The Downtown Investment Authority board is scheduled vote March 17 on moving toward a $32.9 million purchase of three parking garages owned and managed by Metropolitan Parking Solutions.
The step comes as the DIA, city and MPS are in a legal fight over the DIA withholding development loan payments to the Jacksonville-based parking operator.
Also at issue is whether MPS is meeting financial reporting obligations in its 2004 contract to own and manage Downtown parking garages at the Duval County Courthouse and VyStar Veterans Memorial Arena.
MPS filed a lawsuit against the DIA and the city in September in the 4th Judicial Circuit Court that alleges the authority was in breach of contract and in default when it withheld portions of several development loan payments owed to MPS.
The city is required in the agreement to make the payments to cover MPS’ operating losses and to ensure a 6.75% annual return on the company’s $3 million required investment.
MPS only provided a portion of missing revenue information requested by DIA to certify the payments, according to background on the issues included in a March 3 memo to city Chief Administrative Office Brian Hughes from DIA CEO Lori Boyer.
An audit completed last year by the City Council Auditor’s Office identified the omissions in records MPS submitted to DIA, the memo states.
The DIA and city filed a response and counterclaim to the lawsuit in October that reiterates the authority’s allegation that MPS is in default of the 26-year contract.
DIA staff members want Council to authorize borrowing money to pursue the buyout provision under the agreement, if the court rules in the city’s favor.
Council Auditor Kim Taylor said in a March 11 email that the city has paid and loaned a total of $58.45 million to MPS, including $5.7 million to purchase the land, since the contract took effect nearly 17 years ago.
Taylor noted this does not include interest accruing on the loan at a 2.85% annual rate. MPS is obligated to make annual principal and interest payments only if it produces “excess annual cash flow” from garage operations, according to the agreement.
The DIA manages Downtown public parking as well as the city’s contract with MPS that provided three parcels of land to the company to build the garages.
The DIA Strategic Implementation Committee is scheduled to vote March 15 on its recommendation to Council, and the full board is expected to vote March 17 before legislation will be filed with Council.
The city would use either fixed-rate debt or a commercial paper program — a short-term liquidity loan option — to buy out MPS’ contract rights and the garages, according to the memo.
Boyer told the board in May the cost is impeding the DIA’s ability to offer incentives for more Downtown development projects.
“It has had a serious impact on the Northbank tax increment district for many years,” she said.
The garage costs were not as noticeable to past boards because the city was lending money to the Northbank Community Redevelopment Area fund when it had negative cash flow, Boyer said.
The fund is now self-sustaining.
In May, Boyer estimated that $500,000 from the DIA’s unallocated funds might be needed to cover MPS’ revenue losses in 2021 that will be compounded after events were canceled because of the coronavirus pandemic.
“In the event the court were to find certain voluntary purchase option provisions applicable that would allow the city to purchase the garages for less than the authorized amount, it would be in the city’s best financial interest to do so,” Boyer wrote in her memo to Hughes.
The Mayor’s Budget Review Committee signed off March 8 on DIA’s request to file legislation.
The Council bill would amend the existing 2020-21 fiscal year budget, requiring a two-thirds vote before Mayor Lenny Curry’s administration and DIA could access the debt financing.
Hughes, who chairs the mayor’s budget committee, said he hopes the $32.9 million is not necessary. He said he agrees with the steps Boyer is taking.
“The best outcome would be that all parties are content and the garages are making money to help us pay the debt related to it. But there’s some conflicts right now in the process,” Hughes said.
“It’s been a long-standing deal that may not have ultimately been in the best interest of taxpayers,” he said.
“Hopefully, the DIA and the parties at MPS will get together and find a solution so that we don’t have to go down a road we don’t want to,” he said.