https://www.jaxdailyrecord.com/article/city-dia-reach-settlement-with-metropolitan-parking-solutions
Can anyone explain why this is a good deal for COJ?
^Agreed. Read this and could not make heads or tails of this settlement. Was waiting for the much smarter people on this board to break it down.
Before reading the article: The City apologizes to Metropolitan Parking and agrees to double the City payments to them while reducing any "requirements" to "suggestions".
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OK, I read it, and don't know what it says. I lay this in part on it being a complex agreement, and in part on the reporter not understanding the agreement and throwing words at the page in hopes they get close.
It sounds like the city is getting out of what they deem to be uncollectible loans to the tune of $2 million per annum, in exchange for predictable fixed payments of $175,000. Rather than continuing to issue development loan payments that swell the perpetually uncollectible balance, they'll instead end the payments and start officially recognizing the write-offs. Essentially, they appear to be absorbing paper losses (where the cash flow has already occurred) in exchange for significantly reduced future cash outflows. If MPS is required to carry those development loans as a liability on their balance sheet, they may also be happy to see that balance reduced via the write-offs. The extended deal timeline sounds like an accounting trick to reduce the present value of the write-offs. Any resident accountants here?
It's not clear to me if the $13MM NPV here is relative to the status quo or to the city's $32.9MM budgeted purchase price if MPS were found to be in default. Either way, the only way this deal makes sense is treating the development loans as sunk costs.
The Times-Union article is clearer. The savings number is relative to the existing deal:
https://www.jacksonville.com/story/news/local/2022/02/24/jacksonville-and-mps-reach-settlement-downtown-parking-garage-lawsuit/6908581001/ (https://www.jacksonville.com/story/news/local/2022/02/24/jacksonville-and-mps-reach-settlement-downtown-parking-garage-lawsuit/6908581001/)
This fiasco is a great example of the City's inability to negotiate projects in a reasonable and appropriate business-like manner. No private sector deal would typically guarantee no losses and an 8% return under almost any circumstances. I would love to find someone to do that for my investments.
It is also further evidence that the City's desire to promote development at any cost just for the sake of getting development done is not a good policy. Expect to see more such fiascos follow a long line of previous ones.
Lastly, this deal was heavily criticized before the City agreed to it but, as usual, the City doesn't accept inputs it doesn't want to hear about. Critics are summarily brushed off as "naysayers" and against progress, not as champions of the taxpayers.
Now, the taxpayers are, once again, saddled with tens of millions of dollars in losses due to another poorly executed deal. And, the City doesn't ever learn. Thanks a lot, City Hall.