Why is EMU’s attempt to privatize parking on the City Council agenda?

Can someone help me understand something… Why, during this upcoming City Council meeting, is there going to be a public hearing on the subject of Eastern Michigan University’s plan to privatize their parking? I mean, I understand, based on the following letter by Ypsilanti City Attorney John Barr, that EMU legally has to have the City sign off before moving forward with this controversial plan which would give control of their 9,700 parking spaces to an out-of-state for-profit company for a term of between 30 and 50 years, but I don’t understand why. Is it because the for-profit company is seeking to avoid paying taxes on the revenue they’ll collect on campus?

Currently, EMU takes in about $4.5 million a year in parking revenue, and, as a non-profit, does not pay taxes on this income. Could it be that EMU’s Regents need the City’s approval in order to pass along this benefit along to the out-of-state private equity firm that they intend to sell the rights to?

Really, I can’t imagine what other connection there might be between the City and EMU on this, other than as it relates to taxes.

I reached out to City Council member Pete Murdock and asked why this was being brought to Council, and he responded, “This was the first we have heard that we would have a role to play in the privatization of parking at EMU.” Murdock went on to say, “It seems that this public hearing and Council blessing is necessary and required in order to get the tax exempt ‘Private Activity Bonds’ the company is seeking… I think it’s an IRS requirement for those specific bonds.” When ask why this hearing wouldn’t then take place in the state in which the company resides, Murdoch said he was looking into it.

Here, by way of context, for those of you who would like to help me unravel this, is the text of Barr’s letter to members of City Council, which was included in the just-released agenda for the meeting.

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  1. Adam
    Posted March 6, 2018 at 12:31 pm | Permalink

    I read this about the same as you Mark. Reading between the lines my guess is that EMU was able to negotiate a better payment from PHC by agreeing to use this untaxed bond – perhaps they split the tax break. I’m guessing the private hearing is here because that’s where the property being bonded is located(?).

    I’ll be streaming the council meeting tonight for Ypsi Live so hopefully we’ll get some details filled in there.

    One other point I found interesting in the packet for tonight is section 3 of the resolution which seems to be a pretty hefty CYA clause:

    “Nothing in this resolution shall be construed to create any obligation or liability
    of the City in any respect whatsoever pertaining to the Notes. No statement, representation or
    recital herein shall be deemed to constitute a legal conclusion or determination that any particular
    action or proposed action is required, authorized or permitted under the laws of the State of
    4152-8154-6769.3 3
    Michigan, the State of Arizona or the United States. The Notes are not issued by the City or on
    behalf of the City but are issued by the Authority pursuant to the laws of the State of Arizona on
    behalf of the Borrower. The Notes shall never constitute an indebtedness or pledge of the City
    within the meaning of any constitutional or statutory provision, and the owners of the Notes shall
    never be paid in whole or in part out of any funds raised or to be raised by taxation or any other
    revenues of the City.”

  2. wobblie
    Posted March 6, 2018 at 1:23 pm | Permalink

    And folks thought the International Village was shady. Privatization of more public resources. Three separate corporate entities involved. Two for profit with their wholly owned “non-profit” being the flow through entity to get the tax breaks.

    It sounds like they are going to use tax exempt ‘Private Activity Bonds’ to pay EMU, and then just rake in the profits.
    Snyder (the killer) appointees giving future income away. I am sure it will be to the economic detriment of the students, staff and faculty who utilize the parking.

    I also notice not one single reason is presented by the City Manager or EMU as to why the City should give its approval. What is the benefit? Given that we live in a crony capitalist society, why shouldn’t we hold them up for a cut of the action? If we end up torpedoing the deal it won’t hurt the city, and we might help the university community long term.

  3. do the math
    Posted March 6, 2018 at 1:50 pm | Permalink

    Hope EMU has done the math on this better than Chicago did. That city signed away 75 years of parking revenue for just 12 years worth of cash. Oh, and parking meter rates doubled.

    I’m sure Eastern is looking at the long-range financial implications, though, and not just a short-term budget fix. Right?

  4. Pete Murdock
    Posted March 6, 2018 at 2:09 pm | Permalink

    Didn’t realize that the City has a role in this until now. Not a great proponent of privatization. So given this chance will be voting no. Beyond that, there is a great focus on creating a community benefits ordinance – also on the agenda tonight. Where are the community benefits in this arrangement for granting a tax free bond and publicly owned tax exempt property for a private company to profit from. Don’t see them.

