ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services and Budgets

FROM:

The General Managers of Engineering and Corporate Services

SUBJECT:

Parking Corporation of Vancouver- 2001 Budget Review

 

RECOMMENDATIONS

A. THAT Council receive for information the summary of the Parking Corporation of Vancouver (VPC) 2000 Operating and Capital financial results, with the Audited Financial Statements available through the offices of the City Clerk.

B. THAT Council receive for information the summary of the VPC 2001 Operating Budget, with the complete 2001 Operating Budget available through the offices of the City Clerk.

C. THAT Council approve the VPC 2001 Direct and Indirect Capital Budget items totalling $117,500 to be funded from the Parking Site Reserve.

D. THAT Council approve Capital expenditures of $545,000 for the installation of Easy Park signage and wayfinding to be funded from increased parking revenue.

E. THAT the VPC review the Pacific Centre operations, and provide to the City a Business case evaluation prior to approval of proposed equipment expenditures.

F. THAT Staff work with the VPC to establish benchmarking criteria for the lots it manages, noting that this may result in the contracting of specific parking facilities. This would be reported on with the 2002 budget.

GENERAL MANAGER'S COMMENTS

The General Manager of Engineering and General Manager of Corporate Services are concerned with the general trend of decreasing returns from the City's parking facility investments. The Vancouver Parking Corporation has proposed an aggressive marketing program (Easy Park, Validations, Themeparking) to increase revenues. These programs coupled with cost controls are expected to improve financial performance.

While it is difficult to predict the success of these marketing initiatives, they are recommended with the clear understanding that performance will be closely monitored and benchmarked. If the financial performance is not improved substantially, then other options will need to be considered. These options could include contracting some parts of the VPC operation to another operator.

It is RECOMMENDED that A through F be approved.

COUNCIL POLICY

On May 29, 1997 Council authorized a new operating agreement with the VPC that detailed the mission, goals and operating principles for the VPC.

Net revenues from the Off-street parking operations go to the various areas of the Property Endowment fund.

PURPOSE

The purpose of this report is to seek Council's approval for the 2001 VPC Capital Budget, the 2001 Easy Park and Themepark programs, and a Marketing-Communications Program. In addition the report provides the VPC 2001 Operating Budget and 2000 actual financial figures to Council for information.

BACKGROUND

As part of the management agreement approved in 1997 and consistent with Council direction, the VPC have greater responsibility and more independent operations of the City's off- street parking facilities. The VPC is more accountable for its operating budget, which was intended to maximize the City's return on its parking investment consistent with City Policy.

In accordance with the management agreement, the VPC have delivered to the City its year 2001 budget submission. This includes the audited 2000 financial figures for the VPC, andthe 2001 Operating and Capital Budget (Appendix A on file in the City Clerk's Office). In support of this budget the VPC has also submitted a Marketing and Communications Plan (Appendix B on file in the City Clerk's Office).

DISCUSSION

2000 Financial Performance

After Operating Costs, Administrative Costs, Capital Costs, and transfers to third parties, the VPC remitted $6.88 million to the City compared with $7.68 million in 1999. This is $1 million less than budgeted. The parking operations also contributes property taxes for the facilities, as well as lease payments associated with various facilities. After these payments, there was a Net Revenue of $3.83 million earned by the Property Endowment Fund compared with $4.49 million in 1999.

2000 Revenues

In 2000, the VPC collected total Gross Revenues of $14.98 Million. This is $364,000 less than budgeted. These revenues include those monies collected by the VPC for third party private operations and those collected for our joint-venture partners.

In its performance report, the VPC attributes the reduced gross revenues in Actual 2000 over Budgeted 2000 primarily to Pacific Centre as eatons only opened late in the year.

2000 Operating costs

In 2000, actual Operating Costs exceeded budgeted amounts by 14% ($777,000), due primarily to overexpenditures in Wages and Benefits, and Administration. These overexpenditures are attributed to the delayed implementation of automated systems as well as increased costs at Pacific Centre and Woodwards, and extraordinary staff transition costs.

