Question

What rates should be charged?

Downtown Parking Authority In January a meeting was held in the office of the mayor of Oakmont to discuss a unicipal parking facility. The participants included the mayor, the traffic proposca the administrator of Oakmont's Downtown Parking Authority, the city planner, and the finance director. The purpose of the meeting was to consider a report Richard Stockton, executive assistant to the Parking Authority's administrator, concerning estimated costs and revenues for the proposed facility. Mr. Stockton's opening statement was as follows: As you know, the mayor proposed two months ago that we construct a multilevel parking garage on the Elm Street site. At that time, he asked the Parking Authority to assemble all pertinent information for consideration at our meeting today. I would like to summarize our findings briefly for you wned by the city. All that stands on it now are the remains of the old m Street which we estimate would cast approximately $80,000 to demolish. A building contractor has estimated that a multilevel structure, with space for 800 cars, could be built on the site at a cost of about $4 million. The useful life of the garage would be around 40 years. The city could finance construction of the garage through the sale of bonds. The finance director has informed me that we could probably float 5 percent interest. Redemption would commence after three years, with one-seventeenth of the original number 20-year tax-exempts at issue f bonds being recalled in eacnu oposal to operate the A parkin the city, They estimate that their costs, exclusive of the fee, would amount to $480,000 per year. Of this amount, S350,000 would be personnel costs; the remainder would include utilities, mechanical maintenance, insurance, and so forth. In addition, they would require a management fee of $60,000 per year. Any gross revenues in excess of S540,000 per year would be shared 90 percent by the city and 10 percent by the manage- ment firm. If total annual revenues are less than $540,000, the city would have to pay the difference, I suggest we offer a management contract for bid, with rehegotiations every three years. The city would derive additional income of around $100,000 per year by renting the ground floor of the structure as retail spacc. ing garage only three blocks from the Elm Street ta beln estimate revenues from the prospective garage. si The garage, which is open every day from 7:0 A.M., until midnight, charges: $1.50 for the first hour; S1.00 for the second hour; and 50 cents for cach subsequent hour, with a maximum rate of $4. Their capacity is 400 spaces. Our survey indicated that during busi- ness hours, 75 percent of their spaces were occupied by "all-day parkers"-Cars whose drivers and passengers work downtown. In addition, roughly 400 cars use the garage each wockday with an average stay of three hours. We did not take a survey on Saturday or Sunday, but the proprietor indicated tnat e ga n the denartment stores close; the short-term par kers hours. There's a luil until about 7:00 P.M., when the moviegoers averagngin; he says the garage is almost full from 8:00 PM, until closing time at midnight. Sundays are usually very quiet until the evening, when he estimates that his garage is 60 percent utilized from 6:00 P.M. until midnight. In addition, we studied a report issued by the City College Economics Department last year, which estimated that we now have approximately 50,000 cars entering the central business district (CBD) every day from Monday tnrougn d 30 0o0 parking with other cities of comparable size, the econo blork-bw-block estimate made by the spaces in the CBD. Th office last year, which indicated a total parking need in the CBD of 29.000 spaces., Right now we heve 22,000 spaces in the CBD. Of these, 5 percent are curb spaces (half of which are metered, with a two-hour maximum limit for 40 cents), and all the rest are in privately owned garages and open lots. Another study indicated that 60 percent of all auto passengers entering the CBD on a weekday business executives making calls. The average number of peopie per ca Unfortunately, we have not yet had time to use the data mentioned thus far estimates of the revenues The Elm Street site is strategically cks from one of the access ramps to the department stores and offi were on their way to work, 20 percent were shoppers, and 20 percent were work up o be expected from the proposed ga CBD, near the major pect will be open to traffic next year, and only three blocks from the Music Center, which the mayor dedicated last wek. As we all know, the parking situation in that section of town has steadily worsened over the last few years, with no immediate prospect clearly there, and the Parking Authority therefore recommends that we build the garage. improvement. The demand for parking is The mayor thanked Mr, Stockton for his report and asked for comments. The following discussion took place: Finance Director: I'm all in favor of relieving parking congestion downtown, but I think we consider alternative uses of the Elm Street site. For example, the city could sell that site building from which the ci for at least $2 million. The site could support an office around $400,000 per year at present rates. The office buildine wonld alt parking garage for the use of the tenants, and therefore we wolae an underground tax base and increase revenues but also increase the availability of parking t ur the city. Besides, an office building on that site would improve the amenity of downtown; a multilevel garage built above ground, on the other hand, would not. Planning Director: I'm not sure I agree completely with the finance director. Within a certain range we can increase the value of downtown land by judicious provision of parking. te, efficient parking facilities will encburage more intensive use of downtown values. A garage contei s, ofmces, and places of entertainment, thus enhancing iand gests, provide more spaces, but I suspect these ght,as the finance director sug the building and thus would not increase the total a sexclusively by workets think long-term parking downtown should be discoureged by the city We should attempt to encourage short-term parking-particularly among shoppers-in an effort to counteract the growth of business outlets downtown. The rate structure in effect at the privately operated garage quoted by Mr. Stockton clearly favors the long-term parker. I believe that if the city constructs a the suburbs and the conscquent stagnation of retail parker. People who ite,we should devise a rate structure that favors the short-term Finance Director. I'm el Wntown should be encouraged to use our mass transit system you know, our subuaou mentioned mass transit because this raises another issue. As to capacity and are running at a substantial annual deficit borne by the city. We have just spent millions of dollars on the new subway station under the Music Center still further inerease the subway instead of taking the subway represents a loss of $1.00person who drives downtown subway systemn. I have read a report stating that approximately two-third re) to the Why build a city garage only three blocks away that will ersons entering the CBD by car would still have made the trip by subway if they had not been able to use their cars. Mayor: On the other hand, I think shoppers prefer to drive rather than take the subway, particularly if they intend to make substantial purchases. No one likes to take the subway burdened down by packages and shopping bags. You know, the Downtown Merchants generata as informed me that they estimate that each new parking space in the CBD ial extra profit to retailers: Tt 0,000 in annual retail sales. That represents substan gross sales. Besides, the city treasury benefterax profits average about 3 percent of Traffic Commissioner: But what about some o sts of increasing parking down town and therefore, presumably, the number rectly from our 3 percent sales tax such costs as the increased wear and tear on city streets, the additional thiıking of duced with consequent delays and frustration for the drivers, the impeding of the mo ment of city vehicles, noise, air pollution, and so on. How do we weigh these costs in coming to a decision? Parking Administrator: I don't think we can make a decision at this meeting. I suggest that Dick Stockton be asked to prepare an analysis of the proposed garage that will answer the following questions: pro Questions 1. Using the information presented at this discussion, should the city of Oakmont construct the proposed garage? 2. What rates should be charged? 3. What additional information, if any, should be obtained before making a final decision?

Answer 1

In case we apply the rates charged by private company's, it will be beneficial for the long-term parkers that are discourage by the city because the primary objective of the parking spaces is to provide the shoppers with an additional parking spaces. But using the available information, it is not possible to determine the best rate for charging the parkers