THIS PRINT COVERS CALENDAR ITEM NO: 13
MUNICIPAL TRANSPORTATION AGENCY
City and County of San Francisco
DIVISION: Parking Authority
BRIEF DESCRIPTION:
Approving the City of San Francisco Japan Center Garage Corporation’s Fiscal Year 2007-2008 budget, marketing plan and capital improvement requests and authorizing the Executive Director/CEO, or his designee, to forward the budget, marketing plan and capital improvement requests to the Office of the Controller for final approval.
SUMMARY:
· On July 1, 2002, the City and County of San Francisco leased the Japan Center Garages to the City of San Francisco Japan Center Garage Corporation (“Corporation”) for the oversight of the Main Japan Center Garage and the Fillmore Street Annex Garage (collectively “Garage”).
· Pursuant to the lease, the Corporation is required to submit an annual operating budget, a marketing plan and any capital improvement requests for review and approval by the Department of Parking and Traffic, the Municipal Transportation Agency Board of Directors and the Office of the Controller.
· During the first five years of the lease term, the Corporation was also required to submit an annual budget for the Japantown Task Force’s expenses. The contractual authorization to fund the Japantown Task Force concludes on June 30, 2007.
· The Corporation is requesting to continue funding the Japantown Task Force for the next fiscal year.
· The Japan Center Garage Corporation remits monthly payments to the City.
· Staff has reviewed the attached budgets, marketing plan and capital improvement requests and recommends approval and authorization to forward the Japan Center Garage Corporation budget, the marketing plan and capital improvement requests to the Office of the Controller for final approval.
· The City Attorney’s Office has reviewed this item.
ENCLOSURES:
1. MTAB Resolution
2. Corporation’s FY 2007-2008 budget, marketing plan and capital improvement requests for the Japan Center Garages
APPROVALS: DATE
DEPUTY OF DIVISION
PREPARING ITEM __Ronald Szeto______
FINANCE ______
EXECUTIVE DIRECTOR/CEO ______
SECRETARY ______
ADOPTED RESOLUTION
SHOULD BE RETURNED TO: Ronald Szeto 701-4746______
ASSIGNED MTAB CALENDAR DATE: ______
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EXPLANATION:
Background:
On April 16, 2002, the Parking and Traffic Commission approved Resolution 122-02-PTC, urging the Board of Supervisors to approve the lease between the City of San Francisco Japan Center Garage Corporation (“Corporation”) and the City and County of San Francisco for the administration of the Japan Center Garages (“Garage”). On June 10, 2002, the Board of Supervisors adopted Resolution Number 0396-02, File Number 020634, approving the 15-year lease. The Corporation hires a management company to operate the Garage. The management company receives $3,000 per month in management fees and ten percent of annual net revenues in excess of target revenue. The target revenue (gross parking revenue less parking taxes) for each of the five contract years was established based on historical Garage performance. The target revenue for contact year ending 2004 was $2,600,000 and increases $50,000 for each subsequent contract year. This management agreement will sunset on June 30, 2008, at which time the Corporation will conduct a Bid/RFP prior to expiration.
Pursuant to the lease, the Corporation is required to submit an annual operating budget, a marketing plan and any capital improvement requests for review and approval by the Department of Parking and Traffic, the Municipal Transportation Agency Board and the Office of the Controller. For the first five years of the lease term, the Corporation was also required to submit the Japantown Task Force planned expenditure budget. The contractual authorization to fund the Japantown Task Force concludes on June 30, 2007. The Corporation is requesting to continue funding the Japantown Task Force for the next fiscal year.
Under the lease, the Department of Parking and Traffic (“DPT”) receives 75 percent of the Garage’s net income and the Corporation retains 25 percent of net income (up to a maximum of $2 million) in a capital improvement fund. Once the fund reaches $2 million, all of the Garage’s net income goes to DPT.
Fiscal Year 2006-2007
A comparison between the approved FY 2006-2007 budget and the anticipated FY 2006-007 performance in shown in the chart below.
FY 2006-2007 Performance:
July 2006-June 2007 Approved
Budget / July 2006 –
June 2007 Actual/ Anticipated / Difference
Between
Approved and
Anticipated
Revenue / $ 3,367,200 / $3,380,760 / $ 13,560
less Parking Taxes / $ 668,000 / $ 669,200 / $ 1,200
less Expenses / $1,666,500 / $1,565,500 / - $ 101,000
Net Income / $1,032,700 / $1,138,400 / $ 105,700
DPT Income
(75 percent of Net Income) / $ 774,525 / $ 853,800 / $ 79,275
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The Anticipated Revenue for FY 2006-2007 reflects an anticipated growth of $13,560 (or 1 percent) in revenues over the approved FY 2006-2007 budget. The increase was off-set by decline in movie theatre patronage. AMC sold the Kabuki Theatres to Sundance Cinemas in December 2006 and partial renovations has forced the closure of some auditoriums. Also, negative publicity on the sale of Japantown properties has led visitors to believe that San Francisco’s Japantown is no longer in existence.
