DOWNTOWN PARKING AUTHORITY In January, a meeting was held in the office of the mayor of Oakmont to discuss a proposed municipal parking facility. The participants included the mayor, the traffic commissioner, the administrator of Oakmonts Downtown Parking Authority, the city planner, and the finance director. The purpose of the meeting was to consider a report by Richard Stockton, the executive assistant to the Parking Authoritys administrator, concerning estimated costs and revenues for the proposed facility. Mr. Stocktons opening statement was as follows: As you know, the mayor proposed two months ago that we construct a multi-level 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. The Elm Street site is owned by the city. All that stands on it now are the remains of the old Embassy Cinema, which we estimate would cost approximately $160,000 to demolish. A building contractor has estimated that a multi-level structure, with space for 800 cars, could be built on the site at a cost of about $8 million. The practical useful life of the garage would be around 20 years. A parking management firm has already contacted us with a proposal to operate the garage for the city. They estimate that their costs, exclusive of their fee, would amount to $960,000 per year. Of this amount $700,000 would be salary costs; the remainder would include utilities, mechanical maintenance, insurance, and so forth. In addition, they would require a fee of $120,000 per year. Any gross revenues in excess of $1,080,000 per year would be shared 90 percent by the city and 10 percent by the management firm. If total annual revenues were less than $960,000, the city would have to pay the difference. I suggest we offer a management contract for bid, with renegotiations every three years. The city should derive additional income of around $200,000 per year by renting the ground floor of the structure as retail space. We conducted a survey at a private garage only three blocks from the Elm Street site to help estimate revenues from the prospective garage. The garage, which is open every day from 7:00 a.m. until midnight, charges $3 for the first hour, $2 for the second hour and $1 for each subsequent hour, with a maximum rate of $8. Their capacity is 400 spaces. Our survey indicated that during business hours, 75 percent of their spaces were occupied by all-day parkers - cars whose drivers and passengers work downtown. 2 In addition, roughly 400 cars use the garage each weekday with an average stay of three hours. We did not take a survey on Saturday or Sunday, but the proprietor indicated that the garage is usually about 75 percent utilized by short-term parkers on Saturday until 6 p.m., when the department stores close; the average stay is about two hours. Theres a lull until about 7 p.m., when the moviegoers start coming in; he says that the garage is almost full from 8 p.m. 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 the we now have approximately 50,000 cars entering the central business district (CBD) every day from Monday through Saturday. Based on correlations with other cities of comparable size, the economists calculated that we need 30,000 parking spaces in the CBD. This agrees quite well with a block-by-block estimate made by the traffic commissioners office last year, which indicated a total parking need in the CBD of 29,000 spaces. Right now we have 22,000 spaces in the CBD. Of these, 5 percent are curb spaces (half of which are metered, with a twohour maximum limit for 80 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 were on their way to work, 20 percent were shoppers, and 20 percent were business executives making calls. The average number of people per car was 1.5. Unfortunately, we have not yet had time to use the data mentioned thus far to work up estimate of the revenues to be expected from the proposed garage. The Elm Street site is strategically located in the heart of the CBD, near the major department stores and office buildings. It is five blocks from one of the access ramps to the new crosstown freeway, which we expect will open to traffic next year, and only three blocks from the Music Center, which the mayor dedicated last week. As we all know, the parking situation in that section of town has steadily worsened over the last few years, with no immediate prospect of improvement. The demand for parking is clearly there, and the Parking Authority therefore recommends that we build the garage. The mayor thanked Mr. Stockton for his report and asked for comments. The following discussion took place: Finance Director: Im all in favor of relieving the parking congestion downtown, but I think we have to consider alternative uses of the Elm Street site. For example, the city could sell that site to a private developer for at least $4 million. The site could support an office building from which the city would derive property taxes of around $1,250,000 per year at present rates. The office building would almost certainly incorporate an underground parking garage for the use of the tenants, and therefore we would not only improve our tax base and increase revenues but also 3 increase the availability of parking at no cost to the city. Besides, an office building on that site would improve the amenity of downtown; a multi-level garage built above ground, on the other hand, would not. Planning Director: Im 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. Adequate, efficient parking facilities will encourage more intensive use of downtown traffic generators such as shops, offices, and places of entertainment, this enhancing land values. A garage contained within an office building might, as the finance director suggests, provide more spaces, but I suspect these would be occupied almost exclusively by workers in the building and thus would not increase the total available supply. I think long-term parking downtown should be discouraged by the city. We should attempt to encourage short-term parking particularly among shoppers in an effort to counteract the growth of business in the suburbs and the consequent stagnation of retail outlets down town. 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 garage on the Elm Street site, we should devise a rate structure that favors the short-term parker. People who work downtown should be encouraged to use our mass transit system. Finance Director: Im glad you mentioned mass transit because this raises another issue. As you know, our subways are not now used 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. Why build a city garage only three blocks away that will further increase the subway systems deficit? Each person who drives downtown instead of taking the subway represents a loss of $2 (the average round trip fare) to the subway system. I have ready a report stating that approximately two-thirds of all people entering the CBD by car on weekdays 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 Association has informed me that they estimate that each new parking space in the CBD generates on average an additional $40,000 in annual retail sales. This represents substantial extra profit to retailers. I think retailing after-tax profits average about 4 percent of gross sales. Besides, the city treasury benefits directly from our 3 percent sales tax. Traffic Commissioner: But what about some of the other costs of increasing parking downtown and therefore presumably the number of cars entering the CBD? Im thinking of such costs as the increased wear and tear on city streets, the additional congestion produced with consequent delays and frustration for the drivers, the impeding of the movement of city vehicles, noise, air pollution, and so on. How do we weigh these costs in coming to a decision? 4 Parking Administrator: I dont think we can make a decision at this meeting. I suggest that Richard Stockton be asked to prepare a further analysis of the proposed garage using the information presented at this discussion, so we can then make the right decision for the city of Oakmont.

Assume that the City has set a hurdle rate of 15% for new projects similar to the parking garage. Should the City build the parking garage? Why or why not? How confident are you in your recommendation? State and justify your assumptions and document any calculations.