As Nashville backs away from parking privatization, Metro Council eyes $750,000 for study

Photo by Joe Sonka

As a Metro Council committee eyes the possibility of budgeting $750,000 for a study on Louisville’s public parking assets and how much revenue could be added by their privatization, the mayor of Nashville announced on Friday that he is backing away from a similar plan that would have nearly filled its $38 million budget shortfall next year.

Metro Council has three more weeks to pass a budget for the next fiscal year beginning July 1, as its budget committee continues to pour over Mayor Greg Fischer’s budget proposal from April that cut over $25 million from departments and services to make up for a shortfall originally estimated at $35 million.

The newly created ad hoc committee on efficiencies, chaired by Councilman David Yates, D-26, has focused on the possibility of privatizing the city’s parking assets managed through PARC as a way to immediately infuse Metro Government’s coffers with tens of millions of dollars.

Attorneys and national parking consultants Michael Smith and Skip Stitt testified before the committee two weeks ago, arguing that a privatization deal could be a significant revenue generator for the city as a private company improves its parking infrastructure and efficiencies.

Saying that privatization could “free up tens of millions of dollars” for Louisville as it deals with increasing pension costs, Yates said that he would look to add money in next year’s budget for an RFP so a company could do an extensive examination of the city’s parking assets and what a public-private partnership (P3) deal could bring to the city in revenue.

Asked what such an RFP would cost, Smith said the city would likely have to pay a consulting firm like his at least $750,000 upfront, with possible additional charges later.

However, the Fischer administration has expressed skepticism toward the idea of a parking P3, asserting that doing so with PARC’s assets would hurt the city’s ability to attract new businesses and may require the council to approve additional tax incentives or expenditures for development projects to build their own garages.

Additionally, some cities like Chicago have regretted entering into such deals after projections turned out to be off-base, while others like Cincinnati — and now Nashville — considered privatization and opted to pass.

Councilman David Yates, D-26

A parking expert that testified before Yates’ committee in March estimated that the city’s parking assets could be worth as much as $170 million — though such a sale or contract could take many forms.

Some cities entering such private partnerships receive a large upfront payment and share little to no revenue in future years, while others have opted for smaller payments upfront in exchange for a larger share of revenue or guaranteed annual payments from the company.

In the committee meeting last month, Smith and Stitt noted that they were both hired by Nashville to evaluate parking P3 proposals, which Mayor David Briley began to push for last year.

Under Briley’s plan, Nashville would have received $34 million upfront and a total of $300 million over 30 years through future revenue sharing and guaranteed annual payments, all while the company promised to improve efficiencies and double the amount of metered street parking to boost revenue.

However, this privatization plan failed to gain significant support among Nashville’s council members and attracted criticism from some — including his three opponents in the mayoral race this year — who said it would rip off the city. While he still supports the P3 plan, this criticism led to Mayor Briley’s decision on Friday to hit the “pause button” on the deal.

“It is clear to me that residents still have questions about the merits of this proposal,” stated Briley. “Residents need more time – and it is unfair to the public and to Council to rush this process. Worse yet, others are using misinformation to further confuse and scare people. It’s politics at its worst.”

Other cities have run into trouble with parking privatization deals over the last decade, as Insider Louisville reported in March. Most notably, Chicago sold all of its parking assets in a 75-year deal in 2008 for $1.2 billion, with that company now raking in 100% of revenue and on pace to recoup its entire $1.2 billion investment by 2021.

Indianapolis received $20 million upfront in its 50-year parking deal, but its revenue-sharing agreement is woefully underperforming compared to what was first estimated in 2010, leading some city leaders to call for exercising a clause to back out of the deal next year at a cost to the city of $20 million.

Faced with a $34 million budget shortfall in 2013, Cincinnati also considered privatizing parking assets to bring in an $85 million upfront payment but ultimately decided against it, which many city leaders are now thankful they passed on.

In last month’s efficiencies committee meeting, Smith defended aspects of the Chicago and Indianapolis deals, as companies in both cities significantly improved the infrastructure and technology of parking meters and payment methods, thus significantly improving overall revenue — citing a 1,000% boost in Indianapolis.

However, PARC has already devoted a large amount of its revenue and bonding toward modernizing meters and payment methods in Louisville, which has been cited as a reason against privatization by the Fischer administration. Under questioning from Councilman Bill Hollander, D-9, the chair of the budget committee, Smith stated that Nashville is well behind Louisville when it comes to modernizing such assets.

Smith added that for any city to effectively launch a parking privatization plan, it must build political consensus around the idea and be clear about its benefits, which helps gain the confidence of investors and discourages constituencies from being opposed to it at the onset, like Chicago.

Yates did not return a request for comment on whether or not he has met with the Fischer administration to push for either parking privatization or a $750,000 RFP to study the idea being included in next year’s budget.

Councilman Anthony Piagentini, R-19

A spokeswoman from Louisville Forward, the economic development arm of the mayor’s administration, told Insider that PARC has budgeted $30,000 for an RFP to do an efficiency study on parking, which is likely to be issued in July.

Councilman Anthony Piagentini, R-19, the vice chair of the efficiencies committee, told Insider that examples like Indianapolis show that a P3 deal could be a big win for Louisville that helps the city maximize parking revenue, while it learns from others’ mistakes.

“I do believe there (are) enough examples of what works and what doesn’t to help ensure we don’t make any major mistakes,” wrote Piagentini. “Whether we do this idea or not, I am in support of putting PARC more directly under the supervision of Metro Council and the budget process.”

With additional council oversight over PARC, he added: “We should continue to use that money for development when it makes sense but Metro Council may want it for other purposes as well. Currently, we don’t have the ability to make those decisions. It is in the hands of a small group of Mayoral appointees who don’t have the same accountability to the people that we have.”

The seven-member board of directors for PARC consists of four mayoral appointees that must be approved by Metro Council, plus three individuals who serve based on their positions. Those individuals are city budget director Daniel Frockt, Louisville Downtown Partnership Executive Director Rebecca Matheny and Louisville Forward’s assistant director Laura Ferguson.

The council must approve a budget for the next fiscal year at its meeting on June 25.

This story has been updated to detail the makeup of the PARC board.