Los Angeles City Council kills parking deal

Council voted unanimously to end the city’s pursuit of a deal to lease nine public garages to private investors, making Los Angeles the second major city to see a parking deal die in city council. Mayor Antonio Villaraigosa had warned that ‘the modifications, exceptions and carve-outs’ the council had written into the parking contract would seal its fate.

The Los Angeles City Council voted unanimously to kill a plan to lease nine of the city’s parking garages to private investors, dealing a final blow to a bidding process already over a year in the making.

“As of today, it’s officially over,” said Brian Walters, a clerk with the Los Angeles City Council.

The council’s unanimous decision, 12-0, makes Los Angeles the second city to see a parking deal die in city council chambers. Last October, the Pittsburgh City Council rejected a $452 million offer for its parking system from JPMorgan Asset Management.

In Los Angeles’ case, the city council decided to kill the deal after a working group in charge of the deal indicated that the council’s numerous modifications to the parking lease agreement would make it untenable to private investors.

“The negative response to the modified draft concession agreement should not be a surprise to anyone who has been following this issue,” Los Angeles Mayor Antonio Villaraigosa said in a sharply-worded letter to the city council Monday.

“The modifications, exceptions and carve-outs, allowed at the request of a few members, rendered a potentially lucrative city asset worthless – precisely as we were repeatedly warned,” Villaraigosa said.

Villaraigosa had championed the deal as the best way for Los Angeles to raise $53 million to plug a gap in the city’s fiscal year 2010-2011 budget, warning that the proceeds would help avoid painful spending reductions and employee furloughs.

More than a dozen investors, including Starwood Capital Group, Bainbridge ZKS and Kohlberg Kravis Roberts, had expressed interest in the deal, according to the Los Angeles Times. JPMorgan, Loop Capital Markets and Scott Balice Strategies had advised the city on the deal.

With the parking deal dead, the city council instructed Los Angeles’ City Administrative Officer to look for other ways to generate revenue for the gap.

Not all US parking deals have ended in defeat. In November, the Indianapolis City-County Council approved a deal to lease its metered parking spaces for 50 years to an investor group led by Affiliated Computer Services in exchange for a $20 million upfront payment and an ongoing revenue share.

The deal subsequently reached financial close, becoming the third parking deal by a large US city to reach completion, after Chicago’s $1.16 billion parking meter lease in 2009 and $563 million underground parking lease in 2006.

Other parking deals remain active. At the request of the mayor, the Common Council of Hartford, Connecticut will be reviewing a proposed parking transaction in March and has been asked to authorise a request for proposals. And in October, the New Jersey Transit Corporation, New Jersey’s public transportation agency, invited requests for qualifications for a long-term concession of parking lots located next to its bus and rail facilities throughout the state.