Purpose

On May 16, 2006, Council directed staff to provide detailed financial information about the operation and maintenance of the downtown parking system.  This report summarizes the current Parking Authority Fund financial status and provides financial projections for the next several years.  The report itemizes the Fund�s revenue sources, lists maintenance costs for each structure, summarizes approximate maintenance costs associated with new parking structures in the downtown, and identifies the elements of the City�s cost allocation (services by other departments). 

This report includes all quantifiable cost elements for the downtown parking system, except the costs to ensure the long-term structural integrity of the parking structures.  As the structures age, systems such as the elevators, stairwells, fire suppressant facilities, and garage reinforcement deteriorate or wear.  The Parking Authority Fund currently does not include costs associated with aging of the structures in the financial outlook for the fund.  Since many of the existing structures are over 15 to 20 years old, these costs are beginning to increase.

BACKGROUND

Staff presented a modified downtown parking management plan to Council on May 16, 2006 recommending increased enforcement to adequately manage the parking demand in the downtown area. The recommendations included two potential enforcement technologies[1] to enhance the outdated parking enforcement operations currently in use. However, the report explained that the existing Parking Authority budget is insufficient to offset the cost of any improved parking enforcement implementation.  Other sources of funding that were identified include the General Fund, downtown business assessments, or parking user fees in the form of a downtown pay parking system.  

After deliberation, Council directed staff to return with a financial analysis of the Parking Authority Fund showing additional detail of the costs and revenues associated with parking administration and maintenance. This report summarizes and discusses that financial information.

ANALYSIS

A full financial analysis of the Parking Authority must include a structural assessment of the aging City parking structures to determine the magnitude and timing of needed capital improvements and their associated costs.  A structural assessment of each facility, scheduled to be completed in the next few months, will include a follow up ten-year Capital Improvement Protection Plan (CIPP) for on-going structural maintenance. The structural elements identified by the assessment for repair and improvement and on-going preventive maintenance, may add significant additional costs to the annual facility maintenance costs identified in this report.

Revenues and Expenditures:

The Parking Authority cash flow spreadsheet (Attachment 1) is a profile of the costs and revenues that comprise the total parking fund.  The fund includes four main components: 1) operating revenues, 2) operating expenses, 3) capital maintenance and improvement expenses (non-structural), and 4) non-operating miscellaneous revenues.  The spreadsheet shows the historical and projected cash flow for an eight-year period ending in Fiscal Year 2009-10.  The projected income and expenses (excluding the long-term structural rehabilitation of the structures) results in a fund balance deficit in Fiscal Year 2008-09.

Current Fiscal Year 2006-07 operating revenues, approximately $655,942 per year, include employee parking permits, parking in the MTA lots along San Fernando Boulevard, lease income, assessments, and parking fees for film crews. The unspecified and blue parking permit categories that provide for the exclusive use of a particular parking space were discontinued last fiscal year.  The parking permit income is expected to grow by about 50 percent by Fiscal Year 2009-10 to $815,579 primarily because of increased parking permit fees and lease income.

The parking fund revenues offset some of the operating expenses comprised of contractual services for routine maintenance and repair, elevator maintenance and repair, utilities, property taxes, permit supplies, and cost allocation to other departments. Annual operating expenses have exceeded annual operating revenues for the past five years.  Parking Authority total revenues for this fiscal year are $696,942 and total expenditures are $751,394 resulting in a net loss of $54,452. The fund balance is used to make up the revenue shortfall to cover expenses.  Revenue and expense projections show the fund experiencing only slight short-term recovery this Fiscal Year (2006-07) from the additional income from downtown parking lease agreements with Universal City Studios Credit Union and Cusamano (Attachment 2).

Non-operating interest income, earned from interest on the fund balance, decreases each year as the balance is depleted to offset operating expense costs.  Interest income from the Bessie Kahn balloon payment (courthouse parking structure parcel) ends in FY 07/08.  Non-operating expenses include a $60,000 annual lease payment for courthouse land with the final payment in FY 07/08. At that time, the City has the option to purchase the land for $600,000.

Total expenditures exceeded total revenues in Fiscal Year 2002-03, and the Parking Authority Fund has operated at a net deficit since that time as illustrated in Attachment 3. City financial policy requires the Parking Authority Fund to maintain a reserve balance equal to 60 days working capital; this reserve balance requirement averages $125,000 annually. Parking Authority projections show the fund unable to sustain a positive unrestricted/unreserved balance in Fiscal Year 2008-09 (Attachment 4). 

