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Home My WebLink About06/01/2004, - PARKING FUND LETTER Wendy George Parking Fund Letter Page 1 l From: Wendy George To: ANCARTER@aol.com Subject: Parking Fund Letter Andrew, Thank you for your letter concerning the parking fund spread sheets. As you requested, the letter has copied to the Council and the listed City staff. In addition to providing your analysis, you have also raised a number of issues that will provide helpful input to a future study session on the fund. Council has given staff direction to hold a study session sometime during the first quarter of 2005 to do an in-depth review of the Parking Fund, after we have some preliminary cost figures on a Palm-Nipomo structure. It is our intention to follow that direction at this time. 1 P &K4&)J It 0 b db�J\__) ANDREW CARTER 1283 Woodside Drive San Luis Obispo, CA 93401 805-594-1906 ancarter@aoLcom June 6, 2004 City Council City Hall 990 Palm Street San Luis Obispo,CA 93401 Dear Council Members: This is a follow-up to my testimony on Tuesday concerning the Parking Fund. What wasn't mentioned in the Tuesday afternoon Red File memo is that the Parking Fund spreadsheet needed to be revised to correct errors I discovered in the original spreadsheet. This was the third time in four years I had discovered errors in the annual spreadsheet or the accompanying material. As you are well aware, I have concerns about the financial health of the Parking Fund. On-going errors in the numbers only serve to heighten those concerns. This is what the revised Parking Fund spreadsheet now shows: 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Actual Actual Budget Budget Budget Budget Budget Profit/(Loss) $598,300 $119,000 ($1,789,600) ($324,600) ($2,538,100) ($191,100) ($1,133,600) End of year Capital $5,127,500 $5,246,500 $3,456,900 $3,132,300 $594,200 $403,100 ($730,500) Key CIP Events/ Marsh H Palm/Morro Palm/Morro Land Palm/Nip. Palm/Nip. Assumptions opened construction opens acquisition construction opens Fall 2002 Spring 2005 As you can see,deficits are projected from the current year on into the future,with Working Capital turning negative in 2007/08. Since CEP projects in part drive these deficits, it's instructive to recast the Parking Fund spreadsheet to separate on-going operating activity from CIP activity. It's also important to separate operating activity from investments earnings and in-lieu fees to determine whether the latter two are being used to cover operating losses or to build up working capital to fund future CIP projects. Here's what happens to the spreadsheet when you do this: FSLRECEIVEDJUIN 0 8 2004 O CITY COUNCIL Carter—Parking Rind—page I of3--- C 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Actual Actual Budget Budget Budget Budget Budget Operating Profit/(Loss) $702,200 $449,300 $373,800 $614,300 ($106,900) ($279,900) ($1,258,900) Investments/ In-Lieu Fees $313,100 $319,300 $769,000 $297,600 $251,600 $134,100 $125,300 CIP projects net of Bond proceeds($417,000) ($649,600) ($2,932,400) ($1,236,500) ($2,682,800) ($45,300) $0 Profit/(Loss) $598,300 $119,000 ($1,789,600) ($324,600) ($2,538,100) ($191,100) ($1,133,600) End of year Capital $5,127,500 $5,246,500 $3,456,900 $3,132,300 $594,200 $403,100 ($730,500) Revenue Garages Garages Garages Increases Fines Meters As you can see,there are operating profits through 2004/05,but operating losses are projected from 2005/06 onward. In.2005/06, investment earnings and in-lieu fees should be able to cover the operating loss. Afterwards, that's not the case. The"tipping point" I mentioned in my testimony is the switch from operating profits to operating losses which will take place in 2005/06. This is a result of closing the Court Street lot which made money and opening the Palm/Morro garage which will lose money. The huge loss projected in 2007/08 would be caused by opening the planned Palm/Nipomo garage. But even if this garage isn't built,there will be on-going operating losses. That's why I talked about the Parking Fund then being on a"glide path towards bankruptcy." Fortunately,as long as no new garages are built, it's fairly simple to generate on-going operating profits after 2005/06. All it would take is an initial 5% increase in operating revenues(fees,fines,and forfeitures). But to fund another parking garage would require a 40% increase in revenue! Just so you understand the economics of our parking garages, let me divide operating profits and losses between parking garages and streets/lots. My numbers are estimates only and are based on analysis I did in 2002 after discussions with Keith Opalewski, so some of the assumptions I made then may now be wrong. But I do capture the parking garage revenue increases you've enacted since then. In reality,I underestimate parking garage losses since I charge all departmental and general government overhead to streets/lots. 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Actual Actual Budget Budget Budget Budget Budget Garages ($309,139) ($721,557) ($496,082) ($115,407) ($768,771) ($728,417) ($1,750,290) Streets/Lots $1,011,339 $1,170,857 $869,882 $729,707 $661,871 $448,517 $491,390 Operating . Profit/(Loss) $702,200 $449,300 $373,800 $614,300 ($106,900) ($279,900) ($1,258,900) Carter—Parking Fund—page 2 of 3 It's not a pretty picture. Moving from surface lots to parking garages makes sense from a planning perspective. The issue is how to pay for them. This includes the cost of building parking garages,the cost of operating attended garages,and the fines and forfeitures foregone with attended garages. As I understand it, the direction you gave staff on Tuesday was to study the Parking Fund over the next year and come back with recommendations. Due to the significance of the financial problem, particularly if we plan to build additional garages,l think you need to hold a full-blown study session. I think it would be wise to do this sooner, rather than later. I note the proactive financial measures you are taking with our water and sewer funds. Shouldn't we be proactive here as well? Without voicing support or opposition to any of the following,here are the issues you will need to consider: Raise meter rates Raise garage rates—hourly,daily,monthly Reduce amount of free time in garages Charge fees on Sunday—garages vs. streets/lots Raise fines/forfeitures Convert attended garages to metered garages(all vs. some) Add meters to outlying streets(e.g.Pismo,all of Mill,additional streets north of Santa Rosa, outlying business districts, streets near Cal Poly) Increase downtown enforcement(adding officers or decreasing neighborhood coverage) Raise in-lieu fees Tax downtown property owners Use General Fund to support Parking Fund In preparing for this study session, it would be helpful for staff to prepare individual P&L's for each garage, each lot,and our streets and also determine individual occupancy rates. If City staff has any questions about the analysis contained in this letter, I would be happy to discuss it with them. Sincerely, Andrew Carter Cc: Ken Hampian, Bill Statler, Mike McCluskey, Dave Elliott, Robert Horch Carter—Parking Fund—page 3 of 3