An effort to plug a multi-million dollar city budget hole with the sale of the Temple Street Garage has apparently come up short.
Last month, the city put the Temple Street Garage up for sale. It issued a request for proposals (RFP) seeking bidders interested in purchasing the city’s 66 percent share of the garage. The city’s portion was assessed at $7 million, budget director Larry Rusconi said.
That was the last piece of a plan to close the current fiscal year’s budget gap, estimated at the time at at between $5 million and $8 million.
The city’s RFP netted only one bid. It came from ProPark, a company that runs lots and garages in over a dozen states, including over 25 in New Haven. Dennis Safford, a spokesman for ProPark, said the company hopes to install a variety of environmentally friendly amenities and technology to make the facility into a “Green Garage Demonstration Site.”
ProPark’s bid wasn’t as high as the city had hoped, according to Mayor John DeStefano. The bid came in lower than the $7 million hoped for to close the budget, he said. He declined to say how much the bid was. But it fell below the amount needed to fill the budget gap.
“We’re still reviewing the bid at this point. We don’t know if it will be accepted,” DeStefano said.
Under the conditions of the RFP, a right of first refusal belongs to the adjacent Temple Medical Center, which uses the garage. The hope all along was to entice Temple Medical to buy the garage.
“We got the bid. We’ll see what it is. We’ll talk to the bidder. Then we’ll initiate a conversation with the party that has first refusal. We’ll go from there. At the end of the day, it’s not the only factor in how the budget turns out this year,” DeStefano said.
Safford, the ProPark spokesman, said the company would like to install its “‘Green Garage Oasis’ suite of sustainable initiatives’ at the Temple Garage.
“This would include, but not be limited to, the installation of electric vehicle charging stations, electric bicycle charging stations, complimentary bicycle parking, a state-of-the-art energy-efficient LED lighting retrofit and a comprehensive recycling program, complete with conveniently-located recycling stations throughout the facility,” Safford wrote in an email.
Those improvements could make the garage a “Green Garage Demonstrator” with the United States Green Parking Council, an organization that oversees the creation of environmentally friendly parking garages.
“Propark believes that ‘Good Carma’ benefits everyone,” Safford wrote.
The “M” Word”
Matthew Nemerson, president of the board at the New Haven Parking Authority, said this week that he had not yet seen the bid. Informed that it was under what the city had hoped, Nemerson said, “There’s got to be more than one way to skin a cat here.”
“There are many different ways that municipalities or any entities can monetize things,” he said. “We may need to look at borrowing money against dedicated revenues.”
The city could take a loan in exchange for the promise of revenue from the garage, he said. If the city isn’t happy with the bid, he said, the parking authority will try to present the mayor with other options, including monetization—basically borrowing money on the private market for a quick up-front payout in return for decades-long debt.
“We’re just waiting to see how we can be most helpful to the administration,” Nemerson said.
Nemerson’s suggestion echoes a now-discredited plan that would have traded 25 years of parking meter revenue for an up-front cash infusion of $50 million. The administration proposed that idea during last year’s budget season. It met with stiff resistance and eventually died after months of debate because—much like the pension plan deals and monetization schemes that got Connecticut, California, and Chicago, Illinois, in trouble—it saddles future officeholders and politicians with decades of crushing debt or obligations.
posted by: streever on March 14, 2011 11:35am
If we need money, get a loan.
A loan is up-front, clear, and transparent.
Do not—repeat—do not take the easy route of “monetization”. As MacMillan aptly notes, it has crushed states and entire nations. It is an off balance sheet and sneaky way to get a loan.
Our CFO has the same answer to EVERY instance of this type of financial dealing: “If you need a loan, get a loan. Do not take on debt in relation to resources.”
posted by: Not a fan on March 14, 2011 11:37am
I don’t believe anything Destafano says.
posted by: Leslie on March 14, 2011 12:23pm
I realize this is a serious topic, but I can’t help but share that the title cause a double take and then a chuckle on my end. New Haven is now holding a garage sale to fix the budget? I then realized that the confusion is due to me being a California-born transplant to New Haven. What I called “garage sales” growing up are “tag sales” in New Haven. So no city government tag sale on the schedule?
posted by: robn on March 14, 2011 12:54pm
I don’t hate the idea of selling the garage as long as the sale doesn’t create a monopoly in town because it generates taxable property.
