Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Standing Committee on City Services and Budgets

FROM:

The General Manager of Engineering Services, in Consultation with the General Manager of Corporate Services

SUBJECT:

Parking Corporation of Vancouver - 1999 Budget Review

 

RECOMMENDATION

A. THAT Council receive for information, the summary of the Parking Corporation of Vancouver (VPC) 1998 Operating and Capital Actual Financial Figures, with the Audited Financial Statements available through the offices of the General Managers of Engineering and Corporate Services.

B. THAT Council receive for information the summary of the Parking Corporation of Vancouver (VPC) 1999 Operating Budget, with the complete 1999 Operating Budget available through the offices of the General Managers of Engineering and Corporate Services.

C. THAT Council approve the Parking Corporation of Vancouver (VPC) 1999 Capital Budget, totalling $179,650.00 to be funded by off-street parking revenues collected by the VPC.

CITY MANAGER`S COMMENTS

This is the first annual report provided by the Parking Corporation of Vancouver on its 1998/1999 Operating and Capital budget under the new operating agreement between the City and the Corporation which was signed last December. Given this new relationship, City and VPC staff are continuing to work on performance measures which will allow the City to evaluate the ongoing success of this relationship. For Council's information, the Parking Corporation of Vancouver is embarking on a strategic planning process and anticipates having a draft planfor review by the Board and City Council by the end of the year. The City Manager emphasizes the importance of this strategic plan in continuing to ensure the operations are cost-efficient and cost-effective.

The City Manager RECOMMENDS approval of A, B and C.

COUNCIL POLICY

On May 29, 1997, the Standing Committee on City Services and Budgets approved the Council Report titled "New Operating Agreement - Parking Corporation of Vancouver", which detailed the mission, goals, and operating principles for the VPC. Council also authorized the Director of Legal Services to approve the new operating agreement on behalf of the City, if approved by the VPC and the General Managers of Engineering and Corporate Services.

PURPOSE

The purpose of this report is to seek Council approval for the 1999 VPC Capital Budget, and to provide the VPC 1999 Operating Budget and 1998 Actual Financial Figures to Council for information.

BACKGROUND

On May 29, 1997, the Standing Committee on City Services and Budgets approved a report detailing the mission, goals and operating principles for the Parking Corporation of Vancouver (the "VPC"), and directed staff to incorporate these guidelines in the new operating agreement. These new operating principles represented a significant shift by the City, by providing the VPC with more independent operation and by assigning all City owned off-street parking facilities (with the exception of the Park Board and Civic Theatres facilities) directly to the VPC. The increased assignment of responsibilities requires that the City adopt a more stringent approach to the evaluation of the efficiency and cost-effectiveness of the VPC operations.

At that time, Council also acknowledged that the City's block of parking stalls provides a valuable tool to influence the parking market, and to meet transportation objectives. The City's parking assets represent a significant investment, and the revenue generated from these facilities provides a tool for further investment in parking. The VPC plays an important role in managing this significant parking investment.

In February 1998, the City assigned the operation of 9 City owned off-street parking facilities from other parking operators to the VPC, which included 2 parking structures and 7 surface lots, representing 1,805 parking stalls.
In December 1998, following discussions between Engineering Services, Corporate Services, and the VPC and its Board members, the new Management Agreement between the City and the VPC was successfully negotiated, having received the concurrence of all parties involved. This new Management Agreement encompasses all the goals and operating principles approved by City Council.

DISCUSSION

As part of the new Management Agreement and consistent with Council direction, the VPC has been granted greater responsibilities and more independent operation of the City's off-street parking facilities. As such, this report establishes a new approach for reviewing VPC budget submissions, which provides the VPC with the mandate and ability to control and manage its Operating Budget. The VPC will now be more accountable for its own Operating Budget. Staff will provide comments on the Operating Budget to the VPC. The VPC however, in its expert role in the parking industry, shall be responsible for developing an Operating Budget which maximizes the City's return on its parking investment and maintaining a highly cost effective and efficient parking operation within the constraints of City policy. The VPC shall respond as appropriate to staff input, but shall use its discretion to adjust the budget as required. Staff will then present to Council for information the final Operating Budget, as submitted by the VPC. In support of its Operating Budget submission, the VPC will prepare and deliver to the City: a Capital Assets and Fleet Management Plan, a Maintenance Plan, a Security Plan, and a Performance Report, as outlined in the new Management Agreement.

The City shall maintain control of the Capital Budget, which includes items such as the replacement of parking control equipment, the purchase of head office equipment, and general parking facility maintenance and upgrades. The Capital Budget is submitted by the VPC, reviewed by staff, and reported to Council for approval.

