City Councilor Greg Neitzert Press Release December 4, 2017

For Immediate Release

Release Date: December 4, 2017

Contact: Greg Neitzert City Councilor, Northwest (NW) District Sioux Falls
Email: greg.neitzert@gmail.com
Phone: 605-929-9118

Setting the Record Straight on the Mixed Use Parking Ramp Proposal
With the impending vote by the Sioux Falls City Council set for Tuesday night, the proposed downtown
mixed use parking ramp project is a topic of intense debate and media coverage. The public awareness,
involvement, and discussion is wonderful. However, there are a number of misconceptions that have
affected the debate and discussion. Its time to set the record straight and correct misconceptions
about the proposed mixed use-parking ramp says Greg Neitzert, City Councilor for the Northwest
District of Sioux Falls. The following are 12 of the most common misconceptions along with the actual
reality that clarify and correct them.

The 12 misconceptions are listed in summary form first (pages 1-3), and then
in a more detailed form below (pages 4-8) as an addendum to this press
release for those who wish to have greater detail.
Misconception #1: The parking ramp cost has increased

Reality: This is the first time we have a specific project with a detailed design with a concrete number
we can be confident in. All previous estimates were just that estimates based on theoretical
assumptions and ballpark figures for planning purposes only, and many only included construction only
costs. Comparing this final project plan to previous conceptual projects is not appropriate.

Misconception #2: Tax dollars will be used to fund the project

Reality: The parking division, like our water, sewer, and landfill divisions, is an enterprise fund. This
means it gets 100% of its funding from user fees in the case of the parking division parking meters,
leases on ramps and parking lots, and fines. Likewise, 100% of its expenditures come from user fees.
No general sales tax or property tax dollars can be used to fund the system. Your property and sales tax
dollars will NOT pay for this ramp.

Misconception #3: Rates for parking meters and leases of parking will have to be increased to pay for
this ramp

Reality: Rates were already adjusted two years ago so that the parking enterprise collects enough
revenue to fund operations, repair and maintenance, and capital cost to replace or add new parking
ramps.

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Misconception #4: The parking division cannot afford the debt service on this ramp

Reality: The parking division has no debt currently. Stress testing scenarios and a detailed financial
analysis have been performed on the system. Even with a loss of major tenants downtown, the parking
fund can make the debt service payment, maintain a cash reserve, fund operations, and continue repair
and maintenance on existing ramps and parking lots.

Misconception #5: The investors in this project are being kept secret

Reality: The public portion of the ramp is being financed with bonds that will be sold on the open
market. The private portion will be financed by investors and banking institutions that the developer
must obtain. When we enter partnerships with private firms, award bids for major road and sewer
projects, or enter into contracts with private entities, we know who the winning firm is. However, we
do not know all of the investors, shareholders, or part-owners in those entities. This is not something
we obtain as a matter of course. The city does not and will not know who the investors are in the
private portion. The city cannot keep something secret that it doesnt know itself.

Misconception #6: The City is paying for private development

Reality: The development agreement which runs over 100 pages stipulates in very specific detail who is
responsible for what. The city will construct the ramp, and the private entity will construct their private
portion. The developer is paying a portion of the storm drainage work, which both the ramp and private
development will benefit from. The developer is paying for the incremental share of the cost for the
foundation which must be larger to support the hotel on top of the parking ramp. The city is not paying
or subsidizing the private development.

Misconception #7: We are building a ramp for a private developer

Reality: All of the parking spaces will be publicly owned. The developer will lease spaces like anyone
else at market rate. The developer does not get any free or reduced price spaces. The public will be
able to lease or use spaces in this ramp, because they are owned by the city.

Misconception #8: We are building a foundation for a private developer

Reality: The developer is paying for their share of the foundation, specifically the increased cost of the
foundation to support the hotel on top of the ramp.

Misconception #9: The developer is paying $1,041 dollars a month to lease our land

Reality: The development agreement is not a month to month lease and the developer is not obtaining
exclusive use of the parcel. It is a lump-sum payment based on current market value and appraisal for
the rights to lease the air above the ramp and the portion of our city property in front of the ramp
where the private commercial development will sit. The appraisal takes several factors into account
including the fact that the city is still able to use the parcel to its fullest potential for a parking ramp and
the increased cost for the developer to build on top of a structure instead of bare ground. The city will
receive 1 million dollars in three portions before, during, and upon completion of the private
development. This lump sum payment takes into account the cost of the increased foundation that
must be built to support the hotel and the fair market value of the air rights and partial use of the parcel
in front of the parking ramp.