Past Performance

Table 1 shows the overall financial contribution to the City from parking operations over the past 5 years. Prior to 1998 the City utilized both the VPC and other parking operators to manage its parking facilities. Revenue from the parking operations is directed to either the Parking Site Reserve (PSR) or the general Property Endowment Fund (PEF).

The past several years have been disappointing from a financial perspective. Since the VPC assumed greater control of City parking facilities in 1998, the net contributions to theparking site reserve have declined significantly. Expenses have grown and revenues have not increased.

Table 1

 

1996

1997

1998

1999

2000

Rent payments after capital to PSR/PEF

$8,630,000

$8,737,000

$6,370,000

$7,682,000

$6,882,000

           

PSR Taxes/Leases

$3,261,000

$3,506,000

$3,178,000

$3,191,000

$3,052,000

           

Net City

$5,368,000

$5,230,000

$3,192,000

$4,491,000

$3,833,000

Net PSR

$4,063,450

$4,053,568

$2,022,000

$3,389,000

$2,751,000

Net PEF

$1,305,000

$1,177,000

$1,170,000

$1,102,000

$1,079,000

To counter this decline the VPC have developed an aggressive Easy Park rebranding and marketing program to significantly increase revenues. This was approved in principle by Council in 2000, subject to the development of a business plan, and in 2000 the VPC completed the development of a Marketing, Communications and Community relations program, as part of the roll out of the Easy Park rebranding of the facilities.

The VPC have also created a business plan. This includes an ambitious spending program to create a greater awareness of the parkade's operator through the rebranding of the facilities as Easy Park. The details of their proposal are described in Appendix A, and outlined on Appendix C.

The VPC have restructured the organization to give greater empowerment to lot managers to set competitive rates, which often lagged the competition, and with the encouragement of City staff, have rethought how lots should be automated, and where this is appropriate.

Staff feel that the VPC still have to make improvements to its operations to ensure they are providing competitive services. It is recommended that Staff work with the VPC, and their new General Manager, to explore various benchmarking options, which may demonstrate the appropriateness of contracting of specific lots to provide a degree of competition. This would be reported on with the VPC's 2002 budget.

2001 OPERATING BUDGET

The VPC's 2001 budget is outlined in Table 2, which includes their estimated operating expenditures and requested capital expenditures.

2001 Revenues

The VPC have budgeted aggressively for new revenues. They expect an increase in actual revenues of $2,572,000 in 2001. $1,448,000 of this is from an increase in business primarily due to increased health of Pacific Centre with the opening of Eatons and London Drugs ($623,000), and from more market oriented parking rates ($825,000). The balance $1,124,000 would come from various component parts of the Easy Park Program: $889,000 from the Easy Park rebranding and marketing; $180,000 from validations and $55,000 from theme park revenues. This is detailed in Exhibit 4 of Appendix A.

2001 Operating costs

The VPC proposed a number of initiatives to improve customer service. They have created a $115,000 emergency customer service fund and have reduced direct expenditures on security services. They are also spending an additional $110,000 on equipment rental. Building maintenance costs have increased and they have created a painting program. They have also budgeted for a number of Easy Park related expenditures in their operating budget. This includes the Validation, Marketing, and Theme parking costs noted below.

Validation program

A validation program has been seen as an important part of the Easy Park Program and the VPC indicate that there is a strong business case for this work. They have included approximately $50,000 in their operating budget for validation tokens and $50,000 for additional staff resources.

Marketing/Promotions

Part of the Easy Park program is the need to actively market the Easy Park brand and the parking facilities. When Council approved the Easy Park concept in principle the VPC estimated that this expense would be $235,500 in the first year, although subject to the development of a Communication and Marketing Plan, for both Easy Park and validation programs. The VPC have completed this plan, which recommends the expenditure of $435,000 in 2001, and $300,000 in each of the following 3 years. This expenditure has been included in their operating budget, and is supported by a business case the VPC prepared for the Easy Park program.

