Parking garage construction debt raises revenue questions

The City Council has elevated its scrutiny of Columbia’s parking utility, and the mayor wants the city to look at new ways to raise money for the utility without hiking the cost of parking downtown.
The City Council’s examination of the parking utility stems from a request by Mayor Bob McDavid to transfer a portion of the parking utility’s revenue to the general fund, which is expected to run a deficit this fiscal year.
McDavid’s request shed light on the future expense of the city’s nearly completed 10-story parking tower at Fifth and Walnut, which is drawing down the parking utility’s working capital. In 2009, there was about $5 million in the fund. In the budget adopted for this fiscal year, the amount is expected to fall to about $1.5 million.
The city sold $13 million worth of bonds to finance the structure during the past two years, and payments on debt will cause the parking utility to post an estimated net loss of $46,000 for this year. The utility, which is operated as an independent business unit within the city, made money the past two years.
“The business model is, from my perspective, tenuous,” McDavid said.
Rising bond payments will likely exceed the revenue generated by the parking garage, and for this year at least, the parking utility will have to dip into the general fund. The mayor said he didn’t think the financial analysis of the garage was “robust enough for something of this magnitude.”
“What I’m saying is the expense of this parking garage will have profound effects on city finances for a generation,” McDavid said.
McDavid said his initial request to transfer money from the parking utility to the general fund is a practice many cities use. But instead, during a time when the city already has a stretched general fund, it will be subsidizing the parking utility this year, he said.
City Manager Bill Watkins stressed that though the new garage’s expenses might exceed its revenues, the utility as a whole is “in pretty good shape.” In the short run, he said he wasn’t too concerned about depleting the utility’s capital fund.
Looking at the long run, Watkins said parking, especially parking towers rather than surface lots, is essential to the future viability of downtown business. For instance, parking was essential to Commerce Bank’s decision to expand its operations downtown, he said.
With tight budgets expected for the foreseeable future and many City Council members elected on a promise to close budget gaps, there is the possibility that parking rates could go up.
“I think (parking rate increases) will always be a concern for retailers,” said Special Business District board chairman Allan Moore.
Should the city put forth a proposal to change the parking rate structure, Moore said the SBD would “definitely want to have input into it.” But the parking utility fee structure is certainly worth looking at, he said.
SBD board member John Ott said a lot of downtown’s success has come from getting people to use the parking garages. But he said the lighting and upkeep of the garages needs looking into.
“The cleanliness of those garages is a disgrace,” he said.
It has been about 10 years since there was a significant rate increase for street meters, SBD Executive Director Carrie Gartner said. However, Ott said he thought garage fees have increased slightly during the years.
“It seems like as far as rates go, those reserved spaces are fair right now,” Ott said.
Watkins said if the city does decide to build another parking structure as part of the proposed Regency Hotel redevelopment downtown, “I would not rule out the need for a rate increase.”
Although he is concerned about the future liability the Fifth and Walnut garage puts on the city, McDavid said Columbia needs to avoid raising parking rates to keep downtown vibrant. There could be other alternatives for raising revenue, he said, such as increased marketing of the garage or leasing spaces to the university.
“It’s going to take another level of creativity,” McDavid said.