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Misconception #10: We are only getting 390, 270, or X parking spaces

Reality: The ramp is projected to have 525 spaces. All of the current spaces on the surface lot we are
building on will be replaced with spaces in the ramp. While the net increase in spaces will be about 390
(525 135 current surface parking spaces), the total number of spaces is 525.

Misconception #11: We are not building enough spaces because we are allowing a developer to build
on top of our ramp

Reality: We are building enough spaces to satisfy projected demand for the next decade. Regardless of
whether something is built on top of our ramp or not, we would not build any higher than we are
building our ramp. We also cannot go any farther horizontally. Even if there was no private
development, we would not build the ramp any larger or higher.

Misconception #12: We are paying twice the national average for this parking ramp

Reality: The price for this ramp is approximately $26,000 per space using the standard construction cost
only number. The national median cost of a parking ramp per space is $20,000. The standard median
parking ramp for purposes of comparison is a basic bare bones ramp. Our cost is slightly more because
we are adding features and amenities either by code requirement (fire suppression systems) or for user
comfort and increased service levels (example: wider drive aisles and parking spaces). The newspaper
article that stated this ramp would cost twice the national median price was based on an apples-oranges
comparison of our total project cost (including construction, site prep, financing, debt reserve,
architectural, engineering, and other costs) to the national median cost which includes ONLY the
construction cost.

NOTE: See next page for the addendum that expands in a more detailed
longer form the items discussed above.

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ADDENDUM

The following is a longer form detailed discussion of the 12 misconceptions.

Misconception #1: The parking ramp cost has increased

Reality: It is true that the cost is higher than previous estimates. However, this is the first time we have
a detailed plan based on concrete information. All previous discussions and estimates were preliminary
and based on general concepts of a parking ramp. They werent based on a specific plan. An analogy
would be if you asked a builder how much it would cost to build a 2,000 square foot house. They might
be able to give you a rough number based on cost per square foot averages, but that would only be a
very rough estimate. Only when you design the house, pick your finishes, location, and finalize all of the
details would you get an actual final quote. In addition, previous estimates were based on ideas for
ramps of various sizes, designs, and features. Also, many of the previous estimates included the
construction only cost and did not include all of the additional soft costs that go into any project of this
magnitude. Comparing previous planning estimates to an actual final plan is a truly apples to oranges
comparison and provides no useful conclusions. It should also be noted that we have been discussing a
new parking ramp for a decade and construction costs have obviously escalated during that time, so any
project cost is going to be higher today than it would have been years ago.

Misconception #2: Tax dollars will be used to fund the project

Reality: The parking division like our water, sewer, and landfill divisions is an enterprise fund. This
means it stands on its own and is completely self-sustaining similar to a business. No general sales or
property tax dollars fund the parking division. All of its revenues come from its operations such as
parking meters, lease revenue from parking spaces in our City surface parking lots and parking ramps,
and fines collected fund the operations, maintenance, and capital in the parking division. The reality is if
you dont pay to park downtown, you will not pay for this ramp. Your taxes will not go up and your
taxes will not pay for this ramp. It is true that the second penny sales tax is being pledged as collateral.
We do this routinely in City government. In fact, the water division, which is also an enterprise fund,
recently refinanced bonds for water infrastructure, and we guaranteed those bonds with our second
penny sales tax as well. We do this because it gives investors more confidence in our debt and as a
result we get a lower interest rate for our bonds, saving taxpayers and rate payers millions of dollars in
interest. The enterprise funds have never defaulted on a debt payment. Even if by some rare
unprecedented occurrence it did, the parking fund would be required by resolution to pay back every
cent of the second penny to make taxpayers whole.

Misconception #3: Rates for parking meters and leases of parking will have to be increased to pay for
this ramp

Reality: Rates were already adjusted 2 years ago across the system after an independent study of the
parking system was performed to determine the proper rate structure. This study aided in the divisions
determination of where rates needed to be set so that the division could fund not only operations, but
also maintenance and repair of existing ramps and lots, but also to provide adequate cash flow to save
for replacement and addition of existing ramps going into the future. The reality is rates have already
been adjusted to pay for this ramp (and future ramps). The parking system will have inflationary

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increases in rates just like any other service, but no major increases are anticipated or required to pay
for this ramp.