On the expenses, the Corporation anticipates spending $101,000 less than budgeted (or 6.06 percent) under budget due to one journeyman employee retiring and adjusting staff to reflect decline in theatre patronage.
The Corporation anticipates generating $853,800, which is $79,275 (or 8.38 percent) greater than the income budgeted for DPT in FY 2006-2007 due to higher revenues and controlling expenses. In addition, the corporation enrolled with an insurance program that underwrites most City owned parking facilities resulting in a quantity discount.
Although revenues at the Garage continue to climb due to rate increases, the Corporation cautions that the Japantown community is still struggling with the impact of multiple economic hardships in the past six years.
The management company receives in $3,000 per month in management fees and no incentives in FY 2006-2007 is expected since the management company did not exceed the target net revenue of $2,750,000 for the contract year.
Garage Revenues for Fiscal Year 2007-2008
A comparison of the FY 2006-2007 approved budget and the FY 2007-2008 proposed budget is shown in the chart below.
FY 2007-2008 Proposed Budget
July 2006 -June 2007
Approved Budget / July 2007-
June 2008
Proposed Budget / Difference Between 2007 Approved and 2008 Proposed
Revenue / $3,367,200 / $ 3,622,100 / $ 254,900
less Parking Taxes / $ 668,000 / $ 719,000 / $ 51,000
less Expenses / $1,666,500 / $ 1,674,135 / $ 7,635
Net Income / $1,032,700 / $ 1,228,965 / $ 196,265
DPT Income
(75 percent of Net Income) / $ 774,525 / $ 921,724 / $ 147,199
The Corporation projects generating $254,900 (or 7.04 percent) more revenue than FY 2006-2007 due to increases in transient and monthly parking rates. In addition, the Corporation projects that the marketing plan and planned openings for Sundance Kabuki Cinemas and Yoshi’s nightclub should have a positive influence on overall revenues.
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Because savings earned from enrolling onto the City’s garage property insurance policy and the Corporation is continuing to keep most expenses at prior year levels, the Corporation proposes a slight increase in expenditures by $7,635 (or .46 percent) above the FY 2006-2007 budget.
Consequently, the Corporation projects generating $147,199 (or 15.97 percent) more income to DPT than the amount budgeted for FY 2006-2007.
The management company receives $3,000 per month in management fees and ten percent of net revenues in excess of $2.8 million in FY 2007-2008. Although the Corporation projects that the management company will achieve the net target revenue by $103,100, the operator must satisfy conditions described in the management agreement. The Corporation shall make this determination at the end of the FY 2007 – 2008. The maximum incentive the operator can receive is $50,000. The current management contract sunsets in June 2008 which, the Corporation shall conduct a new Bid/RFP prior to expiration.
Garage Marketing Plan:
The Corporation shall continue its marketing efforts with the current marketing company to further promote the garage by adding unique marketing approaches. There are plans to expand the website into other languages with the assistance of the SF Convention and Visitors Bureau and promote public transportation on BART and Muni through the garage’s website.
The marketing strategy for FY 2007-2008 also includes the Corporation allocating some marketing funds towards a monthly children’s art or essay contest that will be conducted through the Japantown Task Force, Inc. and community organizations. Some marketing funds will also be used towards promoting a new festival to attract younger audiences.
Although the special funding to the Japantown Task Force, Inc. has concluded with most objectives having been met, recent challenges in the community require continued funding to the Japantown Task Force, Inc., which are:
· Geary Bus Rapid Transit
· Community Benefit District
· Better Neighborhood Plan
· Future development of the Japan Center malls and hotels
· Sundance Kabuki Theatre
· A proposed 40 story high rise on Cathedral Hill
· Japanese Pop Culture Center
· Sunset of Redevelopment Agency’s Project A-2 Area (January 2009)
All of which was not taken into consideration when the Japantown Community Plan was produced in 2001.
These new developments will require a great deal of orchestrating to preserve and promote the historical integrity of the community that can otherwise have an unfavorable effect on garage performance.
