Scranton parking deal closes; costs, fees top $3M

Aug. 31--With a high, but necessary, cost paid, Scranton is officially out of the parking business, officials said.

Closings held Tuesday completed various transactions and bond financings that underpin Mayor Bill Courtright's parking monetization plan, and a new operator is expected to begin the takeover today or tomorrow.

Called the most-complicated transaction ever for the city, the deal capped two years of planning and intertwined several entities. Those include the city, Scranton Parking Authority, a receivership installed over parking garages after a 2012 SPA default, the bond trustee, bond insurers, a nonprofit firm taking over the garages and meters, another firm that will operate the parking system and the Marketplace at Steamtown.

While bond financings achieved favorable interest rates, the entire deal came with steep closing costs topping $5 million, as follows:

--A $35 million bond issuance by the city paid out $3 million in costs and fees.

--A separate $39 million bond issuance by the nonprofit firm taking over, National Development Council, and issued through the Scranton-Lackawanna Health and Welfare Authority as a conduit, paid out $2.2 million in costs and fees. Because the city is not on the hook for NDC debt, the city did not pay this $2 million in costs.

Still, the high $3 million tab for the city's bond package stems from adverse impact of the 2012 default, and that led to the lengthy, complicated transaction, city Business Administrator David Bulzoni said.

A city monetizing an asset by sale or lease typically represents a cashing in on the deal and the city gets a big windfall. In the parking deal, the opposite occurred -- the city had to pay to get out of a bad deal, Mr. Bulzoni said.

That's because the default created extra costs and a black mark on city credit, and aging garages saddled with high debt also need a lot of repairs. There wasn't enough value in the parking system to cover all of the debt, leaving millions in leftover "stranded" debt that the city has to cover. The deal pays all SPA debt, eliminates the receivership, improves city credit and finances, and promises improved garages and a better parking system.

"With monetizing, generally you're cashing out. We didn't have that luxury," Mr. Bulzoni said. "The city was left with the remaining, stranded debt."

As the city narrowed upon selecting NDC a year ago, the former Mall at Steamtown sold in a foreclosure to John Basalyga. He soon began undercutting SPA garages by renting out monthly parking spots at the mall at about half the rate SPA charged.

The city, SPA and NDC negotiated with him as the deal became more complicated and took longer to resolve. Attorney fees and costs rose to $3 million paid out of the proceeds of the city bond.

"The (former SPA) situation was not sustainable, no matter how you look at it," Mr. Bulzoni said. "It had to be corrected. It was a costly correction, but we think the city will be better for it."

Efforts to reach Mr. Courtright were unsuccessful.

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Scranton's $35 million parking bond issuance paid $3.04 million in costs and fees as follows:

--$1,578,839.52 to Buchanan Ingersoll Rooney law firm for bond/special transaction counsel services.

--$725,000 to the PFM Group for financial advisory services.

--$389,696.60 to Citibank for underwriter fees, per bond issued.

--$200,000 to Abrahamsen, Conaboy, Abrahamsen law firm for labor/special counsel services.

--$50,000 to Saul Ewing law firm for underwriter counsel fees and expenses.

--$33,750 to Todd Johns law firm for Scranton Parking Authority solicitor services.

--$28,000 to UMB Bank for escrow agent services.

--$21,250 to Standard & Poor's credit rating agency for bond rating.

--$5,000 to BondResource Partners for verification agent services.

--$5,000 to PFM Asset Management for escrow structure and purchase services.

--$3,000 to auditing firm SB & Company of Hunt Valley, Maryland, for city auditor consent letter.

--$2,500 to DAC for dissemination agent services.

--$1,800 to Firmex Corp. of Toronto, for data room provider services.

--$1,500 to Community Bank for paying agent services.

--$1,200 to McElwee & Quinn for Official Statement Printing services.

The Scranton-Lackawanna Health and Welfare Authority's

$39 million bond issuance for National Development Council had $2.27 million in closing costs and fees, as follows:

--$812,832.43 to First National Bank, title insurance and transfer taxes.

--$475,000 to Dilworth Paxson LLP for bond counsel fee.

--$340,000 to Saul Ewing law firm for underwriter's counsel fee.

--$225,000 to Dentons US LLP, counsel to the borrower.

--$225,000 to Dentons US LLP, counsel to the borrower and HEDC.

--$47,858.33 to Scranton-Lackawanna Health and Welfare Authority for issuer fee.

--$34,000 to Standard & Poor's for bond ratings.

--$30,000 to Desman Associates, engineer's report.

--$27,500 to Stevens & Lee PC, counsel to the Health and Welfare authority.

--$17,702.42 to Reed Smith LLP, trustee's counsel and expenses.

--$17,000 to Rick Wilson, parking consultant.

--$10,000 to U.S. Bank National Association, escrow agent fees.

--$10,000 to U.S. Bank National Association, trustee fee.

--$1,300 to MuniOS, printing fee, limited-offering memorandum.

--$1,000 to PNC, legal fee.

Officials have said that Scranton parking system changes will begin Thursday,

and will include the following:

--Meter rates will rise from $1.25 an hour to $1.50.

--Parking meter enforcement will increase, including use of technology in enforcement and the boot and towing for scofflaws. There will be a phase-in grace period with warning tickets to alert drivers to changes in enforcement.

--Hourly garage rates will rise from $3 for the first hour to $3.50. The Linden garage currently charges $2 per half hour and $3.50 per hour.

--Monthly garage rates will become a standard $90.

--Parkers will still be able to use the smartphone app Pango to pay at a meter. The operator also plans convenient payment options, including easy parking validations, electronic payments and automated monthly renewals.

--The operator promises garage improvements, including clean, safe, well-lit garages, with responsive on-site management; major repairs to older, dilapidated structures; and modernization and ongoing maintenance to newer garages.

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