Private Parking

March 30, 2007
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GRAND RAPIDS — City commissioners could decide next week whether to enter into negotiations to sell many of downtown’s public parking facilities to a local private firm that normally develops commercial real estate projects.

Third Coast Development Partners, the motivation behind the Midtowne Village project being built near Michigan Street’s Medical Mile, has offered to purchase all but seven of the system’s lots and ramps for an estimated $35 million to $45 million.

“That price is subject to an upward revision,” said David Levitt, a principal in Third Coast with Brad Rosely.

Levitt and Rosely have formed Third Coast Public Infrastructure for the proposal. Levitt said acquiring the properties would help expand their business interests.

“We have no objection to paying more as long as it makes financial sense,” he added.

Second Ward Commissioner Rosalyn Bliss also wanted to know if privatizing the parking system would make financial sense for the city. She asked for long-term revenue projections for Parking Services, the department that operates the city’s lots and ramps.

Bliss also wanted to know if the city should open up a potential sale to the highest bidder instead of entering into exclusive talks with Third Coast.

“Philosophically, I’m not opposed to this. But I’m wondering why we don’t open this up to a competitive bid process for other developers,” she said.

Levitt said the sale would give the city a healthy cash infusion at a time of severe budget cuts, and would boost property tax revenue by $1 million a year because the public property would fall into private hands and go on the tax roll. He said Third Coast would extend the DASH system, provide customer discounts, and offer free nighttime parking.

“We believe we can profit from this by expanding services,” said Levitt. “The private sector can do things that the public sector can’t.”

But City Manager Kurt Kimball said any negotiation to sell the facilities would also have to include the Downtown Development Authority, which owns most of the DASH lots, the Grand Rapids Building Authority, which carries about $30 million worth of debt on three of the ramps that would be sold, and the Parking Commission.

“I don’t think this is a solution to the city’s budget problem. Once the money is gone, the parking is gone,” Parking Commission Chairman Jack Hoffman said last week.

Parking commissioners have already debated whether the publicly owned system should be privatized. Most agreed consumer rates would rise if it went into private hands, and ramps wouldn’t be built in advance of developments, like in 1995 when construction on the ramp at Ottawa and Fulton got started before Van Andel Arena was built.

“I don’t believe it’s going to result in lower parking rates,” said Hoffman of changing to a privately held system.

Levitt said parking is not a core function for a city, and other cities have benefited from selling their parking facilities to private firms. But because Third Coast doesn’t want to buy all of the city’s facilities, the city would still be in the parking business and would compete with Third Coast and Ellis Parking Co., the city’s only private parking firm.

“We want to honor all the contracts the city has in place: the labor contracts and parking contracts,” said Levitt, who added that Third Coast would maintain the number of spaces in the lots and ramps it would purchase.

A sale to Third Coast would include the city’s top income producers such as the Ottawa Fulton ramp and DASH lots, which have been forecast to generate a respective $1.4 million and $1.7 million of operational revenue this fiscal year.

Total operating revenue to Parking Services is expected to exceed $10 million by June 30, the end of the fiscal year. The department has roughly $4 million in working capital left after it spent $2 million from that fund to get construction going on a new ramp at Cherry Street and Commerce Avenue.

At the start of the fiscal year, the Ottawa Fulton ramp carried $8 million of debt; the Monroe Center ramp had $19 million; and the Pearl Ionia ramp had just over $4 million.

Levitt said he and Rosely approached 2nd Ward Commissioner Rick Tormala and 3rd Ward Commissioner James White about the potential sale three weeks ago.

“We haven’t been in deep negotiations with anybody in the city. Nothing has gone on behind closed doors,” said Levitt.

“This is a non-mystery project with no confidentiality agreements,” added Tormala.

But Kimball said the first he heard of the proposal was on Monday afternoon, March 26, the day before the commission was to vote on entering into talks with Third Coast. Bliss said she didn’t learn of it until that Monday evening.

“This is not open and transparent,” said Bliss.

Kimball told commissioners not to include any revenue from a possible sale in their upcoming budget discussions, which has the general fund facing a $5 million deficit in the coming fiscal year. He also said he wasn’t sure what the market value is of the lots and ramps that Third Coast wants to buy, but he hopes to have that number shortly.

“It could be $35 million to $45 million, or $100 million to $110 million. We don’t know that,” he told the commission. “I think there will be costs that the developers haven’t brought to you.”

Parking Sale Breakdown

If the city and the Downtown Development Authority agree to sell most of their parking facilities to Third Coast, a total of 4,698 spaces would go into private hands. The city would continue to operate 2,416 spaces.

What follows are listings of which ramps and lots would be sold and which would be kept, and the number of parking spaces in each.

What would go: DASH West Area 7 (464), DASH West Area 8 (105), DASH West Area 9 (500), Pearl Ionia ramp (598), Louis Campau ramp (541), Monroe Center ramp (544), Monroe Place lot (70), Ottawa Fulton ramp (788), Area 1 lot (101), Area 3 lot (62), Area 4 lot (410), Area 5 lot (155), DASH South Area 6 (170) and DASH South 6A (190).

What would stay: Ionia North lot (63), Monroe North lot (128), Scribner lot (160), Area 2 lot (149), DeVos Place ramp (685), Government Center ramp (921), and the ramp at Cherry and Commerce (310) that is under construction.

Note: ITP has an option to purchase DASH South 6A. The lots in the business districts and metered spaces are not in the sale proposal.

Source: Parking Services, March 2007

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