  5. Jean Henry
    Posted March 6, 2018 at 2:15 pm | Permalink

    The length of the lease also seems problematic. The company could be bad at what they do, but EMU is locked in. In all likelihood transportation will change a great deal in the next 50 years.
    This review of Chicago’s parking privatization mentioned the same concern:
    “The main problem with the parking meter lease is that it locks the city into a particular policy structure on parking for the next 75 years. In order to get someone to pay $1 billion up front, you have to give them certainty as to the quantity, location, hours, and rates of the meters. All of these matters are thus written into the contract. In effect, Chicago has irrevocably set public policy with regards to parking for the next 75 years.” http://www.urbanophile.com/2010/08/22/parking-meters-and-the-perils-of-privatization/

  6. Posted March 6, 2018 at 4:55 pm | Permalink

    The privatization of the parking at EMU has been a “done deal” for a while now– or so I thought. Given some of the language Adam quotes in his post, I’m not sure I quite get the city’s legal role in all this. Could they vote against EMU doing this and the EMU still does it? Does the city have to approve this? No idea.

    My own 2 cents on the proposal itself: I have mixed feelings. On the one hand, EMU needs the money, and while this always seemed like some kind of reverse mortgage kind of scheme to me, I can see why it might not necessarily be that bad of an idea, especially if EMU decides to make use of that money to do stuff like prevent laying off employees (which it is in the midst of doing right now). And it’s not really clear how valuable parking is going to be in 10 or 20 years. We might all be using a lot more ride sharing, a lot more of the courses might be online, and/or we might all have cool teleportation tools. Who knows?

    On the other hand, the details of this deal (which I only vaguely understand) suggest weird shell companies inside weird companies, meaning it’s not like this is a straight-forward arrangement where a company that runs parking lots is coming in to run EMU’s parking lots. Plus the rumors of how EMU is planning on spending these millions of dollars are disturbing. What I have heard is it will essentially serve as collateral so EMU can borrow money to prop up the athletics program and/or build this fantasy-land sports complex. I’ve also heard that it’s seed money for a new college of engineering. Maybe the engineering might be a good idea (though maybe not), but selling decades of parking rights to pay for football is literally like me selling my house so I can take that money and go gamble with it.

    At a minimum, I hope Ypsi city council gets some answers to some of these questions.

  7. Demetrius
    Posted March 6, 2018 at 7:19 pm | Permalink

    Does EMU not have an Economics department? Is there nobody there who can explain to the Regents how getting less today isn’t necessarily better than a lot more over a longer period of time?

    Public entities (States, Cities, Universities) selling off the rights to future revenues for a reduced lump-sum cut today are a bad deal for taxpayers, citizens, and the institutions themselves … and really aren’t much different from the predatory (yet enormously profitable) “payday loan,” “rent-to-own,” and “rapid refund” scams perpetrated on millions of poor, desperate, and/or financially unsophisticated people every day. Shady, either way.

    Glad to know the City gets a say in this terrible deal. (Thanks as usual, Mark, for the reporting). I’m hoping the City says no. Perhaps someday, some future EMU leaders may even thank them …

  8. Councilman Brian Robb on Facebook
    Posted March 6, 2018 at 7:45 pm | Permalink

    This is to privatize parking at EMU (and replacing union with non-union jobs).

    EMU currently budgets $4.5M a year in parking revenue. This agreement sells that off as part of 35 year arrangement for a lump-sum payment of $55M in lieu of the $157.5M generated over the life of the 35 year contract.

    The City Council is the only elected body in the City with that authority under IRS code Section 147(f) to approve this. Since the EMU regents are not elected, this falls to us.

    Even if you don’t want to make this a pro-union issue, that’s over $100M leaving the community over the next 35 years.

  9. Joe
    Posted March 6, 2018 at 9:07 pm | Permalink

    I’m sure the venture capitalists from Georgia, using tax-exempt bonds from Arizona, have only our community’s best interests at heart. It’s a non-profit, so I can only assume that they’re going around buying up parking rights from regional schools around the country because it breaks their hearts so much to see us making $150 million over the next 35 years instead of $55 million now.

  10. torn from facebook
    Posted March 7, 2018 at 8:59 am | Permalink

    From someone who was at the meeting last night: “Three voted to call the question and vote down the resolution (which we greatly appreciate) four voted to delay a vote until April 17. It is a big victory. We’ll be back at council on April 17!”

  11. Lynne
    Posted March 7, 2018 at 12:11 pm | Permalink

    Demetrius, EMU has an amazing Econ dept. Or did 11 years ago but I am not sure how much administration listens to faculty

  12. Iron Lung 2
    Posted March 7, 2018 at 1:44 pm | Permalink

    I think the productive route here will be to blame Ann Arbor.

  13. Dirtgrain
    Posted March 7, 2018 at 4:20 pm | Permalink

    Are they running out of ways to pay for football?

  14. James Katakowski
    Posted March 9, 2018 at 8:10 am | Permalink

    This privatization has its roots from Ex. Gov. Engler these are all scams that take taxes away and give them to private for profit companies usually business partners like for example Betsy DeVos. They have taken over building our roads which pre 1990s were still great now they last and worst in the country. Privatize schools bus drivers substitutes etc. are they an better deal hell no. Did I say coaches in public schools too. This profit for someone other than our state of Michigan. Pure Michigan does not need these grafters. Resist and fight this EMU. EAA got slammed down your throat in Detroit and you knew it would not work stop it now.

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