Where To Park The Deal

April 16, 2007
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GRAND RAPIDS — City Manager Kurt Kimball said more than one "interested party" has told him they would like to bid on the downtown public parking system.

Although Kimball didn't identify those parties, Ellis Parking Co. President Michael Ellis said his firm is one that is definitely interested.

In fact, Ellis told the Business Journal that his company, a family-owned firm headed by his father, Ken Ellis, asked the city — and on more than one occasion — if the system was for sale. Ellis said he made those inquiries years before Third Coast Development Partners unveiled its offer late last month. But every time he asked, he said, the city said no.

Well, Ellis Parking and the other "interested parties" may get their chance to place a purchase bid on the four ramps and 10 lots that ThirdCoast has offered to buy, if city commissioners decide next week to pursue a competitive bid process for what amounts to two-thirds of the publicly owned and operated downtown parking system.

Or they could make an offer to lease and operate the facilities for an extended period, if commissioners decide to do that next week.

Or they could be shut out of the process entirely, if commissioners decide to negotiate a sale or lease deal exclusively with ThirdCoast

Or ThirdCoast, Ellis Parking and the unidentified others could just find themselves waiting, if commissioners decide to do nothing next week.

Those are the apparent options right now, and there doesn't seem to be a clear favorite.

Kimball likes a competitive bidding process for a long-term lease of the properties. Second Ward Commissioner Rick Tormala thinks the city should sell its ramps and lots for $30 million, leaving the lots owned by the Downtown Development Authority out of the deal, and put half of the receipts into an endowment fund that would be designated to help neighborhoods.

Third Ward Commissioner James White wants ThirdCoast to get special recognition before the city opens the bidding to other companies, the same position he favored in the city's attempt to sell the PublicWorksIsland property on

Market Avenue

But 1st Ward Commissioner James Jendrasiak, 2nd Ward Commissioner Rosalyn Bliss and 3rd Ward Commissioner Elias Lumpkins all want more information.

"I would like a much better long-term and short-term evaluation," said Bliss. "There are a lot of questions I still have, even though we've been given a lot of information."

One piece of information Bliss and other commissioners have is that the due diligence preceding a sale would be costly to the city. Kimball and his staff reported the cost during the preliminary stage could easily approach $200,000, with $140,000 of that amount being spent on appraisals of the 14 properties.

"If we successfully achieve a closing of the transaction, costs could exceed $1 million; such cost will dilute transaction proceeds," he wrote in a memo to commissioners.

"If we do not achieve closing, cost incurred by all parties — including the city — up to that point will be lost," he added.

Jendrasiak disputed the validity of that price tag as he questioned whether the city needs outside legal and engineering services that could cost the city close to $200,000. Kimball said the city had already spent $11,000 in staff time since ThirdCoast made its proposal.

Kimball also told commissioners that cities are leasing instead of selling their parking facilities, and gave them a timeline that shows a transaction could take up to two years to complete.

"The city of Grand Rapids is the only city that makes the Vatican look fast," said Tormala. "We need to explore this, but two years is too long."

ThirdCoast principals David Levitt and Brad Rosely have offered the city $35 million to $45 million for the 14 downtown facilities and would offer more if it made financial sense. They also said putting the properties in private hands would mean an additional $1 million a year in tax revenue. But Kimball countered that only 17 percent of that total, or $170,000, would come to the city.

ThirdCoast said it would limit rate increases to inflation, offer free night-time parking, honor all parking and labor agreements in place, and replace all spaces lost to a development.

Commissioners are waiting until next week to take another crack at what to do with the parking system so they can hear what members of the DDA and the Parking Commission have to say about a potential transaction.

A city ordinance requires the Parking Commission to chime in on the ThirdCoast offer, while the DDA owns some of the properties in the proposal. And waiting is just fine for at least one city commissioner.

"I don't think we should rush anything," said Bliss, "especially something of this magnitude."

DDA Leaves Door Open

Most members of the Downtown Development Authority went on record last week as being reluctant to sell seven parking lots to Third Coast Development Partners, the firm that has made an offer to buy a total of 14 public parking facilities in the downtown system.

"I'm a big believer in the private market, but we've developed a model that has worked for 30 years," said long-time board member David Cassard.

But members added that they weren't turning their backs on a transaction.

"By saying we're reluctant, we have not shut the door," said DDA Chairwoman Kayem Dunn.

Only DDA member Paul Mayhue argued that the board should consider a sale, as he said the city desperately needs a cash infusion.

"Right now, we're in a cash-strapped situation citywide," said Mayhue, also a county commissioner who represents a district in the city.

"We have to think in terms of the broad picture," he added.

The DDA owns five DASH park-and-ride lots and two more near Van Andel Arena, and all are included in the ThirdCoast proposal. The board pays Parking Services to operate the surface lots and then retains any surplus revenue after maintenance and operations.

ThirdCoast Principle David Levitt said his firm might also be willing to negotiate a long-term lease for the properties if the DDA and city were interested in doing that.

"Our intent is not to be in land speculation. We do that in another business," he said.

ThirdCoast, which has formed a separate entity for the proposal, has offered up to $45 million for the four parking ramps and 10 surface lots that comprise about two-thirds of the downtown public parking system

ParkersPark Proposal

Parking commissioners last week set aside making a decision on the proposal from Third Coast Development Partners to purchase most of the downtown public parking facilities until they can determine if privatizing the system would benefit the city.

Commissioners said they didn't have enough information or time to vote up or down on the offer from ThirdCoast, adding they would need from six months to a year to fully answer the privatization question.

"We don't want to be viewed as coming out with a hasty 'no,'" said Commissioner David Leonard. "We're playing defense, not offense."

But at least two of the nine commissioners seemed ready to reject the ThirdCoast offer.

Commissioner Kevin Denhof said public parking is an economic tool that has allowed building the lots that support DASH shuttle service and ramps that support new developments such as the arena, art museum and growth in the Cherry Street Landing district.

"How will the city pay for future parking ramps without the (parking) revenue?" he asked.

Commissioner Kathy Clements said she asked at least 25 downtown business people if they favored the ThirdCoast proposal, and she said not one said yes.

"I certainly think this has to go to open bidding," said Clements, a commercial Realtor.

Parking Commission Chairman Jack Hoffman will forward the panel's decision to the City Commission, which will again discuss the proposal next week.

"Our mission is for the community," said Parking Commissioner Lisa Haynes, "and we need to strongly consider that."    

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