The city-owned Pacific Place garage — key to downtown Seattle's late-1990s revitalization — is losing nearly $500,000 a year and unable to keep up with rising debt payments. City leaders fear that if they try to solve the problem with higher parking rates, even fewer people will park there.
The city-owned Pacific Place garage — key to downtown Seattle’s late-1990s revitalization — is losing nearly $500,000 a year and unable to keep up with rising debt payments.
Fewer people have been parking in the 1,200-stall garage during much of the economic slump. City leaders now fear that if they try to solve the problem with higher parking rates — the fifth increase in six years — even fewer people will park there.
Parking rates were a big issue in the just-approved 2011 city budget. Downtown business groups balked when the City Council and mayor increased downtown street parking to $4 an hour. Buried among the votes was a $1.5 million loan from the city’s general fund intended to keep the broke, debt-ridden Pacific Place garage open while the city hires a consultant to figure out what to do.
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“I’m sure other people are making money on parking garages, and we need to take a look at what we’re doing and what they’re doing,” Mayor Mike McGinn said. “I think we have a responsibility to use taxpayers’ money wisely, so yeah, if we’re losing a chunk of money every year, you have to say to yourself, is this the best use for taxpayer money?”
City officials, who with developers engineered Nordstrom’s move into the old Frederick & Nelson building and created the upscale Pacific Place mall, knew they needed cheap, safe parking to lure shoppers downtown.
In a deal with Pine Street Development, city officials agreed in 1997 to overpay for the garage, saddling the city with 30 years of payments.
The garage cost $50 million to build, but the city paid Pine Street Development $73 million. They said the high price was essential to closing the downtown redevelopment deal.
In agreeing to that price, city officials paid twice the national average per parking stall, and they took plenty of heat for it.
But the underground garage soon proved a reliable draw. The well-lit stack of parking spaces zooms parkers by elevator from their cars to the Barnes & Noble at Seventh Avenue and Pine Street. It’s an escalator ride from a late-night movie and an easy stroll across the skywalk to Nordstrom.
The city for years kept parking rates so low that the garage provided some of the cheapest parking in the shopping district.
It worked for a decade
The city expected to subsidize the cost of operating the garage for two years, but business was so good that the city needed only half the money it set aside. The model worked for a decade.
Councilmember Nick Licata opposed the garage deal at the time it was made, but he said proponents were proven right for years.
“Basically, we became a developer,” he said, “and developers, sometimes they make money and sometimes they don’t. They ride an economic tidal wave.”
The City Council placed strict limits on the garage when it bought it from Pine Street Development. By ordinance, the garage cannot make a profit or carry a big reserve. It must set aside almost all parking spots for short-term parking.
“It’s meant to be a break-even operation,” City Finance Director Glen Lee said. “It’s not generating cash.”
So the garage quickly ran out of money when the recession began to take a toll on its revenue in 2008.
In 2004, more than 100,000 cars parked at Pacific Place eight months out of 12. By 2009, the garage served more than 100,000 cars in a month only once — in December. Use fell nearly 18 percent between 2004 and 2009.
Other downtown garages have not struggled as much, according to preliminary findings from a Puget Sound Regional Council (PSRC) parking study scheduled for release Wednesday.
That study found that downtown parking prices have risen and occupancy of spaces has remained steady since the last study in 2006, PSRC spokesman Rick Olson said. And there are fewer parking spaces downtown than in 2006.
Private garages have turned to “early-bird” all-day parking deals for downtown office workers to offset lost short-term revenue, but the city garage isn’t authorized to do that.
It costs $5 to park at Pacific Place for an hour, up from $2 an hour in 2003. City officials most recently increased hourly rates at the garage in July 2009.
In the three or four blocks around the garage, the average off-street parking rate is $10 to $12 for two hours, according to the Seattle Department of Transportation.
The city now worries the garage will lose its low-cost appeal if rates go higher.
Paying debt until 2028
While the city and the private company that it pays to manage the garage have reduced staff and overhead at the garage, operating expenses make up a small percentage of the garage’s annual costs.
To buy the garage in 1997, the city issued $73.8 million in bonds. About $63.3 million is outstanding, and the city this year owes nearly $5 million in payments, an amount that is scheduled to increase by 3 percent a year until the debt is paid off in 2028, according to the Department of Finance and Administrative Services.
Jean Godden, who chairs the City Council budget committee, said the council will wait to see the consultant’s report before deciding what to do. The report is due in June.
It’s probably not a good time to sell the garage, Godden said, but the city might consider opening up more spaces for long-term parking to make up for lost revenue.
“It [the garage] was extremely successful,” Godden said. “It certainly did stimulate downtown.”
Emily Heffter: 206-464-8246 or email@example.com