Misconception #4: The parking division cannot afford the debt service on this ramp

Reality: The parking system currently has no debt. It has strong cash flows and has done a significant
amount of work in recent years to repair and maintain existing ramps and lots. Rates have been
adjusted to account for future debt service on a new ramp. Stress testing has been done to ensure that
even with an economic downturn and the loss of major lease holders downtown of parking spaces, the
system will still be able to make its debt service payment.

Misconception #5: The investors in this project are being kept secret

Reality: The public portion of this project the parking ramp will be bonded and sold on the open
market just like we sell every other debt issuance. It will be competitively bid and anyone will be able to
buy the bonds. As it relates to the private portion the hotel and commercial portion on top and in
front of our ramp the entity and its partners are known Legacy Development. The fact is we dont
know and neither does Legacy at this point most likely who all of their investors will be. As with any
development of this size, the developer will have to find investors, which will likely include individuals as
well as one or more financial institutions, who are interested in investing in the project. City ordinance
and ethical rules dictates that City employees and elected officials may not invest in projects that the
City has an interest in. This is a conflict of interest and is prohibited by law. Our development
agreement also includes language that requires both parties the City and Legacy Development to
assert that they are not aware of and will not knowingly allow any City employees or elected officials
(and their spouses) to invest in the project. Knowingly doing so would be a breach of this contract.
Perhaps most importantly, lost in this entire discussion is the fact that the City enters into contracts,
agreements, and partnerships with private entities on a weekly basis. Those include contracts for
services and consulting, purchases of equipment vehicles, furniture, and more, lease arrangements
with private entities where the City may lease property to a private entity or we may lease property
from a private entity, and the purchase and sale of real property to or from a private entity. The City
also awards multi-million dollar projects to private firms routinely for road projects, water and sewer
infrastructure, buildings like our indoor pool, events center, and future administration building. The City
nor the City Council knows the identity of every investor in any of these firms being awarded these
contracts or projects. We may approve hundreds of thousands of dollars or even millions of dollars in
contracts in one City Council meeting, and we only have the names of the companies being awarded.
We do not have a list of all of their owners or investors nor has anyone asserted we should have that
list. When we approve the rezoning of a parcel of land, it may increase its value dramatically, paving the
way for a major development. We are not provided nor do we ask for the list of all of the investors in
the entity or company asking for the property to be rezoned. The City and the City Council do not have
a list of investors in companies which we contract to do business. This is no different. The fact is this is
a red herring and an argument designed only to create the impression that there is some nefarious
activity going on with this particular project. This is a truly demagogic argument that foments distrust in
City government and does a great disservice to our City and the citizens. This project is no different than
any other project. The private entity who will be constructing the private portion was awarded based
on a competitive selection process. The City cannot keep something secret when it has no knowledge

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of it itself specifically the names of every investor behind a company that is awarded business with the
City.

Misconception #6: The City is paying for private development

Reality: The development agreement which runs more than 100 pages long clearly separates the public
and private development. The public portion, the ramp, is paid for by the City. The private portion is
paid for by the developer. The maintenance going forward for each part is the responsibility of the
entity who built and owns that portion. This is in its simplest form a lease agreement. A private entity is
paying for the right to build on our property. This is the same thing that has been done on multiple
other city properties including the Events Center Complex where the Sheraton hotel now sits on City
property. This is the same paradigm we have at the Elmwood Golf Course, where a Holiday Inn and
Suites hotel and restaurant are being constructed on City property. The Diner on Philips Ave. sits on a
city parking lot. When you read the developer agreement, it becomes clear that the public and private
portions are clearly separated so that the City will not be paying for private development. The City will
own and maintain the parking ramp. The private developer will own and maintain the hotel and
commercial portion. While unique in that the proposal has a structure on top of a City owned structure,
it really is no different than agreements we have entered into in the past for long term leasing rights by
a private entity on City property.

Misconception #7: We are building a ramp for a private developer

Reality: We are building a parking ramp for public use. All of the parking spaces will be publicly owned
and available. Any spaces that the developer leases for the hotel or commercial parcel will be at market
rate. The developer does not get any spaces for free. They will lease spaces just like anyone else.
Consider the following does it matter to the parking division or the City if the person or entity leasing a
parking space happens to be located across town, across the street, or on top of the ramp? Of course
not.

