No Parking Bond Deals Are No Real Bonanzas For Miami
Written by Michael Lewis on July 22, 2010
By Michael Lewis
New York bond buyers and local parking garages may jointly fill big holes in Miami’s vexing financial jigsaw puzzle.
If the big-money guys and the folks taking your bucks at a parking lot don’t seem to fit together, read on.
To refill a rapidly draining bank account, the city, as we reported last week, is headed to the bond market with one deal to fund Florida Marlins stadium garages, another to tap 29 years of future parking revenue.
The city shouldn’t be doing either. But it has little choice.
It’s required in contracts with the Marlins and Miami-Dade County to build four garages and six parking lots at the now-rising stadium.
And it’s trapped by shrinking property values, rising pension costs and a state requirement that it keep almost $100 million in a reserve that by Sept. 30 will hold only $19 million.
The key to both is the bond market.
The city is headed there this week to get $103 million from bonds for baseball parking, paying up to a percentage point higher interest than planned.
The Marlins by contract will buy more than 5,000 parking spaces from the city for every game at $10 or so starting in 2012 and then resell them to fans at whatever price the team inflates them to — although the team gets the best 250 free.
The city must repay the bonds. If they sell at expected rates, taxpayers are to repay $237.7 million, including interest.
The Marlins are the repayment source. But the team would have to buy more than 23 million parking spaces from the city, or 9,800 per game 81 times a year for 29 years, to cover that debt.
But fewer than 6,000 spaces are being built and the city won’t get paid for all of them. So if the Marlins meet their obligations, they will really pay the city $4 million to $5 million a year.
But starting in 2011, before the Marlins pay a penny, the city is to repay $5.6 million or more yearly until 2039. From 2031 to 2038, city payments top $10 million to $11 million a year.
So even if the city gets parking fees from special stadium events, Miami is going to come up about $100 million short of repaying the bonds from parking funds. Other very big sources will be needed.
Let’s hope for the sake of interest rates — not yet set — that buyers didn’t do this simple math as bonds are sold this week. Wonder if the city’s officials did before signing a contract with the Marlins.
To be fair, the city did far better than Miami-Dade County, which must repay a staggering $2.4 billion on two Marlin stadium bond issues and unlike the city gets no payments from the team.
The other upcoming bond effort will eat up the revenues of five city garages, 16 parking lots and 75 on-street sites, a total of 17,759 spaces — 55% of all city-owned parking — for 30 years to patch funding holes.
The city has found no other way to fill the gap.
This might not be a bad patch — if we could be certain the city would suddenly become fiscally responsible and remain so for three decades.
Don’t forget the crisis of the 1990s, when the city was in the same boat, with depleted reserves and insolvency looming. The governor appointed an oversight board that required the city to keep reserves full.
That requirement remains — but the money is almost gone.
Though issuing bonds based on 30 years of parking receipts is creative, it can’t be repeated. Yet the city hasn’t resolved its underlying issues of shrinking property values and bloated labor-related liabilities. So what could it do in a crisis encore in the next three decades?
To make the bonds work, the city’s parking authority is discussing raising parking fees, a tax hike that is not labeled a tax hike. This would reverberate downtown, where major parking structures stand, with repercussions that could further depress property values and decrease tax revenues.
The city goes to market with not only these questions hanging over its bonding plans but a concern more national than local: municipal bond defaults last year rose and fewer municipal issues are being sold.
In 2009, according to Bloomberg, 194 US municipal issuers defaulted on $6.9 billion in bonds, up from 162 in 2008.
Bond defaults this year are triple normal, Bloomberg reported last week, and the $6.8 billion in municipal debt issued during the week was 11% below last year’s average.
Could that be because, according to the National League of Cities, municipalities face up to $83 billion in budget shortfalls through 2012?
So Miami’s anticipated $100 million shortfall — and need for a quick fix from bonds based on future parking fees — fits right in with a national panic to patch city budgets.
But being just one of the pack shouldn’t cheer us as we add obligations that, like stadium parking bonds, cannot be repaid by stadium parking revenues or, like general parking bond funding, cannot be repeated.
It’s shameful that past misjudgments left us stuck with both of these.
The city should have put up No Parking signs.