Paul Bass Photo
When New Haven passes a new budget, Lequane Gormany should still be retrieving quarters from parking meters. Where those quarters end up has become a big question.
The DeStefano administration wants to hand over 25 years worth of meter revenue — worth an estimated $120 million — to a Mayfield, Ohio firm called Gates Capital Partners in return for a quick up-front $50 million to spend over five years.
Mayor John DeStefano calls the unorthodox measure a needed solution in economic hard-times. The deal will enable the city to pass a $476 million budget that avoids laying off city workers like Lequane Gormany (pictured at work on Orange Street) and make progress on improving schools, creating jobs, and keeping streets safe.
The proposed parking meter plan — called a “monetization” deal — has drawn skepticism since DeStefano unveiled his proposed 2010-11 budget on March 1. The budget, which takes effect July 1, needs Board of Aldermen approval.
The plan got its first aldermanic public hearing Tuesday night — and the parking meter deal emerged as a central target of criticism. A prominent citizen watchdog, David Cameron, portrayed the proposed deal as a shaky “mortgage” that could cost the city in the long run. An influential, pro-City Hall alderman, Finance Committee Chair Yusuf Shah, said he’s “concerned” about the lack of details publicly available about the deal, which is still being negotiated. He and Cameron agreed the public needs more answers before such a plan goes through.
Extraordinary Times, Extraordinary Measures
DeStefano offered some of those answers, and his broader reasons for plunging into the murky waters of revenue-stream sales, in an interview in his office.
He said he expects to close the deal within the next three weeks. City budget chief Larry Rusconi is heading the negotiations.
“I wouldn’t look at monetization in the abstract. You have to put it into the context of the extraordinary times we find ourselves in,” the mayor said: declining state aid, successive years of city layoffs and service cuts, the worst recession since the Great Depression.
“Rather than hunkering down and slicing the quality of the public goods we offer here,” he wants to see the city “continue to grow,” he said. The city has launched an ambitious school reform drive; it has been hiring cops. Stopping those plans would hurt the city more in the long term, he argued.
Or as he put it at an unrelated press conference Tuesday, “I don’t believe you move forward by going backwards. New Haven has come too far.”
Under the parking meter deal, Gates Capital would pay the city $50 million right now in return for a guaranteed portion of the money collected from parking meters through the 2035 – 36 fiscal year. The exact amount is still under negotiation, but that portion will probably add up to around $120 million, based on calculating the up-front $50 million’s long-term value, DeStefano said.
New Haven would use that $50 million to help it get through the next four or five years, including avoiding layoffs, other budget cuts, or further tax hikes this year. The $50 million would go into a “Property Tax Stabilization Fund” controlled by City Hall’s finance department. The city would draw between $10 and $12 million a year from that fund, depending on how much state aid it loses, among other factors, DeStefano said.
That gives the city needed short-term cash. The fear is that it could then put the city in a deeper hole the following 20 years when its parking meter revenue flows to Ohio.
DeStefano said he’s working on a way to keep some of that money flowing into city coffers — by increasing how much revenue collectors like Lequane Gormany find in the meters each day.
The city would keep any money it collects beyond the amount it will promise to pay Gates each year under the deal, DeStefano said. He said the city now collects about $4 million a year from parking meters. The city plans to boost that amount first by raising hourly street parking rates from $1.25 to $1.50.
Also, the city plans to replace parking meters with automated machines that other cities have been turning to. The box-like metal kiosks get spread out along blocks that have public spaces. They operate like ATMs. You put in the money; then you get a paper slip you place on your windshield for the amount of time you plan to park. When you leave, there’s no “meter” left with time on it. So the next parker doesn’t get any free time. And the city collects more revenue. (New Haven experimented with the machines on Whitney Avenue in 2006. Click here to read about that.)
In this recession, cities and states have increasingly turned to these deals, selling revenue streams to investors, to plug budget holes. Ratings agencies have frowned on the practice; Moody’s Investor Services, for instance, recently scored the state for relying heavily on such sales. (Read about that here.) In the most notorious case, Chicago sold 75 years worth of parking meter revenue for $1.2 billion. Read about that disaster here.
DeStefano said he was mindful of those perils in pursuing this plan.
The city originally put out a request for proposals in 2008 for a parking monetization deal. It considered leasing its parking garages, among other larger abdication of assets. In the end, it settled on this narrower sale of a single revenue stream; unlike Chicago, the city won’t give up control of setting or collecting parking fees.
DeStefano said the city also consulted with its outside financial advisers, PFM Group of Philadelphia. He said the advice was that the deal, which affects only a small portion of the budget, won’t harm the city’s credit rating. The city has not yet notified ratings agencies about the pending deal, but will soon, DeStefano said.
He also noted that New Haven is resisting taking a far riskier budget-plugging step that cities like Hartford, West Haven, Bridgeport, and East Haven are pursuing: tapping into the city’s fund balance, aka the “rainy day fund.” That’s money left over from previous years that government keep in reserve for emergencies. The city has $17 million in that fund, and wants to preserve it, DeStefano said.
The Greece Of Parking Meters?
Allan Appel Photo
Speakers at the sparsely attended budget hearing Tuesday night before the aldermanic Finance Committee didn’t talk about those details of the parking revenue deal. But they did talk about the deal — and about how they need more details.
Yale political science professor David Cameron (pictured) urged the committee to learn more about the deal before acting. For instance, he asked: What are the year-to-year amounts the city will pay Gates? And how can one accurately project parking meter income?
“It’s like an off the books loan. A mortgage” backed by insufficient information, Cameron argued. “I’m concerned that to the extent it falls short, there will be a deficit.”
Cameron has been an active participant in public debates about the city budget and public safety. He was appointed to a “blue ribbon” panel to review the budget in 2008. He made a suggestion, eventually adopted, to delay some school construction work.
Tuesday night he was one of only a handful of people who showed up to address the aldermen.
“I’m concerned that to the extent it falls short, there will be a deficit.”
“Twenty-five years!” declared Cameron.
“Greece was giving away revenue streams of the future [too],” he said. “That’s what got Greece in trouble too, not parking meters, but airport revenues.”
“If I were in your shoes, I would want more information. I don’t think there’s enough information to make a decision,” he cautioned the aldermen.
“I appreciate David Cameron. It’s congruent with what I feel,” committee Chairman Shah said later. “I’m not saying the city doesn’t have a good plan. But we need to be cautious, and in particular with that proposal.”
Shah added that Aldermen Roland Lemar and Jorge Perez suggested that the committee obtain documentation “on cities currently using this [monetization plan]. We can look at that and get a forecast for New Haven.”