Hartford Considers a Long-Term Plan to Cash in on its Parking Revenue
No free parking!
By Jon Campbell
March 14, 2011
It's not every day that a city government considers making a 50-year commitment. To anything. But for several weeks the Hartford City Council has been mulling a proposal that could secure as much as $150 million for depleted city coffers by leasing to a private company — for half a century — the city's parking facilities.
City staff has been researching the “parking concession” plan, as it's known, for more than a year, and members of the council got a detailed presentation March 7.
The goal, according to Chief Operating Officer David Panagore, whose staff put the plan together, is to sell off the revenue that would normally be earned every year from the city's parking system, in exchange for a lump sum up front.
Panagore says he wants to prepare the city in case there's a large project that requires public investment. The plan might provide the city with cash in reserve for investment.
“The people who are best positioned to take advantage of the deal when it strikes are the people who have capital reserves to be able to expend,” Panagore said, addressing members of the council on March 7. “The people who don't catch the brass ring are the people who don't have the capital reserves to take advantage of the opportunity when it arises.”
Panagore mentioned potential, hypothetical projects like the siting of an NFL stadium in Hartford, the establishment of a medical center, or the revitalization of the XL Center as initiatives that may require some city investment. Large private investments are often supplemented by public funds used to construct sewer lines, new roads and other infrastructure needed to serve a new project.
If a lease was offered, the company who takes the deal would have to pony up for the whole 50-year cost, as much as $150 million, depending on the bids the city receives.
Panagore's plan calls for those funds to be put in a trust fund with restrictions on how they can be used. Interest from the account — as much as $6.8 million annually — could be used to fund ongoing administrative costs, while the principal could only be spent on major projects that would produce a return on investment. The principal can also be used to pay down $36 million the city owes from bonds sold in 2000 to construct the parking garages.
The city has historically earned as much as $3.9 million dollars annually from its parking contracts, but that sum has been declining in the past few years. The city earned around $1.3 million last year. Under worst-case scenarios explored by city staff, which assumes a bid price as low as $30 million, it's possible that the deal could lead to a net loss for the city.
Even if the council decided to put the project out for bids, they'd be free to reject any price that would lead to a loss in revenue.
Council President rJo Winch said she was still unsure about the parking concession, and wondered how future councils would manage the large sum of money.
“It's more of an integrity issue in making sure there are actually controls over the outcome,” Winch says. She worried that future councils might be tempted to spend the large reserve fund on short-term expenses. Winch also commented at the public meeting about the strangeness of making a deal that would likely last beyond her lifetime.
Corey Brinson, the council's lone Republican, said he was still considering the measure and hasn't come to a conclusion. But he said the prospect of having some funds set aside for investment appeals to him.
“If we got $100 million and we could build something so amazing that people would come from near and far” Brinson says, “that's something you have to think about, because opportunities like that don't come around all the time.”
Hartford's plan mentions the experiences of Chicago, which privatized its parking facilities in 2009, in what has roundly been derided as a hastily enacted failure.
Chicago instituted few cost controls in its deal, so parking rates were allowed to jump dramatically, more than doubling in the space of a year. Even worse, the meters in place to accept the increased fees weren't capable of handling all that change. Meters filled up, and people were ticketed. A lot.
The Chicago plan earned more than a billion dollars for the city, but even so, some officials are trying to find a way to void the contract.
Chicago did a few things wrong, Panagore said, and he and his staff studied their experience carefully to avoid those same mistakes.
Parking in Hartford currently costs a dollar an hour at metered spaces. Under the proposal, parking rates would remain stable for the first six months, at which point the management company could increase the charge to $1.50 an hour. After five years, the rate could jump to $2, and every year after that, increases can't exceed the rate of inflation.
Panagore said the price controls ensure that rates won't get out of control, and the increases can only apply to meters that accept credit cards — a way to avoid the coin-overload problem.
New Haven flirted with its own parking concession agreement last year, but after long negotiations, the plan was scrapped, according to the New Haven Independent.