The cost per space caught my eye — It was a tad lower than I have been seeing, so I read the story.
The City of Champaign has cut a deal to build an $11.9 million garage (600 spaces). In exchange a developer is building a building with condos, commercial, and retail space nearby. One of the problems is that the city committed to having the garage before the building is completed later this year. The haven’t issued a contract yet. The other problem concerns that fact that they had budgeted only about $9 million.
They are going to try to negotiate with the builder and get the price down (I doubt if they will drop 20%) AND try to get them to move up their delivery date a year. Someone in Champaign will be holding their sides in laughter.
I often wondered about these deals with private developers. OK — There isn’t enough parking, so the city provides the parking and the developer provides the building. But if the building is such a good deal, why should the tax payers go on the hook for nearly $12 million. It just doesn’t make a lot of sense to me.
My guess is that the city has already given the developer some tax breaks, and probably some corners have been rounded on the planning side. They want the building. Fair enough. But why shouldn’t the developer build the parking structure, too? Its probably on city owned land and the city could give a long term lease to the developer. The developer could build the garage, run it, and give the city some rent. In 30 years, or whatever, the garage could inure to the city.
In this case, the city is in debt for 30 years. The chances are they won’t charge enough to park in the garage (or are probably giving cut rate parking to the developer for his building tenants), and will have to supplement the garage costs with tax money. Mazie living on her fixed income at the edge of town will have to pay for a parking garage and in part the related development.
Does anyone out there think this makes good long term fiscal sense?
JVH
2 Responses
The city wouldn’t be in debt for 30 years, or any years if it long term leased the property to the developer. The developer would have to arrange construction financing for the actual building of the garage and would own the building but not the land. The collatreal is the building plus the 30 year lease. Long term land leases are acceptible loan collatreal by financial institutions.
Regarding the city sharing in the increasing parking rate income over the 30 year period. The land lease, if it was drawn up by a good attorney, would include an annual CPI increase, and could even be tied to the percent of rental increases made each year by the developer.
You might want to inquire as to the details of the land lease to determine if its a good deal for the city or not. The leasing of city property is not a bad thing as long as it is carefully thought out.
Richard is correct. We are currently developing a 650 space Automated Parking Facility for a Municipality in the New York region with a similar approach.
We have a 99 year ground lease from the Municipality for the site (1.44 acres). We are fully funding the development, debt and equity; it’s not costing the Municipality one cent.
In fact, the site for the new facility is currently used for a limited amount of commuter parking that generates a nominal return to the Municipality, which they will obviously lose during the construction period. We are therefore paying them four years of the future projected parking revenues at commencement of construction, which is a multiple of their potential shortfall, and gives the town a boost to their coffers before the new facility is even in operation.
We will operate and maintain the facility and pay the Municipality a percentage of the gross income annually, which in effect becomes the “rent” for the ground lease.
The facility will be primarily for use by commuters (75%), the remaining for local transient use for shoppers, local business people, etc.
An interesting aside to this story is that the Municipality is desperate to solve their chronic parking shortage which is severely impacting the township. This arrangement solves that problem, at no cost to the Municipality or tax payers and has the added benefit of attracting more people into the township because of the ease and availability of parking. A bonus to the local business owners, added ratables for the Municipality and readily available parking immediately opposite the railroad station for commuters. A win-win for everyone!