Leasing city lots to up parking rates?
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Three years of tax cuts failed to stop the upward march of Downtown Pittsburgh parking prices, and plans to privatize public garages have some advocates for the center city wondering whether there will be any moderately priced spaces left in a few years.
Mayor Luke Ravenstahl's garage privatization plan is meant to raise money for the city's ailing pension fund, and thus avert a state takeover of the fund that could lead to higher taxes. But privatization would turn over Pittsburgh Parking Authority garages -- which have held the line on prices -- to a firm that would likely charge what other private operators do. Those private operators have boosted rates in spite of tax cuts.
"That we would plug a hole in the pension fund by making the city even less attractive to developers, shoppers, business, etc., is simply incredible to me," wrote David Paul Gleason, senior pastor at Downtown's First Lutheran Church and chair of the Pittsburgh Downtown Partnership's Transportation Committee, in an e-mail.
City Chief of Staff Yarone Zober, who is on a committee guiding the privatization push, said Thursday that he doesn't think it will lead to crippling price hikes. He hopes that a long-term garage lease can be written with "provisions in place that continue to encourage Downtown shopping as well as residential leasing."
City officials boosted parking taxes dramatically in the first half of the decade. The outcry from Downtown businesses helped prompt the state Legislature to force a gradual reduction in the tax from 50 percent in 2006 to 37.5 percent today.
If the goal was to bring parking prices down, it failed. Seven Downtown garages and lots monitored by the Pittsburgh Post-Gazette have seen average price increases of 30.2 percent for less than two hours, and 14.8 percent for all-day parking, when price hikes set to start Friday are included.
"Who gets over? The owners of the parking garages and parking lots," said city Councilman Jim Motznik, who will leave council after today to become a district judge. "And it wasn't the state's intent."
State law had required a final cut, to 35 percent, effective Jan. 1. But a law passed in September allows the city to keep the tax at 37.5 percent, and then to raise it to 40 percent if it privatizes garages to replenish the pension fund.
Pittsburgh Parking Authority Executive Director David Onorato said cancellation of the tax cut will cost his agency $300,000 next year -- around 1 percent of its budget. But he won't raise the charge to park in his garages, most of which have seen no increase or a modest decrease in prices since 2006.
"I'm just going to try to reduce costs throughout the year," Mr. Onorato said. That's despite a 20 percent jump in employee health insurance costs and other rising expenses.
Downtown's second-largest parking supplier, Alco Parking, managed to hold prices down through this year, but will raise them on Friday. All-day rates at Alco's Downtown garages will rise by $1 or $2.
Alco President Merrill Stabile said rising health insurance costs, strong demand for parking, and the cancellation of the tax cut played roles in his decision to raise prices. "We feel that these adjustments are basically what the market will bear," he said. "I don't see an increase of this magnitude again" in 2011.
The plan to lease the Parking Authority's garages, lots and possibly street meters to a private operator, a lease that would run for decades, is driven by the city's pension woes. The city had, as of Sept. 30, just 31.2 percent of the $899 million it should have to cover future obligations. A $200 million lump sum raised from a garage lease, plus an extra $15 million a year in contributions, could get the fund halfway to ideal levels, Mr. Ravenstahl has said.
If the city can't get its pension obligations half-funded in 2011, the state would seize the fund, under the law passed in September. It might then force the city to make much larger contributions to the seized fund, forcing tax hikes, Mr. Ravenstahl has said.
The Parking Authority has agreed that the financial services firm Morgan Stanley will lead the effort to engineer a long-term lease, and will get $3 million from the proceeds of any deal. The authority is in the process of picking another consultant that would be paid around $600,000 to assemble data for prospective lessees.
If the city sets limits on what a private lessee can charge, it won't get as much money from the lease of the public garages, said Mr. Zober. That said, he doesn't think a lessee would boost prices beyond market levels.
Mr. Stabile agreed, saying "this idea that it's going to be some Armageddon for parking rates is ridiculous."
The Downtown Partnership, though, is worried about privatization. It "could have a lot of impact on the affordability of parking Downtown," said partnership President and CEO Michael Edwards. "If they're selling [garages] off to plug a hole in their pension budget, that may be necessary, but it may have ramifications that they haven't thought of."
The authority's prices are generally around two-thirds of what private garages charge. There's debate over whether the authority acts as a brake on private garage prices.
"I think we keep the market low," said Mr. Onorato. "It's not strictly based on supply and demand."
Mr. Stabile said that the authority's rates don't matter, because the demand for Downtown spaces exceeds the supply. "I don't care if the parking authority gives away their spaces for free," he said, "because I'm still filling my garages."
Mr. Ravenstahl has said he won't let any deal cripple neighborhood business districts that rely on metered street parking. Privatization might not make sense, though, without the meters.
To get the $200 million it needs for the pension fund, the city needs to gross more than $300 million. That's because it has to pay off the parking authority's $104 million debt and cover Morgan Stanley's fee.
A report written for the authority by Chicago-based consultant Scott Balice Strategies estimated conservatively that a private firm might pay the city $185 million to $225 million to lease the 12 authority-run garages for as long as 50 years -- not enough, by itself, to fulfill the city's needs. A firm might pay another $85 million to $110 million to lease an estimated 8,459 parking meters, Balice found.
Chicago, considered the nation's leader in leasing public assets, allowed a Morgan Stanley-led firm to boost neighborhood meter rates from 25 to 75 cents an hour in 2008, $1 an hour this year and $2 an hour by 2013. Downtown rates can go from $1 an hour last year to $2 this year and $4 by 2013. In the central Loop, rates can go from $3 an hour last year to $6.50 by 2013.
Mr. Zober said the city intends to make sure that any deal conforms with the administration's philosophy that neighborhood business districts are crucial to the city's well-being.
First Published December 28, 2009 12:00 am