Village to Village, by Paul Hatfield, Jan. 29, 2010.

Today’s LA Times contained very disturbing news - it appears the city is ready to pull the trigger on privatizing parking.

The Mayor’s desperation to save his political reputation is driving our financial planning.

No matter how CAO Miguel Santana runs the numbers, the privatization of parking facilities and meters to close the current or near-term budget gap defies not only sound financial logic, but common sense as well.

Would you mortgage your home to buy an expensive car or a year-long vacation in Europe?  Well, plenty of people did to some extent, and you see where that has gotten us.

It is foolhardy to use proceeds from the sale of long-term assets or revenue rights to for short-term benefits.  Even with a reduction of the debt service associated with the parking structures, the proposed deal still amounts to diminished future net revenues.

The reserve fund is not an asset to be used frivolously.  It is designed for use in emergencies – earthquakes, terrorism, etc.  The city has already misappropriated it by using it as a band-aid to cover the wounds of irresponsible fiscal policy – self inflicted wounds. Phil Willon of the Times writes:

“If approved by the council and mayor, the transaction would allow the city to use a portion of its $189-million reserve fund to close this year’s budget shortfall and later replenish the reserve fund with the proceeds from the privatization of the garages.”

At least Santana is somewhat transparent in his admission that the deal would enable the city to use (or misappropriate) a portion of the remaining reserve fund to cover the current year’s deficit.

Negotiating a major capital transaction under duress is asking to get hosed.  The effect would be the same from selling your house to fend off foreclosure.  The seller is not going to get a good deal in a down market – and once it is done, it’s done.

I am forwarding this post to my Council Member (Paul Krekorian), along with a resolution opposing such deals passed by NC Valley Village last night (Jan 27th). I will ask him to oppose the deal and urge Bernard Parks to do so as well.

Let me leave you with this thought.  I ran across it in a white paper prepared by the Collaboratory for Research on Global Projects at Stanford University (Working Paper #53, Sept 2009, by Brian Chase):

“…most of the upfront proceeds received from those P3 deals will likely be spent long before the 75- or 99-year concession terms expire, and public pressure to renegotiate these deals or even terminate them will grow—especially as higher user fees begin to kick in over the next several years and memories fade as to the initial benefits that were received.”