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Long-term or short-term parking leases- An issue for the BZA?

Warwick Jones, Editor

It seems to us that the issue is unresolved as to whether the lease between the City and the developer of 418 Meeting Street for parking in the Visitors Center Garage is long-term or short-term. We sought clarification at the City Council meeting on Tuesday night but it was not forthcoming. In some respects, the issue by itself may seem unimportant. But the City ordinance requires that a new development like that at 418 Meeting Street provide parking. If all of it cannot be on site, then the balance must be within 400 feet of the development and under a lease agreement for 10 years or more. If the developer cannot meet the requirement of the ordinance, then exceptions must be obtained from the Board of Zoning Appeals. It is of interest that Councilmember Fishburne is the principal of the development company.

In the interest of space, we refer readers to the note (January 5) written on the last BZA meeting. We describe there the circumstances that led to the issue as to whether the lease is long or short-term.

Opposition to the development
For the record, we opposed the proposed development at 418 Meeting Street. We think that the building is too big for the lot and the parking arrangements are not satisfactory from the viewpoint of the neighborhood. The zoning ordinance stipulates 3 floors but the developer is seeking 4. The Charleston Historic Foundation and the Preservation Society also opposed the development generally for the same reasons that we do. I think we all feel that an appropriate development should be smaller and that the developer should go further in attempting to meet the parking stipulation.

At the BZA meeting, the City in its presentation made no mention of whether the lease of space at the Visitors Center Parking Garage was short or long term. But clearly the Board believed that it was long-term as the City made no reference to the lease and the developer did not seek an exception. It was only after our comment that the Board asked for clarification. And as we pointed out in our previous note, the head of Planning commented that the long-term commitment could not be written into the contract because of bond issues but a long-term commitment was intended. The board deferred a decision until further information was available.

We endeavored to find out more information and sought clarification from Council last night. As Marc Knapp has stated, the issue was not really addressed though the Mayor alluded to tax considerations and that leases like this had been written a number of times in the past. He also voiced praise of the development proposed at 418 Meeting Street.

Tax issues relating to bonds used to finance garages
We asked some questions of te City and from our understanding the issue is as follows. The parking garage at the Visitors Center was financed with a municipal bond issue, as were a number of City garages. The interest on these bonds generally is well below market rates because the interest is not taxable in the hands of certain investors. However, the IRS wants to prevent municipal bond proceeds from being used to finance activities in the private sector. It argues that bonds for private sector activities should be issued at market rates and not through cities or municipalities. In its wisdom, it precludes long term lease arrangement with private entities in parking garages but will allow short term leases. This is why the City has written agreements that are essentially short term but have a long-term intent.

It seems like a short term lease to us
Will the BZA wear this explanation? We don't know. But to us the lease before the Board is short-term. Could the developer successfully sue the City if it chose to exercise the right written into the contract to give 4 weeks notice of termination? We don't think so. And if the developer can determine that in fact he has a long term contract, where does that place the City in relation to the IRS. And what is the penalty?

The Mayor on Tuesday night spoke of the precedent of these sorts of leases and said there had been no problem before. We don't take issue with this but we wonder whether the BZA in all of the precedents knew of the potential issue. The BZA would have assumed that there was a long term lease for 418 Meeting Street if not for our comment at the meeting. Did the Board make similar assumptions in hearings for variances and exceptions in the past?

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