Under separate parking agreements approved by the City Council Tuesday, the city stands to make $4.2 million over the next five years by leasing more than 800 permits for the insurance company in three city-owned downtown garages that now largely stand vacant.
The two five-year deals will boost the city’s dismal parking occupancy rates from just over half full to about 80 percent of capacity, city parking officials said Tuesday.
More importantly, they added, the deals will erase an $850,000 subsidy from the city’s general fund that is helping prop up the city’s bleeding parking enterprise fund during the current budget cycle. They also will wipe out nearly half of the roughly $5 million in debt facing the parking fund in the next two-year cycle.
“I’m thrilled about it,” said interim Public Works Director Kurtis Kingsolver, who oversees the city’s parking enterprise fund. “Obviously, we have a big deficit in our parking system, which we’ve been trying to fill piece by piece. With this, I’m filling it with a large chunk all at once.”
Details of the city’s two new parking contracts emerged Tuesday afternoon, shortly before the council unanimously approved them. The contracts weren’t directly negotiated with State Farm, but with representatives for the Russell Building, where the insurance company announced last week it will soon locate, bringing with it hundreds of jobs.
While describing both parking contracts as “below market rate, but not far off market rate,” Kingsolver noted Tuesday that the city didn’t provide a special deal on parking to lure State Farm to town.
“We negotiated price based on demand,” he said. “It’s not that we incentivized parking.”
The first agreement – struck with commercial real estate broker, the Neil Walter Company – will commence Jan. 1 and run through Dec. 31, 2018.
Under the contract, the city agreed to lease a total of 552 permits – 50 of them in the A Street Garage; 275 in the North Park Garage and 227 in Pacific Plaza – at a bulk rate of $115 per permit, plus tax. The contract also provides a second five-year renewal option that would run through 2023.
Should Neil Walter opt to renew the contract, the city’s bulk rate would increase by 2.3 percent per year, starting at $127 per permit in 2019, and incrementally rising to $139 per permit in 2023. The agreement also provides for an “early termination/reduction option” beginning Oct. 1, 2016.
The second contract is forged with 909 A Street, LLC – a partnership of the Russell Building owners, Seattle-based Illahie Holdings. It commences on Oct. 1, 2013 and runs through Dec. 31, 2018.
Under that agreement, the 909 LLC will re-lease 253 permits in the A Street Garage that are now under contract to the building’s former tenants, Russell Investments.
The permits will be leased at a bulk rate of $60 permit, plus tax – lower than what Russell paid for them – for the first five years, Kingsolver said.
Under a renewal option, the city’s bulk rate for those 253 permits would ramp up to $80 in 2019, and incrementally increase to $88 by 2023.
The city estimates that if both parking contracts are renewed, it will take in an additional $6.2 million in parking revenues from 2019 to 2023.
Though it left three years ago, Russell still pays the city a $342,100 per year for 253 stalls in the A Street Garage under a lease with the city that expires this fall, Kingsolver said.
The new parking contracts for State Farm come at a bleak time for the city’s parking enterprise fund, which faces mounting operational losses due to Russell’s departure and an economic recession.
The city, which owns 2,200 parking stalls in five garages and two lots, faces ballooning debt payments over the next several budget cycles. Operational debt for the system is projected at about $5 million per two-year budget cycle until about 2025, officials have said.
Aside from covering an $850,000 general fund subsidy to what’s supposed to be a self-sustaining enterprise fund, the new parking contracts – if renewed – should help eliminate about half of the parking fund’s projected debt for each budget cycle going forward, Kingsolver said Tuesday.
The agreements also “preserve the on-street level parking for transient use,” Kingsolver said. “So, as street parking fills up, we’ll still have the first level available in all garages.”
Several council members lauded the city’s deal as a creative way to help draw the insurance company to town.
Mayor Marilyn Strickland said Tuesday several downtown real estate professionals have told her “the city stepping up is what really made this possible.”