HomeMy WebLinkAbout6/7/2022 Item 6a, Horn - Staff Correspondence
Council Agenda Correspondence
City of San Luis Obispo, Council Memorandum
DATE: May 27, 2022
TO: Mayor and Council
FROM: Matt Horn, Director of Public Works
Gaven Hussey, Parking Program Manager
VIA: Derek Johnson, City Manager
SUBJECT: Staff Agenda Correspondence Item 6.a - ADOPTION OF THE FISCAL YEAR
2022-23 SUPPLEMENTAL BUDGET
Purpose of this Agenda Correspondence- Parking Rate Focus
The purpose of this Agenda Correspondence is to provide some additional details and background
about the status of the Cultural Arts District Parking Structure, new cost estimates, and the impact
of the construction and financial markets which have prompted staff to make a recommendation
for adjusted parking rates beyond those forecasted in June 2021 as part of the 2021-23 Financial
Plan (pages 339 through 342).
Each section of this memo covers crucial decision points and the footnotes that supports each
section provide historic or other technical details or considerations. Furthermore, the purpose is to
answer some initial questions received and provide additional details about the proposed
adjustments to parking rates recommended for adoption on June 7, 2022, so that the Parking Fund
can support the construction of the Cultural Arts District Parking Structure (at Palm and Nipomo
Streets). Advancing the construction of the Cultural Arts District Parking Structure is a key Capital
Improvement Project in the City’s adopted 2021-2023 Financial Plan and the Major City Goal
1
Economic Recovery, Resiliency and Fiscal Sustainability.
Why is the Cultural Arts District Parking Structure Needed Now?
The Cultural Arts District Parking Structure is a high priority project for both the Parking Fund
and the City to be able to provide adequate off-street parking to the community as well as create
the necessary infrastructure for future implementation of the Downtown Concept Plan including
space for the future SLO Rep Theatre. Parking utilization has seen a steady increase returning to
similar pre-pandemic levels of operation with structures experiencing capacity issues Thursday
through Saturday evenings. Specifically, all three of the City’s current parking structures exceed
2
85 percent occupation during these times and close on Thursday evenings when capacity is
1
Supplemental Budget Pg. 128
2
85% occupancy is generally considered in the parking industry to be a saturation point that parking supply is
impacted that can has a negative perception on the availability of parking and a point that new parking supplies are
needed to meet demand.
Cultural Arts District Memorandum Page 2
exceeded. On June 21, 2022, Council will consider authorizing staff to advertise for construction
bids for the first phase3 of work for the Cultural Arts District Parking Structure.
What is the connection between parking rates, the pandemic, and the Cultural Arts District
Parking Structure?
The City’s Downtown Concept Plan incorporates the community’s vision for downtown and
guides both public and private actions and investment through 2042. Better parking that is easily
accessible is key to promoting an inclusive and easy-to-navigate downtown. At the same time, the
city is seeking to expand cultural,
historical, and artistic
opportunities, including enhancing
the downtown Cultural Arts
District.
Since the early 2000s4, the
Community and city have been
working on this fourth structure.
During this time, the Parking Fund
purposely conserved revenues to
build up working capital funds to
reduce future debt impacts arising
from the construction of the
Cultural Art’s District Parking
Structure. This was done using rate
adjustments and careful
programming of ongoing operating
expenses.
This strategy was a highly effective long-term strategy which allowed the Parking Fund to buildup
it’s unreserved working capital to roughly $13.9 Million. With the March 2020 shutdown due to
the COVID-19 pandemic, the Parking Fund deferred revenue in the approximate amount of $4
Million through fee deferrals, incentives, and other initiatives to support the urgent and immediate
needs for downtown businesses. As noted in the Budget (page 48) variables have caused these
increases to be greater than forecasted to Council with the adoption of the 2021-22 Budget. Those
variables include unprecedented cost increases in the construction industry, increased costs for
borrowing money, and the need to demonstrate to funding entities the City’s plans for maintenance
and preservation of existing assets5.
