Thursday, February 12, 2009

Parking Space (and rates)

So I hear at least some parking rates at Downtown garages are going up ever again. Just waiting for the gnashing over the mandated decline in the parking tax rate to go another round even though the city did what it was told and keeps lowering the tax rate itself. Probably a good time to address the idea of selling the Pittsburgh Parking Authority.

It was not my idea since it has been talked about for decades, but I think I suggested the idea of selling the parking authority last August. As has been in the news the city now agrees it might be an idea to ‘lease’ the parking authority to fund some of the pension liability. So nothing wrong with that idea in itself, but the devil is in the details. Why lease the parking authority’s assets as is being suggested? Is there any reason at all to not just sell the parking authority’s assets outright? Is there really any conceivable benefit from keeping open the option that 99 years from now the legal successor to the special district government otherwise known as the Pittsburgh Parking Authority would be around to repatriate the assets. A lot of cities get by quite fine without owning a lot of parking lots. Leasing the assets would mean some non functioning public authority would have to stay on the books long past when the reason for existence becomes moot. (Why does the Stadium Authority come to mind?)

The argument the city has put out there for 'leasing' and not selling the Parking Authority's assets is that the buyer would then not have to pay the real estate transfer tax which is indeed quite high for properties in the city. But think about that. A high transfer tax would be taken into account by a potential buyer. If they capitalize the entire tax into their bid price it just means they should offer that less in terms of the purchase price. But then the city will collect the tax anyway and the net effect ought to be the same from the city's perspective. Some tax implications at the margin for the buyer, but not anything that ought to justify keeping the city as a nominal owner of property it has leased away for a few generations. Not the biggest of issues, but still.

Maybe some history is worthwhile: mentioned previously as well, but why was the Pittsburgh Parking Authority created as per the late City Solicitor Anne Alpern herself. So there are reasons for the authority to exist. It is worth some debate as to whether the reasons that existed a half century ago are still valid today. The existence of the PPA does not seem to put much downward pressure on escalating parking rates... you can't really blame it on the tax rate at this point. Raises an interesting question.. if the PPA is holding down parking rates, what would the actual market rate be for Downtown parking and what would parking tax revenue be for the city if the parking rates floated higher? Rates would probably have to go up a lot more than not before anything like this in Japan would be built even in space-challenged Downtown.

But worth noting is the city's stated intent to use the net proceeds of such a sale or lease to shore up the city's escalating pension liability. I know the city seems to think that discussion over whether the pension fund could run out of money is akin to "yelling fire in a crowded room"... but watching the markets in even the last month drop, you have to wonder what the pension fund holds right now. Not knowing how much the parking authority could generate, I think a ballpark figure being tossed out there is a payment in excess of debt payoff of $200million or so. Certainly could be useful to the pension fund which needs whatever it can get at this point.

Consider that by the summer the city's pension funds will likely be under $200 million in total. If you don't believe that, don't rant, just note the prediction and we will see how accurate it is when we learn July's fund balance. So $200 million + $200 million would put the pension fund up to maybe $400 million which is about where it was in January of last year. Most everyone agreed that the pension fund was in dire straits even before January of 2008. So the net result would be barely putting back into the pension fund the losses accumulated over the last 13 months.


Blogger Bram Reichbaum said...

Thank you.

Perhaps leasing the properties in leiu of selling them would have some effect on what party bears certain responsibilities and liabilities -- if the City or the Authority retained enough of these, the actual operation of those facilities would be much more palatable. A thought?

Thursday, February 12, 2009 3:42:00 PM  
Blogger C. Briem said...

I doubt that... if anything, leasing would impose much greater restrictions on what can be done with the properties over the long run which can only diminish their sales value. But on market values for these properties. If rates can keep going up, and tax rates keep going down.. it has to be a sign the value of the limited parking assets Downtown are going up.

Friday, February 13, 2009 8:06:00 AM  
Anonymous Anonymous said...

I'm having a great deal of trouble figuring how, in current conditions, the city can get a higher return on any investment than it can get on the parking garages.

Friday, February 13, 2009 10:11:00 AM  

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