Los Angeles' top budget analysts are recommending that the city privatize 10 public parking garages to help close a nearly $200-million budget shortfall, hoping that such a deal could net between $100 million and $200 million.
Mayor Antonio Villaraigosa recommended privatizing half a dozen garages in his budget proposal in April but met resistance from the City Council, in part, because of the political backlash that occurred in Chicago after that city auctioned off garages and meters, driving up parking rates.
But support has grown as L.A.'s tax revenue has continued to drop. The mayor and council are already considering the elimination of 1,000 jobs. Privatizing the garages would be one of their few options to raise a major amount of revenue quickly, although an auction would probably not close until the late summer or fall.
"This is a critical piece of our strategy to maintain the city's financial standing and credit rating," said City Administrative Officer Miguel Santana, the top budget analyst at City Hall. Santana made the recommendation with Chief Legislative Analyst Gerry Miller, the council's budget analyst.
The proposal is scheduled to be considered by the council's Budget and Finance Committee on Monday. If approved by the council and mayor, the transaction would allow the city to use a portion of its $189-million reserve fund to close this year's budget shortfall and later replenish the reserve fund with the proceeds from the privatization of the garages.
Unlike in Chicago, Santana and Miller are not recommending privatizing city parking meters -- that would probably face fierce opposition by some council members. They also call for L.A. to retain authority over parking rates at the garages, although parking costs would almost certainly increase.
Under the proposal, the city would request bids for a long-term lease -- potentially up to 50 years -- of 10 parking garages, allowing them to be operated and maintained by a private concessionaire that would retain the bulk of parking proceeds. In return, L.A. would receive an immediate lump-sum payment and also could retain a small negotiated share of future proceeds.
Privatizing the facilities also would allow the city to pay off the $59.9-million debt on the new parking garage at Hollywood & Highland and the $35.5 million still owed on the garage at the Cinerama Dome, both in Hollywood. The transaction would include the city's downtown parking garage at Pershing Square, as well as garages in Westwood, Sherman Oaks, Van Nuys, Hancock Park, the Westside and Studio City. Combined, the garages have 8,398 spaces.
A number of potential investors, primarily financial firms with special funds devoted to government infrastructure, have shown interest in the garages despite the weak economy, the written recommendation stated.
A recent financial analysis of the city's parking garages determined that a private operator could run them more efficiently and more profitably.
"It's the right thing to do and is an effective use of an asset," Santana said. "We don't have the capital to invest in our garages."