SR-417-005 (13)
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CjED:EDD:PC:JPM:pW
Council Meeting: May 12, 1987
Santa Monica, California
TO:
Mayor and city council
FR011 :
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 recommends 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 Mall. It is also recommended that
the City council appropriate 736,950 from General Fund reserves
for the purchase and installation of parking meters and authorize
the city Manager to take the necessary steps to have them
procured and installed.
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 Specific Plan District. The purpose of the fee
is to pay for a portion of the costs of operating, maintaining
and repairing the public parking structures and common areas in
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MAY 12 1987
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the District. The ordinance established the 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 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 Q\.'iners, 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 I 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 lovlering the Fee and
assuring 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 Hall
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 Committee.
staff met on numerous occasions \'lith the Commlttee to review
revenues and expenses generated ~n the District to determine a
fair and egui table level for the Fee. The result vlas a ne\-J
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methodology which includes attributing all revenues generated in
the District, such as from the leases in the parking structures,
parking permits, parking meters, Hall common area leases and
parking structure retail spaces, to the District's credit. The
methodology also attributes all unique District costs as the
District's responsibility, 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, not the balance of the District businesses. These
non-paying businesses were found to represent 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.
However, using this methodology it was also clear that the Fee as
currently constituted does not come close to actually covering
costs, as ~t should if the Distrlct is to meet its goal of
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self-sufficiency.
Thus, lowering the Fee was not justified
without finding a substantial new source of revenue.
One potential source of revenue was the operation of the parking
structures. The Mall Specific Plan discussed the need to alter
the operation of the current unattended, three-hour-free parking
situation and suggested that operators be installed.
HO\.,rever,
upon investigation, it was found that operators were not likely
to produce significant revenue.
This is due in part to the
design of the structures with multiple exits which does not
facilitate efficient control of vehicles moving in and out. The
alternative of parking meters was explored and determined to be
significantly more cost-effective. Several other jurisdictions,
including the city of Manhattan Beach, have successfully operated
meter systems within parking structures and indicate revenue and
expense ratios similar to on-street parking spaces.
Consistent
t.ti th 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.
opponents
generally claim that the need for coins to operate meters would
be a further inconven1ence for potential patrons or clients to
overcome in the downtown area.
Currently, 1,434 of 2,740 parking spaces in the six parking
structures \vithin the District are unencumbered by leases or
permits and are available for meters. An additional 300 parking
spaces have been proposed and should be under construction and
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available for meters shortly.
11eters are relatively 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
1nstalled by January, 1988.
Projected gross revenue for Fiscal
Year 1987-88 to be derived from the meters, assuming installation
on October I, 1987, is estimated at $490,200.
This assumes a
meter rate of $0.25 per hour and that each meter generates about
$400 annually.
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
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Maximum 5x Business License
Tax or $15,000, adjusted
annually by the CPI, which-
ever is less.
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Maximum 3x Business License
Tax or $15,000 or $.lo/sq.
ft./mo., adjusted annually
by the CPI, whichever is
less,
On-site parking credit
o
The purpose of the square foot limitation is to resolve a
signiflcant problem occuring \nth office leasing.
Some office
tenants must pay significant fees due to the City's business
license tax rate for professionals, but often occupy very small
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square footage areas. The result is a npenal tyn for these
tenants for locating in the District. For a tenant in this
category occupying 1,000 square feet, the resul tant additional
"rent" per square foot (the common ",>lay 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
approximately 30 requests for reduction will be submitted for the
city's consideration.
One other discrepancy of the Fee will also be remedied. Unlike
the assessment charges, the ex~sting Fee does not provide for a
credit for businesses that provide parking on-site. It is
proposed that the new Fee provide a credit similar to that of the
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assessment district when the following conditions are met:
parking is within a 300 foot radius: parking is provided free to
the public: parking by employees is prohibited: and, the
fee-payer seeking the credit owns, controls and is the sole user
of the parking facility. 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 $320,250 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 1n revenue is less
than the projected new revenue which will be generated from the
meters. The meters are projected to generate about $490,200 in
FY 1987-88 and $693,600 in FY 1988-89 (the first stabilized year
for meter revenue) and annually thereafter. Thus, for the
purposes of the new accounting methodology, the gap of District
revenues versus costs is made smaller. And because net 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" ,,/ill be recorded and accumulated over subsequent
years. As revenues from the District increase through more and
healthier businesses paying the Fee, the addition of retail
spaces, leases for outdoor dining, Mall vending, kiosks and other
sources, the accumulated "debt" ,'/ill be amort~zed. After that
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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 Fee below the
proposed rate of 3x the business license tax, staff will monitor
the situation on an annual basis and return to Council \'lith a
recommendation for a reduction in the Fee when appropriate.
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 ~hird Street Development corporation
and the Joint Committee 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 Jlall District where all interested parties were advised of
the Joint Committee's recommendation. All businesses and property
owners were invited to attend the meeting, and generally
expressed support for the concept.
Timing of Meters and Fee Reduction
'The Haintenance 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.
Ihis averages out to a 3.5x rate for the upcoming fiscal year,
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dropping to 3x in subsequent years. In this manner the Fee can
be determined in advance and revenues estimated for the fiscal
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 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 recommendation 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 dmmtmm area. ~vhile parking in the
structures is currently free, the lot-' charges and convenience
associated with metered parking are unlikely to affect either
demand for or location of parking. The EIR on the Third street
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Hall Specific Plan (SeH No. 86043001) examined the effects of
attendant-operated paid parking ln the structures and found it
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. Proj ected 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
1987-88 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, vIill 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
yrill increase until the city 1 s "subsidyll level for the District
operation and maintenance costs stabilizes at 17% of total costs.
An appropriation in the amount of $736,950, from General Fund
reserves, is recommended at account No. 01-770-415-000-904.
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RECOMMENDATION
It is respectfully recommended that the city Council:
1. Approve the purchase and 2nsta11ation of parking meters in
the downtown parking structures and a concomitant reduction of
the Mall Maintenance Fee, and authorize the City Manager to take
the necessary steps to procure and install the meters~
2. Appropriate $736,950 from General Fund reserves at account
Number 01-770-415-000-904;
3. Direct the City Attorney to prepare an ordinance to place the
downtown parking structures within a Parking Meter District;
4. Direct the city Attorney to prepare an Ordinance or
Resolution as appropriate to reduce the Hall Haintenance Fee
levied against all holders of business licenses in the 'Ihird
street Mall and Downtown Maintenance District as outlined in this
report.
Prepared by: Peggy Curran, Director
Community and Economic Development Department
Jeffrey P. Mathieu, Hanager
Economic Development Division
Community and Economic Development Department
ccadfeel
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