Under the Management Agreement the City retains the right to tender all or a part of the operation. This is intended to ensure accountability and to "test the market" as and when appropriate.

1998 Actual Financial Figures

As part of the 1999 budget submission, the VPC has submitted the 1998 audited financial statements, reporting the revenues and costs for all facilities operated by the VPC. This report, prepared by KPMG, is available from the offices of the General Managers of Engineering and Corporate Services for Council information. These 1998 financial figures are summarized in Figure 1 and Table 1 below:

Figure 1

SUMMARY OF 1998 OPERATING ACTUALS

 

Total

City

Joint Venture Partners /Extra-Municipal)

Gross Revenues

$14,574,361

$12,124,825

$2,449,536

Operating Costs

$4,060,512

$3,622,341

$438,171

Admin. Costs

$1,086,649

$1,038,305

$48,344

Net Revenues
(Net to Gross)

$9,427,200
(64.7%)

$7,464,180
(61.6%)

$1,963,020
(80.1%)

Property Taxes

  

$2,492,565

  

Lease Payments

  

$1,518,011

  

Net to PSR & PEF
(Net to Gross)

  

$3,453,604
(28.5%)

  

Table 1

In 1998, the VPC collected total Gross Revenues of approximately $14.57 Million. Theserevenues include those monies collected by the VPC from approved third party private operations and those collected for our joint-venture partners. After Operating Costs and Administrative Costs, and transfers to third parties, the VPC remits Net Revenues of $7.5 Million to the City. The parking operations also contributes property taxes for the facilities, as well as lease payments associated with various facilities. After these payments, there are Net Revenues of $3.45 Million earned by the Parking Sites Reserve and the Property Endowment Fund. Direct and Indirect Capital Expenditures by the VPC totalling $1.78 Million in 1998, would further reduce these earning.

The variance between the Approved 1998 Budget and the Actual Audited 1998 statement is outline in Table 2 below. The 1999 Operating Budget as submitted by the VPC is also shown for comparison.

1998 OPERATING BUDGET TO ACTUALS / 1999 OPERATING BUDGET

 

Approved 1998 Budget

Total 1998 Actuals

Incr. / (Decr.)

1999 Operating
Budget

Gross Revenues

$15,567,112

$14,574,361

($992,751) -6.4%

$14,631,700

Operating Costs

$3,773,726

$4,060,512

$286,786 +
7.6%

$3,857,331

Admin. Costs

$1,087,250

$1,086,639

($611) -

$1,133,800

Net Revenues

$10,706,136

$9,427,200

($1,278,926)-12%

$9,640,569

Property Taxes

VPC
City

$2,510,756
$679,685
$1,831,071

$2,492,565
$661,494
$1,831,071

  

$2,492,565
0
$2,492,565

Net Revenues
(Before Lease Payments & Third Party Payments)

$8,195,380

$6,934,645

($1,260,735)-15.4%

$7,148,004

Table 2

In its performance report, the VPC attributes the shortfall in expected revenues in Actual 1998 over Budgeted 1998 to a variety of factors which include:
· the downturn in the economy and the decline in the downtown retail, commercial, hospitality, sports and entertainment patronage;
· high levels of crime and vandalism in a few carparks;
· most of the new consolidated facilities fell below budget revenues due to loss of patronage during the transition and VPC inexperience with their historic performance.

In 1998, Operating Costs exceeded budgeted amounts, due primarily to overexpenditures in Wages and Benefits, and in Security Costs. The VPC attributes these overexpenditures to a 3 month delay in the installation of the automated pay-on-foot technology in Pacific Centre (CP #9), and a continued 24 hour presence in the Gastown Parkade. The VPC also increased the corresponding amount of security costs to deal with these additional operating hours and to deal with the vandalism and crime problems.

1999 Operating Budget

The VPC 1999 Operating Budget is summarized in Table 2 above, and details of the budget are available through the offices of the General Managers of Engineering and Corporate Services for Council information. The Capital Assets and Fleet Management Plan, the Maintenance Plan, the Security Plan, and the Performance Report have also been submitted to the City, in accordance with the Management Agreement.

The VPC projects no appreciable increase in the 1999 Budget for gross revenues of the facilities over 1998 Actuals. The VPC anticipates the continued decline in downtown business activity. The VPC also expects reductions in transient parking patronage due to this economic slowdown, "epidemic" problems with crime and vandalism, and an oversupply of on-street and off-street parking supply in the majority of the downtown districts. However, the VPC expects to maintain gross revenues at 1998 Actual levels by offsetting the declining patronage with parking rate increases where possible.

