When the Sacramento City Council votes Tuesday on a $477 million downtown arena deal, one significant piece of the financial puzzle will remain unclear.
To manage its end of the financing – a $255 million subsidy – the city is counting on raising net parking revenues by as much as 50 percent in the next seven years, documents show. While city leaders say they’re confident they can do it, they acknowledge they are six months away from presenting a definitive plan for how.
It leaves a tough question hanging: How much will parking rates rise in coming years, and how often?
City Parking Manager Matt Eierman said his department’s still-evolving plan to modernize parking operations will include rate increases, as well as new meters that take credit cards, extended meter hours, and changeable, demand-based pricing at meters and garages. He declined to say how much rates might increase, but said current meter rates, at $1.25 an hour, are low and could be raised in increments without causing downtown visitors and workers sticker shock.
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“We will go at the market rate,” Eierman said. “We haven’t decided what that is.”
Speaking separately, Assistant City Manager John Dangberg said drivers can expect meter rates to go up 25 cents next year. Eierman’s group will bring its recommendations to the council later this year.
The council may be faced with raising meter and garage rates several times in the early years of the arena loan. The city’s arena financing plan relies on steadily increasing net revenue from parking operations over several years, topping out at a net increase of $7.5 million in 2021. Yet current net revenues from city garages, meters and parking citations were flat for five years during the recession, and are only beginning to improve.
A recent consultant’s report suggests the city could boost its street parking meter rates in the next four years to $3 an hour, and increase rates in four of its five downtown garages from the current $3 an hour to $5 an hour. On game nights, Walker Parking Consultants suggests some fans might be willing to pay a flat $15 rate for the best parking spots close to the arena. Eierman said the city is using that report for guidance.
The city is only one player in the downtown parking market. It controls just 24 percent of parking spots withing a half-mile of the arena, and must compete with owners of other downtown parking facilities, including private companies, the state and, to a degree, the Kings. As part of the arena deal, the city is scheduled to turn over 3,900 parking spots in Downtown Plaza to the Kings in July. A fourth of them will be demolished to make room for the arena. Many of the rest will be used by the Kings, some for team officials and players, and many likely will be sold as part of high-end ticket and luxury box package deals.
“We will have to see how other owners of private parking assets behave, but also what is the behavior of parkers, and people going to events,” said Assistant City Manager Dangberg. But he said he’s confident the city is in a good position to pay its debt: “We have done sufficient analysis to know we can compete in that market.”
City Councilman Steve Hansen, who represents downtown, supports the arena but said he thinks city staffers are putting council members in a tough position by asking them to approve the deal without knowing what parking rate increases lie ahead. He said he fears a potential “Hobson’s choice,” or no-win decision, for the council.
“There is no data yet on what is being proposed, and I think that is a deficiency,” Hansen said. “That is not to say the overall (arena) deal isn’t worthy of approval. But these are key questions. This is an area of risk that needs to be better understood.”
Councilman Kevin McCarty, an arena financing plan opponent, also called the uncertainty worrisome.
“(Parking revenue) has to keep up, and if it doesn’t, the backdrop is the city’s general fund,” he said. “That’s something we better be sure we’re right about down the road.”
Longer meter hours
The financing plan before the council Tuesday proposes a bond issue as the primary source of funding for the city’s arena subsidy. The city will be responsible for an estimated $21.9 million in annual debt service, to be supported primarily by lease payments from the Kings and the projected rising tide of parking revenue.
The parking division revenues will account for anywhere from 35 percent to 50 percent of the revenue the city will use in the early years of its 36-year bond repayments. Lease payments from the Kings will account for $6.5 million to $18 million annually over time. The city also plans to put $6 million in hotel taxes and other funds into the financing pot as a reserve for the early years.
Councilman Steve Cohn said he is confident the city will be able to pay its debt and keep future parking rate increases at acceptable levels. A growing downtown and rising economy will naturally provide more parking revenue to help pay the debt, he said.
“I don’t necessarily buy into the notion that it will be more expensive because of the arena,” he said. “If that is the case, it’s because the arena is creating such demand that the market rate is going up downtown.”
City parking department representatives said rate increases are only one of many tools they expect to use to make their parking program more efficient and boost revenues.
The city intends to increase the number of meters downtown and in midtown from 5,500 to 6,000 in the next few years. Sacramento also likely will follow other cities by extending meter hours beyond the current 6 p.m. cutoff so that it can capture revenues from people who attend night events at the arena, or go to restaurants, clubs and other downtown venues. That, in turn, will increase parking enforcement and citation-writing after hours.
The city also expects to start using flexible, or dynamic, pricing, in which rates at street meters and in city garages rise and fall during the day based on demand. Meters on streets closest to the San Francisco Giants’ AT&T Park, for example, charged $7 an hour during a weeknight Giants game last week, far more than their daytime prices. Portland, which charges $1.60 an hour at most meters, increases those rates to $3.50 an hour near Providence Park stadium during Portland Timbers soccer games.
Sacramento has already begun making several parking system upgrades. The council last year approved buying up to 6,000 “smart meters” that take credit cards as well as coins. Those meters also “zero out” the time on the meter after a car pulls away. The first 1,800 have been installed, and 4,000 in total are expected to be in action in four months, Eierman said.
Officials say offering the credit card payment option will increase the number of drivers who feed the meter, and could prompt them to put in more money. Some downtown merchants have cheered the move.
“We are interested in the new technology with credit cards,” said Chris McSwain, executive director of the Old Sacramento Business Association. “It’s weird how a dollar payment with a credit card in the meter is no big deal, but a dollar in quarters (can) make people angry.”
Pay by phone
In its analysis, Walker Parking Consultants says Portland saw a 40 percent revenue jump with smart meters. Portland parking meter supervisor Steve Herboth told The Bee he could not corroborate that figure, but said 80 percent of parkers in the city now pay with credit cards, and officials there believe the credit card option prompts more drivers to feed meters.
Smart meters automatically notify the city if they break down, allowing technicians to get the meters running again immediately. They have a blinking red light that signals to code officers that the meter has expired.
Sacramento parking manager Eierman said the city plans to program its smart meters to send drivers a text to let them know when their meter time is running low. Drivers can then choose to add more time via phone for a 35-cent fee.
The city also plans to reduce a notable irritant by allowing garage users to pay a flat night fee on arrival with credit cards, so they can leave after an event without getting stuck in a post-event traffic jam in the garage. “If you have (thousands of) people going to their cars, you want to flow those cars out as quickly as you can,” Eierman said. “If every transaction takes a minute, we need to do that at the front end.”
Sacramento in the last few weeks began deploying the first of 11 new code enforcement vehicles that can digitally “chalk” cars parked on both sides of a street at the same time via camera and on-board computer, making meter enforcement more efficient. The systems can alert enforcement officers if a car has outstanding tickets, allowing the city to boot the car.
Public Works Director Jerry Way said it’s uncertain whether the city will increase parking ticket fines, but said it would consider doing so, if needed to pay the arena debt.
The city’s consultant and some arena deal skeptics note the city faces one risk that cannot be quantified: the possibility that more people will take public transit downtown, reducing demand for parking spaces.
City officials say that possibility is counterbalanced by two trends that should help existing downtown parking spots maintain their value: The city does not allow construction of new private parking garages that would compete with meters and city garages; and it has begun allowing housing and office development downtown without requiring additional parking for residents or workers.
Way said the city’s planned rollout of its meter and garage modernizing program gives him “every confidence we will be able to do this. This is a walk-off home run.”