Miami lawmakers, facing a $110 million budget gap, are looking at the city’s parking system for revenue to replenish reserves and make bond payments.
Commissioners of Florida’s second-largest city unanimously authorized a Nov. 2 voter referendum to give the administration direct control of the Miami Parking Authority, a semi-autonomous department run by its own board. Taking over would allow the city to lease or sell parking assets without the board’s approval. It may also raise about $100 million by issuing bonds backed by parking revenue or by entering a public-private partnership, City Manager Carlos Migoya said.
Miami isn’t alone at looking to leverage parking assets as U.S. municipalities face budget shortfalls of as much as $83 billion through 2012, the National League of Cities said. Los Angeles, Pittsburgh and Harrisburg, Pennsylvania, have considered parking leases. They would follow Chicago, which got $1.2 billion of upfront payments from private investors in 2008 when it leased its parking system for 75 years.
“When everything was going great, we wouldn’t even look at the parking authority because we were happy and satisfied with whatever money they gave us,” Miami Mayor Tomas Regalado, who was elected in November, said in an interview. “It’s time now to look at every option.”
The Miami Parking Authority contributed $2 million to the city in 2009 and expects to transfer around $7 million in 2010 after it trimmed expenses and increased parking fees, said Arthur Noriega, its chief executive officer. Revenue grew 3.4 percent to $13.4 million in the first seven months of fiscal 2010, according to the authority’s monthly financial report.
The city might sell additional bonds backed by parking income, Regalado said. The city also has had “many offers” to enter into public-private partnerships, he said, in which an outside operator would lend the city money using parking assets as collateral.
“We just feel that we needed to have all the options available so we can decide what to do, if anything, with the parking assets,” Regalado, 63, said of the city commission’s action on July 29.
Miami, whose population of about 433,000 is second in the state to Jacksonville, faces a $96.5 million operating deficit in fiscal 2011, which begins Sept. 30, and another $14 million shortfall from deferred capital expenditures, Migoya said at a commission meeting July 22. It plans to close the gap by cutting salaries greater than $40,000 by 5 percent to 12 percent, reducing pension and health benefits and raising city fees.
Use of Proceeds
Regalado said no money from parking assets taken over by the city would be used for operating expenses. Instead, he said, proceeds would fund capital improvements, bond payments and be used to replenish budget reserves.
Reserves are projected to fall to less than $20 million by the end of the fiscal year, after the city fills its budget gap, from $120 million in 2001, Regalado said. The city needs $90 million of reserves to comply with an ordinance adopted after a 1996 fiscal crisis left the state overseeing its finances.
The parking authority manages more than 30,000 spaces and 11 garages over the city’s 34.3 square miles (55 kilometers). The department appoints its own board, draws up its budget and sets parking rates, all of which must be confirmed by the city.
The parking board approves revenue-bonds sales, which are then issued by the City of Miami, Noriega said. If the authority were to be taken over, any outstanding debt would remain backed by parking revenue, said Larry Spring, Miami’s chief financial officer.
The authority’s current autonomy makes bonds backed by its revenue more attractive to investors, said Noriega.
“We’re a little less politicized than a city department and we’re able to be more efficient,” he said in an interview.
Moody’s rates an October sale of Miami parking revenue bonds A2, its sixth-highest grade. The rating was recalibrated this year from A3 in a Moody’s review of its grading scales.
There are about $65 million of outstanding Miami parking-revenue bonds, Noriega said. A 5 percent 30-year security sold in October at 97.4 to yield 5.2 percent traded as high as 102 last week to yield 4.9 percent, according to data compiled by Bloomberg.
The City of Miami’s unlimited general-obligation bond rating was cut one level on July 1 by Moody’s to A1. The evaluator cited its operating deficit and pension costs, which will consume about one-fifth of the $514 million fiscal 2010 general-fund budget. Standard & Poor’s, which doesn’t rate the parking bonds, also cut the city’s rating on June 16 by two levels to A-, its fourth-lowest investment grade.
The U.S. Securities and Exchange Commission is investigating City of Miami bond sales in 2007 and 2009 for whether officials properly disclosed budget gaps.