Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services and Budgets

FROM:

The General Managers of Engineering Services and Corporate Services

SUBJECT:

City of Vancouver Off-Street Parking Facilities - Parking Corporation of Vancouver Budget Review and 2002 Capital Budget Approvals

 

RECOMMENDATIONS

A. THAT Council receive for information the summary of the Parking Corporation of Vancouver (VPC) 2001 Operating and Capital financial results, with the Audited Financial Statements available through the office of the City Clerk.

B. THAT Council receive for information the summary of the VPC 2002 Operating Budget.

C. THAT Council approve the VPC 2002 Direct and Indirect Capital Budget items totalling $203,500 to be funded from the Parking Site Reserve.

D. THAT Council approve $300,000 for security upgrades to the Gastown Parkade with $150,000 funded from the Parking Site Reserve and $150,000 from a Western diversification fund grant.

E. THAT Council approve additional Capital expenditures of $350,000 for the City's 50% share for the rehabilitation of elevators at Pacific Centre, and $214,000 for the City's proportionate share for security and equipment improvements at the Bentall V parkade, funded from the Parking Site Reserve.

F. THAT Council approve $150,000 for staff resources over the next 2 years for the oversight of the City's off-street parking assets, and to further acorporate review of the various properties, including potential development opportunities, funds provided from the Parking Site Reserve.

G. THAT Staff, with the support of Bentall Properties, issue a proposal call for the operation of the jointly owned Tower V parking facilities, and issue a proposal call for the operation of the parkade at Library Square, as required under the sharing arrangement with the Federal Public Works department. Both would be reported to Council for any award.

GENERAL MANAGER'S COMMENTS

The General Managers of Engineering and Corporate Services are concerned about the inability of the Vancouver Parking Corporation to meet its budgeted financial targets for the past two years. In 2000, the shortfall in the net payable to the City was approximately $1,000,000 or 13% of the budgeted amount. In 2001, the shortfall was approximately $963,500 or 11% of the budgeted net payable to the City. The 2000 shortfall was largely the result of exceeding projected expenditures, while the 2001 shortfall was largely the result of not attaining revenue targets.

While the 2001 total revenue and net payable to the City increased in actual dollar amounts over 2000, it is felt that additional measures must be developed to evaluate the performance of the VPC and to work toward an optimal level of performance. To this end, City staff have worked with the management of the Parking Corporation to establish the budget targets for 2002, which anticipate increases in both revenues and net payable to the City. In addition, City staff will continue to work with the management of the Parking Corporation to establish other specfic and mutually agreed upon performance measures to be tested this year and operationalized for future years.

We are also concerned about the general level of returns to the City. The Parking Corporation undertook an aggressive marketing program (EasyPark, Validations, Theme parking) to increase revenues, but the expectations created in the business case approved by Council are not reflected in the current budget for 2002. We continue to feel that the VPC has to make improvements to its operations to ensure they are providing competitive results. One method to test the competitiveness of the operation is to subject the managment of two lots to an open bidding process.

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 review the financial performance of the VPC and seek Council's approval for the 2002 Capital Budget for the VPC and Bentall and Pacific Centre business partners. The report also recommends that proposal calls be issued for the jointly shared Bentall Tower V parkade and for the continued operation of the Library Square parkade. In addition, the report provides the VPC 2002 Operating Budget and 2001 actual financial figures to Council for information.

BACKGROUND

As part of the management agreement approved in 1997 and consistent with Council direction, the VPC has 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 delivered to the City its year 2002 budget submission. This includes the audited 2001 financial figures for the VPC, and the 2002 Operating and Capital Budget (Appendix A). In support of this budget the VPC has also submitted a Business and Management Plan (Appendix B), security plan, maintenance plan, and three year communication plan.

DISCUSSION

2001 Financial Results

After Operating Costs, Administrative Costs, VPC Capital Costs, and transfers to third parties, the VPC remitted $7.53 million to the City, compared with $6.88 million in 2000. Although this is greater than the previous year, it is still less than 1999 and $963,500 less than budgeted.

In 2001, the VPC collected total Gross Revenues of $16.62 Million. This is $934,000 or 5.3% 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 2001 over Budgeted 2001 to a lower than expected return from the EasyPark rebranding / promotion, as well as business impacts from reduced economic activity partially caused by the events of September 11.

2001 Operating costs

In 2001, actual Operating Costs met budgeted targets although there was somewhat less spent on marketing to counterbalance increases in security and maintenance expenditures.

2001 Capital costs

In 2001Capital expenditures exceeded the budgeted amount of $692,500 by $160,600. This over expenditure was a result of: added LAN costs (+$87,500); vandalized equipment repairs (+$35,000); unexpected equipment upgrade for new currency (+$23,000); and office equip/furnishings (+$13,000).

2002 Operating Budget

The VPC's 2002 budget is outlined in Table 1, which includes estimated operating expenditures and requested capital expenditures.

Table 1

 

Budget
2001

Actual
2001

Actual to Budget **

Budget
2002

% change from Actual 2001 to Budget 2002

Revenue

$17,555,000

$16,621,000

($934,000)

$17,294,500

+4.1%

           

Operating costs

$5,559,500

$5,506,000

$53,500

$5,580,500

+1.4%

Administration

$1,195,000

$1,189,500

$5,500

$1,199,000

+0.8%

Total Expenses

$6,754,500

$6,695,500

$59,000

$6,779,500

+1.3%

           

Net Operating Margin

$10,800,500

$9,925,500

($875,000)

$10,515,000

+5.9%

           

Less Payable to Others

$1,692,500

$1,619,500

$73,000

$1,588,000

-1.9%

Operating Revenue Payable to City

$9,108,000

$8,306,000

($802,000)

$8,927,000

+7.5%

As a % of Revenue

51.9%

50.0%

  

51.6%

  

Deduct Total Capital Costs

$692,500

$853,000

($160,500)

$353,500

  

Add Capital Costs Recovered from Others

$76,000

$75,000

($1,000)

$4,000

  

Net Payable to City

$8,491,500

$7,528,000

($963,500)

$8,577,500

+13.9%

           

** - Negative numbers indicate "worse" than budget - Positive numbers indicate "better" than budget - from the City's perspective.

