A Mid-Night Review of Scranton’s Meters

I couldn’t sleep.  I still can’t.  So you know what I did?  I took a walk around Scranton and inspected the meters.  And the results are pretty sad:

I found 20 meters that were straight-up missing.  Either the pole was there and the head was gone, or the entire assembly was missing, leaving just a hole in the ground.  I know what you’re saying: “But Gary, isn’t it possible the meters were removed?”  I thought of that, but consider this: the missing meters were all in the middle of the black, with meters behind and ahead of them.  That’s strange.  Also: there were not any “No Parking” signs.  So: missing meters.

I also found 69 dead/broken/”fail”-ed meters.  Seriously.  SIXTY-freakin’-NINE.

That’s a total of 89 out-or-order meters in the area I reviewed.  And here’s the kicker: the worst blocks – some of them had more than twenty (20!) broken meters – were located either on the U of S campus or around the Gino Merli Center.  Both of these areas see high meter turnover and lots of traffic.  So it goes to reason that these meters, if they were operating, would also be among the highest earning meters in the downtown.

Again, you might be sitting there reading this and thinking “89 broken meters isn’t a lot, I mean there’s a total of 1,100 meters downtown, right?”  And right you are.  But I only looked at meters on 13 blocks, picked at random based on where I felt like pulling over and parking (OK, so I lied.  I took a walk and a drive around the downtown.  It was cold.).

In my “sample area” there are a total of 243 meters.  (No, I didn’t actually count all the working meters, too.  I am relying on the Rich and Associates parking study which includes a map of the downtown meters).  So that means that about THIRTY SIX PERCENT – more than one third – of the meters are non-functional.  And I didn’t pick crappy blocks either.  Here’s a run down of where I inspected:

• Mulberry, Penn and Franklin around the Veteran’s Center
• Penn Ave between Mulberry and Linden
• Courthouse Square
• Madison Avenue from Elm Park Church to Vine Street
• Linden Street from Courthouse Square to the new Science Center

Those are heavily used, heavily trafficked areas.  Even at night, many of these metered spaces are filled with cars (especially on campus).

This is… not good.  And the condition of the meters is also pretty ugly: near the Veteran’s Center the poles were so bent and tilted that I had trouble looking at the meter heads.  Some of the meters were even so broken that they didn’t flash the “dead”, “fail” or “out of order” message.  They simply didn’t do anything.  And the graffiti!  Apparently “Go OG” is a gang that has laid claim to pretty much everything near the Veteran’s Center.

And then there is this little surprise:

It might be tough to read, but that sticker says “Hours of Operation: 8 AM to 6 PM Monday through Saturday”.

I thought Council tabled changes to the hours and days?  If so, why are the meters labeled with the new hours?  And who installed the sticker but didn’t fix the broken meter?  Oh, and one last question: why is http://www.scrantonparking.com on the label?  That website doesn’t work (it is the old SPA site).

So many questions.  So little revenue.

 

“The Receiver Won’t Allow It”

Before we get into a formal rant discussion of my on-going complaints about the SPA’s maintenance woes, let’s take a trip down memory lane:

Summer 2010: SPA pulls a loan from Fidelity to make a debt service payment.

Summer 2011: SPA pulls a loan from Landmark to repay a 2010 loan and make another debt service payment.

April 2012: As a requirement of the Landmark loan, SPA engages Rich and Associates to perform a Parking Study

June 2012: SPA requests more than $1,000,000 from City to make debt service payment. Council balks; SPA tumbles into receivership.

Now, Standard Parking (née Central Parking) operates the five SPA garages.  When they were hired, Standard estimated a profit of $2,900,000 for the year – or roughly $250,000 per month.  After two months on the job, though, Standard revised their revenue estimate and “re-forecasted” for a profit of $2,100,000 – or about $175,000 per month.  However, the Scranton Times reported on 2/12/13 that revenue has fallen short of that mark, by quite a bit.  Let’s look at the numbers:

October 2012: $112,000 or a $63,000 shortfall

November 2012: $91,000 or a $84,000 shortfall

December 2012: $114,500 or a $60,500 shortfall

January 2013: $84,000 or a $91,000 shortfall
(FUN FACT: this is definitely related to the fact that the garages were free for 7 days in January 2013)

So the total shortfall for this period is about $300,000.  If you extrapolate that over the course of a year, that adds up to about $900,000.  Let me rephrase that: at the rate the garages are collecting revenue, annual profit will be in the neighborhood of $1,200,000; not the $2,100,000 projected by Standard.

