SR-417-005 (9)
..
.
i1r'-00s:
.
II-A
JUN 2 3 1987
C/ED:EDD:PC:JPM:pw
council Meeting: June 23, 1987
Santa Monica, California
TO:
Mayor and City Council
FROM:
City staff
SUBJECT: Recommendation for Approval in concept
Installation of Parking Meters in the
Parking Structures and the Reduction of
Maintenance Fee
for the
Downtown
the Mall
INTRODUCTION
This staff report reconunends that the city council approve in
concept the purChase and installation of parking meters in the
downtown parking structures, and a concomitant reduction in the
Mall Maintenance Fee, which is used for operation and maintenance
of the parking structures and the common areas within the Third
street Mall and Downtown Maintenance District.
BACKGROUND
At its August 19, 1986 meeting, the city council adopted
Ordinance 1382 (CCS) establishing an annual Mall Maintenance Fee
which is levied against all holders of business licenses in the
Third Street Mall and Downtown Maintenance District (District).
The purpose of the Maintenance Fee is to pay for a portion of the
costs of operating, maintaining and repairing the public parking
structures and common areas in the District.
The ordinance
established the Maintenance Fee at five times the City'S Business
License Tax or $15,000, annually adjusted by the Consumer Price
Index (CPI), whichever is less.
It should be noted that this
- 1 -
I/.A
JON 2 3 1987
.
.
Maintenance Fee is separate from the assessment charges which
were also established by the City Council in August of 1986.
Those charges, which are levied against property owners, are
necessary to service the debt on the Certificates of
Participation issued to raise capital for District improvements
and are not recommended for modification.
In its review and approval of these actions, the City council
requested that staff evaluate the equity of the formula for
determining the Maintenance Fee. This report relates staff 1 s
efforts to work with the constituent groups in the District and
the Third street Development Corporation (TSDC) to evaluate the
Fee level and consider opportunities for lowering the Fee and
assuring that the Fee does not present a barrier to the economic
health of businesses on the Mall. It was also a goal of these
parties to ensure that any change in the Fee did not create a
greater burden on the General Fund for the support of Mall
operations.
TO pursue this evaluation, the TSDC organized a representative
group of District property owners, merchants, professional office
tenants and the Chamber of Commerce to form a Joint conuni ttee.
staff met on numerous occasions with the Committee to review
revenues and expenses generated in the District to determine a
fair and equitable level for the Maintenance Fee. The result was
a new methodology which includes attributing all revenues
generated in the District, such as from the leases in the parking
structures, parking permits, parking meters, Mall common area
leases and parking structure retail spaces, to the District I s
- 2 -
/
.
.
credit. The methodology also attributes all unique District
costs as the District's responsibility I such as the budget for
the TSDC and all operation, maintenance and extra security costs
(parking structure guards). The costs of standard city services
such as routine pOlice, fire and street maintenance are not
included, nor are standard citywide revenues such as sales tax
and parking violation fines. It was also agreed that the fair
share contribution of certain businesses located in the District
which do not hold business licenses (and therefore don't pay the
Fee) , such as social service agencies, should be the
responsibility of the City I not the balance of the District
businesses. These non-paying businesses were found to represent
approximately 17% of the District, both in terms of square
footage and estimated unrealized revenue. The purpose of the
methodology is to establish the basis for a self-sufficient
District, where the General Fund or citywide contribution to the
District would be diminished over time. This methodology was
found to be acceptable to both staff and the Joint Committee as
fair and administratively manageable.
city Subsidy To District
The use of this cost accounting methodology made it clear that
the Maintenance Fee as currently constituted does not come close
to actually covering costs, as it should if the District is to
meet its goal of self-sufficiency. The City is currently
subsidizing the District's operating deficit from the General
Fund by approximately $436,000 annually.
- 3 -
.
.
As demonstrated by the fallowing table the projected FY 1987-88
expenses for the District are estimated to be $1,649,660.
Revenues from existing permits, leases, common area/parking
structure retail spaces are expected to total only $489,437.
Consequently,
the
Oistrict's
operating
deficit
prior to
collecting the Maintenance Fee is projected to be $1,160,223.
with the current five times business license tax Maintenance Fee,
the
remaining
operating
deficit,
or
city
subsidy,
is
approximately $436,158.
If the Maintenance Fee is reduced as
requested to three times business license tax, with a $0.10 per
square foot or $15,000 maximum levy, the remaining operating
deficit, or City subsidy, is approximately $772,600.
