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Parking

Parking

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Published by Cosmo Garvin

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Published by: Cosmo Garvin on Dec 08, 2011
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12/08/2011

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Eileen Teichert, City AttorneyShirley Concolino, City ClerkRussell Fehr, City Treasure
John F. Shirey, City Manager 
City of SacramentoCity Council
915 I Street, Sacramento, CA, 95814www.CityofSacramento.org
Meeting Date
:
12/13/2011
Report Type:
Staff/Discussion
Title: Entertainment and Sports Complex Update and Parking MonetizationReport ID:
2011-01016
Location:
District 3
Recommendation:
Authorizing staff to issue a Request for Qualification (RFQ) for parkingmonetization.
Contact:
JohnDangberg, Assistant City Manager, (916) 808-1222, Office of the City Manager 
Presenter:
John Dangberg, Assistant City Manager, (916) 808-1222, Office of the City Manager 
Department:
City Manager / Economic Development
Division:
Executive Office
Dept ID:Attachments:
 _____________________________________________________________________________________________________________ 
 _________________________________________________________________________ City Attorney Review
Approved as to FormEileen M. Teichert12/8/2011 12:06:35 PM
City Treasurer Review
Reviewed for Impact on Cash and DebtJanelle Gray12/8/2011 10:31:29 AM
Approvals/Acknowledgements
Department Directoror Designee: John Dangberg -12/8/2011 12:04:29 PM
22
 
Description/AnalysisIssue:
This report and the presentation to the City Council includes the following informationon the development of an Entertainment and Sports Complex (ESC) for Sacramento: 1) anoral status report on discussions with the NBA/Kings and ICON-Taylor for the development of the ESC and an update on the status of the Natomas arena site reuse; 2) a parkingmonetization strategy and schedule for the concession of City-owned parking assets and thepotential value of those assets; 3) an update on consultant contract expenditures and budgetbalances. This report requests City Council approval to issue a Request for Qualifications tosolicit interest from respondents for the monetization of the City’s parking assets as describedbelow.
PARKING MONETIZATION
At the September 13, 2011 Council meeting, the Mayor and City Council directed staff toproceed with studies to determine the market value of granting a long term operating lease or concession for the City’s parking garages, parking meter operations, and parking enforcementoperations (Parking System). The premise behind a long-term parking concession to a privateoperator is for the City to receive an upfront cash payment in exchange for operating controland future cash flows derived from the operation. This exchange for an upfront cash paymentis broadly referred to as
monetization.
Similar efforts to monetize public parking assets havebeen executed in Chicago and Indianapolis, and considered in other cities such as Pittsburghand Los Angeles.In order to complete its analysis, the City contracted with Walker Parking Consultants (Walker)to provide a market, financial and condition assessment of the City’s parking assets, projectedout 50 years. Walker was selected due to their extensive experience in parking monetizationtransactions and their previous work on rehabilitation of the City’s parking lots and garages.Bank of America / Merrill Lynch (BAML) was selected as the City’s financial advisor based onthe existing banking relationship it has with the City. BAML provided the preliminary valuationbased on the Walker projections and market analysis.The goal of the parking study was to develop the information necessary for Council to make aninformed policy decision regarding proceeding further with a potential monetization. For thegreatest flexibility, each of the three distinct programs garages, on-street parking andenforcement –within the Parking System was evaluated. The study addressed the followingelements of all or a portion of the three programs within the Parking System:1.The potential value of a long term lease of the Parking System.2.The process by which bids may be obtained.a.The potential cost of that process.b.The length of time the process would take.3.Comparison between the estimated marketvalue of a long-term lease of the ParkingSystem and the continuing City operation of the system.4.Identification of potential policy issues that should be considered in making an informeddecision.
 
Back to Tableof Contents
 
Based on the analysis conducted by Walker and BAML, which are attached to this report asAttachment 4 and Attachment 5, respectively, the estimated upfront payment to the City for granting a 50-year lease or concession to a private parking operator ranges from $170 to $245million as summarized in the table below.
Estimated Value of Parking System Assets
Low ValueHigh ValueGarages$89 m$128 mEnforcement$40 m$57 mTOTAL without Meters$129 m$185mMeters$40 m$60mTOTAL all Parking Assets$170 m$245 mNote: All values are in millions.The above ranges of values reflect the potential upfront payment the City could receive. For the purpose of analysis, Walker and BAML considered two alternative scenarios: a “base case”that assumed non-union labor utilized by a future operator and an “operating case” thatassumed a future operator utilized a union wage and benefit structure similar to the currentCity parking operations. The table above reflects the value of the Parking System assumingunion conditions are placed on the concession. The actual value will be dependent upon manyfactors including constraints the City may require as a condition to entering into a long-termconcession, future parking rates, operational efficiency opportunities and investor outlook onthe future risks and returns of Sacramento’s parking enterprise. Additionally, there are severalissues associated with a potential parking monetization, which could impact the value availableto the City:1.Three of the parking garages are encumbered withtax-exempt bond debt which wouldhave to be paid off upon monetizationrequiring payment of a total of $52million for bond defeasance and IRS private use penalties.2.Under current California law, parking meter revenue and operations cannot be includedin the monetization. Meter revenues may only be expended on maintenance, safetyand security of the rights-of-way, and parking facilities or garages (including debt). Staff is exploring the viability of using parking meter revenue to refinance the abovereferenced tax-exempt debt on garages with new taxable debt, which is a permissibleuse of the funds.3.The Parking System annually contributes approximately $9 million per year to theGeneral Fund based on FY 2010/11 results (unaudited). The maximum value inmonetization would be achievedby forgoing these contributions from the parkingenterprise to the City’sGeneral Fund. The Council’s policy direction has been to ensurethrough a broad financing strategy that there is no net negative fiscal impact to the

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