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MBTA considers selling future parking revenue

Strategy could raise as much as $325m

By Eric Moskowitz
Globe Staff / January 5, 2011

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Trying to avoid a fare increase and service cuts despite a crushing debt burden, MBTA officials are considering a plan to sell long-term parking revenue to investors in exchange for a lump sum of as much as $325 million.

The proposed arrangement would help the T close a projected deficit of more than $100 million for fiscal year 2012, which begins July 1, and pay off some debt ahead of schedule to reduce expenses in the coming years.

MBTA officials are also considering going from two operators to one on Red Line subway trains, replacing staff at parking lots with machines, and doing some currently contracted maintenance in-house.

T officials also hope to save up to $30 million on health insurance by transferring employees to a state insurance plan, a move being contested in court by several unions, General Manager Richard A. Davey told the Department of Transportation’s finance committee yesterday.

“Our number one priority is to deliver a balanced budget without fare increases and service cuts, and we’re looking under every cushion we can, to find every nickel to do that,’’ Davey said.

The most complex proposal being weighed by the MBTA — and the one likely to provoke the most questions — is the plan to pay down debt by persuading investors to pay money up front in exchange for collecting future T parking lot revenue. Debt payments are a huge issue for the T, which soon will owe more in debt each year than it collects in fares from riders. The agency is scheduled to pay about $450 million in principal and interest next year, and the debt payments rise in each of the five years after that, reaching $575 million in fiscal 2016.

As the T looked around for ways to raise money without increasing fares or cutting service, it began considering ways to squeeze more money from its many parking spaces.

The MBTA owns about 46,000 parking spaces at about 100 garages and lots across the region. After paying a private company a flat management fee, the T ends up taking home about $30 million or so a year from parking, according to Jonathan R. Davis, the MBTA’s deputy general manager and chief financial officer.

Under the proposal, the T would set up a subsidiary to sell most or all of that projected parking revenue for a set period — say, 20 or 25 years — as tax-exempt debt, in exchange for an up-front payment of perhaps $250 million to $325 million. The T would retain control over its garages and lots, including the ability to set the parking fee, and would also collect any annual surplus that comes in on top of the parking revenue guaranteed to investors.

Officials said they were hesitant to lease parking facilities outright, wary of what happened in Chicago after that city turned street meters over to a private company to plug a budget gap, resulting in the highest parking meter rates in the country.

Some transportation board members sounded hesitant.

“I want to understand a lot more about this,’’ said board member Elizabeth Levin, a transportation, design, and environmental consultant. “I get nervous with things that aren’t easily understandable.’’

John R. Jenkins, the insurance agency owner who chairs the board of directors, said he supports “financial engineering . . . when it makes good business sense.’’ But he wanted to know how well developed the parking proposal was and whether the T also planned to trim expenses.

Davey and Davis said that the T is working on a host of proposed budget cuts and that the parking plan could be fully developed in time for the board to vote on a budget in the spring.

Because 10 percent of the state’s population relies on the T each workday, lawmakers have never expected the transit system to be funded strictly by its own revenues.

A little over a decade ago, they dedicated a portion of the sales tax to the MBTA, but in the process they also saddled it with the debt from past expansion projects approved on Beacon Hill. Now those debt payments are burdensome, and the sales tax revenues disappointing.

As the scheduled payments balloon, each of the coming years could be more difficult than the one before it.

“After a host of really challenging years, this could be your toughest year ever,’’ said Paul Regan, executive director of the MBTA Advisory Board, which represents cities and towns in the service area.

Eric Moskowitz can be reached at emoskowitz@globe.com.