The RMA Parking Deck Debacle, OR Just When You're Sure the City of Richmond CAN'T Be Any Stupider, They Prove You Wrong!

O.M.G.  The one d*mn day I don't read the whole paper.  Just came across this article on the front page of the Metro Section of the Richmond Times-Dispatch: "City Wants to Take Downtown Expressway Parking Deck from the RMA."  The article literally compelled me to run to my office and bang out this blog post.  I am constantly amazed at the stupidity of the City of Richmond.  Just when you think it can't get any worse, it does.

If you don't feel like reading the article, here is the very short summary.  In 1990, the City of Richmond paid for the construction of the parking deck over the Downtown Expressway by the purchase of $18.9M in Richmond Metropolitan Authority ("RMA") bonds. The City was supposed to be paid back by the revenue from the parking deck.  The RMA has not repaid the City of Richmond.  In fact, in the over 20 years since the parking deck has been open (1992), it appears the City of Richmond has not been paid one. red. cent.  The City of Richmond is owed the entire principal amount of the bonds PLUS another $15M in interest. 

So, the RMA owes the City of Richmond almost $34M.  So, what is the City going to do about this?  The City Council, by consent agenda, was prepared last night to (i) foreclose on the parking deck; and (ii) forgive the RMA's $34M debt.

Yup, folks, you heard that right.  It was the City administration's recommendation to City Council that the City take back a non-performing asset and forgive $34M in debt.  To an entity that has net positive cash flow in the millions of dollars of years a year.  [NOTE:  The RMA capital budget for 2013-2014 is $12.77M, of which $7.56M is operating expense, and $5.21M is salaries and benefits.  See Page 24].  An entity that has been jerking the City around over The Diamond, and control of the Downtown Expressway, for at least the last two years.

Clearly someone needs to teach the City administration the definition of "leverage."  Perhaps followed by a little lesson in negotiating.  I mean, we already knew they were lacking in that whole negotiating skill thing when they gave away the Westhampton School building to Bon Secours for peanuts in the Redskins Training Camp deal.  Particularly since it wasn't really theirs to give away, it was the surplus property of the City of Richmond Public School system.  Details, details!  But really, this has crossed the line from the ridiculous into the sublimely absurd.  This is the conversation I imagine taking place:

"Yeah, well, that d*mn parking deck has never made any money, but I'm sure we at the City will do a MUCH better job running it.  We'll have it generating income in no time!  What, there have been operating deficits in the past?  Hmmmm.....we'll figure it out!  We've got lots of smart people here.  Just look at how great we did negotiating the deal for the Redskins Training Facility!  We'll just let those nice folks at the RMA keep that $34M they owe us, we'll just take this parking deck and go on our way...."

Dear Mayor Jones and Administration:  Here is a suggested script for your negotiations.  Please, I beg you.  Try it. 

"Hi, RMA?  Yeah, this is the City.  We kind of have a problem.  You owe us a sh*t ton of money.  Yup, $34M.  So here is how this is going to go.  We're going to take back the parking deck.  THEN we're going to sue you for the $34M deficiency.  You have a couple choices.  You can pay us that money in nice, cold, hard cash, or you can hand over some assets, like the Diamond, and give us the remainder in cash.  Maybe we'd consider some non-cash concessions, like a contractual agreement from you to stop screwing around with us over the Downtown Expressway.  We're tired of dealing with the bullsh*t about 'regional cooperation' while you take our land, fail to compensate us, jerk us around, and treat us like the poor cousin.  Looks like you're going to have to play nice."

And City Council, you all should be absolutely ASHAMED of yourselves that this horrific provision was somehow on the consent agenda.  I mean seriously, WTH?  I know it's only a part-time job, but surely y'all or your staff could have figured out that giving away $34M was not a super idea. 

Here's what I think should happen.  City, if you want to run the parking deck, fine, whatever, I really couldn't care less.  Just try not to lose money.  But since you don't seem to have any need for that $34M, I propose that you turn it over to the City of Richmond Public Schools ("RPS"), to be split equally between capital expenditures and instructional expenditures.  That should about make up for the value you stole from RPS in the Westhampton School deal.

As always, just one woman's opinion.  Comments and feedback welcome.

 [NOTE, SEPTEMBER 25:  As a commenter pointed out, of course, the City would not be entitled to the parking deck AND $34M in cash.  The City would be entitled to the parking deck PLUS the deficiency, meaning the difference between the $34M they are owed and the value of the asset they took back.  And if the parking deck has been losing money all this time, I am having a hard time believing there is any way the deck itself could be worth $34M, or even anything close to that. However you look at it, the RMA owes the City LOTS of money.  Why wouldn't we force them to pay up?]

 

Comments

[Melissa Loughridge Savenko]

Trip, to answer your question, yes, the mortgage company is entitled to come after a home owner for the deficiency - the difference between what they are owed and what they recovered when they took back the house in foreclosure and subsequently sold it. The reality is in the period from 2007 to today, many banks CHOSE not to come after homeowners, knowing it was essentially a futile effort. But that doesn't change the fact that they could easily get a judgment.

So, you are correct, if the City forecloses on the parking debt, they would be credited with the value of that asset against the debt owed. But it still sounds like there are MILLIONS of dollars in additional debt that the City would be forgiving. My question is: WHY? Especially since the RMA owns additional valuable assets and generates net positive cash flow. In other words, unlike the poor homeowners in the mortgage crisis, the RMA actually has assets to go against. Why shouldn't the City recover everything that it is owed? Which of course includes the unpaid interest on the debt.

[Trip Underhall]

if they foreclose on the parking deck they have to credit the RMA with the fair value of the property they take. I don't know, but maybe that value covers the whole debt? You're in real estate and a lawyer, think about it - would a mortgage company be able to foreclose on a house and still come after the homeowner for the whole mortgage? Can a government take private property without just compensation?