Miami Beach commissioners on Friday voted not to buy out a lease for a parking garage on Collins Avenue.
A big reason for declining to buy the lease in the first place was because a staff analysis showed it would take more than 14 years without factoring in operating costs to recoup the citys investment. Based on this, the administration advised against buying out the lease.
However, that analysis was based on charging city-subsidized rates at the garage, called the Pelican. The city has a longstanding policy, set by ordinance, to offer reduced parking rates of about $1 per hour.
The Pelican, 1041 Collins Ave., charges market rates for its almost 330 parking spots. An additional city analysis has shown Miami Beach could make a profit sooner on the garage if the city continues to charge the market rate of about $3 per hour.
Documents provided to the city by the garage lessee show that the Pelican pulls an annualized net income of about $1.34 million.
Only commissioner Ed Tobin had suggested the city should move forward with the purchase and continue to charge market rates.
Anybody in real estate would understand its a slam-dunk, he told the Miami Herald.
But government doesnt always make deals in the hopes of turning a profit.
That line of thinking shouldnt apply here, Tobin argued. The city is already in the business of running other parking garages, and the public is going to charged a market rate whether the city buys the garage or not, he said.
The difference, he argued, is where the money ends up: in the pocket of private business, or back in government coffers.
Im looking at this as a business deal, Tobin said in an interview. He added: What Im buying is an income stream.
Commissioners echoed a fear expressed by commissioner Micky Steinberg: if the city buys the garage and continues to charge market rates, residents would likely convince a future commission to lower rates at the garage, resulting in a financial loss.
Said Commissioner Jonah Wolfson: The only way to make it work is to put ourselves in the shoes on an aggressive business person.
Commissioner Deede Weithorn wondered how the $22.5 million price tag to buy out the Pelican lease would affect the citys ability to complete future parking projects. And if the city borrowed the money for the purchase, what would the building already about 10 years old be worth by the time it was paid off?
The Pelican is actually owned by the city. But it is leased to a private company and is tangled in a complicated settlement agreement spanning back to the late 1990s and early 2000s, when the garage was built. The current lessee has a buyer thats ready to take over its lease for a payment of $22.5 million cash.
Miami Beach has a contractual right of first refusal, which basically means the city needs to be offered the opportunity to buy out the lease before another entity does. The deadline to decide whether to move forward with potentially buying-out the lease was Dec. 13.