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Moreover, the Corporation will host the fifth annual car show, which the Corporation pioneered. The Corporation expects continued increase in attendance for the upcoming year. In FY 2006-2007, the car show drew over 7,000 visitors in one day to the Garage and the Japantown community.
Garage Capital Improvement Requests:
For FY 2007-2008, the Corporation requests authorization to expend funds from the capital improvement account for the following purposes:
1. Garage Expansion Feasibility Study $100,000
With the proposed plan for the Geary Corridor Bus Rapid Transit (BRT), the Corporation will explore the feasibility of garage expansion. There are currently two designs in the plans that would fill the Geary Boulevard underpass crossing underneath Fillmore Street.
The Corporation is proposing to perform a feasibility study to expand the Fillmore Street Annex Garage into the underpass in connection with the BRT construction. This expansion is essential as a result of current development of the Fillmore Street Jazz district and planned future development of Japantown. The expansion will also serve as a transit hub encouraging people to park and use public transportation or bike to congested areas of the City.
2. Upper Level Main Garage Recoat $130,000
The Corporation was approved to expend $218,545 in the FY 2005-2006 capital improvement budget to resurface the upper level of the main garage. The Corporation has expended $10,000 on specifications and consulting fees to date. A bidding process was conducted and the lowest responsive bid amount is $318,000. The re-striping of the garage level is included in the bid, however, the Corporation is also requesting to expend $8,000 for architectural stall marking plans. The total project cost is $336,000 and the Corporation is requesting approval of an additional $130,000 for FY 2007-2008 to complete the project.
3. Contingencies $23,000
Reflects 10% of all items above.
The City Attorney’s Office has reviewed this item.
Recommendation
Staff recommends that the MTA Board of Directors adopt the attached resolution, approving the City of San Francisco Japan Center Garage Corporation’s Fiscal Year 2007-2008 budget, marketing plan, capital improvement requests and authorizing the Executive Director/CEO or his designee to forward the budget, marketing plan, capital improvement requests to the Office of the Controller for final approval.
MUNICIPAL TRANSPORTATION AGENCY
BOARD OF DIRECTORS
CITY AND COUNTY OF SAN FRANCISCO
RESOLUTION No. ______
WHEREAS, The Japan Center Garage Corporation (the “Corporation”) operates the Japan Center Garages (“Garage”) on behalf of the City and County of San Francisco under a lease agreement with the City; and,
WHEREAS, Under the conditions of the lease, the Corporation is required to submit an annual operating budget, marketing plan and any capital improvement requests to the Department of Parking and Traffic, the Municipal Transportation Agency Board of Directors and the Office of the Controller for review and approval; and,
WHEREAS, Each year the Municipal Transportation Agency Board of Directors reviews the non-profit garage budget and any capital improvement requests and makes recommendations to the Office of the Controller; and,
WHEREAS, The Corporation has submitted the Fiscal Year 2007-2008 Garage budget, marketing plan and capital improvement requests to the Municipal Transportation Agency Board of Directors for review; and,
WHEREAS, The Municipal Transportation Agency Board of Directors has reviewed the budget, marketing plan and capital improvement requests of the Japan Center Garage Corporation for the operation of the Japan Center Garage, including the request that one hundred thousand dollars of garage revenues be allocated from the Corporation to the Japan Town Task Force to fund marketing, community outreach, neighborhood improvements, and cultural events and activities; and,
WHEREAS, The use of garage revenues to fund certain marketing, community outreach, neighborhood improvements, and cultural events and activities may reasonably be expected to increase garage revenues by increasing transient parking in the Garage, but such expenditures may be also be restricted by law; now, therefore, be it
RESOLVED, That the Municipal Transportation Agency Board of Directors approves the Japan Center Garage Corporation’s Fiscal Year 2007-2008 budget, marketing plan and capital improvement requests for the Japan Center Garages, subject to this Resolution; and, be it further
RESOLVED, That the Director of the Parking Authority, in consultation with the Executive Director/CEO of the Municipal Transportation Agency, the City Attorney and the Controller, shall review each proposed expenditure by the Japantown Task Force to ensure that proposed activities to be funded by garage revenues are appropriately related to the promotion of the garage and are lawful expenditures of public funds; and, be it further
RESOLVED, That the Municipal Transportation Agency Board of Directors authorizes the MTA’s Executive Director/CEO or his designee to forward the Japan Center Garage Corporation’s Fiscal Year 2007-2008 budget, marketing plan and capital improvement requests for the Japan Center Garages to the Office of the Controller for final approval.