ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

The General Managers of Engineering and Corporate Services

SUBJECT:

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

 

RECOMMENDATIONS

A. THAT Council receive for information the summary of the Parking Corporation of Vancouver (EasyPark) 2002 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 EasyPark 2003 Operating Budget.

C. THAT Council approve the EasyPark 2003 Capital Budget items totalling $1,396,400 with funding provided from the Parking Site Reserve ($1,023,400), Property Endowment Fund General ($158,000), and Power Smart grants ($215,000).

D. THAT staff review with the EasyPark its cost and revenue structures to examine measures which would reduce the trend of reduced financial returns.

GENERAL MANAGERS' COMMENTS

The General Manager of Engineering Services and General Manager of Corporate Services are concerned about the inability of EasyPark to meet its budgeted financial targets for the past three years, particularly the trend of reduced financial returns for the core parking operations. It was expected that the 2002 results in particular would be better as the importance of setting and meeting financial expectations was emphasized in last year's review.
EasyPark is managed independently from the City, and through a 1998 management agreement has the exclusive right to operate City owned parking facilities. While its mandate has not been to maximize revenues, there needs to be greater attention to financial returns.

With the support of EasyPark, staff will review the corporation's cost and revenue structures with the aim of generating more revenue for the City.

It is RECOMMENDED that A through D 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 core parking operations go to the Parking Site Reserve for reinvestment in the community, and from Real Estate holdings to the Property Endowment Fund - General.

PURPOSE

The purpose of this report is to review the 2002 financial performance of EasyPark and seek Council's approval for the 2003 Capital Budget for the VPC. In addition the report provides the EasyPark 2003 Operating Budget and 2002 actual financial figures to Council for information.

BACKGROUND

As part of the management agreement completed in 1998 (effective as of January 1, 1999) and consistent with Council direction, EasyPark has greater responsibility and more independent operations of the City's off- street parking facilities. EasyPark is accountable for its operating budget, and a EasyPark goal is to provide a highly cost effective operation that maximizes the City's return on its parking investment within the constraints imposed by the City.

The related City policy is that parking rates set by the City (on-street and off-street) should generally reflect the market demand except where variation from market rates is appropriate to influence the duration of parking usage (e.g. encouraging short-term and discouraging long-term commuter parking), support specific land use patterns by maintaining reasonable pricing for short-term parking (e.g. maintain shopping streets), and minimize traffic circulation by maintaining competitive on-street parking rates.

In accordance with the management agreement, EasyPark delivered to the City its year 2003 budget submission and audited statements. This includes the audited 2002 financial figures for EasyPark, and the 2003 Operating and Capital Budget. In support of this budget EasyPark has also submitted a Business and Management Plan, security plan, maintenance plan, and three year communication plan. These documents are available through the offices of the City Clerk.

DISCUSSION

2002 Financial Results

After Operating Costs, Administrative Costs, EasyPark Capital Costs, and transfers to third parties, EasyPark remitted $7.33 million to the City, compared with $7.53 million in 2001. This is $200,000 less than the previous year, $880,000 less than budgeted. After property taxes and lease payments associated with various facilities, there was a net revenue of $4.28 million earned for the Property Endowment Fund.

2002 Revenues

Excluding the Richmond operations which were not budgeted in 2002, EasyPark collected total Gross Revenues of $15.94 million. This is $1.36 million less than budgeted. These revenues include those monies collected by EasyPark for third party private operations and those collected for our joint-venture partners.

In its performance report, EasyPark attributes the reduced gross revenues in Actual 2002 over Budgeted 2002 to various factors including slower than expected business growth at Pacific Centre, credit card fraud problems at several lots, significant problems with the transition to pay-and-display equipment at 520 West Georgia, and reduced revenue in Gastown, due to the reconstruction of Water Street and closure of the Cordova structure, and from Library Square due to reduced evening and weekend event parking. On a positive note, revenues from film crew parking were significantly higher than expected. Details are provided in EasyPark's Variance analysis.

2002 Operating Costs

In 2002, actual Operating Costs were $257,400 below budgeted targets. Significant savings included reduced staff and maintenance costs of $227,000 and reduced utility costs of $146,000, which included a one time repayment by Hydro for an overpayment at 107 E. Cordova parkade.

2002 Capital Costs

In 2002 Capital expenditures met the budgeted amount of $353,500 and it should be noted that a Western Diversification Grant of $150,000 was received which reduced the City's cost to $353,000.

2003 OPERATING BUDGET

EasyPark's 2003 budget and comparison with 2002 is outlined in Table 1. This includes estimated revenues, operating expenditures and recommended capital expenditures.

Table 1

 

Budget
2002

Actual
2002

Actual to Budget

Budget*

2003

2003 Budget to
2002 Actual

Revenue

$17,294,500

$15,937,000

($1,357,500)

$15,542,500

($394,500)

           

Operating costs

$5,580,500

$5,323,100

$257,400

$5,379,100

($56,000)

Administration

$1,199,000

$1,153,900

$45,100

$1,335,900

($182,000)

Total expenses

$6,779,500

$6,477,000

$302,500

$6,715,000

($238,000)

           

Net Operating Margin

$10,515,000

$9,460,000

($1,055,000)

$8,827,500

($632,500)

Payable to others

$1,953,300

$1,778,800

$174,500

$1,847,700

($68,900)

Capital costs(EasyPark)

$353,500

$353,000

$500

$1,396,400

less $215,000+

($828,400)

           

City Net before leases and taxes

$8,208,200

$7,328,200

($880,000)

$5,798,400

($1,529,800)

* The budget includes only 6 months of operation for Bentall V. With a full year of EasyPark operation, staff would expect an increase in City Net of approx. $112,000. The budget excludes the Richmond operations for comparative purposes. The Richmond operation is expected to contribute approximately $105,000 to the City Net in 2003 with gross revenues of approximately $1,050,000.