Third street Mall Maintenance District
Projected operating Schedule FY 1987-88
Expenses Parking Structure O&M $ 760,140
Mall O&M 234,508
Security 284,508
TSDC Budget 330,715
structure 6 Retail Amortization 39,400
$ 1,649,660
Revenue Permits $ 288,700
Leases 80,065
Outdoor dining 8,900
Structure 5 Retail (1/87 - 6/87 ) 37,257
Structure 6 Retail 74,515
$ 489,437
Balance:
Deficit without Maintenance
Fee or New Revenue Source
$ ,1,160,223
As demonstrated above, any reduction of the Maintenance Fee
without a new source af revenue, or decrease in expenses, would
increase the city's already considerable subsidy.
- 4 -
.
.
Alternative Expense Reductions
The only identified expense not fixed by a binding agreement is
the maintenance of the six parking structures. The City's
General Services Department conducted an informal solicitation of
private firms to replace the existing City parking structure
maintenance staff . without considering contract administration
costs, the cost savings estimated from franchising this work to
the private sector was less than 3%. The Mall improvement
program's construction activity over the next two years further
complicates awarding a maintenance contract to a private sector
firm due to fluctuating need for maintenance service. Therefore,
consideration of private contracting does not appear warranted at
this time, especially in light of the construction period
upcoming in the District. However, staff will continue to work
with the TSDC to ensure that the quantity and scope of
maintenance service is appropriate.
Alternative Revenue Sources
Many sources of revenue were explored by the Joint Committee and
City staff and included additional leasing opportunities,
advertising revenue, levy of additional taxes or fees,
Redevelopment funds, state and federal grants, gifts and
endowments, surcharges, recurring event, parking structure
operators and parking meters. Leasing opportunities exist, or
can be created for limited retail uses within ground floor spaces
of parking structures and common areas of the Mall.
Approximately 15,000 sq. ft. is either built, or soon to be under
construction, and is already included in the District's revenue
- 5 -
.
.
projection. Addition of substantive new space is limited by
legal covenants and market demand. Advertising revenue potential
from kiosks, bus and park benches and billboards would generate
very limited income while creating conflicting design quandaries.
Consideration of an additional tax levy or fee imposition is
impractical since it either merely compounds the burden from
which the District members are seeking relief or results in the
case of certain special taxes which could cause the Ci ty to
exceed its revenue limitation established under Proposition IV,
more commonly known as the Gann Initiative. Use of Redevelopment
funds were considered, however, state law prohibits use of such
funds in non-designated Redevelopment Project Areas except for
certain restricted social or public capital purposes.
wi th the exception of the federal Community Development Block
Grant program, most state and federal grants and programs are
designed to assist one-time only capital investment in specially
defined distressed areas. Even special demonstration programs
from the U.S. Department of Housing and Urban Development, U.S.
Economic Development Administration, U.S. Small Business
Administration and state of California Department of Commerce are
specifically structured not to fund ordinary operation and
maintenance expenses. The same general principle prevails for
donors of gifts: contributions are generally earmarked for
specific capital projects or items. The limited occasion of
endowments for ordinary operation and maintenance expenses
generally occurs for social service or cultural organizations.
Surcharges or permit fees for recurring events within the
- 6 -
.
.
District were considered for special activities such as film
company use of the Mall, performances by entertainment groups,
sidewalk sales by merchants, craft fairs by home cottage
businesses etc. However, while these events reflect the
District's promotional efforts, they cannot be construed as
generating more than nominal fees. The remaining potential
revenue sources of operators and meters recogni ze the parking
structures as the only viable District asset which could generate
sufficient funds on an equitable basis.
Parking Operators versus Meters
Currently, 1,434 of 2,740 parking spaces in the six parking
structures within the District are unencumbered by leases or
permits and are available for meters. An additional 300 parking
spaces have been proposed for Parking structure #5 and should be
under construction in the fall and available for use beginning in
January of 1988. The Mall specific Plan discussed the need to
al ter the provision of the current unattended, three-hour free
parking and suggested that operators be seriously considered to
better control the facility and offer a source of revenue for
District purposes.
The staff explored the concept of an operator parking system and
found a number of significant problems that would likely outweigh
any potential benefit accruing to the District. The economic
return for these particular type of structures was found to be
minimal. According to the National Parking Association, most
parking facilities having operator management consists of 350 or
- 7 -
.
