10.25.12
About the Parking System Lease: Harrisburg Receiver Meets with the Harrisburg Parking Authority
by Tara Leo Auchey
As originally reported at Roxbury News
On the morning of October 24, 2012, the City of Harrisburg’s Receiver, General William Lynch, and the Receiver’s financial advisor, Steven Goldfield, held a meeting with various employees of the Harrisburg Parking Authority (HPA) to discuss the impending lease of the City’s parking system to Harrisburg First, LLC.
On October 10th, Receiver Lynch announced that the City of Harrisburg would enter into exclusive negotiations with Harrisburg First, LLC a venture led by Guggenheim Securities and includes also Standard Parking and AEW. Those negotiations began almost immediately; however, the Receiver’s Team has been very private about what the terms of the deal being brokered.
During the 70 minute meeting with about 35 HPA employees, Lynch and Goldfield explained in general the Receiver Team’s approach to the establishing fiscal recovery for the City of Harrisburg declaring the Team’s responsibility is the the City first and not the creditors, as many people believe. Goldfield told the anxious crowd, “The first order of business of this team is to take care of the City, not the creditors. The first order of business of this team to fix the structural deficit.”
After Receiver Lynch opened up the meeting by saying “We’ll tell you what we know, what we think, and where we would like things to go,” Goldfield asked each HPA employee to give her/his name, job position, length of time of employment, and to pose any questions. One by one the people assembled—administrators, maintenance personnel, security officers, cashiers, custodians with a range of tenure from 11 months to 29 years—laid out the same primary concern of job security.
In response to the common worry in the room, Lynch and Goldfield assured them that the Receiver Team shared the same concern as the employees telling them, “Maintenance of jobs is a high priority of what we’ve been doing.” Goldfield said the goal of negotiations with Harrisburg First is to secure a job for everyone who wants one.
Overall, Receiver Lynch and Goldfield asked the HPA employees for patience and trust as the process unfolds.
For videos of the meeting, see:
I'm not a city resident, I live in Mechanicsburg. I also know nothing of the HPA or its operation. With all those disclaimers, I'd like to see if I'm following the logic.
The first order of business is the City's "structural deficit." Leasing the HPA would apparently be a step in that direction, which means to me the HPA is losing money. However, a private entity is not in business to lose money so, that points to the private entity believing the HPA can be a money maker. There are 2 ways to do that: raise prices (income) or lower expenses. From the outside that looks like prices are going up or jobs are going away or some combination of both.
That means the city doesn't see the HPA as a money maker (assuming it's a money loser now) under any circumstance of city ownership. Why not? I honestly hope I'm missing something because the alternative is very, very disturbing.
The City has received $250k, this year from HPA (which is a small portion of the taxes – $1.6 m, and meter revenues – $1.5 m) that it could be receiving if the transaction that is proposed occurs. The reason these amounts are not going to the City is that they are now being used to pay for the City's cash flow borrowing from last year ($1m per year) and to make up for Harrisburg U's inability to service parking debt ($500k per year). In addition, parking tax rate went up and the fiscal crisis is contributing to downturn. The proposal is more akin to a public/public transaction – there is no private equity machine that needs to be fed, and thus while you are correct that parking rates will likely increase, they will likely increase at a slower pace than had a true private concession been brought in. The goal is to improve technology and that will indeed result in less need for jobs, however through natural attrition, that too can be accomplished with minimal job disruption. There is still a long way to go and creditors who are not as concerned about job maintenance will disagree with this approach, however there is nothing disturbing behind the scenes.
Thank you sir. I'm still not sure I'm following you on a couple things. Please forgive me, I'm not a finance/accounting guy. You say the money isn't going to the City and then you say it is going to pay the "City's cash flow borrowing…" Isn't borrowing to meet cash flow needs part of the structural deficit? That sounds like the HPA is already contributing to paying that off. If that's the case, then isn't the $250k over and above the money they're making from meter revenues?
Again, using that, possibly wrong assumption, it sounds like you are also saying the newly privatized garages would now have to pay property taxes which would amount to about $1.6m/year. Is that correct?
Finally, I understand the logic of improving technology and efficiencies. I pointed that out because the original article indicated the receiver pretty much promised no one would lose their jobs but the City would magically make more money by leasing the garages to a non-city entity while that non-city entity also made money on the deal somehow. I just don't see how that is possible. I can't find any information online about Harrisburg First LLC so I can't comment on whether or not your statement about this being a public/public transaction. Again, in the context of this article and the context of the City selling its assets in general, I was under the assumption the bidders were private companies.
You have some really good ideas in this article. I am glad I read this. I agree with much of what you state in this article. Your information is thought-provoking, interesting and well-written.