HARRISBURG, Pa. -- A 40-year public-private partnership involving Harrisburg’s parking assets -- a major component in the proposed financial recovery plan for Pennsylvania’s capital city -- would provide a back-end revenue stream and avoid a Chicago-type fiasco, according to a receivership official.
“What I can promise you is that this will not be like Chicago, where you sit back and say damn, we should have gotten more,” Steven Goldfield, the financial advisor to the Harrisburg receiver’s office, told the City Council on Tuesday night.
Under the “Harrisburg Strong” plan that receiver William Lynch filed with the Commonwealth Court of Pennsylvania last week, the city would lease its parking assets -- garages, lots and street-metered spaces -- to Harrisburg First, a consortium of Guggenheim Securities, Piper Jaffray & Co., AEW Capital Management and Standard Parking Corp.
In Chicago, former Mayor Richard Daley struck a 75-year deal in 2008 for about $1.15 billion upfront. Parking rates quickly quadrupled. Much of the money went to balance budgets, leaving little remaining to show for the deal.
“It seemed like a pretty good deal at the time, but after a while, the sense was like we should have gotten $2.5 billion,’” said Goldfield, an attorney with Public Resources Advisory Group.
A 40-year lease that includes back-end financing is more suitable for Harrisburg, according to Goldfield.
“The Jacob Frydmans and Morgan Stanleys of the world came in with 75-year deals,” he said. Frydman, a New York real estate developer, was an early bidder for the parking assets.
“This isn’t all perfect -- we didn’t have the greatest hand to play -- but we took the hand and did the best we could with it,” said Goldfield. “Cash flows from three different levels are coming into this city.”
In the Harrisburg transaction, the Pennsylvania Economic Development Financing Authority will own the facilities and issue tax-exempt bonds. The state will lease more than half of the parking spaces, which Janney Capital Markets called “a key underpinning of the transaction.”
About $99 million of the proceeds, along with some reserve fund balances, will be used to defease or retire $106 million of parking debt.
Payouts to the city from the Harrisburg Parking Authority have plummeted from about $5 million in 2008 to roughly $250,000 last year, with the same amount expected in 2013.
Councilman Bruce Weber, however, worried about Harrisburg being stuck with a raw deal in the end. “We don’t have the deal, we have a term sheet of the deal,” he said. “Terms can change.”
The parking lease and the sale of the incinerator are the lynchpins of the recovery plan. The Commonwealth Court will hold a hearing on the plan next Thursday.