The City's Gastown Parkade is aging and major improvements are needed to ensure it continues to serve the needs of the Gastown community. There is an immediate need for security improvements, which would include lighting and access changes to the Water Street side. This work is estimated to cost $300,000. This cost would be offset by a Western Diversification fund grant totaling $150,000.

A consultant's review of the parkade supports the rehabilitation of the Water Street side, which was built in 1971, with the potential for a two floor parking addition. This work would upgrade the parkade to extend its life, meet the current seismic code, improve access, and improve its appearance to better reflect its Gastown heritage setting. The Cordova side was built in 1951 and the estimated cost to rehabilitate the structure exceeds its value. It is recommended that this building be replaced with a new structure that could allow for a commercial joint venture that could possibly be done in stages.

The redevelopment of the parkade structures is expected to proceed later this year, and the proposed immediate parkade improvements will compliment any future work.

Pacific Centre Elevator repairs
There is a need to repair the elevators that serve the parkade at Pacific Centre. This work is cost shared directly with Pacific Centre. The City's 50 % share of this work is estimated to be $350,000.

Bentall Tower V Parkade
There is a need to upgrade the parking control equipment at this site and make security and wayfinding improvements. This work is cost shared directly with Bentall. The City's share of the $350,000 equipment cost is $145,000 and the City's share of the security and wayfinding upgrade is $69,000, for a total City cost of$214,000.

Performance

Table 2 shows the overall financial contribution to the City from parking operations over the past 4 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 the parking site reserve have declined significantly. Expenses have grown more than revenues.

To counter this decline the VPC developed an aggressive Easy Park rebranding and marketing program intended to significantly increase revenues. This was approved by Council in 2001.

Table 2

 

1998
$

1999
$

2000
$

2001
$

% Change 1998-2001

Total Revenue

14,574,000

14,980,000

14,983,000

16,621,000

+14.0%

Total Expenses

5,808,500

5,406,000

6,267,000

6,695,500

+15.3%

Payable to Others

1,635,000

1,642,000

1,603,000

1,619,500

-0.9%

Operating Revenue Payable to City

7,130,500

7,932,000

7,113,000

8,306,000

+16.5%

As a % of Gross Revenue

48.9%

53.0%

47.5%

50.0%

+2.2%

           

Capital Costs Paid by City

1,764,000

254,000

$233,000

778,000

  
           

Net Payable to City

5,366,500

7,678,000

6,880,000

7,528,000

  
           

The EasyPark program rebranding and promotions have changed the face of the City's parkades. The improvement to the parkade signing was needed and the program has greatly improved the appearance of the parking properties. The revenues attributable to this rebranding and the promotions are difficult to determine. However, as revenue targets for 2001 were not met, it appears that the future business case revenues expected from the program may be in question as well. VPC, with the encouragement of staff, has reviewed the EasyPark program, particularly the merits of continued advertising, and has revised the 2002 budget to reflect more realistic expectations.

Staff continue to feel that the VPC has to make improvements to its operations to ensure they are providing competitive services. The major concern is growth in expenses exceeding growth in revenues over the past 4 years, resulting in stagnant operating margins.

City staff, in conjunction with VPC management, will undertake to establish specific performance measures to address this concern. To this end, city staff will undertake discussions with VPC management to identify performance measures, to be implemented for the last half of this year and subsequent years. The measures will require that budgeted targets for 2002 be attained. Continued improvements would be expected over future years. Ultimately, the establishment of performance measures will require a detailed understanding of individual lots and the factors that impact the financial performance of those lots. The performance measures will also include operational measures related to security and maintenance.

These performance measures will serve as one benchmark, amongst other data, against which to judge the operations of the Parking Corporation. Contracting some work has merit and in one case appears necessary. This would provide a degree of competition and would allow the city to make direct comparisons of the value of the parking operations. The City has partners in several of the parking operations and it is recommended that two of these, Library Square and the Bentall tower V site, go out for a public tender (proposal call).

Library Square

The Library Square parkade is a joint venture with the Public Works Canada. The City has the rights to 407 of the 712 spaces in the parkade. The agreement with PWC needs to be renewed as well as the agreement for the parking operation, which has expired. This should be put out for proposal call.

Bentall Tower V

The Bentall Tower V Parkade is a joint venture with Bentall Properties. Later this year their office tower will open and they have requested that the parking operation be put out for a proposal call as they feel that a different operator could provide a better level of service, at a lower cost. The City's agreement with Bentall allows the City to require the use of the Parking Corporation. Because of the concerns raised by Bentall; however, staff support the issuance of a proposal call as this would allow an evaluation of the Parking Corporation operation.

Staff Implications

There is a need for added staff resources to provide adequate oversight of the City's parking assets and to further a corporate review of the various properties, including potential development opportunities. Currently there is no full time staff available for this work and it is recommended that a position be created, for a two year period, within Engineering Services that would be responsible for the City off-street parking assets that are within the Parking Site Reserve, at an estimated annual cost of $75,000. This would be funded by the Parking Site Reserve.

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