FORM GEN. 160 CITY OF LOS ANGELES INTER-DEPARTMENTAL CORRESPONDENCE Date: August ~. 2010 To: The Honorable Members of the Los Angeles City Council From: Miguel A. Santana ._lilllt L _j rJ. ~ City Administrative Officer , ''7/'-- Gerry F. Miller f a/~ Chief Legisl~~s/r• I Subject: PROPOSED PUBLIC-PRIVATE PARTNERSHIP FOR PARKING ASSETS REQUEST FOR PROPOSAL AND DRAFT CONCESSION AGREEMENT (C. F. 09-0728; 09-0728-S1; 09-0600-S120) SUMMARY In November 2008, a working group consisting of staff from the City Administrative Officer (CAO) as Chair, Mayor's Office, Chief Legislative Analyst (CLA) and City Attorney was convened upon request of the Mayor to explore opportunities for a public-private partnership (P3) with respect to the City's parking assets. Subsequently, upon the instruction of the City Council, the working group focused its efforts on developing a concession agreement for ten City-owned public parking structures, as follows: Garage Location CD S12aces Broxton Westwood 5 366 Cherokee Hollywood 13 386 Cinerama Dome Hollywood 13 1,717 Dickens Sherman Oaks 5 198 Friar St Van Nuys 6 237 Hollywood & Highland Hollywood 13 3,006 Larchmont Hancock Park 4 167 Pershing Square Downtown 9 1,590 Robertson West LA 5 334 Ventura Blvd Studio City 2 397 TOTAL SPACES: 8,398 In July, the Controller's Office joined as an ex officio member following a discussion in Council (C.F. 09-0728-S2). In September 2009, the working group was instructed by the Mayor and Council to provide the final parking study, an analysis of the results and a discussion of options for consideration (C.F. 09-0600-S120). In February 2010, the working group concluded the assessment phase of this project and presented findings and recommendations for further action in support of a P3 concession and lease for the identified parking structures. - 2- On June 15, 2010, the working group presented to the City Council in Closed Session ten key issues affecting the price and terms of payment for this Concession Agreement. Councilmembers expressed concerns regarding certain conditions proposed in the draft agreement intended to maximize the value of the transaction, but could impact business and/or residents in the vicinity. Based on the instructions from the Council, the working group made the following changes to the Request for Proposal (RFP) and draft Concession Agreement (CA). • Removes the Larchmont Parking Garage from the proposed P3 transaction. • Includes language to require any future vendor to accommodate 1,200 vehicles during the evening hours to support the Broadway Theatre district. • Phases out the current parking validation program at the Broxton Garage over three years. In addition, Schedule 6 in the attached draft CA establishes maximum rates to be allowed at each of the City-owned parking structures. These rates were determined based on an occupancy and market study conducted by the City's parking consultant, Desman Associates, and have been incorporated as a requirement of the draft CA. REQUEST FOR PROPOSALS The P3 working group, in close consultation with the City's independent advisors and sell­ side advisors, developed the attached RFP to solicit responses from the list of pre-qualified bidders identified in the recent Request for Qualifications. The RFP contains the following key elements: RFP Evaluation Process Responses to the RFP will be judged on a pass/fail basis relative to the respondents' operational experience running similar parking assets in areas comparable to Los Angeles. The Operational criteria detailed in the RFP was developed in consultation with the City's parking experts in the Department of Transportation and the General Services Department (GSD) Responses will also be judged on a pass/fail basis relative to the Financial Plan presented in their submittal. A qualified financial proposal is required to "contain a fully committed Financing Plan without any contingencies and demonstrating enough capital to fund the upfront rent payment." Proposers must submit verifiable evidence of compliance with both the Financial and Operational criteria. In addition, all proposers must fully comply with the City's Administrative requirements, by fulfilling the standard requirements for City contracts including, but not limited to, Non­ Discrimination/Equal Employment Practices/Affirmative Action policies, MBE/WBE/OBE - 3 - requirements, the Equal Benefits Ordinance, Contractor Responsibility requirements, and the City's Living Wage and Service Contract Worker Retention Ordinances. Proposed Selection Process The working group recommends an RFP selection process intended to measure the value of the Pershing Square and Broxton provisions, noted above, by requiring each respondent to the RFP to submit four distinct bids: • Base Response that includes both the Pershing Square and Broxton requirements; • A first alternative values the removal of the Pershing Square Garage provision; • A second alternative