This is pretty shocking.  Especially given the prior year performance when the SPA was managing the garages.  According to Rich and Associates, the SPA was generating revenue from these garages at a much higher rate.  See for your self:

2009 Revenue: $2,300,000
2010 Revenue: $2,400,000
2011 Revenue: $2,200,000

With Standard in charge, we will see about half the average prior year revenue.  Which is strange.  They are a professional outfit after all, right?  But, let’s take a look at this shit (literally):

See that first picture?  That’s literally a mountain of bird crap.  And that wonderful spot on the floor – right in front of the door? – that’s the shit that tumbled off the rafter.  I literally have to dodge falling bird shit every time I park my car.  No wonder usage of the Downtown garages has fallen off a cliff.

I can tell you that prior to the receivership, the garages were actually well maintained.  I never saw birds – let along mountains of guano – before Standard took over and fired all but one maintenance employee.  There have also been other complaints: a lack of snow and ice removal, a lack of maintenance to common areas (i.e. lightbulbs), homeless people moving into the stairwells, etc.  Again: these problems all seemed to materialize post-receivership.

When you attend a City Council meeting, there is a very common refrain that comes from the dais: the bondholders won’t allow maintenance.  To which I respond: bullshit (pigeonshit?).  The bondholders are in business.  They understand that you can’t ignore customers and still have revenue.  Is it reasonable that the bondholders instructed the Receiver to cut operating costs?  Absolutely.  Do they really, honestly, truly pick up the phone every week and demand that the stairwells not be swept, the elevators remain smelling like urine and the disease carrying, parasite ridden animal feces be left in place?  Absolutely not.

Why?  Because you wind up with the exact situation we have: pissed off parkers who stop using your garages leading to massive revenue shortfalls.

Now, consider this: There are five garages.  They don’t need to be cleaned every day, so it is entirely conceivable that a single person – employed full time, don’t forget – could spend 4-6 hours per day at a single garage and then visit each garage once per week.  That leaves plenty of time for whatever other duties a garage maintenance employee has (getting lunch? washing the truck?).  So why does this seem so difficult?  Here’s the thing that really pisses me off: the garbage cans seem to get emptied every day or two, and they are right by the pigeon problem.  How hard would it be to clean this up?  It is clearly the result of weeks or months of neglect.

What is happening in Scranton is that people are voting with their dollars: the product sucks, so they don’t use it.  It is a classic case of a nickel (the maintenance) holding up a dollar (or $2,100,000+, actually).

And let’s be honest: this isn’t a banks fault.  This is poor management and lax $100 an hour oversight.  Stop blaming everyone and take responsibility, Mike Washo.  I don’t want any more pigeon shit on my head.

 

IZA After Dark: Let’s Take a Look at Stockton

Welcome to the seventh installment of IZA After Dark, in which I relate to you tales of intrigue.  Tonight I am going to deviate from my Scranton-centric focus and look at another distressed city: Stockton, CA.  I don’t want to bore you with the numbers, so tonight we are going to look into some interesting ideas coming out of their bankruptcy filing.  I think that there may be some interesting case law being set which could make a federally protected restructuring of a municipal government (a.k.a. “chapter 9 bankruptcy”) a much more palatable option for taxpayers.

To set the stage, I want to remind you of the main fear around bankruptcy: it protects the bond holders at the expense of the tax payer.  

Keeping that in mind, let’s take a look at the recent activity on the Left Coast:

(You can read some really technical stuff here)

Stockton is embroiled – mired? – in bankruptcy negotiations.  Recently, the city settled a case against an individual for $55,000. The bondholders were not consulted.  Now, the bondholders are arguing that all settlements should require approval of the bankruptcy court (thereby giving them input).  They cite a procedural rule that is standard to most other forms of bankruptcy.  Down this path lies the “doomsday scenario” because this type of input opens the door a rate hike and drastic cuts to service.*

Stockton had a good response, though.  They say that a rule specific to Chapter 9 prohibits the court from interfering with the city’s use of its “property and revenues”.  And since any cash payment necessarily involves the city’s “property and revenues”, the city is free to settle its debts as it sees fit.

On January 30, the court sided with Stockton, opening the door to a “unilateral” restructuring by saying it is up to the city if they wish to seek approval of a settlement, but it is not required as the bondholders allege.  Instead, the court will simply review the settlements the city made in the context of the overall plan.  Then, at the court’s discretion – not the bondholders, a settlement may be rejected by rejecting the entire Bankruptcy Plan if the terms are “unfair”.