+ power smart grant

2003 Revenues

EasyPark is projecting a further decrease in Gross Revenues of $394,500 in 2003. EasyPark is projecting lower revenues at Pacific Centre due to continued weakness in the commercial activity in the complex and the Gastown Parkade due to the construction work. Increased revenues are projected for 520 West Georgia as the transition problems are sorted out, and in Yaletown due to business growth.

2003 Operating Costs

Operating Costs for 2003 are budgeted at $5,379,100. This is a modest increase of $56,000 from 2002.

The significant changes in 2003 are increased expenditures on basic maintenance, security and equipment rental, offset by savings in Market / business development.

2003 Capital Budget

The Parking Corporation has submitted proposals totaling $1,396,400 for various Capital improvements in 2003, and these are supported by staff. This work is noted below and detailed in Appendix A. Staff recommend that funds totaling $1,023,400 be approved from the Parking Site Reserve, $158,000 from the Property Endowment Fund General, and $215,000 from the Power Smart Program.

CarPark 3 (535 Richards Street) - Surface repairs and membrane

This parkade was built in 1980 and the parkade surface needs to be repaired and a membrane installed to protect the life of this facility. This work was started last year as part of a two-year upgrade. It is recommended that $300,000 be approved this year to complete this work. Over the next 4 years it is expected that we would recommend surface repairs and membrane installation at CP 4 - 107 East Cordova and CP 2 - 150 West Pender.

Carparks 9 & 31 (Pacific Centre and Gastown) - Power Smart lighting and fan improvements

A Power Smart review was conducted in 2002 and it is recommended that the lighting and fans at Pacific Centre be upgraded at an estimated cost of $340,000. The net cost to the City is $150,000 after a $190,000 Power Smart grant and the payback of this expenditure is 2.5 years. In addition it is recommended that the lighting in the existing Water Street parkade structure be upgraded at an estimated cost of $152,000 with the net cost to the City of $127,000 after a $25,000 Power Smart grant.

Carpark painting program

EasyPark has proposed a painting program for the parkades which is estimated to cost $210,000 per year in addition to its regular maintenance programs. It is important that the parkades be properly maintained and staff support the need for this work.

Landscaping improvements

A number of the surface parking lots need landscaping improvements to meet Parking By-law requirements at an estimated cost of $108,000. There is also a need to repair the trellis at the City's parking facility in False Creek at 1100 The Castings at an estimated cost of $50,000.

Miscellaneous Items

The following items at a total estimated cost of $236,400 are also supported:

PERFORMANCE / COST AND REVENUE REVIEW

Table 2 shows the overall financial contribution to the City from parking operations over the past 4 years compared with the 2003 budget. Revenue from the parking operations is directed to the Parking Site Reserve (PSR) and the general Property Endowment Fund (PEF).

Table 2

 

1999

2000

2001

2002

Budget*

2003

% Change 1999 to 2003

Total Revenue

$14,980,000

$14,983,000

$16,621,000

$15,937,000

$15,542,500

4%

Total Expenses

$5,406,000

$6,267,000

$6,695,500

$6,477,000

$6,715,000

24%

Payable to others

$1,642,000

$1,603,000

$1,619,500

$1,778,800

$1,847,700

11%

Operating revenue payable to City

$7,932,000

$7,113,000

$8,306,000

$7,681,200

$6,979,800

-12%

             

City capital costs

$254,000

$233,000

$778,000

$353,000

$1,181,400

  

Net payable to City before leases & taxes

$7,678,000

$6,880,000

$7,528,000

$7,328,200

$5,798,400

  

The past several years have been disappointing from a financial perspective. Since EasyPark assumed greater control of City parking facilities at the start of 1999, the net contributions to the Parking Site Reserve have declined and expenses have grown more than revenues. Operating revenues payable to the City are expected to be 12% lower this year than in 1999.

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

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 were difficult to determine.

Revenues gains have been less than expected, due in part to: reduced business growth at Pacific Centre, credit card fraud problems at several lots, significant problems with the transition to pay-and-display equipment at 520 West Georgia, and reduced revenue in Gastown due to the reconstruction of Water Street and closure of the Cordova structure and from Library Square due to reduced evening and weekend event parking. The increase in revenue since 1999 has been offset by greater increases in operating costs. While EasyPark has taken steps to improve its operations, staff believe that EasyPark needs to look at more ways to generate revenue and reduce costs.

One of EasyPark's mandates is to provide affordable parking for downtown visitors and this means there may sometimes be lower parking rates and correspondingly lower financial returns. However, declines in revenue seem greater than would be expected as a result of this role. To address this, it is Recommended that staff, with the support of EasyPark, review with the corporation ways to reduce costs and increase revenues.

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© 2002 City of Vancouver