Differences over financial information related to the operation of downtown parking garages may land the city in court with its partners, Metropolitan Parking Solutions.
The company operates parking garages near the county courthouse and the sports complex.
Lori Boyer, CEO of the Downtown Investment Authority, cut off loans to the company after it failed to provide information she requested.
It was a prudent move.
In a deal inked during the administration of Mayor John Peyton, the city agreed to lend the company money until it began producing a positive cash flow.
The city now is holding the company’s IOUs for $56 million.
And the company is balking at providing more information, which suggests it may wind up in the courthouse.
Under the agreement, the company’s lawyer said, the city is bound to continue handing over money until 2031 and the company doesn’t have to begin paying it back until 2036.
All the company’s revenue from operations is in cash. In other words, it can rake in dough for 30 years before it has to pay the city anything, as long as it doesn’t make too much money.
Boyer apparently is not convinced they aren’t making a bundle.
The company’s lawyer said it could provide all the information Boyer requested but it wants $100,000 a year to do it.
In addition, the city says the company isn’t even paying all of the property taxes it owes.
Metropolitan is part of Signet Real Estate Group. For the past five years, the garages have been managed Elite Parking Services of America. Its president is Dane Grey, a former DIA board member.
After leaving the board, Grey made an unsolicited proposal to DIA for Elite Parking Services to get a 30-year contract for managing city-owned garages, parking lots and on-street meters.
Grey proposed spending $6 million to improve parking facilities and also add shuttle and valet parking services – if Elite could set rates at city-owned garages, lots and parking meters. The offer has not been accepted by the DIA.
Over the years, politicians have questioned the parking garage deal’s generous provisions. Originally, it guaranteed the operators a healthy 8 percent profit, although it later was renegotiated down slightly.
Theoretically the city could have bought out the company after the loans reached $16 million but city officials say they can’t afford the buyout.
(However, they managed to come up with a large bundle of cash to buy out the owner of the Jacksonville Landing, which they promptly tore down.)
Boyer’s letter stopping loan payments came a year after City Council Auditor Kyle Billy issued a report critical of the deal.
It said the information from Metropolitan was inaccurate and incomplete, and it noted the failure to pay property taxes.
Concerning the year-long delay, Boyer told the Jacksonville Business Journal that the auditor’s report had not been presented to the DIA board earlier because she just got it from Brian Hughes, who served as interim CEO.
Other participants in the deal are Jim Catlett and Jim Gilmore, who previously were director and deputy director of the Downtown Development Authority, predecessor of the DIA. Now lobbying and developing, their company is related to Signet.
Insiders at City Hall raised their eyebrows at the time this deal was made. Soon after, and periodically thereafter, there were attempts to get out of it, but they never went anywhere.
Jerry Holland, who opposed the proposal when he was on the council, said in 2004, “We’re guaranteeing too much for something that may always be the last resort for parking.”
Michael Munz, then a spokesman for the company, painted a rosy picture: “The city is not out a penny. If they had done the garages themselves, they would have cost $32 million. Now, the city’s cost is $18.2 million and the whole project is $50 million. MPS is responsible for any cost overruns.”
But critics noted the company was putting up $3 million in cash, and getting $5 million in land in return. Then the company issued revenue bonds to build the garages, and the debt service on the bonds is one of the expenses the city is covering with its loans.
If MPS ever does pay back the loans, it is at the rate of 2 percent.
And all the while, they are guaranteed a nice, fat profit.
Another unseen cost is this: Because the garages take revenue from the surface parking, the city has to pay out another $800,000 to SMG, the operators of the surface parking, who also have a guarantee.
By any measure, the downtown parking garage agreement looks like the Deal of the Century — for everybody but the taxpayers.
Boyer made the right move. The city needs to make sure it is getting accurate information and to make sure the company fulfills its end of the bargain.