This page is designed to explain the work that has gone in to the parking system monetization process and inform City residents and stakeholders of how the City arrived at the final stages of the transaction.
Parking Authority Monetization at a Glance
Here are some of the key facts driving the responsible monetization process
- Protect the City’s General Fund Maintain City ownership of valuable assets (i.e. garages)
- Set high operating standards to ensure high quality performance (better than current)
- Control and protect the quality of downtown parking and the Parking System
- Ensure the system is well maintained so the City receives it back in good condition
- Future rate increases will be permitted (but not mandatory) and capped at predetermined, fixed amount
The City has control and approval rights over things such as a new operator and incurring parking fee rates above such pre-approved levels
The City will receive ongoing monies since the eventual concessionaire will incorporate a non-profit structure. In addition, there will be revenue share provisions in the concession lease agreement
- The City will receive financial/operating reports on an ongoing basis
Impact at a Glance
The below chart shows the cost of the status quo (blue line) to Scranton taxpayers versus the savings that could be achieved through a responsible monetization of the City Parking System.
For illustrative purposes: “Status Quo” scenario reflects continuing to receive nominal parking tax revenue , parking fines/permits, and parking meter revenues. Also reflects continuing to pay Republic citation issuers, SPA debt service guarantee, capital costs, and Receiver/Trustee fees. “Stranded Debt” scenarios assume a 30 year level debt structure.
As described in the timeline above, a series of decisions by the City Council in 2012 forced the Scranton Parking Authority (“SPA”) to default on payments owed under two loans, one issued in 2009 by Pennstar Bank and another in 2011 by Landmark Community Bank, as well as a June 2012 payment owed by the SPA on parking bonds. The decision to default on the bank loans resulted in over two-years of litigation. The decision to miss the bond payment resulted in the court appointment of a receiver to oversee the operations of the SPA.
As the Pennsylvania Economy League and the City’s financial advisors have correctly pointed out, whenever the SPA cannot make its debt service payments out of its own revenues, the City must make up the difference. Generally speaking, this means that the City will be required to annually budget and pay at least $2.9 million in SPA-related costs. Such City payments on behalf of the SPA will increase significantly over the course of the next 5-10 years if no changes are made.
In December 2014, the Courtright Administration successfully negotiated a favorable settlement and resolution to litigation among the City, SPA and Landmark Community Bank. Around the same time, the City refinanced nearly $4 million in SPA-related loan guarantees owed to both Landmark and Pennstar Bank. The settlement and refinancing efforts were both key aspects of the Recovery Plan and important steps toward restoring the City's creditworthiness. Further, the settlement and refinancing efforts were a necessary first step in allowing the City and SPA to undertake another key milestone of Recovery Plan - the responsible monetization of the City's parking system.
Since settling the Landmark litigation and refinancing SPA-related debt, that the City guarantees, the City, in cooperation with both the City Council and a newly formed SPA, has taken cautious steps toward this important mandate in the Recovery Plan.
Throughout the parking system monetization process, the City has remained focused on the main goals of a responsible monetization, which include:
(1) Monetizing Scranton’s parking system to eliminate SPA-related debt, which the City guarantees
(2) Retaining ownership of important City assets
(3) Eliminating the receivership
The City and the SPA have engaged in an exhaustive process to achieve an outcome that will help continue progress towards recovery and continue to serve the needs of the City's residents, businesses and other community stakeholders.
SPA-related debt guarantee payments currently covered by the City will be eliminated through a successful monetization of the City’s parking system.
Scranton’s on and off-street parking assets will require at least $2 million in capital needs over the course of the next 4-years to remain merely “usable” (i.e. in their current condition). Such near-term capital requirements increase to $15 million if the City were to fully repair its garages in this same period of time (i.e. return the garages to fully-functional condition).
Five years from now, in addition to the above-mentioned near-term capital costs, the SPA (or the Receivership) will need to implement a large parking garage capital plan that will add $1 million-$3 million of new annual debt service that the City will be liable for in addition to the $2.9 million it currently contributes to the SPA’s debt service and high trustee and professional fees the City effectively covers on behalf of the SPA.
One of the fundamental goals and advantages of the parking system concession lease transaction is a shifting of extraordinary capital needs costs away from the City and to the concessionaire.
A responsible monetization provides the City with a more efficient and cost-effective way to serve the parking needs of Scranton while reducing the financial burden of current SPA-related debt paid by the City.
The final concessionaire will be represented by one the nation’s leading parking operators and will be backed by financially sound investors. More importantly, the City has taken great care to narrow its concessionaire choices to only those teams who have expressed genuine interest in improving the City’s financial stability.
What will a responsible monetization look like?
The transaction will take the form of a lease-concession agreement, which means that the City and SPA will lease Scranton’s parking assets (i.e. meters and garages) to a high-quality professional operator. In turn, the operator will pay the City and the SPA an upfront consideration, or payment.
- Under the terms of the concession lease agreement, the City will retain ownership of both the meters and the garages. The City will also retain veto power over key public policy considerations during the term of the concession lease, such as rate setting and certain capital improvement projects.
Upon closing, the City will be able to retire the majority of the SPA’s debt and refinance any stranded, or leftover debt at a more favorable and sustainable rate.
- Moreover, the City will have the opportunity to share in revenue generated from the concessionaire’s operation of Scranton’s parking system.
About the Likely Concessionaire
The likely concessionaire, National Development Council, was chosen after months of exhaustive discussions with as many as 10 potential bidders.
- National Development Council is the oldest national non-profit community development organization in the U.S. NDC’s mission is to help governmental entities to efficiently develop and maintain infrastructure, like parking garages and parking meters, and lessen the burdens of government.
- NDC’s goal is not to maximize revenue for itself, which means that whatever revenue is generated above NDC’s projected management fee and costs will flow back to the City over the term of the agreement. As a non-profit, NDC’s goal is to save local government money, creates jobs, strengthen the local tax base and benefit the community at large.
For more information on NDC:
What will a responsible monetization accomplish?
By entering into a long term lease, the City will be able to significantly reduce parking-system related debt guarantee obligations and redeploy approximately $1.2m-$3m in the near term annually for other essential City needs and possibly much more in the long term.