Project Category: Rebuilding our Public Infrastructure
Organization Name: Parking Authority of the City of Scranton
Project Cost: $39,487,000
In 2012, the City of Scranton was on the verge of municipal bankruptcy. Many structural and managerial factors were contributing factors but the City of Scranton Parking Authority, was one of the most pressing contributors due to defaults on both revenue bond payments and bank debt. The defaults resulted in a court-appointed receivership which effectively removed control of the garage assets from City and Parking Authority control. The City of Scranton retained control of the on-street parking system, which was managed independently of the garage assets. The resolution of this situation required creative and dynamic thinking combined with innovating financing. The resulting strong
collaboration between the City of Scranton, the National Development Council, and a host of other related parties identified and implemented an innovative solution to the city’s parking and financial woes. The resulting management structure not only removed the stigma of the default but created efficiencies in system management not previously experienced by the parking services.
Scranton is Pennsylvania’s sixth largest city. Geographically, the City is located within a two hour drive south to the Philadelphia and two hours west to New York City. Scranton, formerly an industrial and mining town, has begun embracing new forms of employment including government, higher education, and healthcare. Notably, the City has a net inflow of 25,000 workers each day, which represents 70% of the entire city’s employment. With most of the workforce subject to a daily commute to Scranton, adequate, modern, and affordable transportation to and from work every day is critical. According to census data, by far the most popular form of daily transportation of is automobiles, with a significant portion identified as carpooling or ridesharing. These factors demonstrate just how crucial public parking is to Scranton. Scranton’s infrastructure situation is actually quite common for small cities, particularly those whom are economically distressed. Smaller cities across the country struggle with financing and maintaining their infrastructure. Cities want to provide a safe, clean, well-maintained, and affordable parking for their resident, commuters, and visitors. Scranton and its project partners have implemented a parking services structure with this project which not only elevates the delivery of this critical service, but created an integral component of the revitalization of the City’s downtown section.
The collaboration of NDC and the City of Scranton resulted in the creation of an innovative solution to the complexity of the City’s parking and financial problems. The two parties came joined for an innovative P3 partnership, or private-public partnership. Through the creation of this partnership, an NDC affiliate company, the Community Development Properties, Scranton, INC. or CDP, would take control of the combined assets from the City of Scranton and Scranton Parking Authority. Those assets included all components of the on street, or meter, operations, and parking garages. The daily management and operation was assigned to a private firm, ABM Parking Systems. The transaction
includes all five of Scranton’s parking garages, and the management of the garage assets of the Steamtown Marketplace, which was a separate transaction with the establishment of private ownership, and nearly 1500 parking meters. This long-term solution involved the execution of a 45-year lease concession agreement.
To finance the project, bonds were sold, using senior and subordinate tax-exempt bonds. The innovative financing arrangement was devised by the City’s partner and financial advisor, Public Financial Management. The benefit to Scranton was significant in that the City deployed the proceeds to reduce the City’s overall debt profile while placing the system in the trust of a committed and knowledgeable partner. Additionally, through this partnership, Community Development Partners has begun to undertake significant renovations to the parking garages and meters. Going forward, the CDP plans to increase efficiencies, improve the asset monetization, and upgrade technologies to keep
parking affordable for commuters, resident, and visitors, but also ensure the financial impact to the City of Scranton is favorable.
Without the expertise of NDC and the commitment of the many project partners involved with this project, likely would not have had the ability to exit the receivership and would have had the continued burden of their Authority debt guarantee, which approximated $3.00 million annually. At the time, Scranton had limited access to the debt markets and could not resort to more traditional financing mechanisms. Without this transaction, Scranton’s continued revitalization would have confronted a serious impediment and the cost of not only maintaining the ongoing debt responsibilities but any capital improvements to the garages would have been exclusively the City’s responsibility. Costs
associated with those improvements would ultimately have been borne by the residents of the City. NDC’s preeminent status as a nonprofit specializing in community development initiatives allowed Scranton to secure financing through tax-exempt bonds. Because of the partnership with NDC, the debt issue was well received the capital markets and oversubscribed by the prospective investor base. Additionally, the efficiencies associated with a private sector operator eliminate many of the costs associated with a government operation. NDC and the City assured a commitment to keeping the “public” in a public-private partnership, which was demonstrated by reserving three seats on CDP’s board for city officials, compliance with Pennsylvania’s prevailing wage act for public work, and the allowance of the city to have access to records and data at will.
Current Status: Completed on-time, on-budget and 100% leased.
Community Needs Addressed:
- Transportation: Devoid of the partnership, the City of Scranton might have had to rely on financing from for profit entities. In addition to increasing transaction costs, a transaction with a more private connotation may have been detrimental in keeping parking rates affordable. The non-profit complexion of the transaction had less concern with rates of return and more with creating efficiencies and financially improving the operation. This partnership, however, enabled the City to avert a financial crises associated with the parking assets and offered as a prospect modernized parking at affordable rates.
