Tuesday, September 28, 2010

More On Pittsburgh Got A Better Deal Than Indy For Parking Meter Lease

WRTV's Norm Cox just happened to be in Pittsburgh last week to see a Pirates game with his son, Jeff, when Pittsburgh announced it was awarding a 50-year lease for its parking meter and garage services that would net the city $451 million up front. LAZ Parking, the same contractor who paid the City of Chicago almost $1.2 billion for a 75-year lease agreement for the Windy City's parking meter business, submitted the winning bid. Norm caught my blog post discussing how Pittsburgh seemed to make off better than both Indianapolis and Chicago, with its long-term lease agreement and stopped by to interview me for a story. Here's some of what Norm said today in his report:

Critics of Mayor Greg Ballard's plan to lease Indianapolis' parking meters said they believe he could have negotiated a much better deal for the city.

Skeptics point to Pittsburgh, which has a deal expected to bring in $451 million, compared to Indianapolis' $35 million arrangement, 6News' Norman Cox reported.

Pittsburgh, which plans to lease 8,700 spaces and nearly 9,000 more in 11 garages, is a bigger metro area with more daily commuters, while Indianapolis is a bigger central city leasing 3,600 spaces, but none in the city's garages.

Both deals are for 50 years, but Pittsburgh will get $416 million more upfront than Indianapolis.

"It does make you have some pause as to whether or not we're getting the best deal," said Advance Indiana blogger Gary Welsh.

Deputy Mayor Michael Huber said Indianapolis could have gotten more money if it had agreed to raise meter fees as high as Pittsburgh's, up to $4.50 an hour.

"We are getting less money overall because of some of the policy decisions that we've made," he said.

Pittsburgh will get all money upfront, while Indianapolis will continue to share revenue with the operator over the life of the deal, an estimated profit of between $200,000 and $400,000, Huber said.

But Welsh argued that even with the differences in spaces, fees and funding, the deals don't even out.

"If you have immediate access to $451 million, and the city of Indianapolis is having to wait 50 years to get access to that money, you know, that's a big difference," he said.

Most financial experts advise getting money upfront when it's more valuable, before inflation erodes its buying power, but Huber said he disagrees.

He said the feedback the administration got from residents is that they don't want the politicians to get their hands on all that money at once and squander it, but preserve most of it for future generations.
There were a couple of additional points I made to Cox that didn't make the aired report. One is that the large upfront payment Pittsburgh is getting allows it to retire $300 million in long-term debt the city would have been paying off with costly interest payments for many years to come. By taking a small upfront payment and a share of revenues over the 50 years, Indianapolis cannot use any of the money to retire long-term indebtedness and, even under the best projections, won't recover over a 50-year period anything close to what Pittsburgh is getting up front, particularly when you factor in inflation as Cox' report notes. Indianapolis would have to issue bonds to realize upfront benefits from the deal and commit the revenue stream to paying debt service on that debt, but it would wind up paying a lot more money over time to cover interest on the debt.

The other key point relates to the higher price Pittsburgh charges for its parking meters under its deal. Pittsburgh, unlike Indianapolis, has a very robust public transportation system. It has a subway system operating in the downtown area that connects to a light rail system that reaches into the outer reaches of the city and some of the suburban communities, in addition to a city bus service. Indianapolis has no viable public transportation option for most commuters who don't want to pay the higher parking fees. If you want to come downtown, you have no choice but to pay to park your automobile in a metered spot, a parking lot or garage. 

1 comment:

Citizen Kane said...

"He said the feedback the administration got from residents is that they don't want the politicians to get their hands on all that money at once and squander it, but preserve most of it for future generations."

Really Mr. Huber? But it is okay to borrow $450 million dollars and enslave water and sewer ratepayers with this massive debt and then proceed to waste nearly 1/2 billion dollars in a few years on infrastructure unrelated to the user fees. Try again. When these guys lie like this, someone needs to get "Granny" her switch to whip some sense into them. And "Granny" does not care how old you are, she still take the switch to your lying, thieving a..