Nemersons suggestion isn’t necessarily like the meter monetization plan which gave over complete control to the other party. I’m pretty sure you can collateralize a bond with the garage revenue stream allowing the city to continue ownership and rate regulation. However, we need money to pay down debt, not to create more debt. So I think the sale is the most responsible action.
posted by: ignoranceisbliss on March 14, 2011 2:01pm
... The City is prohibited by state law from borrowing to cover operating costs. Now there are good fiscal policy reasons for that prohibition and it is for those reasons that “monetization” is a bad idea. It simply amounts to doing indirectly what you are prohibited from doing directly.
But when you suggest “get a loan” because it is more transparent, you just serve to confuse the issue.
posted by: streever on March 14, 2011 2:13pm
you’re right, sorry: I didn’t mean to confuse the issue with this quick comment, but just reiterate that I think it is a bad idea to do anything “like” getting a loan without just getting a loan—from a very general perspective.
posted by: don't sell, raise the rates on March 14, 2011 4:09pm
I hope the city can find a solution to its fiscal crisis other than selling the parking garages. In the short-term, we would lose revenue from the garages. In the long-term, we would be weakening the viability of creating Parking Improvement Districts or local infrastructure banks to improve multi-modal transit.
Friends in the medical area complain about the LACK of parking, even though an 800+ garage and expanded surface lots have just been added. Just as adding lanes to roads increases congestion, adding parking simply increases demand. Because the vacancy rates at the Air Rights and other Yale Medical Area garages are under 15%, its time to raise rates. Some of this income should go to debt service, but it is also important to provide for (and not foreclose on) a better future and invest some of this income in a local infrastructure bank.
posted by: Matthew Nemerson on March 15, 2011 9:54pm
Come on Tom and Paul, is that last sentence journalism or a uniformed editorial commentary?
“because…it saddles…[us] with crushing debt” did someone say that or are you just putting on your best imitation of Jim Cramer for comic appeal?
Look, the meter deal expressly provided for an annual payment that was equal to what we already receive from the meters, and the city would actually receive all new revenues from rates increases.
So, if some of the money borrowed went to put in credit card heads for all the meters or credit card boxes in place of meters we would probably end up with another $2m to $3m in new additional revenues and would receive the $50m too. But you know that and for some reason still want to compare this deal to Chicago with which it has no connection.
Shame on you for not only getting the facts wrong but making it that much more difficult for all of us to rationally deal with the tsunami of coming deficits without one of the stairs that could get us to higher ground.
I understand spending the $50 million on deficits is infuriating as a tax payer.
But what if the $50m went to a light-rail trolley system, would you still hate it?
Let’s divorce the idea of raising money from a revenue producing city asset from what the money is then spent on as a mental exercise.
Now, what do we think about converting a tax on out of town cars to a mass transit system for city folks? Not as bad, right?
Monetization is not bad on its face - whether we call it a loan, a mortgage, a bond, borrowing etc., because converting a stream of secure revenue to a large one time payment (or doing the opposite - an annuity) is just a technique to balance once person’s value of time, interest and money to another.
If done right the swap is equal plus a slight “vig” for the person without the actual pressing need to convert the money from one form to another.
I think we need to step back a minute and think about the issues here before we all jump to conclusions.
Again, the so-called “Chicago” concept gave complete control of the meters and any rate increases to an outside entity in return for the $1.2B payment (which they spent in two years, I think). The “Gates” plan would give us money and only use the meters as collateral for the loan, but give us full control over rates and new revenue for those 25 years.
This is key to any deal and I think is something that all of the NHI arm-chair finance experts and political activists need consider a bit more carefully.
Finally, if the NHPA can get a better deal borrowing money, not charge the city “fees” and raise its rates to allow us to keep enough net revenues coming in to keep the garages in good repair, isn’t that a good reason to have control of a valuable asset - the garages and lots we operate?
Sure, if the private sector can make more money than NHPA that’s one thing, but the rub with these deals is that you don’t ever want to give up control over rates AND the up-side potential of the inherently scarce “car storage systems” that will only increase in value over time.
Its the higher meter and parking rates that you give up if you sell that make deals like Chicago bad, not swapping annual fees for one time payments.
Let’s get our facts about monetization right and then debate what we should as a city about big deficits. The two are connected only by the accident of time and necessity.
posted by: jjlowe332 on March 16, 2011 10:48am
very typical of the mayor….. he really know how to destroy a city…. the chapel street mall… the Colosseum… raiding the bars…. now selling a ramp garage….. hmmmm no wonder this city has no income being generated and the taxes continue to rise…. hey mr. mayor sell the city!!!!