Harrisburg settles multimillion-dollar parking dispute, leaving $1.4M behind

Harrisburg parking meter

New parking meters were installed in Harrisburg in 2014 as part of a new parking regime.

A multimillion-dollar dispute over Harrisburg parking payments dating back to 2016 has been settled after city officials agreed to accept $1 million in owed payments but leave $1.4 million on the table.

The settlement between city officials and the people who run the city’s parking system under a long-term lease:

  • Repaid the city for payment shortages from 2016, 2017 and 2018 (that money had been accruing in an escrow account until an agreement could be reached.)
  • Established the framework for city payments going forward,
  • Allowed the city to maintain its priority position for parking system revenue in the future—something that was under attack, and
  • Avoided a hike in street meter rates this year. (The mayor tried but said he could not convince parking officials to agree to a multi-year freeze.)

The settlement also meant the city had to abandon its claim to shortages in payments from 2014 and 2015. Parking officials claimed the city wasn’t entitled to all of it because the city was slow to roll out the adjudication phase of the parking system, which reduced enforcement revenue in the early years and resulted in 7,000 tickets being tossed out of court as un-collectable.

Either way, that money is not available from the parking system and may not have been available until the end of the 40-year term of the lease, Mayor Eric Papenfuse said.

“We traded that for getting our money now, not changing the waterfall and blocking an effort to raise meter rates,” he said.

The settlement was finalized late last year but not publicly announced. The settlement prompted parking officials to restart biannual public meetings, including one held Tuesday, after a two-year hiatus. Parking officials said they halted the meetings while the money was in dispute.

The parking system, for its part, had enough money at the end of last year to deposit about $1.1 million into its capital reserve fund, the first time any money has been added to the account to finance repairs and improvements since 2014.

Concern over the dwindling capital reserve fund has plagued the parking deal since the beginning as revenue into the parking system often has fallen short of expectations. The city's garages are expected to need $13 million in improvements over the next decade.

That’s why county officials supported higher meter rates and changing the contracts to prioritize money flowing into the capital reserve fund before city coffers, Mayor Eric Papenfuse said. But that wasn’t the deal the city entered into in late 2013 as part of the city’s financial recovery.

Instead, he said, the city turned over control of its valuable parking assets—which include about 1,250 metered spaces, 10 garages and five surface lots— in exchange for guaranteed annual payments.

According to the asset transfer agreement, revenue generated by the parking system (from street meters, parking garages and tickets for violations) is distributed each month, first to pay debts and expenses, then to pay a "waterfall" of recipients.

The city is supposed to be first in line at the top of the waterfall, according to the contracts, then parking managers, and finally the fund to pay for capital repairs. But often, there hasn’t been enough cash to flow completely through the waterfall, leaving those at the bottom with smaller payments or empty-handed.

At times, there wasn’t enough money to pay the city its guaranteed payment even at the top of the waterfall.

The way the system works, if the revenue falls short each month, then the "shortfall" for the city payment is supposed to be carried over to the next month or "accrued" until there is sufficient revenue to pay the city the entire amount.

The legal dispute arose from when, if ever, does the clock reset? Or do the accruals carry over indefinitely?

The city's original position was: yes, the accruals compound indefinitely because the city was promised those specific payments. But parking officials said the language in the asset transfer agreement was "ambiguous" and they believed the duty to pay each year's accruals ended with the fiscal year.

The issue was sent to an arbitrator who agreed the contract was ambiguous. That prompted a new effort by parking and county officials to change the order of the waterfall recipients to ensure more money would go into the capital reserve fund each year.

But that would have resulted in uncertain, if any, payments from the waterfall to the city in future decades. (The city would still continue to get 20 percent of parking garage proceeds.) Papenfuse instead has promoted cutting expenses to increase revenue flow to the cash reserve fund.

In the end, as part of the settlement, city officials agreed that shortages would only be carried to the end of the fiscal year, which the mayor said was a “reasonable clarification.”

The recently released 2018 annual audit of the parking system showed it generated $300,000 less than expected from transient parking (mostly parking garages) and $225,000 less than budgeted for parking enforcement (ticket violations) as part of its $22 million annual budget.

But the system did better than expected with meter revenues (about $285,000.)

Parking managers received a portion of their “performance fees,” which are sometimes called bonuses, last year totaling about $200,000 when they were expecting to get about $350,000. Parking officials said they were unlikely to get the performance fees this year because of tight finances.

The amount paid to the city each year through the waterfall has varied, according to the contract, which front-loaded larger payments in the early years to help the city with its recovery. The annual payment, which totaled about $3.5 million last year, is expected to decline in 2020. The annual payment is in addition to parking taxes generated by the system, which last year totaled another $3.5 million for the city.

If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement and agree that your clicks, interactions, and personal information may be collected, recorded, and/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.