Los Angeles exploring deal to lease parking structures and meters to a private firm
In a bid to potentially raise hundreds of millions of dollars for ailing city coffers, Los Angeles Mayor Antonio Villaraigosa is exploring whether to allow a private party to lease the city’s parking structures and possibly its meters.
The mayor in recent weeks has quietly begun building a team of financial experts and attorneys who could advise him in structuring a deal. In December, Chicago Mayor Richard M. Daley -- whose city is also grappling with a budget crisis -- leased about 36,000 parking meters and several parking structures to the financial services firm Morgan Stanley for 75 years in exchange for $1.15 billion in upfront cash.
The city of Los Angeles is facing a shortfall of $430 million in its 2009-10 budget, and revenue worries have already threatened key Villaraigosa initiatives, including the hiring of more police. While city officials have yet to discuss particulars of a parking deal, the proposal would offer the city a rare injection of cash during a time of government belt-tightening.
“The mayor intends to move forward with a parking structure deal that makes the most sense for the long-term fiscal health of the city,” said Matt Szabo, a Villaraigosa press secretary. “We are also aggressively exploring the possibility of a private partnership for the operation of the city’s parking meters.
“While it’s cliche to say the devil is in the details, in this case it really is,” Szabo also said, adding that the City Council would have to approve any such deal.
Councilwoman Wendy Greuel, who chairs the council’s transportation committee that oversees parking issues, said the key is not selling the future to profit in the present.
“Anything that comes forward has to make long-term financial sense,” Greuel said. “Seventy-five years” -- as in the Chicago deal -- “is a long period of time . . . but the deficit is so large you don’t want to overlook any idea.”
The city of Los Angeles recently doubled its meter rates in most places. The city last year brought in $21 million annually from its 43,000 meters, about $1 million less than it did five years ago.
The Chicago parking meter lease -- which officials say was the first of its kind nationally -- was approved by the council there on a 40 to 5 vote. Some of the criticism focused on whether the city extracted enough money from Morgan Stanley.
As part of the deal, Morgan Stanley gets to keep all revenue from the city’s about 36,000 meters for 75 years, but agreed to upgrade many of the city’s meters. The city also agreed to expand meter hours and significantly raise meter rates for the first time in years -- with some rates for key downtown locations going from $3 an hour to $6.50 in 2013.
In exchange, Chicago got $600 million to help balance the city’s budget through 2012. An additional $400 million is being set aside to replace the lost meter revenue.
The city also retained the right to keep parking ticket money and set meter rates. While the city will continue to write parking tickets, Morgan Stanley won the right to do “supplement enforcement” and also have its parking concessionaire issue citations -- a good way to remind motorists to not forget to plug meters.
Although government is not usually known as a money-making venture, increasingly firms that manage pension and other investment funds are looking at infrastructure -- particularly the kind people pay to use.
“It’s a steady stream of quarters” for Morgan Stanley, said Pete Scales, a spokesman for the Chicago Office of Budget and Management.
Chicago has been aggressive with similar deals, already having leased the rights to run a few downtown parking garages and the Chicago Skyway toll road. Daley is also in the process of leasing out the operation of Chicago Midway Airport.