Now I want to get technical.  (I’m sorry)

Judge Klein laid out three criteria the bankruptcy plan must meet to be considered “fair”:

1. The Plan must be in the best interest of the creditors and be feasible
2. The “proponent” must comply with rules
3. The Plan must be filed in good faith

I think that by giving the city the authority to settle it’s debts with minimal input from bondholders coupled with the “feasibility” clause open the door to a counter-argument that the tax base is tapped out.  How so, you ask?  Well, let us consider the facts:

• The city is unable to raise additional revenue from the tax base.  They raise rates, people stop paying.
• Alternative revenue measures are insufficient to close the deficit.  Unless, of course, that revenue measure is debt issuance.  In which case future year expenses are increased without a simultaneous increase in revenue (see point number 1, above)
• The City’s is free to negotiate settlements.  This would include renegotiating CBAs and funding pension obligations without input from the bondholders.
• The City could maintain or increase services under the proposed Plan.  This would be indicated by several years of balanced budgets.

If this is right, it is very exciting.  I think we may be on the verge of a legitimate tool to fight municipal distress.

*OK, full disclosure: the  bondholders actually contend that allowing a city to settle its debts without court input could lead to an inequitable liquidation of available revenues.  I.E. picking favorites.

To which I retort:   let’s be honest here.  We have 100 bills that need to be paid to keep the city going, and you can either pay the three largest or the ninety-seven smallest, what do you do?  And what if those 97 small bills are mostly due to local businesses?  Politicians aren’t doctors, but shouldn’t they “first do no harm”? 

We, the unreasonable

We, the unreasonable.

This is a fantastic and thought provoking read.  And it is short to boot!

I stumbled upon this while google surfing earlier.  Behold: the internet.

A Self-Inflicted Swirly?

On Thursday (2/14/13), the Scranton Sewer Authority published a request for qualifications.  They are seeking a valuation on the Sewer Authority so the board can explore a potential sale.

Today, I want to discuss valuation methods.  Because they are not all created the same.

There are three main methods of valuation:

1. Comparable Sale
2. Cost-to-Build
3. Cash Flow

A comparable sale valuation is the most reliable and easiest to perform, but it is not really feasible when you are talking about municipal assets.  Why’s that?  In a word: volume.  There simply aren’t enough regular transactions to review.  In the US, there are about 36,000 municipalities and my research indicates that most publicly owned sewers tend to service 3-5 municipalities.  That means there are about 12,000 – tops – sewer systems in the US.

When you take into account geographic dispersion (i.e. the sparsely populated rural areas that rely on septic tanks and cesspools), that number is likely closer to 7,500.  And it’s not as though you can hop on-line and review listings for sewers.

So, that rules out a “comparable sale” valuation for the SSA.

What about cost-to-build?  That’s tricky because environmental regulations have changed so drastically since Scranton built its sewer system more than 100 years ago.  The cost to build a similar system would likely grossly outpace the actual “sunk cost” incurred by the City.  And then you have questions of efficiency and design: would a modern day system require the same amount of pipe, pumps and stations?  If not, do you still include value of the under-utilized or outdated pipes, pump stations and processing plants that our current system may have?  Because of the difficulty of addressing these issues, a cost-to-build valuation is typically not performed.

That leaves us with a cash flow valuation model.  This is the same type of valuation that Rich and Associates used to value the City’s parking asset.  A cash flow valuation is fairly straightforward.  Here’s a overview:

1. Determine the annual revenue (monthly bill times number of users)
2. Adjust for defaults
3. Apply an annual factor to account for anticipated future rate increases (a.k.a. “revenue growth factor”)
4. Adjust each year’s revenue for the “time value of money” and add up the adjusted annual revenue for a set period (probably 20 years)
5. Profit?

Because you are dealing with a utility, revenue is essentially guaranteed – don’t pay me? I will lien your property – so when it comes to a sale, the sewer authority is less of a company and more of a financial instrument – a purchaser would be buying a stream of future cash flows with a fixed maintenance cost, just like a loan portfolio.  This makes the purchase attractive to companies in low margin industries (such as other utilities!).  They make a profit on volume, not individual customers.  And with about 35,000 users, the SSA certainly has volume.

