Scranton council will cast final votes tonight on Mayor Bill Courtright’s plan to get the city out of the parking business and restore creditworthiness as a path to recovery.
The monetization plan, one of the city’s biggest and most complicated deals, calls for the city to turn over its parking garages and meters to a nonprofit firm, National Development Council, and remake the downtown parking landscape by bringing the owner of the Marketplace at Steamtown, John Basalyga, into the transaction.
Council unanimously introduced on June 16 and advanced on June 23 seven Courtright administration ordinances underlying the parking deal. Those ordinances are on the agenda for third and final votes at council’s regular weekly meeting tonight at 6:30 p.m. at City Hall.
While council members have raised various questions about parts of the mayor’s parking plan, none has expressed outright opposition to it. Most said the plan is an inevitable outgrowth of the 2012 default on Scranton Parking Authority debt that’s guaranteed by the city, and that led to a black-mark receivership over SPA garages. Councilmen also said that the mayor’s deal is the best, and only, deal the city could make.
“We’re fine-tuning it,” Council President Joe Wechsler said of council’s queries to the administration. “I’m comfortable with it. I’m looking for better ways to explain it. Doing nothing (and continuing with the status quo) is not an option. Whether you’re in favor of the default or against the default, this mess has to get cleaned up.”
That the administration and parking authority did not get an appraisal of the Electric City garage before deciding to sell it for a $1 to Mr. Basalyga’s firm, Steamtown 300, does not appear to be a fatal flaw for council.
“I believe the deal with Electric City, even without an appraisal, is the way to go,” because it brings 500 monthly parking spaces at the mall under the NDC umbrella, Mr. Wechsler said.
Appraisals of parking garages occur infrequently, and when done are viewed as special-use facilities, according to William “Ted” Anglyn, president of Anglyn Property Advisors of Marietta, Georgia, which specializes in commercial real estate services and consulting, including distressed assets and parking structures and lots.
An appraisal of a parking garage likely would involve an income analysis, which would “forecast revenue to be generated by the facility, the likely supply/demand (occupancy), the cost to operate the property, and how the market will convert that property’s income stream into a supportable value indication,” Mr. Anglyn wrote in a recent post on his firm’s website.
According a report for the city by Desman Design Management issued in June 2015, the Electric City garage had total annual revenues from monthly and transient parkers of $395,169 in 2013 and $335,702 in 2014; and $414,162 projected for 2015. This garage had expenses of $114,869 in 2013 and $120,547 in 2014; and $118,342 projected for 2015.
Councilman Bill Gaughan has questioned whether the deal is vague on fees that would be paid from financing proceeds. An ordinance authorizing up to $47 million in city debt in general obligation notes approves the appointing of agents and professionals, the payment of expenses, and for certain officials to do certain necessary “acts and things.” The ordinance would authorize appointment of city solicitor Jason Shrive as a special counsel, as well as “other professionals as required.”
Mr. Gaughan also asked how the city came up with the $4.5 million payment to Steamtown 300, and $348,000 in NDC annual rent payments to that firm. In an email reply, William Conaboy Jr., the SPA/city lead attorney on the deal, said those figures were the result of negotiations, and Desman used a standard formula to determine how much a parking space costs per year based on operating expenses and maintenance expenses. A typical operating expense ranges from $250-$500 per space per year, depending on level of automation used. Scranton historically has had an operating expense exceeding $400 per space per year, but Desman thinks it should be $360. NDC’s contractor that will run the system, ABM Parking, thinks it can operate it for about $360 per space per year, Mr. Conaboy told Mr. Gaughan.
Regarding the $4.5 million payment from the city to Steamtown 300 for NDC’s use of 500 mall spaces as city monthly parking, Mr. Conaboy said Steamtown 300 wanted an unspecified, much higher amount and only 15 years of exclusivity. “We negotiated way down to $4.5 million and extracted an additional 7.5 years of exclusivity.”
John Cognetti, of Scranton-based Hinerfeld Commercial Realty, said the city is stuck in a problem of its own making developed over many years. Mr. Cognetti recalled that as soon as he heard last year that the foreclosed mall, which had been built with public financing, sold for $5.5 million, he said the new owner could undercut SPA on monthly parking spaces and collapse the parking authority. With 2,414 parking spaces, the mall has nearly as many as the five garages combined, 2,659.
“The mayor is trying to get the taxpayers out from under it (SPA), but all we’re going to do is borrow more money,” Mr. Cognetti said. As debt service payments will come out of city budgets, “who’s going to end up paying the freight? The taxpayers.”
Contact the writer: jlockwood@timesshamrock.com, @jlockwoodTT on Twitter
COUNCIL ORDINANCES
Scranton City Council tonight will cast final votes on the following Courtright-administration ordinances underlying the mayor’s parking monetization plan:
• To authorize the concession agreement with National Development Council, which will hire a firm called ABM Parking to operate the system.
• To of up to $47 million in debt in general obligation notes to finance the parking deal. This amount is a ceiling and this issuance would be about $40 million for the following: to refinance stranded Scranton Parking Authortity debt; to get funds to pay Steamtown 300 for use of 500 mall spaces and for repairs of Electric City garage that Steamtown 300 is buying for $1; to provide $1.75 million for repairs to city firehouses; and to pay costs and fees.
■ To repeal a failed parking tax.
■ To extend the SPA’s existence 50 years.
■ To authorize increases in parking-meter rates.
■ To authorize increases in parking-meter fines.
■ To authorize the new operator to enforce parking regulations, including using a tire boot or towing.
Details of deal
Scranton Mayor Bill Courtright’s parking deal intertwines the city, Scranton Parking Authority, the nonprofit National Development Council and the private Steamtown 300, which is owned by Marketplace at Steamtown owner John Basalyga. The complicated transaction involves the following:
■ The city will lease garages and meters to NDC and receive at least $28 million in an upfront payment; the city will use this money to pay down the $53 million in debt owed by SPA but guaranteed by the city.
■ The city will refinance SPA’s leftover “stranded” debt by issuing new city debt in general obligation notes at current, lower interest rates.
■ The deal will end the city’s annual bailouts of SPA debt that SPA can’t pay, as well as end a costly receivership that has been in charge of the five SPA parking garages — Electric City, Linden, Medallion, Casey and Connell — since a 2012 default on SPA debt by the authority and city.
■ NDC is issuing its own bonds of up to $49 million, also a ceiling, to raise the money to pay the city the upfront lease payment. The city won’t be on the hook for NDC debt.
■ The city will sell the Electric City garage for $1 to Steamtown 300. This firm will lease the garage back to SPA, which will assign it to NDC to continue operating it as a city garage. NDC will get use of 500 of the 2,414 parking spaces at the mall to operate as a city garage, and oversee the rest of the mall’s parking.
■ The city will pay Mr. Basalyga’s firm $4.5 million for him to give up those 500 mall parking spaces and to get him out of his monthly parking business that has been undercutting city garages since last fall.
■ The city will pay $2.85 million toward $5.1 million in immediate repairs needed at the Electric City garage that Steamtown 300 will undertake. This firm also will assume long-term renovation costs of the Electric City garage.
■ NDC will pay rents totaling $348,000 a year to Steamtown 300.
