It will be an expensive venture — and one the City was warned about by its Council Auditor’s Office in 2003 — but the City may look into buying three parking garages currently owned by Metropolitan Parking Solutions. And, the price tag will be at least $64 million.
“Generally speaking, it was a financing method,” said Council Auditor Kirk Sherman. “It appears the best course of action is to go ahead and buy them out when feasible.”
Feasible comes at the end of 2011 when the cost of the Arena, Courthouse and Sports Complex parking garages will be $64.1 million. The next day — Jan. 1, 2012 — the price jumps to $65.2 million. Sherman said the deal was one his predecessor, Bob Johnson, warned was bad for the City. In it, the City sold the land the garages are on to Metropolitan Parking Solutions for $5.7 million in the form of a development agreement. At the same time, the company secured a $50 million bond to build the garages. However, due to the structure of the contract, the owner has no financial obligation. According to information provided by the Council Auditor’s Office, the City reimburses Metropolitan Parking Solutions for everything — from the bond payments to accrued interest to day-in-day-out expenses that include such items as a storage unit to cell phones to gas for cars owned by Republic Parking Services, which manages the garages. Also included in the City’s annual payment to Metropolitan Parking Solutions is a guaranteed 8 percent profit margin, regardless of revenue generated or occupancy.
Monday, the garages were on the agenda of the City Council Finance Committee thanks to an almost $860,000 tab the City owes Metropolitan Parking Solutions from the first six months of the calendar year. Some members of the Finance Committee were on the Council when the development deal — which is overseen by the Jacksonville Economic Development Commission — was passed by Council in early 2004. Others were elected to Council in 2007 and aren’t as familiar with the deal.
“Why are in we in the situation where we are paying a development loan payment?” said Finance member Clay Yarborough. “When I first read the text of the bill, I couldn’t figure it out.”
Sherry Hall of the mayor’s office explained the legislation meets a previous obligation agreed to by Council in February 2004. Finance member Art Graham was on the Council at the time and said he didn’t support the bill at the time, but doesn’t see any way the City can do anything until it’s contractually able to purchase the garages.
“The developer fronted the money and we would guarantee the developer’s return,” said Graham, explaining at the time the City needed parking for the 2005 Super Bowl and the proposed new County Courthouse. “I don’t know if there’s a way to get out of this legally.”
Graham said he remembers that people tried to fight it — including former Council member Warren Alvarez and former Council President Daniel Davis — but it was “a contract we couldn’t get out of.”
According to Janice Billy of the Council Auditor’s Office, the City can purchase the garages if the payments to Metropolitan Parking Solutions exceed $16 million by the last day of 2011. She said the obligation at that point is over $64 million.
“That’s the bond plus the equity on $3 million and the guaranteed equity earned plus $16 million,” she said.
Finance Chair Michael Corrigan said there was no money in the Better Jacksonville Plan for the garages, which at the time looked like they were needed.
“The best thing we can do is fill those garages,” said Corrigan. “As the activity increases, the payments will decrease.”
Since the payments from the City began in 2006, the payments to Metropolitan Parking Solutions total $6.2 million. According to documents provided by the Council Auditor’s Office, the payment to assure an 8 percent profit is $20,000 for the first six months of the current calendar year.
“This is a classic example of entering into a contract while negotiating the other,” said Finance member Jack Webb, referencing the not-built Courthouse, which now stands at about $390 million. “At some point we will build the Courthouse, but we should look very, very seriously at the purchase of the garages.”
In other news from the Finance meeting:
• The Committee voted to approve a study that will look at what to do with the old fire station No. 5 on Riverside Avenue that sits on property owned by Fidelity National Financial. The new Station No. 5 officially opens today.
“I have talked to the administration and we have come to an agreement,” said Council member Glorious Johnson, who sponsored the bill. “We have compromised on this issue.”
According to Johnson, Fidelity has contributed $75,000 towards the relocation of the station. Now, the City needs to find a suitable location and the funds to move the station.
• The Committee deferred a bill that would have set aside $300,000 from the City’s Tree Mitigation Fund to conduct a citywide canopy study. The study, if approved, will look at the current tree situation in the county, determine the health of many trees and determine where new trees need to be planted.
Graham led the opposition.
“I don’t see the need to spend $300,000 on a tree canopy study,” he said.
Hall said she would gather more information as to exactly how and where the study will be conducted and present it to Finance at its next meeting.