A detailed breakdown of the parking fund operating revenues for the eight-year period to Fiscal Year 2009-10 is illustrated in Attachment 5. The table identifies specific components of each account and the expected change in revenue. All operating revenue components are expected to remain relatively constant, except the monthly employee permits and additional leases with Universal City Studios Credit Union and Cusamano.  The growth in permit parking revenues is a result of increased fees over the next several years.

Facility Maintenance Costs:

Common Area Maintenance, Inc. (CAM) provides the daily routine maintenance of the City�s public parking supply. The public parking facilities are illustrated in Attachment 6.  CAM is in the final year of a three-year price agreement.  The City will solicit bids for maintenance services at the end of the current contract period to award a new contract.  Maintenance expenses are anticipated to increase when a new contract is awarded and the increase in costs have been included in the projected future expenditures. Current maintenance costs are determined by the level of parking structure use and as such, each structure varies in its maintenance needs and costs. The maintenance costs of each City owned facility are itemized per structure in Attachments 7 and 8.

The City owns and operates three downtown parking structures: the AMC structure (Facility A), the Orange Grove structure (Facility G), and the Courthouse structure (Facility M).  The AMC structure has a unique maintenance arrangement.  In return for parking easement rights, four parcels adjacent to the AMC structure (Facility A) are assessed the costs to maintain this parking facility.[2] Maintenance costs for the Courthouse structure (Facility M) are offset by a 20 percent contribution from Los  Angeles County.  The third City structure (Facility G) is the City�s oldest structure, built in 1978, and all maintenance costs are paid by the Parking Authority. There is no contingency funding for long term structural maintenance or capital improvements for any of the three City owned parking facilities.

The Parking Authority pays lease payments and taxes for one of the parcels on which the Courthouse structure is built.  The Authority has an option to purchase this privately owned parcel for $600,000 in Fiscal Year 2008-09.

The City has lease rights for public parking in four privately owned downtown structures: the Gangi structure (Facility N), the Cusamano structure on Orange Grove Avenue (Facility H), the new Village Walk structure (Facility R), and the DIC structure (Facility P).  The City shares maintenance costs in the Gangi structure (Facility N) and the Cusumano structure (Facility H).  The Parking Authority pays an annual management fee to Gangi Development to offset the cost of maintenance and administration of the 300 public parking spaces in the structure.

The City owns 50 public parking spaces and has lease rights to 127 parking spaces in the Cusumano parking facility on Orange Grove Avenue (Facility H). Shared maintenance costs for this structure are paid through Redevelopment Agency contributions.  All spaces in the Cusumano structure are open to the public after 6:00 p.m. Monday through Friday and all day on weekends.  The City has public parking rights to 120 parking spaces in the Village Walk structure recently completed by the Olsen Company (Facility R), and evening and weekend rights to 150 spaces in the DIC structure (Facility P). The City does not have maintenance obligations in either of these two structures.  The contract obligations for all four of these facilities are itemized in Attachment 9.  

New Facility Maintenance Cost Projection:

Construction of the Collection project (AMC Phase II) is underway with an expected completion date in the Spring of 2008.  The City will gain 275 parking spaces in the newly built parking structure at the lowest level of the garage.  Assignment of parking structure maintenance responsibilities and costs are still in the negotiation stages. However, based on the per space cost of maintenance in the adjacent AMC structure, the City can anticipate a minimum maintenance obligation of approximately $110,000 annually (Attachment 10). This estimate does not include reserve contributions for long-term structural capital improvements, an anticipated requirement by the property owner.

Future Revenues

New parking lease agreement revenues, earmarked for the Parking Authority according to contract commencement dates, help maintain a short-term viable fund balance.    There are three new lease agreements in the downtown; two agreements affect Courthouse parking and the third agreement was recently adopted to facilitate the sale of office property at 175 East Olive Avenue (the Universal City Studios Credit Union

lease).  Another important Parking Authority revenue source is annual fee increases to the monthly parking permit program, designed to bring the price of a monthly parking permit closer to actual market rate. 

The 2006 Burbank Civic Plaza parking agreement assigns 190 courthouse parking spaces to the tenants of the Burbank Civic Plaza with lease payments to commence 19 months after occupancy.  Occupancy began on July 1, 2006, therefore lease payments will begin February 1, 2008.  The per space cost will be calculated by 2008 market rate. A second courthouse lease agreement with the Burbank Civic Plaza allocates an additional 75 spaces to the Civic Plaza tenants, if the parking is needed to serve the building.

