Parking enterprise fund for Tacoma will fall into deep debt in two years

The City of Tacoma’s parking enterprise fund is heading into crisis – a financial mess that could see what’s supposed to be a self-­sustaining system plummet into debt in about two years and then be unable to pay its own bills for more than a decade after that.

City parking revenues should finally be able to cover yearly bond debts and other system costs in 2025. But Tacoma’s parking fund won’t be able to climb back into the black until at least 2034.

“To say that this was sobering to me would be a massive understatement,” Kurtis Kingsolver, an assistant public works director who oversees city parking, told Tacoma City Council members this week.

The grim projections are based on the first-ever financial analysis of the city’s newly integrated parking system, which combines management and operations of five off-street municipal lots and garages with those of 150 newly introduced on-street parking pay stations.

The study also took into account citywide parking enforcement operations and needed capital maintenance costs, as well as how Tacoma’s long-term parking debt obligations factor into the enterprise fund.

In all, the city owes $50 million in parking bond debt through 2035.

“Debt against the system is substantial,” said Kingsolver. “Without having it all tied together (in one study), frankly I never knew that.”

The projections provide city officials with a new perspective: The parking enterprise fund cannot endure without major help. Instead, the city must find ways to subsidize the system – likely through its general fund.

“There’s no other place it can come from that I’m aware of,” Councilman Jake Fey said. “We’re just going to have to cut from other places in the general fund – and that usually means people, right?”

The parking system’s troubles promise to be a drain on city coffers for years to come – yet another stark brush stroke in a bleak financial portrait of Tacoma that’s now coming more clearly into focus.

But the fund’s troubles – exacerbated in the near term by declining off-street parking revenues while ballooning bond payments are coming due – won’t factor into the city’s 2011-12 budget crisis. The parking fund isn’t on pace to go broke until 2014.

“We’re not going in the hole right away,” Kingsolver said. “That gives us some time to figure out what we can do to help the system.”

The city has no plans to raise on-street parking rates, Kingsolver added, even though Ross Tilghman, the consultant who analyzed the parking system, suggested that among several actions to consider.

On-street parking rates – now set at 75 cents per hour – can be adjusted based only on market conditions, not as a revenue source, Kingsolver said.

“There’s no discussion right now about raising rates on the street,” he said.

Rather, city staff is examining other ways to cut costs and increase efficiencies before the financial situation turns south.

“The stuff we’re going to work on probably isn’t going to cover the debt,” King­solver said. “But this is really stuff that should be done that we’ve been working on for a while – even before we knew about this.”

EMPTY STALLS

Tacoma established its parking enterprise fund in 1987 to manage financial operations of municipal downtown parking lots and garages.

The city issued bonds in 2004 to expand its parking system, including building the Convention Center’s new garage and expanding the A Street garage – largely for employees of Russell Investments.

In 2007, more bonds were issued to build the South Park Plaza, now known as Pacific Plaza. And in 2009, the city took out another $2 million in bonds to start its paid on-street parking program, introducing about 150 pay stations downtown in 2010.

In 2011, the city for the first time fully integrated all of its parking-related endeavors under one “parking services system.” In total, it includes operations for all of the city’s 3,880 revenue-­generating spaces – 2,477 in garages and lots, and 1,403 on the street. The system also just incorporated enforcement operations that issue parking citations, and municipal court operations that process tickets and issue related fines.

Now, all city parking revenues – from garages, lots, pay stations, tickets and court fines – flow into one pot: “the parking enterprise fund.”

As of today, the fund holds a positive balance of nearly $2.4 million. But, according to Tilghman’s analysis, the fund is rapidly being drawn down, with costs now outpacing revenues.

On-street pay stations are making money. They’ll net about $378,000 during the current budget cycle, and more than $645,000 in each of the ensuing two-year budgets, projections show.

But the city’s off-street garages and lots tell another story.

“A few years ago, most of our garages were running 110 to 120 percent full,” Kingsolver said. He said it is standard in the industry to oversell permits by 10 percent or more.

Now, only about 35 percent of spaces in lots and garages are occupied at peak times, Tilghman found.

With Russell’s departure, the A Street garage is virtually empty, and the investment firm’s $342,100-per-year lease with the city for 253 stalls in the garage is set to expire at the end of 2013. Meantime, business at the Convention Center garage and other parking structures also has tanked.

“Revenue from off-street facilities has declined approximately 18 percent from its high in 2007 due to the recession and to the departure of Russell Investments,” Tilghman found.

While that business is expected to rebound slowly, it won’t come quickly enough to cover the city’s parking-related debt service. Nor will annual parking revenues keep pace with expenses for years to come.

If Tilghman’s projections stay true, the parking fund will be more than $14 million in the hole by 2024.

That’s partly because the city refinanced two of its parking bonds in 2010 to help balance its current budget. The refinancing involved pushing off nearly $7 million of debt into the future. The unpaid debt will start coming due in 2013 – along with other bond repayments already scheduled. The effect means the city’s total parking debt payments will nearly double – from $1.4 million today to $2.7 million in 2013.

By 2015, annual debt service shoots up even higher – to $3.3 million each year – until 2023, when the trend reverses. City parking revenues will once again outpace expenses in 2025, projections show, but it will still take another nine years for the enterprise fund to climb out of debt.

BETTER MARKETING

While Fey said an annual general fund subsidy seems likely, the parking system can also cut costs and increase revenues on its own, Kingsolver said.

“One of the things we’re working on that seems kind of small – but I think is really important – is just better branding,” he said.

In Portland, drivers can easily find municipal parking because of good branding, marketing and signs, Kingsolver said.

“We have none of that,” he added. “When you drive down the street (in Tacoma), you really don’t know where there’s public parking.”

Councilman David Boe, who noted he still doesn’t know where the Convention Center’s garage is, agreed that Tacoma has done a poor job marketing such facilities.

“A super simple approach to how we get people into our parking system is something we need to address,” Boe said.

Other strategies include working with University of Washington Tacoma, hospitals, Pierce County and other big “parking generators” to fill available city spaces; implementing a permit system for regular downtown parkers; considering a license plate recognition system to optimize enforcement; and adjusting garage rates to draw more customers and complement on-street rates.

“It doesn’t do us any good to have 75 cents an hour on-street,” Kingsolver said, “then have $4 dollar an hour in a garage.”

Lewis Kamb: 253-597-8542

lewis.kamb@thenewstribune.com

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Twitter: @lewiskamb