.
more spaces (three of the City's structures have less than 255
spaces available). Fewer spaces diminish the economic return to
the operator. In addition, free one-to-two hour parking, without
validation, is customarily not feasible in a revenue-producing
facility. An average hourly rate of $0.50 per space is generally
necessary to cover overhead for operator management and
maintenance expense. Val ida tion was deemed an extraordinary
burden on the predominately small merchants and not viewed
favorably as an offset to free parking. An analysis of operator
parking was conducted with a free two-hour provision for these
six structures. The projection actually results in operator
expenses exceeding revenue by $100,000 and enlarging the
District f s annual operating deficit. Operator parking without
free parking vlould result in approximately $560,000 of net new
revenue to the District, exclusive of substantial operator
equipment amortization.
The physical configuration of the six parking structures is
inadequate to properly facilitate the modifications for the
required parking equipment and traffic cirCUlation. Vehicle
entry is hampered by insufficient storage depth because of the
placement of the gated coupon dispensers. Automobiles could
queue onto the sidewalk area and street, impeding traffic at peak
times. Exiting would be confined to one exit lane for the public
and a separate exit for monthly permit parkers. This cannot be
accomplished without substantial capital improvements and may
still result in less than satisfactory traffic circulation and
safety.
- 8 -
.
.
Parking Meters represent an effective and efficient revenue
source which can be implemented with minimal disruption. The
installation and use of parking meters is projected to result in
substantial new revenues to the district. Assuming installation
by october I, 1987 of 1,434 parking meters and 300 additional
meters by January I, 1988, the meters, at a rate of $0.25 per
hour J are projected to generate approximately $490,200 in FY
1987-88 and $693,600 in FY 1.988-89 ( the first stabilized year
for meter revenue) before amortizing the $736,950 capital cost.
The suggested hourly rate will be the lowest parking meter rates
in the downtown area (street meters are $. 35/hour) and
substantially below the $0.50 per half-hour rates commonly found
in private downtown Santa Monica parking lots. Time limits of
the parking meters would be stratified to range from 1. hour
maximum period on the lower floors to ten hour parking on the top
floors. specifically, the Joint Committee has recommended the
following allocation of meters, to be operational 7 days per week
from 8:00 a.m. to 6:00 p.m.
- 9 -
e
.
ALLOCATION OF METERS
o
One hour parking
10%
These meters would be on
levels and become the means of
easy access for the short-term
is currently forced to use
level.
the street
preserving
parker who
the upper
o
Four hour parking
50%
These meters would be in the lower levels
and provide longer-term convenient
parking for shoppers, restaurant patrons,
and day-time movie goers, and so forth.
o
Ten hour parking
40%
These meters would be on the upper levels and provide the
opportunity for all day parkers who do not need or may not have
permanent parking permits.
This should relieve the more
convenient spaces on the lower level from being taken by early
arriving employees by offering an incentive to these particular
users to have unrestricted long-term parking without the need to
move the vehicle several times in one day to avoid the mandatory
short-term time limit. For added convenience, the one and four
hour meters will accept nickels, dimes and quarters. The 10-hour
meters will accept dimes and quarters.
consistent with the general reaction to on-street meters,
proponents of meters within parking structures assert that the
meters encourage a desired turnover of patrons and clients and
moves long-term parkers, such as employees, to more appropriate
spaces further from the core of the commercial building area
{i. e. upper floors}. Several other jurisdictions inclUding the
- 10 -
.
.
Cities of San Francisco, Monterey and White Plains, New York
successfully utilize meters in parking structures. The city of
San Francisco utilizes meters in all parking structures of less
than 350 spaces. These structures are typically found in
neighborhood commercial districts which experience repeated use
by the same patrons. The city of Monterey f s metered parking
structures are successfully utilized in tourist areas and
accommodate visitors not usually acclimated or prepared to
encounter meters. White Plains, New York probably represents the
most analogous situation to Santa Monica. Having several
existing parking structures located in the White Plains Central
Business District, extensive consideration was given to
converting their structures to an operator system. However 1
inadequate structure configuration existed to accommodate the
necessary adaptation to an operator system. Instead, the White
Plains structures all utilize parking meters. Favorable public
reaction to parking meters in White Plains is attributed to clear
signage, and fair and consistent enforcement.