So what’s the bottom line?  My back-of-the-envelope calculations put the value of the SSA around $75-100 million.  Less an allowance for the EPA requirement to upgrade the treatment plant.  After paying off some debt and splitting proceeds with Dunmore (about an 80/20 split), I think Scranton will pocket somewhere in the neighborhood of $25-35 million – just enough to line the pockets of our Police and Fire unions via the $17,000,000 supreme court judgement and $10,000,000 minimum pension obligation in 2013.  How convenient!

There is one major bright spot in this deal: if the SSA is sold off, it will be regulated as a public utility and will therefore have its rate increases capped at certain levels and subject to review by the PUC.  Does this mean no more 44% single year hikes?  No.  But it does mean more transparency about why they are needed and where the money is going.  That’s always good.

FUN FACT: at the City Council meeting on 2/14/13, Council President Janet Evans stated that a sale of the sewers would allow the cost of upgrades to be spread out over more customers.  This is false.  Sewer users in Syracuse, for instance, would not help defer the cost of upgrades to a system in Scranton.  That’s because sewers are discrete entities – they are not interconnected in the same way highways are.  The only way costs would be spread over more rate payers would be if the new (and EPA required) processing plant was hooked up to multiple sewer systems.  But that can’t happen, because we don’t have any other privately owned sewer operations near Scranton.  Even if Allentown were to “privatize” their sewer, it would not be feasible to ship shit 50+ miles for processing.

FUN FACT #2: I spent three months working on a review of billing practices by a very large Utility during my time in Public Accounting.  When this utility ran new gas lines or electric lines, they carefully tracked the cost of the upgrade and then billed the customers who benefited from the upgrade via a new monthly charge.  There was no cost sharing.  But it’s still cute to see a disabled teacher spout off about how a major organization in a highly regulated industry does business.

IZA After Dark: There’s No “Jingle Mail” for Cities That Wind Up Underwater

Welcome to the sixth installment of IZA After Dark, in which I relate to you tales of intrigue.  This installment is going to look at Scranton’s Parking and Economic Development Report, which was compiled in August of 2012, but largely kept quiet.  So quiet, in fact, that Councilman Loscombe had to inquire to the City Clerk: “Did we get a copy of that report?”.

Jingle Mail is a term that was coined during the Savings and Loan Crisis of the late 80’s/early 90’s.  During this time, mortgage delinquencies rose at an astonishing pace and many owners resorted to mailing the keys back to the banks.  With declining property values and mortgage balances that kept climbing thanks to fees and interest, borrowers decided there was no chance of salvaging any equity and it would be easier to just walk away.

But what happens when it is a city that is left holding the bag?  Who do they mail the keys to?

I ask because of Scranton’s recent “Parking and Economic Development” study, compiled by Rich and Associates in April of 2012 and released to the city in August of 2012.  There are many interesting things in this report, but a few stuck out like… well, like negative findings in a hush-hush report.  Here’s the biggies:

• Scranton’s parking system, including the meters, is valued at about $21,000,000.  SPA owned garages are worth just under $20,000,000.
• Two of the garages require immediate structural repairs totaling more than $5,000,000.  Over the next five years, total capital investment requirements are estimated at $10,500,000.
• The SPA has about $55,000,000 in total outstanding debt.  Interest on this debt is another $50,000,000.  Much of this debt was issued to purchase and refurbish the garages.

Let’s dig deeper:

VALUATION

Rich and Associated valued the city’s entire parking system at $21,626,300.  They arrived at this number by discounting projected future earnings.  This is a very common valuation method and – conveniently – is something I am extremely familiar with.  I found a few of the valuation assumptions… interesting.  To be kind.  Here’s the weird stuff:

• The earnings that were used excluded debt service.  Essentially, the report estimated income and expenses for 10 years, then backed out the debt service obligation and valued that resulting stream of cash flows.  The debt was ignored.
• One alternative method of valuation – the method which is most common in reports such as this – is called the “cost approach”.  This method values the garages at the estimated cost of building an identical property.  In Scranton, this method could not be used because “several of the… garages are… beyond their useful life”.
• The revenue projections included a 10% management fee for the city’s on-street meters.  Prior to its cancellation, a management agreement existed between the SPA and the City.  This is the function the City has contracted with Standard Parking to fulfill.
• The discount rate used in the report was 8%.  Usually in model’s like this, the discount rate should reflect the cost of borrowing.  For Scranton, we know that is about 10%.

According to the valuation, the City’s garages, plus 10% of meter revenue, would be roughly $32,100,000 over the next 10 years.  There’s a big problem with that though, because the SPA has more than $40,000,000 in debt service due over the same period.  Obviously, if the report had included the debt service, the result would have been a $0 valuation.

