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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.