No Takers Yet for Los Angeles Parking-Garage Lease Proposal

SAN FRANCISCO — Los Angeles Mayor Antonio Villaraigosa’s plan to lease city garages to private investors to raise money that would close a year-end budget hole and defease bonds is on the rocks.

The public-private partnership proposal that would lease nine parking garages to raise more than $54 million in revenue already included in this fiscal year’s budget has attracted no bids after being tweaked by the City Council last month.

“It is certain that proceeds from this transaction will not be received in the current fiscal year because of the time frame,” the city’s administrative officer, Miguel Santana, said in a report released Friday. “This office continues to recommend pursuing a P3 parking transaction to strengthen the reserve fund and defease the debt.”

The city has two parking-system revenue bond series totaling $94 million that would be defeased as part of the P3 proposal. As a result of tight budgets, more states and municipalities are looking harder at public-private partnerships as a potential way to raise revenue more efficiently.

Santana said Los Angeles received no bids for a concession agreement modified by the City Council in January. Council members changed the plan to keep parking rates from rising after getting complaints from local business leaders.

The city administrative officer said he will recommend that the council either adopt a concession agreement that would maximize assets or abandon the mayor’s proposal.

“The P3 for the city’s parking structures offers the most immediate and cost-effective option for maximizing the value of these structures in a manner that will ensure these facilities remain operational for the next 50 years,” Villaraigosa said in a letter to the council last month.

A spokesperson for the mayor did not return a call for comment. A working group charged with handling the P3 will seek direction from the council in a closed session next week. Even if the council moves forward on an improved agreement, the tight time-frame would likely push the revenue from a deal beyond the end of the fiscal year on June 30. Once an agreement is released, responses would be due in six weeks and the winning bid would have a 90-day escrow period.

The council already approved $33 million of cuts to make up for the potential loss from a canceled P3 plan. But the city administrative officer is now expecting an additional $25 million, leaving a $54 million hole in the budget largely due to a fall-off in tax collections. The council has taken a piecemeal approach to fixing the budget, rejecting furlough days for city employees and some other proposed fixes.

Santana said in the report that his office is working on solutions to the deficit without having to dip into the reserve fund. He said there are seven possibilities before the budget committee that could generate between $13 million to $18 million for the general fund.

Having started the fiscal year with a $490 million deficit, Los Angeles expects a $300 million budget deficit next fiscal year, according to the mayor.

Santana has told council members that it is important this year to take extra care to shore up finances because of the potential for a weak municipal bond market.

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