Even ignoring this glaring deficiency, I have some concerns about the valuation amount.  First, the valuation includes the 10% management fee which is no longer being paid to the SPA.  That added approximately $2,000,000 to the valuation figure, meaning that the garages alone – based on their 10 year revenue projections – are worth about $19,000,000.

My other concern with the valuation is the discount rate.  If we upped the 8% to 10%, the valuation falls by another $1,750,000.

Bottom line: the garages, most of which are past their prime, are worth about $17,500,000.  On a good day. But the total debt is more than the potential revenue, so they are really worth $0.

CAPITAL INVESTMENTS

Two of the City’s garages – Linden Street and Electric City – contribute more than 50% of the parking related revenue.  Unfortunately, these garages are in deplorable condition.  The report states the condition of these two garages is of “principal concern” as any closure in either of these garages would result in a “negative effect on revenues”.

Translation: you’re screwed if these two garages get shut down.

The cost to fix the problems, though, is not exactly peanuts.  The report estimates that the Linden and Electric City garage, along with the brand-spankin’-new Casey garage, will require an immediate investment of $5,450,000.  Regular maintenance and miscellaneous repairs on the other two garages – Connell (which hasn’t been charging for parking lately) and Medallion (where the Hilton parks) – will need about $4,900,000 over the next five years.

Wow!  That’s a lot, right?  Well, it gets better: we don’t have any of this money.  Even though we knew these repairs were needed (this is the third parking study), Scranton pulled a… Scranton.  They planned to fund these repairs by using any surplus generated from operations.  They even had an account set up with the bond trustee.  But guess what?  When you run a deficit, there’s no money to invest in your infrastructure

REPORT RECOMMENDATION: “DISCOURAGE DEVELOPMENT”

You read that right; the report actually recommends discouraging development of alternative parking arrangements in the downtown.  The report states that parking can be “manage[d], regulate[d] and enforce[d]” more efficiently if the City controls 50% or more of the available parking stock.

The City currently controls 61%.  But 12% of that total (more than 1,200 spaces) are located in the Electric City and Linden garages, which are “beyond their useful life”.  So if the City loses them, they will control 49% of the available parking.

So, let’s recap: the garages value is based on a set of questionable revenue projections, and there is no way that the SPA can produce enough revenue to meet the debt obligation they have acquired.  The stock of parking garages is not aging gracefully and requires massive investments just to stay in business.

No wonder the city tried to hide this report.  Yikes.

A Deep Dive into Landmark Bank versus City of Scranton

It appears that the carefully crafted facade of financial stability is beginning to crumble.  On Friday, Landmark Community Bank sued the City of Scranton for approximately $2,700,000.  Interest is accruing on this balance at the rate of $339.50 per day.

Wow, you might say, that’s a lot of money.  What’s going on here?

Well, dear reader, let me lay out a timeline.  It starts WAY BACK in September 2011:

• July 2011: with cash running short, Scranton becomes aware that they have a large debt service payment due to the Parking Authority.  This is because of the SPA’s deficit.  Scranton begins searching for a loan.
• August 2011: during a meeting with Paul Kelly and Ryan McGowan, Landmark is told that City Council would not guarantee the note, but the SPA could pledge a “management fee” (from the operating agreement) as collateral.
• August 2011: Paul Kelly promises that City Council cannot terminate the operating agreement.
• September 2011: City Council acknowledges the Landmark loan at a weekly meeting.  Cash is disbursed to the City by the Bank.
• March 2012: Council President Janet Evans and Solicitor Boyd Hughes make “disparaging remarks” about Landmark and one of it’s employees.
• Summer of 2012: Evans and Hughes continue their crusade against Landmark, hinting at action designed to cancel the operating agreement.
• August 2012: Landmark warns city that cancelling of the agreement would lead to litigation.
• September 2012: Council cancels Co-operating agreement and acknowledges ramifications of of doing so.  Council also violated Home Rule Charter during this process.
• December 2012: Landmark calls the note, leading to the current lawsuit.

There’s a lot to love here, and I haven’t even told you about some of the juiciest parts yet.  Let’s dig deeper:

MANAGEMENT FEE and OPERATING AGREEMENT

The SPA previously managed the city’s on-street parking for a 10% fee of gross revenue.  This agreement was outlined in a 1995 Operating Agreement (which Council later nullified, causing this lawsuit).  As part of the loan agreement, the City agreed to increase this 10% fee to 20% in 2012 and 30% in 2013, so that the SPA would have sufficient cash flow to satisfy the debt.