Carpark Operating Costs have increased $83,605 in Budget 1999 over Budget 1998, but have decreased $203,181 over Actual 1999. During 1999, the VPC will have completed the automation of three attended parking facilities (Carparks #3, #9 Pacific Centre, and #31 Gastown Parkade) with an expected savings in wages and benefits in the amount of $418,000 over Budget 1998. However, unanticipated increases to the Operating Costs encountered in Actual 1998 over Budget 1998, primarily as a result of increased staffing in the Gastown Parkade (Carpark #31) and increased security costs, have resulted in these savings not being fully realized. Therefore Budget 1999 Operating Costs are slightly higher than Budget 1998, but are less than Actual 1999.

The VPC has increased Administrative Costs by $47,161 (4.3%) over Actual 1998.

Capital Budget

The VPC 1998 Capital Budget involved an intensive year of upgrading for the City facilities, which resulted in $1,781,598 in direct and indirect Capital Expenditures. Direct Capital Expenditures relate to capital improvements, such as equipment upgrades and painting, that are performed at each facility. Indirect Capital Expenditures relate to Head Office Capital Expenditures, such as the purchase of vehicles, office equipment, and computers. The 1998 Capital Budget to Actual figures are summarized in Table 3 below:

1998 CAPITAL BUDGET TO ACTUALS

 

Approved 1998 Budget

Total 1998
Actuals

Incr. / (Decr.)

Direct Capital Exp.

$1,636,362

$1,675,946

$39,584

Indirect Capital Exp.

$ 118,815

$ 105,652

($13,163)

Total Capital Exp.

$1,755,177

$1,781,598

$26,421

Table 3

Major capital projects initiated in 1998 include the following:

· Carpark #9 - Pacific Centre: This capital project involved painting and signage upgrades, and replacement of the revenue control equipment with a hybrid pay-on-foot & pay-on-exit system. This new system was completed in November 1998 prior to the Christmas season, and the pay-on-foot express system had achieved 41% usage by the end of the year.

· Carpark #3 - 535 Richards Street: This capital project was initiated in 1998 and involved the automation of this attended facility with a pay-on-foot only system, as recommended by the VPC.

· Carpark #31 - Gastown Parkade: The revenue control equipment was replaced in this facility and secured parking was installed.

The VPC 1999 Capital Budget submission totals $179,650, and is summarized in Table 4 below. Details of the capitalexpenditures are available through the offices of the General Managers of Engineering and Corporate Services. The Capital Budget is much reduced this year with only minor upgrades and equipment replacement in the parking facilities. Staff recommend approval of the VPC 1999 Capital Budget, to be funded from off-street parking revenues collected by the VPC.

Table 4

Performance Review

With the increased responsibilities granted to the VPC, the City will be taking a more stringent approach to performance evaluation. Staff have been working with the VPC to establish performance measurement criteria, targets, and external measurement comparisons. Staff will report back to Council on the performance evaluation of the VPC. In addition to financial performance, the City will also review performance in the areas of customer service, marketing plans, and overall facilities management.

While a full performance review has not been completed, there are several issues which require a more detailed examination. Some of the key performance indications are summarized as follows:

1. The revenues at the core facilities over the past 2 years are flat or declining. While this can be attributed in part to the overall economy, it serves to highlight the need to control costs and increase marketing initiatives.

2. Labour costs continue to decline as more fully automated facilities are introduced. This reduces operating costs and provides a better return per stall.

3. Security costs are escalating and have increased by 42% since 1997. While its critical to provide safety and security at VPC facilities, the increasing costs reflect a need to review methods and cost effectiveness.

4. In February 1998, the City assigned 2 Parking Sites Reserve Parkades and 7 Property Endowment Fund surface lots directly to the VPC, in accordance with the May 29,1997 Council report. This assignment of parking facilities was partly based on a KPMG report commissioned by the VPC which suggested that the City would benefit from the economies of scale which would result from a consolidation of all City owned off-street parking facilities. With the completion of the first year of operation of these new facilities by the VPC, the projections of the KPMG report and the validation of the cost benefit can now be reviewed.

CONCLUSION

With the completion of the New Management Agreement between the City and the VPC, the City has adopted a new budget process. The VPC has been granted greater authority and responsibilities, but shall also be more accountable to the City in terms of providing cost-effective parking operations. The City will be establishing performance measurement criteria to evaluate the VPC parking operations. As a part of this new process, staff are now presenting to Council for information the VPC 1998 audited financial statement and the VPC 1999 Operating Budget. Staff also recommend the approval of the VPC 1999 Capital Budget.

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