Parking Garage Deal One Step Closer to the Grave, As No Company Will Bid
City Administrative Officer Miguel Santana reported today that no bidders were interested in the deal under the terms approved last month by the L.A. City Council.
In other words, we're back to square one.
The city had hoped to raise in excess of $200 million to help close this year's deficit and replenish the reserve fund. Under the proposal, a private operator would take control of nine garages for 50 years, and raise rates to market levels.
But starting in December, merchants in Westwood and Hollywood began to complain that raising the rates would be bad for business.
Responding to those concerns, the city council tweaked the deal to lower the proposed rate increases. That made it a significantly less attractive offer, so much less so, in fact, that not one company would bid on it.
If the deal is dead -- and it looks dead -- it will be because the council did not fully anticipate the blowback from the business community on any of the three separate occasions it voted to move forward with a plan to go up to market rates. That should not have been a surprise in December, but it was.
In his memo to the council, Santana recommends either going back to the original rate structure or scrapping the deal.
Either way, the city won't get the money from the deal this year, which means it's time to make some cuts. Santana reported that the deficit for the current fiscal year is $54 million.
Update, 5:55 p.m.: In an interview, Santana said he will bring forward in March a list of proposed cuts, including $30 million in cuts the council rejected last month.
He also said the deal is not necessarily dead -- it just won't be done this fiscal year.
"We still recommend it," he said. "We still think we should not be in the parking business. We think we should adopt a concession agreement that maximizes value."
In a fit of optimism, Santana also said that this setback should not spell doom for other privatization proposals, including the convention center and the zoo.
"This has its own separate issues and challenges," he said, understating the case significantly.