Legislation to amend the agreement and increase the fee was never entertained by Council.

“DISPARAGING REMARKS”

In March of 2012, Janet Evans and Boyd Hughes engaged in one of their patented-and-rehearsed Q-and-A sessions.  The discussion centered on Scranton’s 2012 Tax Anticipation Note.  Landmark – which was preparing an offer for the City’s TAN – had requested the City to  guarantee the SPA loan.  During closed-door discussions, this term was discussed with both the Mayor and Council President.  On March 19, both Evans and Doherty signed a letter addressed to Landmark approving this provision.

On March 29, Evans stated that the terms – which she had approved of, remember – were equivalent to “holding the City hostage”.  Boyd Hughes then went on to make assertions that a Landmark employee was causing the problem – because he was “sweating” the note, which caused him to change his story “from morning to afternoon”.

VIOLATION OF HOME RULE CHARTER

When Council decided to cancel the operating agreement with the SPA, they placed it on the agenda for adoption on September 13, 2012.  Council also placed an ad in the Scranton Times publicizing the ordinance on the same day.

Additionally, the ordinance (enacted on 9/13/12) was scheduled to become effective on 10/8/12.

Both of these activities violate the City’s Home Rule Charter.  The Charter requires that public notice be posted prior voting on an ordinance and that all ordinances become effective after 30 days, or as of a stated date after that time.

CASH CRUNCH

The Landmark loan to the SPA was needed to pay:

• $1,300,000 in 2011 Debt Service
  
• $900,000 repayment of Fidelity Line of Credit (used to make 2010 Debt Service)
• $700,000 in Capital Investments (new automated pay stations, which were never installed)

That means that Scranton was aware of the SPAs massive deficit and looming crisis in the summer of 2010, and likely towards the end of 2009 when budgets were being compiled.  They knew the City could not absorb that cost, which is why they were pursuing the loans.  And yet City Council cut taxes in 2010 and then halved the 2011 rate increase.

Talk about making a problem worse.  Imagine it this way: in 2009 you find out your spouse is going to lose their job.  So in 2010 you borrow on your credit cards, but continue to live like you have two incomes.  When the tab comes due, you try to transfer the balance to a new card.  But… no one wants to lend to you.  That’s how Scranton runs it’s finances.

PAUL KELLY

First, some background: Paul Kelly is the City Solicitor.  He bumbled through the City’s commuter tax hearing in December 2012, causing Judge Nealon to remark that the City is “not good with numbers”.  He attempted to sue the City on behalf of a client in 2010 – that’s tantamount to suing yourself.  He is “special counsel” for bond offerings and pulled in more than $30,000 in extra fees in 2012.

During this fiasco, he was also the solicitor for the SPA.  Thanks to his dual role, he was able to write an opinion letter to Landmark assuring them Council could not take the actions they did.  Council, apparently, was never consulted.

Let me put that another way: the only relevant group that Kelly was not pulling fees from representing, City Council, was the only group that should have been consulted on their potential actions.  But they weren’t.

So what’s going to happen here?  I don’t know.  What I do know is that this lawsuit is going to really muddy the waters: Landmark is alleging that the violations of the Home Rule Charter make the ordinance null and void, meaning the SPA is still the “operator” of the meters and giving the bank a claim to the revenue.  What does that mean for the plan to outsource parking to Standard?  Well… certainly makes that look uncertain.

This lawsuit really lays bare the absurdity of the three ring circus known as City Council.  On 2/7/13, Councilman McGoff hinted that many companies no longer respond to Scranton’s requests for proposals because the City’s recent antics.  This certainly doesn’t help our public perception.

Would you do business with an organization that reaches out with one hand while stabbing you with the other?

Comments on Scranton’s “Parking and Economic Development” study

You can find the study in it’s entirety here.

This is currently a place holder.  The content contained in this post is in rough outline format and will be refined into an “IZA After Dark” post this weekend.  There is some interesting stuff here, and that is why I am opting to post naked notes rather than wait for a polished story.

STUDY AREA

This study analyzes the most heavily used meters in the City and includes an analysis of SPA garages.  The meters covered by the study are clustered in a 28 square block area covering approximately 1 square mile.

                Total City Meters (per Standard Parking): 1,400
Total Meters in Study Area: 1,095

                Map of Study Area is provided on page 2 of the Rich and Associates document.