Misconception #8: We are building a foundation for a private developer

Reality: We are building a foundation for our ramp. To support the building on top of the ramp, we
must build more into the foundation. That incremental cost is covered in the up-front payment we are
receiving from the developer. We are not subsidizing the developer they are paying for the
incremental value of the increased foundation we must build. The fact is with or without a private
development on top of our ramp, we would have to build a foundation anyway, and the developer is
paying for their portion.

Misconception #9: The developer is paying $1,041 dollars a month to lease our land

Reality: This argument is clearly designed to create the impression that this is a give away to the
private developer. We are not leasing the land on a monthly basis. As part of the agreement, the
developer is paying the City $1 million dollars in 3 portions during various phases of construction for
the right to build on our property. That figure is based on actual concrete information and calculation.
It is based on appraisals of the property and the value of the lease of portions of the property to a
private entity, taking into account several factors. Consider the following analogy. Assume you were to
sell your house and you received $250,000 today. If the new owner stays in that home for 50 years,
would you argue that you didnt get a good deal because you in effect sold your house for only $416 a

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month? Of course not. Thats not how you judge the value of your property. We could sell this
property today to the private developer. That would be an option. However, we would lose control of
this important parcel in this important location. We also would not obtain millions of dollars from that
sale. We know what the appraisal is on this parcel and it is not millions of dollars. We are retaining the
ability to build a ramp on this parcel, which we wanted to do anyway, and we are being paid $1 million
dollars by a developer to build a hotel and commercial development on top of and in front of our
parking ramp. Rather than having only a parking ramp, which generates no sales or property tax dollars
(City owned property is not taxable), this proposal would include a private development that will
generate millions of dollars in property tax, sales tax, and hospitality tax revenue for our City, State,
County and School District. In addition, we will have an iconic and beautiful development, instead of
just a parking ramp. We are retaining full use of this parcel for what we want to use it for a parking
ramp and as a bonus are giving a developer the opportunity to create significant new tax revenues and
economic impact for our downtown and our City. Finally, in doing so we have a guaranteed customer
for our ramp on day one, who will lease spaces just like anyone else. How many businesses can expand
and know on day one they have a strong customer base to support it?

Misconception #10: We are only getting 390, 270, or X parking spaces

Reality: We are building a 525 space parking ramp. All of those spaces will be publicly available for
lease. Deducting the amount the hotel might lease from the number is misleading because they will be
a customer just like anyone else. Whether the hotel or an individual who lives on the west side of town
leases the space, its the same revenue to the parking system. It is truly irrelevant. Whenever you build
in a location with existing parking, your net spaces gained will be different than the total you construct.
We are not losing the existing spaces on the surface lot however. They are being replaced with spaces
in a ramp. We are building a ramp with 525 publicly available parking spaces. Consider the following
if we had to tear down an existing ramp that was at the end of its useful life that had 500 spaces and we
were replacing it with a 525 space ramp would anyone argue that it wasnt a good deal because we
were only getting 25 spaces? Of course not.

Misconception #11: We are not building enough spaces because we are allowing a developer to build
on top of our ramp

Reality: We are building enough spaces to address our parking needs for the next 10 years. We can only
go so high with a ramp for technical reasons. Whether we had a private development on top of this
ramp or not, we really are at the practical limit of what we can do. Extra spaces cost money as well. The
parking division needs to be able to make the bond payment. We have to make sure the payment is
prudent and workable, just like we in our private lives can only buy so much house.

Misconception #12: We are twice than the national average for this parking ramp

Reality: The price for this ramp is in line with national averages. The median price for a parking space
for a very basic, bare bones ramp on a green field site is approximately $20,000 per space. This price
includes construction only costs. It does not include existing site conditions or remediation. The pricing
for our ramp is approximately $26,000 per space. However, we are not building a bare bones ramp.
Various items we are proposing to include by necessity or for optimal function and customer satisfaction
are not included in the national median pricing. These include fire sprinklers (required by code), two
stairways (one on each side) instead of one, wider parking spaces and drive aisles (recognizing we have

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many larger vehicles like trucks and SUVs in our region), and a number of other factors. An article that
stated we were paying twice the national average was comparing our total all-in project cost (which
includes construction costs, site preparation which is substantial in this case, financing costs, debt
service reserves, architectural and engineering fees, etc.) to a construction only cost (as cited by the
entity that tracks median costs annually). That comparison was an apples to oranges situation that was
not a fair comparison and led to a great amount of confusion.

**END OF PRESS RELEASE**