value of the parking assets and options for resolving the pension crisis. That study likely will be the prism by which most members view the mayor's proposal.
In the spring, the city prequalified seven firms and consortia to bid on the lease. Last week, it opened a first round of bids.
The city received three initial bids -- $413 million from J.P. Morgan's group, $391.5 million from EQT's group and $311 million from a partnership led by the Carlyle Group.
The two highest bids were within 10 percent of each other, triggering a runoff.
J.P. Morgan and EQT had until 4 p.m. Monday to submit revised proposals, called "the best and final offer." J.P. Morgan's bid jumped to nearly $451.7 million, while EQT's jumped to $423.1 million.
Mr. Ravenstahl said he was well pleased with the second-round runoff. "I didn't think the jump would be as significant as it was," he said.
"I think the number is in the range of what we expected it to be," City Controller Michael Lamb said after the two second-round bids were opened. "I think the process was a good one and better than the one they used in Chicago."
Mr. Ravenstahl said he wasn't sure when LAZ teamed with J.P. Morgan.
LAZ manages parking systems in 99 U.S. cities. "With our proven track record and experience in Chicago and the dozens of other cities in which we operate, we know that we can and will manage a successful transition as the Pittsburgh Parking System modernizes and expands its facilities," said Peter Levin, CEO of Pittsburgh Parking Partners, the high bidder.
City officials have called council's alternatives to the long-term lease unworkable.
Mrs. Harris previously proposed floating a bond to boost the pension fund, while Councilman Patrick Dowd and Mr. Lamb had proposed giving certain parking garages to the pension fund as an ongoing revenue stream.
Mr. Ravenstahl has issued no new debt during his four years as mayor and wants to pay down what the city already owes, not add to it. The mayor's office questioned the legality of the Dowd-Lamb plan and noted it would not generate a large upfront payment needed to boost the pension fund.
Mr. Ravenstahl has said his proposal safeguards community needs. For example, it would ban parking enforcement in certain neighborhoods after 6 p.m. weekdays and citywide on Sunday.
The proposal also would require the successful bidder to replace meters with machines that accept credit cards and to rehabilitate a handful of parking garages. He said the city and parking authority could not afford to do that work -- estimated to cost $58 million -- on their own.
First Published September 21, 2010 12:00 am