Reducing the Price of Parking Expense

Wednesday, June 13, 2012

In a tight economy, U.S. colleges and universities are getting creative when it comes to cost-saving measures. They’re holding “chill-out” programs, which encourage students to turn down their thermostats to save on heating. They’re reducing hot-water and detergent costs by eliminating cafeteria trays, and reducing paper use by putting admissions brochures and course catalogs online. They’re also holding “virtual” athletic events, a move that saves money on travel expenses.

 One effective, yet often overlooked, cost-saving measure involves a thorough evaluation of parking operating expenses and implementing measures to reduce these expenses. A recent survey sheds light on what it costs to operate a typical parking facility. Data was taken from operating statements from 140 different parking structures located in North America, including profit and loss statements filed between 2003 and 2009. Operating costs were converted to a per-space basis by dividing the annual cost by the number of parking spaces to provide a per unit cost comparison between structures. 

Detailed here is the expense line items typically associated with parking, as well as what university and college administrators can do to decrease them.

Labor costs

One of most common cost leaders is labor. Staff costs are unique to each parking structure and vary based on a number of factors, including geographic location, the level of service provided, and if the facility utilizes parking access and revenue control systems (PARCS).

For many parking owners, technology can provide an effective cost-saving solution. Pay-on-foot technology, for example, gives parkers the ability to pay at stations prior to returning to their vehicles. This technology can help reduce, or even eliminate, the need for revenue control staff at exits. Some parking structures have even gone cash-free in recent years, further reducing the need for staff. These structures have parkers to pay by credit card either at pay-on-foot kiosks or in exit lanes.

Security can also account for significant labor expenses. Security costs are typically associated with an outside security firm providing a presence within a parking facility. Security is more likely to be provided in areas that demand a higher level of service, utilize automated cashiering, or are located in areas subject to crime.

While security is often a high-cost item, it’s not necessarily advisable to cut back on this expense. Parking owners must evaluate their own unique security needs before deciding whether to cut back and, if so, by how much. Reducing security can lead to a number of unanticipated consequences, including higher legal costs due to increased liability and lost business if patrons perceive that the structure isn’t safe.                      

Maintenance costs

Maintenance is another high-cost, yet essential expense. Improperly maintained structures often suffer from equipment failure and concrete degradation, and need to be replaced or repaired much sooner than they otherwise wood. In the case of cutting back on maintenance, it’s easy to be penny wise but pound foolish.

Maintenance costs typically cover routine cleaning and upkeep, structural repairs, and PARCS equipment care. Routine or daily maintenance includes sweeping and washing surfaces, light painting, replacing light bulbs, cleaning offices and public areas, repainting line stripes, and maintaining landscaping and plants. Some parking structures hire a professional cleaning firm to provide routine maintenance; most provide and supervise the staff directly. 

Equipment maintenance is not always reported on profit and loss statements. With new PARCS installations there is typically a one-year warranty or extended service contract. Depending on the age and complexities of the PARC system, the owner may or may not opt for the service contract. Other equipment that requires regular maintenance includes elevators, escalators, and moving walkways.

Structural maintenance is another item that is not always reported on profit and loss statements. These costs may be paid directly by the owner or coded as capital costs due to the high expense. It’s recommended that owners establish a “sinking fund” of $30 to $75 per space annually to cover structural maintenance.

Despite all this, there are ways to cut maintenance costs. For example, parking owners can upgrade existing lighting fixtures to high efficient florescent, induction, or LED lighting fixtures, which can provide improved visibility at a significantly lower operating cost. The savings are potentially substantial enough that it may be possible to have a new lighting system installed with little or no upfront costs in exchange for a payment made from the monthly utility savings.  Lighting typically represents the largest utility cost in a parking structure, especially for below-grade or enclosed structures.

Parking administrators can also lower costs for utilities such as phone services, internet access, and water and sewer services. Electricity costs are influenced by the geographic area, as well as the type of lighting system. For example, in 2009 the average commercial retail price of electricity per kilowatt-hour ranged from 6.26 to 21.54 cents per kilowatt-hour. The highest costs were found in the Northeast and West Coast states.

Accounting and banking costs

Accounting and banking costs include any fees associated with banking, accounting, auditing, and credit card fees. Over the years, a parking structure’s banking fees have increased as credit card usage has increased. When credit cards are used, there is a charge from a credit card clearing house, as well as a direct charge from the credit card company.

These credit card processing fees vary widely and should be audited to ensure the lowest fees are charged in this highly competitive market. This is especially true since the Durbin Amendment went into effect in October of 2011. The new rules reduce the fees charged to process debit cards, but don’t require the savings to be passed on directly to the merchant. Because the fees are typically established by an agreement, unless that agreement has been updated, the merchant is likely to be on the higher fee schedule and not benefiting from the lower costs.

An effective cost-cutting approach

Across the country, colleges and universities are being imaginative when it comes to cost-cutting methods. Reducing the price of parking expense items may not be as attractive as arranging competitions to see which dorm can reduce its heating costs the most, but such an approach has proven to be just as effective.

Jon Martens is a parking consultant with Walker Parking Consultants, the world’s leading parking design and consulting firm. He can be reached at jon.martens@walkerparking.com.

 

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