values the removal of the Broxton validation phase-out; and • A third alternative values the removal of both provisions. The selection panel, comprised of representatives of the GAO, CLA, and the Mayor's Office, will evaluate each proposal based on the detailed criteria in the RFP. For those respondents that 'pass' the City's Operational, Financial, and Administrative criteria, the respondents Base Response and three alternatives would be reviewed. In each of the four categories, any respondents whose proposal is within 10% of the top submittal will be asked to submit a Best and Final Offer (BAFO) in that category, thereby providing respondents with one more opportunities to fully value the concession agreement. All RFP submittals, including any BAFO submittals, will be forwarded to the City Council for consideration and award. Related Issues: Pershing Square Garage: The Pershing Square Garage is under the control of the Department of Recreation and Parks. According to the City Attorney, inclusion of this facility in this transaction requires the approval of the Board of Recreation and Parks Commissioners. Parking revenues from this facility totaled $3.7 million in 2008-2009, of which $1.4 million was paid to GSD for operational, maintenance, capital improvements and security expenses, and the remaining $2.3 million covered Pershing Square Park administration, security, maintenance, capital improvements, recreational, special event programming and mobile youth programming. On August 2, 2010, the Board approved the inclusion of the Pershing Square Garage in the RFP and draft CA, with the understanding that the concessionaire will be required to make a "reasonable good faith effort" to accommodate the Department's parking needs relative to park improvements from time to time for the continued effective use of the park. Board approval will also be required upon final award of this CA, to allow the Board to determine if they would prefer a lump sum or annual payment from the proceeds of this transaction. In addition, should the terms of the CA relating to the Pershing Square Garage change substantially prior to award, Board approval would be required. -4- Cinerama Dome: The Cinerama Dome garage is currently owned and managed by the Community Redevelopment Agency (CRA). To include this facility in this transaction, the City will purchase the garage from the CRA for $44.75 million. This amount will be sufficient to retire the outstanding bonds of $38.15 million and an outstanding debt to the developer, Dome Entertainment Center, Inc, of $6.6 million. A purchase and sale agreement is being drafted for presentation to the CRA Board for final approval. The sale will only be consummated if the City enters into a Concession Agreement for the Parking System. The garage is being sold to the City in an "As Is" condition and subject to all existing license and parking covenant agreements. The existing Reciprocal Easement Agreement (REA) between the developer and the CRA will remain in place including the rate setting mechanism set forth in the REA, which requires public hearings before there is any change to the range of rates that can by charged for parking. Any changes to the REA will be subject to the terms and conditions of the purchase and sale agreement between the City and the CRA. The CRA is also currently contracting to replace the revenue collection equipment at a cost of over $700,000. They anticipate that this conversion of equipment to be completed by December 2010 and prior to execution of the Concession Agreement. NEXT STEPS Should the City Council approve the release of the attached RFP and draft CA, the following is the anticipated timeline and process for returning to the Council with recommendations: Step Dates Action 1 8/11/2010 City Council meets to consider the draft Concession Agreement (CA) and Maintenance and Operating Standards (M&O Standards) and Request for Proposals (RFP). 2 8/11/2010 Upon approval of the City Council, release the RFP and the CA and M&O Standards to pre-qualified parties. 3 9/13/2010 Commence due diliQence sessions with pre-qualified parties. 4 10/5/2010 Complete due diligence sessions. 5 10/8/2010 Respondents' post-due-diligence legal and business issues due. 6 10/22/2010 Drafting/strategy session to review and, where appropriate, revise the draft CA and M&O Standards based on respondents' feedback. 7 11/12/2010 Final comments due from potential respondents. 8 12/8/2010 Final CA and M&O Standards completed by City working group. Report to Council with recommended revisions, if any. 9 12/13/2010 City Council meets to review and approve final CA and M&O Standards (possible Closed Sessioni. - 5- 10 12/14/2010 Release final CA and M&O Standards to proposers. 11 1/31/2011 Proposals Due. 12 2/3/2011 City Panel (CAO, CLA, Mayor) review proposals for pass/fail criteria and to determine if Best and Final Offers (BAFOs) are needed. 13 2/10/2011 BAFOs due.