Each jurisdiction is unique and results from meter use cannot
necessarily be duplicated elsewhere, however, it is important to
note that each of the four sample cities serviced a different
client group and still experience success with meters within
parking structures. Meters are rela ti vely easy to install and
require few additional modifications to the parking structures
other than signage. The projected operating revenues assume that
meters will be installed in 1,434 parking spaces by October 1,
1987, and that an additional 300 parking meters will be
- 11 -
.
.
installed by January, 1988.
projected gross revenue to be
derived from the meters for Fiscal Year 1987-88, assuming
installations in October 1987, and January 1988, is estimated at
$490,200. This assumes a meter rate of $0.25 per hour and that
each meter generates about $400 annually.
The concept of installing parking meters with a concurrent
reduction in the Maintenance Fee as outlined in this report has
received the support of the Third street Development corporation
and the Joint commi ttee it formed,
the Mall Merchants
Association, the Property Owners Association, and the Chamber of
Commerce. In addition, a meeting was held on April 22, 1987, in
the Mall District where all interested parties were advised of
the Joint committee's recommendation.
Over 700 businesses,
tenants and property owners received leaflets advertising the
meeting which occurred at Step-up on Second Street's facility.
Approximately 50 people attended the meeting, almost all of whom
expressed support for the concept of meters.
Reduction of Maintenance Fee
The new source of revenue represented by parking meters creates
the opportunity to lower the Maintenance Fee without increasing
the City subsidy to the District.
In fact, the new revenues
permit a reduction in both the city's subsidy to District
operations and the Fee.
The recommended modification to the
Maintenance Fee is as follows:
EXISTING FEE
PROPOSED FEE
o
Maximum 5x Business License
Tax not to exceed $15,000
o
Maximum 3x Business License
Tax or $15,000 or $.IO/sq.
- 12 -
.
.
(or the adjusted amount in-
creased by the CPI).
ft./mo., adjusted annually
by the cpr, whichever is
less,
On-site parking credit
o
The purpose of the square foot limitation is to resolve a
significant problem occurring with office leasing.
Some office
tenants must pay significant fees due to the city I s business
license tax rate for professionals, but often occupy very small
square footage areas.
The resul t is a "penal tyll for these
tenants for locating in the District.
For a tenant in this
category occupying 1,000 square feet, the resultant additional
"rent" per square foot (the common way for office tenants to view
space) is $1.25 per month ($15 per year), which is a significant
additional cost, and places the District at a competitive
disadvantage in leasing space in a tight leasing market. Thus
the $.10 per square foot per month cap would provide assurance to
potential tenants that their effective rent for office space
would not exceed this amount.
This square foot cap would be effective on a request basis only,
with applicants having the burden to demonstrate to the City that
they qualify for a Fee reduction. This is because the city does
not keep records on lease spaces with buildings (and they change
frequently as well). Applicants requesting a reduction will be
required to submit a copy of their lease and other documentation
as to the amount of gross square feet they are leasing. The
Department of community and Economic Development, in conjunction
with the Finance Department, will work with tenants and building
owners on an individual basis to determine eligibility and
appropriate reductions in Fees.
It is anticipated that
- 13 -
.
.
approximately 30 requests for reduction will be submitted for the
City's consideration.
One other discrepancy of the Maintenance Fee will also be
remedied. Unlike the assessment charges, the existing Fee does
not provide for a credit for businesses that generally provide
parking on-site, including private validation parking. It is
proposed that the revised Maintenance Fee provide a credit
similar to that of the assessment district when the following
conditions are met: parking is within a 300 foot radius; parking
is provided free to the public: parking is available on a
non-preferential basis to all users: and, the fee-payer seeking
the credit controls the use of the entire parking facility (only
one fee-payer would be able to claim a credit for a gi ven
parking facility, not multiple tenants of a building). If all of
these conditions exist, the business will be eligible for a
percentage credit determined by dividing the amount of parking
provided by the amount required by the zoning code.
The proposed reduction in the fee and credits will result in a
loss of approximately $336,465 from this revenue source in FY
1987-88 compared with the estimated revenue that would have been
generated in FY 1987-88 using the current fee mUltiplier of 5
times the business license tax. This loss in revenue is less
than the projected new revenue which will be generated from the
meters. The meters are projected to generate about $490J200 in
FY 1987-88 and $693,600 in FY 1988-89 (the first stabilized year
for meter revenue) and annually thereafter. Thus the gap of
District revenues versus costs is made smaller. And because net
- 14 -
.
.
revenues to the city are increased, the city subsidy is reduced
and the District moves closer to self-sufficiency in operations.