Theme parking/Advertising

Theme parking involves the use of advertising as a wayfinding device and to generate revenues for the parkades. Specific floors or areas on the parkades would be brandedwhich is intended to improve customers ability to find their way in the parkades. If done well it could also be an attractive improvement. There is a good business case for this program; however, care needs to be taken to ensure it is an attraction. The first use of theme parking is in the Pacific Centre parkade, where an Eatons area has been created. The color chosen for most of the walls and columns was dark purple. There is a concern that this has significantly reduced the brightness of this area, and the ability to see other persons in the parkade, which would be contrary to the City's safety and security guidelines. The VPC are aware of these concerns and have assured staff that the Safety and Security guidelines will be adhered to.

Emergency Customer Service

Theft from automobiles continues to be a problem, even though the VPC spent $611,000 on security services in 2000. In 2001 the VPC have created an emergency customer service fund of $115,000, which is meant to assist those that have had their cars damaged. To fund this they have reduced the security service budget by approximately $80,000. This may be a worthy expenditure; however, it is noted that a business case was not prepared for this program.

Table 2

 

Budget
2000

Actual
2000

Actual to Budget

Budget
2001

Budget 2001 to 2000 Actual

Revenue

$15,347,000

$14,983,000

($364,000)

$17,555,000

$2,572,000

           

Operating costs

$4,120,000

$4,685,000

$565,000

$5,124,000

$439,000

Market research

$150,000

$150,000

---

$435,000

$285,000

Administration

$1,220,000

$1,432,000

$212,000

$1,195,000

($237,000)

Capital costs

$257,000

$233,000

($24,000)

$795,000

$562,000

           

VPC net

$9,600,000

$8,483,000

($1,117,000)

$10,006,000

$1,523,000

Private net

$1,716,000

$1,601,000

($115,000)

$1,598,000

($3,000)

City Net before leases and taxes

$7,884,000

$6,882,000

($1,002,000)

$8,408,000

$1,526,000

CAPITAL BUDGET

The implementation of the Easy Park program represents a major part of the 2001 Capital budget and new programs expenditures. This program is intended to build a new corporation branding identity "Easy Park" for the VPC facilities, as well as establishing strategic alliances and cooperative marketing and promotion initiatives with downtown business, entertainment and community organizations.

This expenditure is supported by a business case which anticipates increased revenues over the next 4 years of $4,709,000 with related expenditures estimated to be $2,340,000. This is detailed in Appendix A and outlined in Appendix C. The business case indicates healthy financial returns but staff have no way to validate the revenue projections. So the accountability of achieving the Business Plan lies with the VPC. There are three main component parts to the Easy Park Program: Easy Park Signage and Wayfinding, which is part of the Capital budget request, and Validations, and Marketing/Promotions which are included in the 2001 operating budget.

Easy Park signage and parkade wayfinding

The VPC requests that $545,000 be approved for the installation of Easy Park signage and wayfinding. These initiatives, to create new revenue streams and to raise the profile of the VPC facilities with the Easy Park branding, appear to be a worthwhile and promising venture and this expenditure is recommended.

Pacific Centre equipment

The VPC have proposed the installation of two additional pay stations at Pacific Centre. One of these would be relocated from Carpark 3, where pay and display equipment will be installed. The other would be purchased at a cost of $132,000. Staff do not support the purchase of the 2nd pay station at this time. There is no business case to support the expenditure, and savings expected from previous equipment installations have not be realized. Staff recommend that the Parking Corporation do a full review of the Pacific Centre operation, and prepare a business case, before the expenditure is considered.

Automation of Carpark 2 (150 Pender St)

The automation of Carparks 2 and 19 (900 Cordova) was proposed in 2000, subject to a business case, and review of equipment options. Following this review the VPC have amended the proposal, and plan to lease pay and display equipment for Carpark 2, and defer the automation of Carpark 19. This proposal is supported.

Direct and Indirect Capital budget items

The VPC submitted requests for $171,500 for direct capital budget items, including $132,000 for Pacific Centre, which staff do not support at this time as noted above. In addition the VPC have requested $78,000 for indirect capital budget items, which include: computer upgrades, an additional service vehicle, and minor office renovations. Aside from the Pacific Centre purchase staff support these items which total $117,500.

* * * * *

Appendices A & B on file in the City Clerk's Office

Link to Appendix C