Rich and Associates finds that it is “especially desirable” for a municipality manage at least 50% of available parking stock.  In Scranton, the City and SPA control 61% of available spaces (or 6,824 total parking spots).

Parking Spaces are most available on blocks which contain garages (i.e. 100 of North Washington; 100 of Adams; 400 of Linden, etc.).

On-Street (meters) are primarily 2-hour parking and are clustered around Courthouse Square.  The largest concentration of meters is along Penn Avenue, between Mulberry and Linden (where Banshee was located) and continuing up Linden (alongside the Cathedral).  This is block 12 on the map.

METHODOLOGY

The Turnover Study was completed on April 28, 2012 from 9AM to 5PM.  To perform the study, on- and off-street parking habits were observed.  The observer walked a circuit through the study area, mimicking the route a meter enforcement officer would follow (so each 2 hour stall was visited at least one every 2 hours).

• Turnover is how often a single space is used by multiple parkers.
• Occupancy is what portion of the day the space is filled.
• Calculated values can be found on Page 13 of the report

Counts for the SPA garages were not compiled by Rich and Associated.  The SPA provided daily totals at the Study’s request due to an “equipment malfunction”.  Garage counts are from July of 2012.

RESULTS FOR ON-STREET PARKING

Usage of on-street (metered) parking averages 55%.  This indicates that approximately 500 spaces in the Study Area are not utilized.

Approximately 150 spots are in “low traffic” areas or areas outside the Courthouse Square vicinity.  (see blocks 28, 29, 15, 1 and 2).

91% of observed vehicles remained for less than 2 hours.  Only 488 of the 1,095 meters were included in this analysis.  As the highest concentration of 2 hour meters is found in the 9 block area of Court House Square, it is assumed this was the area analyzed.

ECONOMIC “DRAG”

Rich and Associates also considered trends would lead to an increase in parking usage.  They noted several neutral-to-negative factors which could depress parking demand, such as:

• Vacancy rate in downtown buildings
• Budgetary uncertainty may make relocating or opening downtown unpalatable
• Estimates for future occupancy of vacant space are lower than normal in Scranton (by half)

REQUIRED CAPITAL INVESTMENT

Assessment of SPA’s garages was completed by DRC Associates.  During this assessment, the condition of each garage was reviewed and an estimate of necessary upgrades or repairs was created.  The report also included timing of repairs – i.e. completing the most important work first.  Repairs are spread over five years.

The Casey, Linden and Electric City garages are in need of immediate, major repair.  Total cost is anticipated to be $2,600,000 in 2013 and $2,800,000 in 2014.

The Linden and Electric City garages generate 51% of revenue (approximately $800,000), making repair of these structures of strategic importance.  The report states that closure would cause a “negative effect on revenues”.

The report’s conclusion is that a “parking surplus” exists of approximately 10%.

This contrasts markedly with personal experience, as spots in desirable locations are difficult to come by.  The report indicates that there is an incentive to abuse the parking rules (meter overtime) due to the price gap between citation and garage charges ($10 fine; $20 daily rate at the time of the Report).

This “incentive” has been addressed by increase the cost of meter violations to $25 [Need to Confirm].

Parking Rates for meters and garages are higher than in comparable cities, and only exceed by Philadelphia and Harrisburg.

2 Hour Parking: A Glimpse at Potential Revenue

You can view the Parking Meter Contract here.

Yesterday, Standard Parking made the rounds discussing the proposed contract to have SP Plus manage the city’s on-street meter program.  At a meeting on Thursday morning arranged by Scranton Tomorrow, residents and business owners met with Standard and City representatives to discuss their concerns.  And there are some valid concerns, such as:

• Standard already manages the City’s garages and isn’t doing a great job.  Garages have burned out lights and filthy common areas.  Snow removal is unreliable.  One local business owner was even told he could “pitch in” and clean up if he was unhappy with the grounds.  
• Meter rates and hours are subject to change.  New hours would be Monday through Saturday 8-8 and the cost would increase to $1.25 per hour.  Violations would increase from $10 to $25 and be administered by Standard.
• The contract cost is tough to pin down.

At a public causes on Thursday evening, Standard answered questions from City Council and revealed additional details, such as:

• Standard has been operating the city’s meters since 1/1/2013.  In January, they replaced batteries in more than 600 meters, returning them to operation.
• Standard manages similar programs in more than 150 cities.  They also manage parking at 150 airports around the country.
• If hired, Standard would retain the 6 parking enforcement employees currently employed by the City.
• The contract can be cancelled at any time – with 60 days notice.  The total cost of cancelling the contract would be in the neighborhood of $450,000.  That is the total to be spent on new meters and vehicles and also includes “damages” of $5,000 per employee.
• Standard typically realizes 15%-25% more revenue than city-run operations.

