Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/los-angeles-privatization-2011

Reason Foundation

Annual Privatization Report

Villaraigosa Administration Advocating Reform in Los Angeles

Debate over city-owned parking garages and zoo continues, progress made elsewhere

Harris Kenny
May 15, 2012

Like most cities, Los Angeles grappled with a substantial budget deficit for FY 2012. Mayor Antonio Villaraigosa eliminated the $457 million budget deficit and proposed a $6.9 billion plan that balanced cuts with limited service expansion. When Villaraigosa first entered office he made public-private partnerships (PPPs) a major priority. While results have been slow to materialize, the City of Angels is making progress toward more efficient provision of public service delivery through the private sector.

Policymakers have been exploring a PPP for the city’s parking garages at Mayor Antonio Villaraigosa’s behest since 2009, however their efforts ended in failure after the city council ultimately voted down the idea. Mayor Villaraigosa sought a 50-year lease of the city’s parking garages that would include infrastructure upgrades and automated payment systems. An April 2011 article in LAWeekly argued the plan failed because officials failed to conduct political due diligence and constituent outreach on the deal.[1]

Local chambers of commerce and business associations criticized the parking garage plan fearing it would hurt their ability to draw customers. According to the article, two restrictions were explored to placate business concerns: first, cutting hourly rates at several facilities and retaining site-specific validation discounts; and second, removing noncompetition zones around each garage, thereby preserving the city’s right to build competing garages nearby existing garages.

There were so many changes during in the procurement process it’s difficult to estimate how much revenue the city left on the table by abandoning the deal. Regardless, abandoning the deal is already having an impact; Bloomberg reported on January 5, 2011 that the city included $53.2 million in anticipated revenue from the lease in this year’s budget. The article stated that in an internal memo City Administrative Officer Miguel Santana and Chief Legislative Analyst Gerry Miller found, on average, only half the total 8,200 spaces in the city’s nine garages are used. Santana and Miller attribute underutilized parking infrastructure to limited marketing and lack of conveniences such as automated payment systems.

An exasperated Santana told LAWeekly on January 13, “There’s no such thing as free parking. Somebody’s paying for it, and in this case the taxpayers are paying for it.”[2] For now, subsidized parking will go on in Los Angeles as policymakers explore alternatives to raise revenue with a projected $350 million deficit on the horizon for next year. For more on parking privatization, see Annual Privatization Report 2011: Local Government (Part 2: Parking Privatization Blossoming in 2011.)

After issuing a Request for Information (RFI), the Los Angeles City Council approved privatizing the operation of the Northeast Valley Animal Care Center in Mission Hills, transferring management to Best Friends, a Utah-based national nonprofit organization focused on animal rescue. The Los Angeles Times reports Brenda Barnette, general manager of the Department of Animal Services, defending the move on August 17, 2011 saying, “The deal with Best Friends cost the city nothing and will save the lives of thousands of animals that would otherwise be euthanized each year.”[3] Best Friends announced that over the course of the three-year contract they would:

The Mission Hills facility was built three years ago for almost $20 million, but was never fully staffed because of budget cuts, according to the Los Angeles Times. In fact, the facility has been closed and according to budget estimates would have cost the city $3.3 million to run it. For more on animal shelter privatization, see Part 10: Nonprofit Groups Transforming Government Animal Shelters.

The city council also achieved mixed results regarding public art facilities. It agreed to spin off four facilities, but was initially hoping to privatize nine and generate $1 million in savings. According to a February 26, 2011 report by the Los Angeles Times, facilities in line for outsourcing include the: Madrid Theater in Canoga Park, Warner Grand Theater in San Pedro, Vision Theater in Leimert Park and Lincoln Heights Youth Art Center. Olga Garay, executive director of the Department of Cultural Affairs, told the Los Angeles Times that the city must seek new operating proposals for facilities already operating by private non-profit groups that are not under official lease agreements.

Finally, last year the Los Angeles City Council ordered feasibility studies on ways to privatize the operations of the Los Angeles Zoo & Botanical Gardens, partnering with a nonprofit organization like the Greater Los Angeles Zoo Association. This proposal progressed in 2011 when the city council voted to begin soliciting proposals from prospective operators. The zoo’s operating budget is projected to increase from $26 million to $33.7 million over the next five years, expenses the city can’t afford.

City analysts calculate a PPP for the zoo could save as much as $20 million over the next five years. A July report by Miguel Santana found that “Without an alternative (operating) model, the city’s fund subsidy is very likely to be reduced further or eliminated, resulting in the continual increase of admission fees and the possible eventual closure of the (zoo).”[4] For more on zoo PPPs, see Annual Privatization Report 2011: Local Government (Part 9: Privately Operated Zoos Now Considered the Standard.)

While divesting operation of the Mission Hills animal shelter and several public art facilities were considered a win, all eyes are on Villaraigosa to see if the momentum will continue in 2012. Likely candidates for PPPs include: the Los Angeles Zoo and Botanical Gardens, city-owned parking infrastructure and the Convention Center.

Harris Kenny is a policy analyst at Reason Foundation. A modified version of this article was published in Reason Foundation's Annual Privatization Report 2011: Local Government report.


Notes

[1] Gene Maddaus, “City Council pays for needless study by not doing its homework,” LAWeekly, April 7, 2011.

[2] Gene Maddaus, “Plan to sell city garages could anger voters forced to pay more to park,” LAWeekly, January 13, 2011.

[3] Kate Linthicum, “Los Angeles to hand over animal shelter to nonprofit group,” Los Angeles Times, August 17, 2011.

[4] Rick Orlov, “Report by CAO endorses private partnership for L.A. Zoo,” Daily News Los Angeles, July 16,2011.


Harris Kenny is Policy Analyst


Print This