3 Phase 1A PG&E Relocation – Project Design is 90% complete. Phase 1A expected to advertise for construction in
Summer 2022, with construction work on this phase beginning Fall 2022. Phase 1B Site Clearing and Demolition –
Project is at the 95% design completion level. Staff will be applying for reviews for building permits for Phase 1B in
the Spring of 2022. Construction is scheduled to begin Spring 2023.
4 A simple search of the City’s website shows over 390 results for “Palm Nipomo” parking that dates back to the
early 2000’s with dozens of hearings on the project.
5 The City has historically under invested in parking structure maintenance and deferred maintenance issues need to
be addressed to preserve life of the existing three assets and to modernize equipment to match customer needs and
maximize technological integration.
Cultural Arts District Memorandum Page 3
Why Do Rate Adjustments Need to Be Approved in June 2022?
To secure debt financing for the Cultural Arts District Parking Structure before the vertical
construction of Phase 2 requires proof of an approved long term rate structure that will ensure
financing and other operational obligations are achieved. The bottom line is that the conclusion
based on the analysis of variables is that it is necessary to increase parking rates in 2023 and 2025
to demonstrate to future finance lenders that the Parking Fund has an approved and long-term rate
strategy to be able to continually fund the long-term debt and operations that will be taken on to
construct the Cultural Arts District Parking Structure. Some important information related the
Parking Fund’s ability to fund the Cultural Arts District Parking Structure, necessary rate
adjustments, and the need to move this project forward include:
What are the Rate Adjustments Proposed and How do they Compare Locally?
Staff have previously conveyed to Council with the 2021-23 Financial Plan, the 2021-22 Mid-
Year update, and now with the 2021-22 Budget Supplement that rate adjustments are necessary to
ensure the Parking Fund’s health, ability to support existing and future debt obligations, required
infrastructure improvements and safety upgrades, while continuing to modernize the program.
With these forecasted rates, Council also approved the elimination of the first hour of free parking
in the parking structures with the 2021-23 Financial Plan (see page 340) beginning in fiscal year
2022-23. Without these rate adjustments, the Parking Fund will not be able to build the new
Cultural Arts District Parking Structure.
Table 1 below details the proposed rate adjustments and effective dates for on-street and surface
parking lots. Table 2 below details the proposed rate adjustments and effective dates for the public
Parking Fund lost over $4 million
to support downtown during the
pandemic
Construction is immient for City
and its community partner SLO
Rep
March 28, 2022 Received revised
project cost estimate based upon
current market conditions and
forecasted out to time of
construction resulting in increased
cost for parking structure
Construction cost increases of
27% between January 2021 to
May 2022 and expected to
continue to increase
May 10, 2022 Forecasted interest
rates for debt financing adjusted
to reflect inflationary trends
Bond Counsel advise staff to have
debt ratio at a minimum of 130%
Rate adjustments are needed to
meet debt ratios and must be
approved prior to debt issuance
Majority of rate adjustments take
effect in July 2023
Cultural Arts District Memorandum Page 4
parking structures. Table 3 compares local rates which shows that the City’s current parking rates
are $1.02 below the average parking rate for on-street parking and $1.40 below the current average
parking rate for parking structure parking rates. After the July 2023 parking rates are in place, the
city will slightly exceed the average parking rate for on-street but will be $0.75 below the average
current parking structure rates assuming other areas do not increase parking rates. As indicated in
the Budget Supplement (page 48) staff is aware that both Cal Poly and Paso Robles are considering
rate adjustments.
Table 1 below shows the
proposed parking rate
adjustments that are
recommended as part of the 2022-
23 Budget Supplement. As a
reminder, parking rate
adjustments were forecasted to
Council in the 2021-23 Financial
Plan (see page 342) but are
required to be revised due to
inflation and cost of construction
increases.
