The city of Los Angeles is moving forward with a plan to lease to the private sector for 50 years some of its most prized assets – nine parking garages with 8,231 spaces – in order to raise $53 million to help close its current budget deficit. The City Council is to approve final provisions of the request for proposals this month and is expected to award the lease in February. There has been very little dialogue with the community about the details. As stakeholders are learning more about the proposal, we are hearing from groups that have serious reservations.
Recent news reports about an ill-fated long-term lease of Chicago’s parking meters to a private company send up a red flag about the pitfalls of entering into similar deals without a full public airing of the benefits and downsides. While city officials say they have learned from Chicago’s experience and have taken steps to avoid a repeat of that fiasco, the more important question is whether the short-term gain for the city may be outweighed by potential negatives.
The proposed lease is front-loaded. Whoever secures it will need to factor in the up-front payment to the city of $53 million, plus the cost to retire the debt of $44.75 million on the Cinerama Dome garage. How can any firm acquire this lease without considering hefty increases in parking rates to pay for its investment?
When Hollywood & Highland opened in 2001, the $10 parking rates discouraged visitors and nearly killed the center. Even after the city lowered the prices, it took years to get local residents to return.
How will this proposal impact the pending Cirque du Soleil show, which the city played a major role in bringing to the Kodak Theatre? The show opens in July for a 10-year run that will not only benefit Hollywood businesses but should also generate additional revenue for the city. The Cirque show has been underwritten on the basis of the current $10 event parking rate. The city’s projections under the proposed lease show a potential $30 event parking charge after five years at Hollywood & Highland. There appears to be no carve-out to protect Cirque. How a $30 parking fee might impact the show is anyone’s guess.
There is a noncompete requirement in the proposal that would not allow the city to construct new garages within a one-eighth mile of the concession garages. Because three of the garages included in this lease are disbursed throughout central Hollywood, the result of this limitation is that the city is basically agreeing that it will not develop any garages (other than one lot being “carved out,” according to the lease) in Hollywood over the next 50 years. This would impact not only the businesses along Sunset and Hollywood boulevards, but it would prevent the city from constructing a parking garage in connection with the new civic center that is being contemplated for Hollywood. To eliminate our ability to meet the future need for parking is not acceptable.
The big picture
Perhaps what has been lost sight of in the rush to lease these garages is the big-picture perspective of why the city built these garages in the first place. Parking garages are a long-term investment in the future of a community. Yes, the city may have to subsidize them for a while, but they allow the business community to prosper, and in turn, that generates tax revenue for the city – utility taxes, hotel occupancy taxes, sales taxes, gross receipts taxes, among others. It also enables a city to attract the types of retailers, hotels and restaurants that the residents want. We compete with cities like Santa Monica, Pasadena, Beverly Hills and Culver City that have all built parking garages. Perhaps the city should ask the question how this 50-year lease of its parking assets is going to allow Los Angeles to compete in the future with these neighboring cities.
Nearly two-thirds of the spaces that are included in the proposed lease are in Hollywood. Hollywood will bear the greatest impact from what is decided, and there is a strong likelihood that the revitalization of Hollywood will be set back significantly if this deal proceeds as conceived. Hollywood stakeholders should have been involved in discussing the business terms, rate structures and operating requirements to assure that local concerns were addressed.
What has happened in Hollywood over the past 10 years has shown what a great asset Hollywood is to the city. We simply cannot jeopardize the revitalization of Hollywood. The same can be said for other neighborhoods within the city where the parking garages are proposed to be leased out.
The Hollywood Chamber of Commerce and the Hollywood Property Owners Alliance are both in strong opposition to the proposal as it now stands. Let’s take the time to examine whether this contemplated action is really in the best interest of our city.
Leron Gubler is president and chief executive of the Hollywood Chamber of Commerce.
