The Swarm

Mix it up with The Bee's editorial board.

March 14, 2012
On parking deal, Sacramento has few guideposts to follow

Not only is a potential parking deal essential to financing a new arena in downtown Sacramento, its success -- or failure -- could also point the way for cash-poor cities across the country.

That much is made clear again in a new piece on Atlantic Cities, the municipal policy website of the venerable magazine. "Is There a Smart Way for Cities to Privatize Parking?" the article's headline asks.

It points out that Sacramento could become only the third major U.S. city to privatize its parking. As author Nate Berg details, "the two others -- Chicago and Indianapolis -- have had wildly different experiences with their privatization schemes, paving an uncertain path for Sacramento."

Chicago is widely viewed as a cautionary tale. Its 2008 plan leased the city's parking meters for 75 years for a one-time payment of $1.16 billion, which it immediately used to fill budget holes and pay for everyday services. The private company jacked up rates and in its first year made a profit of $32 million, Berg says, while the city is stuck with a 75-year contract.

Indianapolis is seen as a success story. In 2010, the city turned over parking to a private firm for $20 million up front and revenue sharing. In the first full year of the 50-year deal, the city's parking-related revenue hit $1.4 million, more than double the average in recent years. The private company raised rates, but it also improved technology and convenience, Berg says.

Sacramento, however, needs much more cash up front than Indianapolis received, in the neighborhood of $230 million of its $255 million share of arena construction costs.

It is looking at two general approaches: a long-term lease with a private company that would pay the city up front, or a city-created nonprofit that would borrow against future parking revenues.

There are pros and cons to both.

The long-term lease would put more of the risk on the private operator, if future parking revenues don't meet projections. But it would tie up a city asset for probably 50 years. And the city would likely give up some control over parking rates.

The city-affiliated nonprofit would let the city keep control over parking rates and the workforce -- which makes it attractive to some City Council members. But if revenues don't pan out, the city would face more risk, and in a worst-case scenario might have to dip into its general fund to repay bondholders.

Berg says that Assistant City Manager John Dangberg, City Hall's point person on the arena, is "trying to learn as much from Indianapolis' successes as from Chicago's missteps."

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About The Swarm

The Swarm is written by members of The Sacramento Bee's editorial board. They meet daily and are separate from the newsroom. Views included here are those of individual writers, and do not necessarily reflect those of a majority of the board or the positions expressed in The Bee's editorials.

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