For the most part, I believe this is a good idea.  The City need money; Standard knows how to make it.  The City should be pursuing this type of stuff, but there are too many variables at this moment.  If I were in power, I would pursue alterations to the contract.  Here’s why:

MONTHLY COSTS

There are several fixed costs such as the management fee ($10,000), the meter purchase fee ($6,910), the meter usage fee ($6,375), the vehicle fee ($895).  That is nearly $25,000 in fixed expenses before we add in salary and benefits – which the city is reimbursing Standard for (estimated at $22,000 per month).  There is also a 10% “vig” (as Councilman Rogan called it) on all violations.  My analysis indicates that this could be in the neighborhood of $80-90,000 per year, or about $7,000 per month.  The city also pays $0.13 per credit card transaction, and Standard admits that about half of parkers utilize the pay-by-credit card feature.  That’s about $1,500 in monthly charges, based on current usage.

So, what’s the bottom line?  I think it is around $55,000 per month.  Which can increase if Standard manages to issue more citations.  Total Annual Cost: $660,000, which means the City would net – at most – $2,200,000, or $1.2M more than last year.

There is one caveat here, though: Standard admitted that January 2013 collections were down compared to 2012.  This was likely due to having so many meters out of service, but it certainly isn’t a good thing to see when you are hoping to more than double prior year revenue.

Also to consider: if the City does not raise the rates or alter the hours, the revenue would need to be adjusted downward.  This would not impact Standards monthly cost to the city, though.  My analysis estimates that the lost revenue from failure to adopt the new rates and hours would be in the $600,000 to $750,000 range.  So total net income to the City would be about $1,500,00.  Still 50% more than last year, but not exactly $2,800,000.

NEW HOURS AND RATES

In an attempt to increase revenue, the City plans to extend parking meter hours to 12 hours per day, six days per week as well as up the cost 25%.  Currently, the meters only operate for 40 hours (9-5) per week.  Many downtown businesses are worried this may inpact business.  At Thursday’s meeting, a local restaurant owner supported this assumption with an anecdote: when meters go out of service, people fight for that parking spot – and that is at current rates.

Other restaurant owners discussed concerns about how it would impact patrons – who wants to step away from dinner to feed the meter?  And what about the staff who earn low wages composed primarily of tips?  Suddenly, it is going to cost them $5 per day to park at work (in the evening).

There is also concern about 10 hour versus 2 hour parking.  If the long-term street parking is taking away, people are suddenly forced into the garages, which charge $20 per day, making a $100 monthly parking pass seem reasonable.

Imagine that you make $30,000 per year and it suddenly costs you an extra $1,200 to get to work.  That’s basically a 4% tax.  Total Scranton tax rate: 7.4%  Yikes.

VEHICLE PURCHASES

Under the proposed contract, the City would purchase two new vehicles – a Ford Transit van for meter collection duties and a Ford Escape car for enforcement duties.  Total cost: $53,700 over five years, financed by Standard.

In case you didn’t know: Scranton is small.  All the city’s meters are clustered in 28 blocks in the down town – an area roughly 1 square miles according to Google.  A staff of six means each team member covers 4 blocks.  Why do we need an enforcement vehicle?

I can understand the need for a vehicle to assist in the collection of coins from the meters, but there have to be options cheaper than a $24,000 van.  What about small utility vehicles – like these Gators, which cost one-fourth of the van?

I am glad Council tabled this contract, but I hope they pick it up back up and make some concessions.  If we can reduce the costs slightly, and maybe go with longer hours (and not rate hike) or a rate hike (and no longer hours), the city can still realize an extra million dollars.  And we really, really need it.

Here’s today’s bonus feature: timing.  There is no way that we will have the new meters installed before the summer, effectively forgoing $300,000-$400,000 in revenue stemming from the new meters and proposed rate hikes.  If the city opts for a less aggressive parking overhaul – by reducing the rate hike or eliminating Saturday hours – I think we give up another $250,000, which means total parking revenue would be in the $2.1-$2.2M range.  We’d still be on the hook for roughly $600,000 in fees and costs, though, so we may only see an $400-600,000 this year.

That’s nothing to turn down, but it also isn’t one full payroll cycle, either.

How are you finding out about my blog?

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