Just how much of a cash cow is a zoo, anyway?


The city of Los Angeles may find out soon if it follows through on Mayor Antonio Villaraigosa's notion of turning over noncore city assets to businesses, either by contracting out the operations or out-and-out selling them.

In a wide-ranging session with Business Journal editors and reporters last week in advance of Tuesday's election, Villaraigosa said he hoped to help plug a budget deficit by privatizing some operations.

"Why do we have to own a zoo?" he said. "A lot of cities don't own their own zoos; they are privately run or have a public-private partnership structure. And, while we're at it, why do we have to own a convention center?"

The city is facing a $450 million deficit in the 2009-10 fiscal year beginning July 1 and a projected deficit of at least $500 million the following year. Villaraigosa is looking for major revenue sources other than tax increases that can whittle down those deficits, and prevent massive layoffs of city workers and cutbacks in city services.

Villaraigosa is also exploring whether Los Angeles should make a long-term lease arrangement with a private operator for its parking garages, surface lots and parking meters.

The city of Chicago late last year announced that it had struck a 75-year lease worth $1.16 billion with a consortium led by Morgan Stanley Infrastructure Partners, an investment fund raised by New York investment house Morgan Stanley, to maintain Chicago's 36,000 parking meters, manage collections and implement technology upgrades.

Late last week, Los Angeles was soliciting bids from law firms and other consultants to look at the viability of a similar deal for L.A.'s parking meter and parking structure system. One of the firms bidding for this work is Chicago law firm Baker & McKenzie LLP.

"No one had really thought of doing this until Mayor Richard Daley in Chicago proposed this last year. Now, cities all across the country are looking into it," said Leonard Gilroy, editor of the annual Privatization Report published by the Reason Foundation.

But other cities aren't talking about selling their zoos or convention centers or setting up long-term partnerships to run them.

Rather, cities are giving zoological societies greater roles in zoo operations, said Steve Feldman, spokesman for the Association of Zoos and Aquariums in Washington, D.C. Feldman said Atlanta; Memphis, Tenn.; Pittsburgh; Sacramento; and Seattle have all gone in that direction or are considering doing so.

Officials with the Los Angeles Zoo and the Greater Los Angeles Zoo Association the organization that provides support for the attraction are open to this idea. Under the association's current contract, it manages concession services and sells memberships. Those are in addition to its main role, fundraising.

John Lewis, director of the zoo, thinks giving the association a bigger part in operations is feasible. But he also said the zoo could move to an operating agreement model, which would involve payment of a large up-front sum for long-term rights to the zoo and its revenue.

"We certainly think it's worth looking at," he said. "The real trick is finding the right model."

Lewis said the transition could face opposition from labor unions, which would likely oppose any change that would result in job cuts for their members. That controversy could be defused by crafting a deal that included preservation of union jobs.

Contracting conventions

Dozens of municipalities across the country have contracted with private operators to run their convention centers. There are even major corporations that specialize in convention center management, with one of the largest being SMG Inc. in Philadelphia, which manages about 60 convention centers.

But there's little history of selling off entire convention centers to the private sector or of having private companies pay a lot of money up front for a long-term management deal. Privately owned and operated convention centers do exist; among these are two in Las Vegas, one owned by the Mandalay Bay resort hotel and the other by Las Vegas Sands Corp. But these started out as private centers.

Villaraigosa isn't the first Los Angeles mayor to suggest privatizing operations at the Los Angeles Convention Center. In 1994, then-Mayor Richard Riordan wanted to contract out management of Convention Center operations, claiming it could save the city up to $40 million a year.

But Riordan's proposal ran into a buzz saw of union opposition and was handily defeated by the City Council, according to Fernando Guerra, director of the Center for the Study of Los Angeles at Loyola Marymount University.

However, Guerra said, the outcome now might be different. "Under Riordan, this whole debate was highly ideological, with Riordan committed to privatizing as much of government as possible and former Councilwoman Jackie Goldberg essentially saying, 'Over my dead body.' Now, with the economic meltdown, these private-public partnership proposals might not be dead on arrival."

Officials with the Convention Center referred calls on the issue back to the Mayor's Office, while L.A. Inc., the city's convention and visitors' bureau, declined to comment.

As with the zoo, defusing labor opposition would require preservation of union jobs.

"If it comes down to a choice between accepting a private employer and losing their jobs entirely, then the unions might go for this," Guerra said.

Business retention

Villaraigosa also told the Business Journal that the city's economic development team, under the direction of Deputy Mayor Bud Ovrom, has shifted its focus to retaining existing businesses in the city and attracting new ones.

For most of this past decade, the business team has focused on housing or major economic development projects, such as Grand Avenue now stalled due to financing problems.

"Our goal was to get the biggest bang for our efforts," Ovrom said. "And for the first three years of our administration, that was in shepherding economic development projects through the permitting and development process."

But Villaraigosa said that market has now dried up, and that has freed the seven-member business team to focus on business retention and attraction.

"With the economy going in the tank, we're looking at being more of an economic development department and figuring out how we bring other kinds of businesses here," he said.

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