The most recent lease agreement was approved by Council to facilitate the sale of the office building at 175 East Olive Avenue.  The new lease is more flexible than the previous parking agreement with respect to location of the leased spaces for the tenants of this building, and the new lease provides a higher lease price for tenant parking.  The agreement commences in September 2006.  The tenant has agreed to a minimum lease of 55 parking spaces at $70 per space with annual Consumer Price Index (CPI) adjustments on the anniversary date of the agreement.  The lessee has the option to lease up to 100 parking spaces as determined by tenant parking demand.

The City adopted a three-year fee increase for the monthly parking permit program within the Fiscal Year 2006-07 budget.  The price of a monthly parking permit increased to $40 per permit on July 1, 2006.  The fee increases five dollars per permit per year for the next two years culminating in a final fee of $50 per permit in Fiscal Year 2008-09.  Current permit sales are approximately 450 per month. The current per space market rate is calculated at $70 per space.

Cost Allocation

The City�s cost allocation plan is prepared annually for the new budget.  The cost allocation plan allows the General Fund to recover costs from non-general fund entities (i.e. the Parking Authority) for services provided to those entities by City staff.  The cost allocation plan identifies, accumulates and distributes allowable and reasonable indirect costs.  It uses standard established methods for allocating indirect support costs.  For example, departmental staff support provided for parking issues and parking administration is a cost applied to the Parking Authority.

The General Fund cost allocation to the Parking Authority for Fiscal Year 2006-07, with annual projections through Fiscal Year 2009-10, is summarized in Attachment 11.  The proposed allocation in Fiscal Year 2006-07 is $136,994, and the amount is forecasted to grow by about 5.6 percent per year to $167,824 in Fiscal Year 2009-10.

Structural Assessment and Capital Improvement Protection Plan (CIPP)

As our structures continue to age, capital improvements are needed to preserve and possibly extend their design life. The downtown parking structures vary in age from as old as 28 years for the Orange Grove structure (Facility G) to 12 years for the Courthouse structure (Facility M).  Structural improvement needs differ according to age and level of use. Not surprisingly, a younger structure, such as the AMC (Facility A) built in 1989, which is the most heavily used structure in the downtown, is expected to be most in need of capital improvements.

The need for rehabilitation recently became evident when an underground water pipe ruptured beneath the driveway of the AMC structure and emergency repairs were required to remove the aging fascia that separated due to weathering and fell from the fifth story to a pedestrian walkway. Staff proposes to develop a Capital Improvement Protection Plan to enable the budgeting of structural maintenance needs of all downtown public parking facilities. 

Staff is asking Council in a separate report to appropriate funds to hire a consulting firm to perform a comprehensive structural assessment of the three City owned parking structures (Facilities A, G, and M).  The assessment will also complete a due diligence survey of the two structures that include leased public parking (Facilities H and N).  The due diligence survey will define long-term maintenance needs of the private structures, and it will determine the responsibilities of the City for those needs.  Staff will share the results of the investigation with Council upon completion of the project.

FISCAL IMPACT

The Parking Authority Fund was established in the early 1970�s to administer parking related matters.  The Parking Authority conducts real estate acquisition, construction, operation, and maintenance of parking facilities for the City.  At this time, the Parking Authority operates at a deficit of approximately $100,000 annually.  Historically, the fund balance allowed the Parking Authority to act as an independent entity without City assistance.  This is no longer the case, primarily due to increased routine maintenance costs and the anticipated unbudgeted funding needed for long-term structural maintenance of the downtown parking system. 

For fund viability, fiscal policy requires the Parking Authority to maintain a balance equal to 60 days operating expense. The Parking Authority is projected to fall below this unreserved balance requirement during the next fiscal year. 

RECOMMENDATION

Staff recommends that Council provide further direction on the financial future of the Parking Authority.

Attachments:

Attachment 1.      Parking Authority, Fund 310 Cash Flow

Attachment 2.      Operating Revenues and Expenses

Attachment 3.      Total Revenues and Expenditures

Attachment 4.      Ending Unreserved Balance Projections

Attachment 5.      Operating Revenue Worksheet

Attachment 6.      Downtown Public Parking Supply

Attachment 7.      Maintenance Costs AMC and Orange Grove Structures

Attachment 8.      Maintenance Costs Courthouse and Police/Fire Structures

Attachment 9.      Non-City Owned Facility Maintenance Costs 

Attachment 10.    New Facility Maintenance Cost Projection

Attachment 11.    Cost Allocation

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