- Employment: The pure benefit of this project is not entirely related to the City’s immediate financial issues but the importance as a meaningful economic development component is a rapidly improving downtown section. Concerning this project, it is not how many jobs the partnership created but rather how many were saved and the enhanced potential to attract future employers. Affordable parking is a necessity for any city’s economy because without it, workers are penalized by rates set arbitrarily and would be required spend a larger percentage of their income for parking. Employers are sensitive of this employee impact and may have direct concerns if parking is subsidized. The negative impact of unaffordable parking not only impacts the discretionary spending of residents, but is a deterrent to attracting employers into the downtown and would create hardship for those businesses trying to improve their operations. So not only would commuters be negatively impacted but all the stimulus they bring to the downtown as well; increased parking rates would discourage visits to the shops, galleries, and restaurants that have all come to depend on downtown workers but also visitors and transient users of downtown facilities.
Benefits and outcome:
- Economic Benefits: One of the most prominent issues that confronting many cities, particularly those in areas with limited growth such as the City of Scranton is infrastructure improvements. Without the appropriate resources, a city struggles to provide their residents, visitors, and commuters with safe, clean, well maintained, and affordable parking. Having the ability to competitively finance this transaction with tax exempt bonds enabled the City to access the least expensive municipal financing mechanism in the market. Also since a component of the debt is the responsibility of CDP and the revenue from the system itself, the City was able to reduce its debt profile and reserve capacity for more pressing needs. In addition, the efficiencies and new technology that the CDP is implementing will allow for parking to stay relatively constant, which should serve as a stimulant to the local economy.
- Cultural Benefits: Scranton has been experiencing a cultural renaissance in that, galleries and restaurants are opening, young professionals and artists are moving in. A modern, affordable, safe, clean, professionally managed parking system complements this trend and is necessary to allow this momentum to continue.
Project partners and collaborators:
Due to the size and scope of this project, it would have been impossible to complete without cooperation from a multitude of different parties, all of which are committed to the City of Scranton. This commitment to the transaction enabled the City to not only survive the financial hardships associated with the parking assets position those assets to thrive. Working in tandem, the National Development Council and the City of Scranton, along with a collection of committed partners, this highly complex project was completed within a condensed timeframe and was as effectively managed as could be expected.
- The local government officials, including the Mayor and City Council, were prominent in this transaction and worked tirelessly and cooperatively to advance this project;
- The National Development Council was singularly instrumental in this public-private project. Though they have facilitated many other P3 projects before, this transaction was their initial venture in Scranton. In addition to just having experience facilitating such P3 deals before, the NDC has had vast experience in dealing with parking garages, having been a part of numerous projects involving that asset type;
- ABM Parking Systems, the parking system operator, has a 6.4% nationwide marketshare of parking operations, and currently manages about 1800 parking operations across the country;
- Dilworth Paxson LLP provided Bond Counsel. Founded in 1933, this firm has incredible experience dealing with public/private partnerships. In addition, Dilworth Paxson has been directly involved in many projects in Pennsylvania from Allentown to Harrisburg;
- The Citigroup Municipal Securities Division effectively contributed by underwriting the bonds and created a significant measure of investor sentiment in the debt;
- The parking consultancy firm, Desman, is another partner that provided important analysis, planning, and logistical support to this project.
- Buchanan Ingersoll and Rooney, worked diligently as the city’s counsel and chief negotiator. The firm has a presence in seventeen cities and is headquartered in Pittsburgh.
- Public Financial Management, the premier municipal financial advisory firm in the country, was the transaction architect;
- Finally the Dentons Law firm acted as the project’s concessionaire council, and has vast experience working together on projects with the National Development Council.
What makes your project unique?
From a number of different perspectives, this parking transaction was exceptionally unique, not only because it is NDC’s first public-private partnership in Scranton. The transaction team was confronted with a fragmented parking system, a receivership situation, and the City’s limited capital market access. Despite the fact that operations of the parking have been transferred to a private company, this transaction and resulting structure is unique in that it still gives democratically elected officials a voice. Three out of the seven board seats are reserved for public officials, and for any major change in the parking situation, like a rate increase, at least five have to agree so any major change needs at minimum one public official to sign on.
This project also employed a unique financing methodology. The project combines aspects of both the public sector and private sector. Utilizing tax exempt bonds, the least expensive in the marketplace and the efficiencies of private sector management for both the operations and garage restoration allowed the City to eliminate a costly receivership and create the partnership that maximizes operational efficiencies for the benefit of the City’s continued economic development.
This project is also unique in that it directly impacted the ability of the City to deliver public parking effectively. Much of the parking capacity in the City’s downtown section is public so the positive impact delivers exponential benefits. While many smaller and other distressed cities also face similar infrastructure issues, the rate of employment contribution in Scranton from commuters is 70% of the workforce. The vast majority of commuters who travel to and from the city are transported daily by car. Safe, clean, well maintained, and affordable public parking delivered by the City and its transaction partner, NDC, is crucial to continued economic development success. Additionally, Scranton has quickly developed this economic development momentum with the continued growth in the higher education, healthcare, and public sectors, along with the rebirth of art galleries and beautiful shops. The foot traffic in the downtown of young professionals is a welcome addition to Scranton. Much of that business is also affected to this project in a more indirect way because Scranton now welcomes visitors with its improved parking system.
The benefit of this parking transaction has a meaning to the City of Scranton that is not entirely quantifiable. It has given the City an edge in improving its viability as not only a favorable City in which to reside but which to do business. The impact will be experienced for many years to come.
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