City looking to sell Love Park garage

[thoth]

You know that's not what I was saying. My whole point is that pension, benefit and debt service are increasing at such an out of control rate that the city can't pay it's way out without first staunching the bleeding. Your own links show debt service increasing by 20mil a year, and pension costs are rising even faster. The city has already compromised it's ability to pay for basic services, the system needs to reformed instead of the city simply axing everything else to pay for a fraction of unsustainable cost increases.

The argument about getting the city out of a costly renovation job is more compelling.

you're right, we should do nothing about our pension, benefit, and debt service.
I don't know that I see the logic in the city owning parking garages which it poorly maintains. the city is struggling to fund basic services and $40 million could help alleviate debt service while getting an underutilized asset off its balance sheet...and help give it some borrowing flexibility in the future should it need it.

[raider.adam]

Thoth has a point, it might make more sense to put the $40M towards an infrastructure project the city has been putting off. Or if it were me, a trust fund for the park system.

Well, you can also argue that the shortfall in the pension fund puts off infrastructure projects too because money has to be diverted to it every year.

[eldondre]

You know that's not what I was saying. My whole point is that pension, benefit and debt service are increasing at such an out of control rate that the city can't pay it's way out without first staunching the bleeding. Your own links show debt service increasing by 20mil a year, and pension costs are rising even faster. The city has already compromised it's ability to pay for basic services, the system needs to reformed instead of the city simply axing everything else to pay for a fraction of unsustainable cost increases.

The argument about getting the city out of a costly renovation job is more compelling.

right but none of us know the debt service schedule. I don't see how a $40 million payment wouldn't help if it was over and above the debt service (which is the required payment). that's how you pay down debt and staunch the bleeding. for all I know, there may be a spike debt maturing next year the city wants to address. most of the city's debt growth occurred under mayor street who, per the link, more than doubled the city's debt service. I also haven't seen any numbers on the city actually making a profit nor would I want the city to be motivated to increase the number of drivers into the city.

[phillyaggie]

I doubt it.

I don't know; I get the feeling the city is littered with big and expensive reports that never get acted upon but that nonetheless cost money and time to produce. I guess I'm just becoming way too cynical.

[raider.adam]

Where are we going to get it next year when the city spends this 40million dollars in 5 seconds? You're throwing money into an unquenchable fire, i.e. the city's out of control pension and benefit growth. They could sell off all the assets they had and the obligation would continue to grow. You show me a plan to wisely invest 40mil, to grow that money into a sustainable fund, such as BarryG's park trust plan and maybe I could see the point. But I just don't know if I see the logic in cannibalizing moneymaking assets to feed a wildfire.

You know that's not what I was saying. My whole point is that pension, benefit and debt service are increasing at such an out of control rate that the city can't pay it's way out without first staunching the bleeding. Your own links show debt service increasing by 20mil a year, and pension costs are rising even faster. The city has already compromised it's ability to pay for basic services, the system needs to reformed instead of the city simply axing everything else to pay for a fraction of unsustainable cost increases.

The argument about getting the city out of a costly renovation job is more compelling.

Well, there is short term and long term issues with the pension. The short term is that the city is currently bleeding based on the current underfunding. The long term is that the obligations don't seem to be getting better. The short term solution is to dump in a bunch of cash to alleviate the yearly budget item and at the same time accrue interest from investments. The long term component is to address reform to help prevent it from getting so out of whack again.

Here is something else to keep in mind about why it will be better to send the money to the pension fund as opposed to infrastructure projects. It is probably an easier fight to get the lump sum dumped into the pension fund, whereas if you plan to end it to infrastructure projects, 10 or so different council members are going to want a cut and some of that will likely be to "economic development" projects that only economically development politically connected people.

At least with dumping the money into the pension fund, it relegates the "I want my share" to the yearly budget battles from less debt they are paying and not from a perceived windfall.

There is also something else to think of. If the garage goes from city owned to privately owned, you now get property tax revenue and business tax revenue, which a share goes to the schools. So, you aren't completely giving up a revenue stream either.

I don't know; I get the feeling the city is littered with big and expensive reports that never get acted upon but that nonetheless cost money and time to produce. I guess I'm just becoming way too cynical.

The "I doubt it" was in response to doing it in house. I doubt they have such staff in house. Now, if they are going to make this a habit of selling off assets, it may well make sense to hire a special department with those type of people instead of contracting it out.

[BarryG]

There is also something else to think of. If the garage goes from city owned to privately owned, you now get property tax revenue and business tax revenue, which a share goes to the schools. So, you aren't completely giving up a revenue stream either.

Good point, and there is an extra parking lot tax too.

[raider.adam]

Good point, and there is an extra parking lot tax too.

Correct. So if the property is worth $40 million and the new property tax is even as low as 1.5%, that is $600K a year in property tax. Half the prior revenue stream right there for zero overhead.

[BarryG]

Correct. So if the property is worth $40 million and the new property tax is even as low as 1.5%, that is $600K a year in property tax. Half the prior revenue stream right there for zero overhead.

If it sells for 40M, that is the value of the whole business, not just the property.

[thoth]

Correct. So if the property is worth $40 million and the new property tax is even as low as 1.5%, that is $600K a year in property tax. Half the prior revenue stream right there for zero overhead.

That is a good point, although I still wonder what, if any parking issues the city will have with its fleet, and costs of buying back parking. If there are any.

[raider.adam]

If it sells for 40M, that is the value of the whole business, not just the property.

The business is all property and improvements on the property. A parking garage business worth $40 million dollars should probably mean the property is worth pretty much close to that.

[raider.adam]

That is a good point, although I still wonder what, if any parking issues the city will have with its fleet, and costs of buying back parking. If there are any.

Nothing stops the City from selling the parking garage with an agreement they get to use X amount of parking spots for free.

[BarryG]

The business is all property and improvements on the property. A parking garage business worth $40 million dollars should probably mean the property is worth pretty much close to that.

No the value of an operating business also considers its potential revenues and profits, as well as the physical assets. A $40M price probably puts the property plus improvements at $10M or less is my guess. Really depends on how much revenue the lot does, which we don't know. Rule of thumb is 8-10x net income. Then again we also don't know how much work it needs, which would bring down the price.

[raider.adam]

No the value of an operating business also considers its potential revenues and profits, as well as the physical assets. A $40M price probably puts the property plus improvements at $10M or less is my guess. Really depends on how much revenue the lot does, which we don't know. Rule of thumb is 8-10x net income. Then again we also don't know how much work it needs, which would bring down the price.

I dunno. They really aren't buying a business so much as they are buying a property and starting a business. What is there of value besides the property? The amount of revenue they can do is what dictates the value of the property. It isn't like they are buying intellectual property along with it.