Table 1: Proposed Street Parking Rates and Effective Dates
Proposed Parking Hourly Rates Current Parking Rate Effective
Jan 2, 2023
Effective
July 1, 2023
Effective
July 1, 2025
1 On-Street and Lots
2 Tier 1 (Super Core) $2.00 $2.00 $4.00 $5.00
3 Tier 2 (Core) $1.75 $2.00 $4.00 $5.00
4 Tier 3 (Outlying Areas) $1.25 $1.50 $3.00 $3.00
Table 2: Proposed Parking Structure Rates and Effective Dates
Proposed Parking Structure Rates Current Parking Rate Effective July 1, 2023
1 Parking Structures
2 Hourly $1.50 $3.00
3 Max Daily $6.00 $12.00
4 Lost Ticket $6.00 $12.00
Cultural Arts District Memorandum Page 5
What is next for communications with the Community?
Staff are focused on the following efforts to communicate about these rate changes.
1. Targeted outreach using local media, print and digital platforms in addition to City
accounts on proposed changes between May 27th and June 7th.
2. Ongoing efforts such as in person meetings and publications for community partners to
address the concerns of downtown businesses and customers.
3. Expanded outreach on the Cultural Arts District Parking Structure and community benefits
of this resource.
4. Using consultant communication services to aid staff over the next year with a consistent
and comprehensive messaging on parking rate changes, program enhancements, and the
Cultural Arts District Parking Structure construction.
Alternatives to adjusting parking rates.
1. Do not adjust parking rates per staff recommendation: If Council chooses to not
increase parking rates or adjust parking rates at a lower amount this would effectively halt
the city from constructing the Cultural Arts District Parking Structure. The parking rates
as proposed are necessary to both secure and service the debt funding required to construct
the parking structure.
2. Council could direct staff to reduce the cost of the parking structure: If Council
directed staff to look at reducing the cost of the parking structure that would require that
Council use Parking Fund working capital to hire a consultant to audit the design for ways
to decrease cost. This audit is commonly referred to as Value Engineering.
This will likely take approximately 12 months to complete as it is necessary to prepare a
Request for Proposal, have Council approve the Request for Proposal to advertise, review
proposals and select the desired consultant, the time necessary for the consultant to review
the project plans and make recommendations to staff, and the time necessary for the City’s
design consultant to update the plans for construction.
Since January 2021 through May 2022, California has seen a 27% increase in construction
cost which equates to approximately 1.58% per month. Assuming that the construction
climate near future is much like the recent past, that would require the City to find in excess
Table 3: Comparable Agency Rates w/ Proposed Rates
Average Parking
Hourly Rate
Current
Parking Rate
Effective
January 2, 2023
Effective
July 1, 2023
Effective July
1, 2025
1 On-Street
2 San Luis Obispo $1.63 $1.75 $3.50 $4.00
3 Cal Poly $2.50 --- --- ---
4 Pismo Beach $5.50 --- --- ---
5 Paso Robles $1.00 --- --- ---
6 Parking Structures
7 San Luis Obispo $1.50 $1.50 $3.00 $3.00
8 Cal Poly $2.50 --- --- ---
9 Pismo Beach $5.00 --- --- ---
Cultural Arts District Memorandum Page 6
of $10 million in construction cost savings prior to realizing any fiscal benefits and the
consultants will most likely recommend the removal of environmental sustainable and
community amenity/benefit features of the garage such as 1) solar panels and electrical
vehicle charging, 2) aesthetic detailing, 3) frontage and site readiness costs for the SLOREP
building6, 4) frontage and site readiness for affordable housing development area7 and 5)
rooftop community viewing areas8. Staff’s does not recommend this alternative as costs
would likely increase during the redesign phase and the structure would provide less benefit
to the community.
3. Council could direct staff to explore other avenues and defer construction to same
date in the future: Any direction that defers construction of the Cultural Arts District
Parking Structure to a later date in the future will likely increase the overall cost of the
parking structures construction.
6 Cost estimates are anticipated to be over a million dollars
7 The assumption is that the City would not seek to recover any of these costs, or the land costs associated with
development affordable housing and the Council could direct Staff to recover all or some of these costs to defray the
costs to the parking fund visa vi the Affordable Housing Fund.
8 The rooftop viewing area requires the structure to be built to a different load bearing standard which is
approximately 25% above the traditional costs for supporting vehicles.