Tuesday, November 15, 2016

Is selling those City garages a good idea?

Downtown parking garages for neighborhood rec centers, who wouldn't prefer a rec center? That was at least what Stephanie Rawlings Blake thought even before the Baltimore unrest, way back in 2014 when she initially pitched the idea. 
Municipal Garage: Market Center

But the Mayor's plan stalled because Council President Jack Young objected with two arguments that he seemed to use like a lawyer, the second kicking in just in case the first failed, no matter that they contradicted each other. Young said he wanted two "super-centers" (instead of the long list of smaller improvements and centers the Mayor prefers) but he also argued that  it would make no sense economically to sell four garages that make $2.8 million profit each year and cash them in for what is estimated to be a combined sales price of $60 million. The result was our very own impass with neither side budging or providing any additional information.

The Mayor has a long list of recreational facilities in mind for funding. The list includes rehabilitating or building 11 fitness and wellness centers for residents of all ages for $84 million, $20 million  for renovating five community centers and $20 million more for upgrading four outdoor sports centers. Additionally, upgrades to four existing outdoor pools and three "spray pads" is estimated to cost about $13 million.
Municipal Rec Center: Carroll Cook on Eager Street
One of the central arguments after the March 15 uprising centered around the lack of investments in neighborhoods and that the young people had "nowhere to go". Providing facilities for people to meet, work out and have fun would clearly enhance the quality of life in the neighborhoods served by the facilities and move some of the youth off the streets into  more productive activities. As such channeling money from parking into recreation looks like a good investment.

But the economic argument has teeth as well. If everything would continue as it is, including interest, the garages would produce in 20 years more money than their sales generates. Young also wonders if there are willing buyers, which is a bit surprising if the garages are, indeed so profitable.

Many cities have sold assets to generate short-term liquidity and most analysts say that the numbers don't work for the municipality in the long run. But even economists disagree, as these quotes from 2010 WSJ article about cities selling their assets show:
"The deals are part of a broader restructuring of our economy that carries big risks because of revenue losses over time," says Michael Likosky, a professor at New York University who specializes in public finance law.
"The City of Los Angeles shouldn't be in the parking business," says Mike Mullen, senior adviser to L.A.'s mayor. Mr. Mullen was hired from Bank of Montreal to study selling some of the city's assets, including parking spaces, which bring in about $20 million annually.
Even if it sold four garages Baltimore would remain active in the parking business and would have to maintain its Parking Authority, presumably with reduced efficiency due to a reduced economy of scale. There are 11 more garages to manage along with the metered parking. The proceeds from parking garages and parking taxes are also crucial for funding the free Charm City Circulator and contribute to the City's bond rating.

The City of Chicago sold 36,000 parking meters to Morgan Stanley in 2008 and soon started regretting the deal in which the investor is expected to recover the $1.16 billion price tag in twenty years while the City is stuck for 50 years with zero proceeds from those meters. Even the conservative Wall Street Journal acknowledges that there is a whole cottage industry of consultants, lawyers and bankers around privatization who is looking for "jurisdictions of opportunity" like ambulance chasers are looking for crash victims.

Catherine Pugh 
Catherine Pugh is right to not jump to a conclusion on this matter that may land in her lap. The parking assets could rapidly lose value if and when the next transportation revolution comes to pass which involves autonomous vehicles and hopefully a shift from privately owned cars to fleet vehicles that operate on demand and are shared by users. In that scenario, the demand for parking would drastically shrink and garages would be worth only the land on which they sit.

The current Mayor wants to bypass the City Council altogether in a murky move that involves a shadowy "Off Street Parking Commission", a group that hasn't existed since 2007 and supposedly can wave through the sale of the asset which ostensibly is owned by "The Mayor and City Council". SRB should leave the matter entirely to the new Mayor and City Council which should decide on the base of a sound analysis, something that the current Mayor failed to produce in spite of the two years that passed in the current limbo.

Klaus Philipsen, FAIA

Baltimore SUN article about Mayor bypassing the Council

National League of Cities Municipal Action Guide
Wall Street Journal, 2010,
The Baltimore City Municipal Garage brochure