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Cincinnati's parking deal will generate $570M in revenue
City gets to keep half -- or less
Kevin Osborne, WCPO Digital
7:10 PM, Mar 12, 2013
1:42 PM, Mar 13, 2013
CINCINNATI - A lease of the city of Cincinnati's parking system will generate more than a half-billion dollars in revenue over 40 years, with roughly half going to the city.
The lease of Cincinnati's parking meters, lots and garages to the Port Authority is estimated to yield a total of $570.7 million, according to the city's financial consultant.
Tim Carden, a managing partner with Public Financial Management (PFM), provided the data Tuesday in response to questions posed by WCPO Digital last week.
"The overall net revenue generated by the parking system over the 40-year concession is $570.7 million," Carden wrote, in response to the questions.
"This consists of 30 years of on-street net revenue and 40 years of off-street net revenue," he added.
The city has used PFM as its consultant since 2010. The Philadelphia-based firm specializes in public-private partnerships.
Exactly how much the city will receive over the term of the deal still is up in the air, Carden said.
"The percentage amount is currently under negotiation between the Port Authority and the city," Carden wrote. "The current pro forma model assigns net revenues to the city on an annual basis in the range of 50 percent."
If that percentage is agreed upon, it means the city would get $285.35 million over 40 years.
After an upfront payment of $92 million, the city would get $193.35 million during the deal's remainder.
The net present value of the lease for the city is $197.4 million.
Net present value compares the value of money currently to the estimated value of money in the future, taking inflation and returns into account.
"The pro-forma financial projections, among other assumptions, are based on conservative growth in parking rates and enforcement, current level of parking occupancy, growth in parking operating expenses, capital improvements in technology and system repair, and current standard market rates," Carden wrote.
City Councilman Charlie Winburn, a Republican who opposed the lease, is skeptical of PFM's estimates.
"There's no way in the world half of that (money) is going to come back to us," Winburn said. "If you're going to raise a half-billion dollars, the number of tickets issued will have to go way up if you're not going to significantly raise the parking rates."
The lease generally restricts rate hikes to either 3 percent annually or the Consumer Price Index, whichever is higher.
An advisory board could recommend rate hikes above the cap, but it would require multiple layers of approval to take effect.
"The city manager needs to come clean on what this deal is really costing us," Winburn said.
City Council approved the lease of its parking system to the Port Authority in a 5-4 vote last week.
Lease opponents, however, successfully pushed for a temporary injunction against implementing the lease shortly after the vote. They allege council added an emergency clause to the lease solely to have it take effect immediately and avoid a possible voter referendum on the issue.
Hamilton County Common Pleas Court Judge Robert Winkler will hold a hearing on the issue Friday morning.
Under the deal approved by council, the city would receive an upfront payment of $92 million from the Port Authority. Also, it would get annual payments that would begin at $3 million and gradually increase over time.
With the money, city administrators would cover a nearly $26 million deficit in the budget and jumpstart several development projects including construction of a luxury apartment building downtown.
To pay the city and finance improvements to the system, the Port Authority will issue bonds backed by Guggenheim Partners, a New York-based investment bank.
The Port would hire Xerox Services to oversee the parking meters, and hire Denison Parking to operate the garages and lots. In turn, the two companies would hire local employees.
During the deal's first year, the Port Authority will get $319,000 in fees, and $400,000 will go to the asset manager; Guggenheim will get $2.2 million, according to City Manager Milton Dohoney Jr.
Lease supporters say the deal will help the city grow its tax base.
With the large projects funded by the parking plan, it could generate $15.1 million in extra tax revenue by 2016 if it sparks just 1 percent growth above the current level, Dohoney said.
But critics have countered that it lessens public accountability for the assets, and fear that increases in parking rates will hurt small businesses.