Because the proposed fee does not achieve the goal of
self-sufficiency, the "shortfall" will be recorded and
accumulated over subsequent years. As revenues from the District
increase through more and healthier businesses paying the
Maintenance Fee, the accumulated "debt" will be amortized. After
that occurs, the Fee should be reduced below the 3x rate to the
level necessary to cover costs. Eventually, if non-fee revenues
from the District increase substantially the Fee may be
eliminated entirely. Because it is difficult to predict the
point at which revenues will exceed costs to permit lowering the
Maintenance Fee below the proposed rate of 3x the business
license tax, staff will monitor the situation on an annual basis
and return to Council with a recommendation for a reduction in
the Maintenance Fee when appropriate.
T~ming of Meters and Fee Reduction
The Maintenance Fee for each fiscal year is collected through
quarterly installments. It is recommended that the payment be
lowered from the 5x rate to the 3x rate commencing the second
quarter of Fiscal Year 1987-88, which should coincide with the
installation of the meters. However, for ease of collection, it
is recommended that these different quarterly rates be averaged
to enable the payment of four equal installments during the year.
This averages out to a 3.5x rate for the upcoming fiscal year,
dropping to 3x in subsequent years. In this manner the Fee can
be determined in advance and revenues estimated for the fiscal
- 15 -
.
.
year. Reducing the Fee rate during the first quarter of the
fiscal year, before the meters are installed, would result in a
reduction in revenues to the city without the offsetting increase
from the parking meters. Therefore, the goal is to have the
reduction in the Fee occur at approximately the same time as the
installation of the meters. If there is a significant delay in
the schedule to install the meters, a concomitant change in the
schedule to reduce the Maintenance Fee will be recommended.
Coastal Commission Approval
The installation of parking meters will require an administrative
approval from the Coastal Commission, which Commission staff has
stated should be routine and without difficulty. Upon approval
of the reconunendation to install meters, staff will submit an
application to obtain this approval.
CEQA Compliance
This project has been determined to be categorically exempt under
the California Environmental Quality Act (CEQA) under Class 1 for
installation of parking meters in an existing facility.
Installation of parking meters in the existing public parking
structures will not alter the number or location of existing
parking resources in the downtown area. While parking in the
structures is currently free, the low charges and convenience
associated with metered parking are unlikely to affect either
demand for or location of parking. The EIR on the Third Street
Mall Specific Plan (SCH No. 86043001) examined the effects of
attendant-operated paid parking in the structures and found it
- 16 -
.
.
would not have any significant effects. A parking meter system
is expected to have less extensive effects than
attendant-operated parking.
BUDGET/FISCAL IMPACT
The capital cost of the purchase and installation of all the
necessary parking meters is $736,950. Projected parking meter
revenue to the city in FY 1987-88 will be $490,200 and $693,600
in FY 1988-89 assuming that 1,434 meters are installed by October
1, 1987 and an additional 300 meters are installed by January 1,
1988. Projected Maintenance Fee revenue will be $387,600 in FY
19B7-88 and $344,200 in FY 1988-89 assuming the Maintenance Fee
is reduced as outlined in this report. Thus, the net benefit to
the City as a result of these actions, assuming a straight
five-year amortization of the $736,950 capital costs for meter
purchase and installation, will be $22,550 in FY 1987-88 and
$157,000 in FY 1988-89 when meter revenue is fully realized. As
revenues from the Fee and other sources increase, this benefit
will increase until the city f s "subsidy" level for the District
operation and maintenance costs stabilizes at 17% of total costs.
RECOMMENDATION
It is respectfully recommended that the City council:
1. Approve in concept the purchase and installation of parking
meters in the downtown parking structures and a concomitant
reduction of the Mall Maintenance Fee;
- 17 -
.
.
2. Direct the city Attorney to prepare an ordinance to place the
downtown parking structures wi thin a Parking Meter District to
permit meters to be installed no later than October 1, 1987:
3. Direct the City Attorney to prepare an Ordinance or
Resolution as appropriate to reduce the Mall Maintenance Fee
levied against all holders of business licenses in the Third
street Mall and Downtown Maintenance District as outlined in this
report to become effective by October 1, 1987.
Prepared by: Peg Curran, Director
Community and Economic Development Department
Jeffrey P. Mathieu1 Manager
Economic Development Oivision
Community and Economic Development Department
ccadfee4
- 18 -