City wants $10.5m from State for sub-Plamondon parking garage — it’s a $800k/yr loser

The City’s latest ‘One-Pager’ is pitching for $10,500,000 from the state budget to support construction of an enlarged $16.15 million two-level 234 car-spaces parking garage to be located underneath Plamondon’s proposed 199-room Marriott Hotel. Let’s dub it the Sub-Plamondon  (S-P) Garage. The City document dated Dec 27, 2018 now puts total public funding for the hotel at $22.25m with the county and city putting up the remaining $11.75m between them. No County, City split is specified. 

In May last year (2018) in an Amended & Restated MOU with Plamondon the City was building a single-level parking garage with 160 spaces to cost $11,554,000. That was $72,200 per parking space. The two-level basement garage now proposed at $16.15m is only slightly lower cost per parking space at $69,000. By contrast as recently as 2015 the project involved construction of Parking Deck #6 (PD6), an elevated structure to cost $16m for 650 spaces: $24,600/space. (Forella Group LLC, a Fairfax VA costing specialist put the likely cost much higher at $27,734,000 or $42,670/space in a report in January 2016. It was that cost estimate which caused PD6 to be dropped from the hotel project.)

Walker projected Parking Deck 6 as a financial flop

The May 2015 study of City parking and the impact of the hotel by Walker Parking Consultants found that Parking Deck 6 wasn’t financially viable even at the then estimated cost of $13m. Parking revenues were put at $1,263/car space/year generating revenue of $821,000 stabilized from the fourth year of operation (the first three years would be worse.) Against that $821,000 revenue operating costs would be $272,000 for net operating income of $548,000. But debt service on the $13m capital (assuming 20 year municipal bond financing at 3%) comes to $874,000, so the stabilized result is $326,000 in the red. (The $1,263 of revenue and $372 operating costs per parking space cited by Walker were based mainly on the performance existing five parking garages.)

$878,000 annual loss in prospect for S-P Garage, or maybe $792,000

With only 234 spaces and the City’s average parking deck system revenue per space of $1,263 the revenue of the Sub-Plamondon (S-P) Garage would be $295,000. With operating expenses of $372/space they come to $87,000 a year producing a net operating income of $208,000. But annual debt service would be over $1,086,000 for an annual loss of about $878,000.

Sub-Plamondon Garage is worse — a near $800k to $900k a year loser

Now maybe the S-P Garage can command a parking fee premium (we chose 18%) over the other garages and generate revenue of $1,500/space giving a gross of $351,000 a year. And maybe operating costs can be reduced by a third to $250/space to $58,500. Net operating income goes from $208,000 up to $293,000. But the killer is still the debt service of $1,085,000 so the S-P Garage is still in the red to the tune of $792,000/year. 

For reference: the S-P Garage’s prospective annual deficit of around $800k to $900k will compare with a current profit or surplus of $235,000 estimated to be made by the City’s overall parking operations. That goes into the general fund.  (p36 of City of Frederick, Annual Budget Report FY2018)

So the S-P Garage for which the City is now seeking County and State support is a huge loser, and its construction as a parking garage is sheer waste. Who would build a structure for $16.15 million that by all normal financial calculations you know will lose of the order of $800,000 a year?

A 234 car garage only makes financial sense in Frederick if it costs $3,720,000 or less, according to the City’s last parking study $-numbers. That is the amount whose debt service will be covered by an operating income of $250,000/year ($250k/0.0672). It follows that of the $16,150,000 proposed to be spent on the S-P Garage only 23% is really justifiable or attributable to parking (3720/16,150), while 77% or $12.43 million is boondoggle money that is taxpayer subsidy for the building to be constructed above. 

Conclusions seem clear:

(1) Frederick cannot justify underground parking financially.

(2) This underground parking garage we’ve called the S-P Garage is not really about providing public parking. It is about providing expensive foundations and a ‘podium’ for the crony developer selected by the City in the corrupt closed-door machinations of the Hotel Advisory Committee to be a recipient of taxpayer largesse. About three-quarters of the $16.15 million proposed to be spent is a big, wasteful, undeserved and unjust giveaway of taxpayer money.

In April 2018 City parking manager Steve Johnson told the Mayor & Board he proposed commissioning a new parking study on “the need for parking decks, the best places to put them, alternative parking options, how to accommodate future vehicles and whether modern technology such as circulators would be a good fit for the city.” (FNP 2018-04-17) No mention of assessing the impact of the S-P Garage on the City Parking Fund!

The City’s latest ‘One-Pager’ (two pages) and the latest Capital Budget and Sources & Uses of Funds:

https://www.cityoffrederick.com/DocumentCenter/View/11916/Downtown-Hotel-at-Carrol-Creek-OnePage-updated-12-27-2018

http://www.cityoffrederick.com/DocumentCenter/View/11917/Downtown-Infrastructure-Sources-and-Uses-Budget-11-20-18

PSam 2019.01.30

 ADDITION: Hotel project advocate Donald Burgess writes me: “Your analysis is flawed.The debt service by the city will not be on $16.2 million of city debt. You forgot to subtract the $10.5 million grant from the state.  So instead of your debt estimate for the city of $1,085,000 per year, it is actually $382,000. Subtracting operating income of $293,000 that makes $89,000 per year loss, not $792,000. Only a $700,000 mistake.”

Comment: There is no $10.5m grant from the state. Of course if the State were to make a $10.5m grant for the project then of course there would be no City debt service on that amount. And of course it would have no impact on the Parking Fund if everything else worked out, a big if… But my point is that the City and the City’s shills are being misleading suggesting they are simply seeking ‘Public Infrastructure’ now. Here is the way the Frederick County Capital Budget Requests FY2020 submitted to the State is couched:

Capital Project 1 – City of Frederick Public Infrastructure $10,500,000 

“The City of Frederick and Frederick County request shared investment in public infrastructure to support continued economic development along the Carroll Creek Linear Park and the revitalization of the east side of the City. 

“The city, county and state have made a series of intentional investments over the past two decades to revitalize the downtown core of the City of Frederick. These investments include the flood control project and linear park along Carroll Creek, the extension of East St. to a new interchange at I-70, a new Tourism Visitor Center and improvements along the East St. corridor. These investments have spurred over $150 million in private investment along Carroll Creek including new buildings, infill development, and historic renovation. While providing an obvious recreational and cultural resource, Carroll Creek Park also serves as an economic development catalyst. This investment has resulted in added jobs and vibrancy to the historic City of Frederick. 

“To continue this economic development success, there is a need to expand public parking and other public infrastructure to support new business development along Carroll Creek including a private sector investment in the Downtown Hotel at Carroll Creek as well as redevelopment on the east side of the City of Frederick…”

This $10.5m is described as for parking and street improvements. Left unsaid is that it represents a highly uneconomic and wasteful way of providing car parking. Parking should pay its way in parking fees, and that has been the principle we’ve followed with the Frederick City parking garages until now. As my comment indicates hardly a quarter of the investment in the S-P Garage stands to be covered by parking fees. The rest represents money squandered on the Plamondon hotel’s foundations and on its ‘podium.’ The state money would go to support not ‘public infrastructure’ but a boondoggle project whose procurement was a disgraceful, corrupt racket from start to finish. It is this misbehavior in the city of Frederick that our representatives now ask the state to underwrite.  PSam 2019-01-31

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