I think it varied from year to year, but it was probably higher.
Can we get an idea of what it was at the time of the -- prior to the settlement with the FAA? We know it's 28 percent now, but what was it before.
Just to the time prior to the settlement with the FAA capping it at 28 percent.
I guess the question is, if we had -- and can USAir respond at all to how it compares to other cities or other airports and what the parking situation is there? I guess the end line of this 78 5/7/00 - FINANCE - BILLS 010258, 59, 60 questioning is, could the money that's being taken for parking at the Airport by the Parking Authority be used to fund debt service on construction projects related to the Airport, which seems to be the most likely use for that money, because the activity's generated as a result of Airport operations. And if it's taken from the Airport for its use and given to other uses, perhaps there's an explanation for that, but I don't seem to know what it would be.
Yeah, I'm sorry. Obviously, it's in our interest to have the administrative charge as low as possible, but we're not in a position to hold ourselves out as experts on what other airports take as the percentage.
I would like to formally request that, if the Airport could give us an idea as to what other parking arrangements there are in international airports that are a similar size to Philadelphia and what percentage, either the municipality, the state, the authority that runs it gets as it relates to Philadelphia? And perhaps we could be utilizing those dollars to 79 5/7/00 - FINANCE - BILLS 010258, 59, 60 be putting into construction projects at the Airport or overruns or things rather than borrowing additional money and putting it on the backs of the flyer. One other question, one other request. What is the percentage on this issue request and on the prior issue, the percentage of professional service fees as it relates to the bond issue, the percentage of the deal?
The lawyers, bond counsels, underwriters, the consultants, advisors, chief cook and bottle-washers, whoever we hire, what is the percentage of the deal, the percentage of those fees as it relates to the amount of money we're borrowing?
Well, the cost of issuance for the two transactions that we're proposing are estimated to be a total of $2.2 million. 80 5/7/00 - FINANCE - BILLS 010258, 59, 60
If we're looking at a total bond size of about $200 million, we're looking at a 2 percent.
Okay, okay. Does the federal government or FAA have any standards relative to the size of professional service fees as it relates to borrowings for airport purposes?
Well, the City generally has a standard whereby cost of issuance shall exceed no more than 2 percent of the total bond side.
That's the City's policy, but it's also the industry policy for the most part, unless you have a transaction that is very complex. This is not necessarily a complex 81 5/7/00 - FINANCE - BILLS 010258, 59, 60 transaction.
I'd be interested in knowing if there is an FAA policy on that and whether or not other airports -- how we relate to the cost of I guess general airport revenue bonds and other types of bonds as it relates to airports.
We'll check 'em. I'm not sure if there's an FAA policy with respect to that.
Okay, and there's other questions, but just one final question. Councilmember Nutter and myself recently wrote a letter to Mr. Isdell relative to the issue of concessions. And in your presentation, there was about 36,000 new square feet of concession space that will be available both in Terminal F and in Terminal 1. Is it the intent of the Airport to extend the existing concession contracts to those facilities or to bring that concession back to City Council for approval of a long-term deal -- more than one year obviously -- that this charter requires? 82 5/7/00 - FINANCE - BILLS 010258, 59, 60
Well, the intent actually is -- there was an RFP put out in early 1999, and the result of the RFP was only one -- there was on one respondent, which was the Marketplace Redwood Development, a firm that is already doing the existing five terminals. So we negotiated and (indiscernible) ultimately to their existing agreement to extend it into Terminal F and the new international terminal and --
And I believe that's already been finalized and certified. I'm not sure.
Madam Chair, as a member of this Council, I have a real serious concern about that. Number one, I don't think that any entity of the City should be extending any contracts beyond a year. It is not within the scope of their ability to do so relative to the charter. And I would suggest that that should 83 5/7/00 - FINANCE - BILLS 010258, 59, 60 have come back to here for approval by this Council and that this is still -- at some point in time, I don't care if it stays a City facility, but at this point in time, it is a City facility and I think that we as a Council have the responsibility to approve any contracts or extensions beyond a year. And I think the charter's clear about that. And the fact that happened, and happens in other instances, needs to stop come, and we need to have this stuff come back to Council at least for our approval and information purposes so we know what we're doing. I don't think that was an appropriate thing to do, to simply extend that unilaterally without the approval of this Council. And we will have discussions as to what we should do about that, but I think that that is extremely problematic. Thank you.
Thank you. And the charter is the charter, and certainly we try to do our part to work with you, but certainly the charter is our constitution and we do want it adhered to. 84 5/7/00 - FINANCE - BILLS 010258, 59, 60 Councilman Cohen?
Could we have a response to this question from the City Solicitor's office?
I absolutely want to respond first to the question of whether prior bond proceeds might be available. If you look at Section 2 of both Bill 258 and 259, it lists the purposes of the bonds proceeds with some specificity. I haven't reviewed the earlier unrelated bond issuances, but I would be surprised if any would be available from prior bond issuances.
Well, there may be prohibitions on its use but I want to know if the money's sitting there and how much is sitting there and in what accounts and for what purposes.
And by the way, I'll just add one addendum. I understand there are also leases for property off-site of the Airport, that there are also accounts that may be available that have money in it that from comes from property that's leased around the Airport but 85 5/7/00 - FINANCE - BILLS 010258, 59, 60 not on the Airport facility itself -- or not on the Airport proper but contiguous to the Airport, that we either have control of or own, that are leased, and what the revenues that comes from those leases go to and for what purpose they're used.
Okay. And if you want to talk about the charter, I'd be happy to hear it.
Well, on the charter issue, I'm not prepared to give an opinion of the Solicitor, which Ken would need to do. However, it's my general impression that a concession is not the type of contract that has ever required Council approval because it is not committing City funds; it's money coming into the City and not going out.
And we have -- I think the spirit of the charter is clear that they 86 5/7/00 - FINANCE - BILLS 010258, 59, 60 put it in there. I didn't write it. It was 1951, I wasn't born.
But they must have put it in there for a reason and anything over a year needs to be approved by this body, in my opinion, and maybe that's something that needs ultimately to be litigated, but I really do believe that not only in this particular instance, but in the last administration going on through this administration, there have been continuous efforts to get around the charter by doing option years, which I think is clearly against the spirit of the charter, and I know there's a solicitors's opinion that says that's okay. It doesn't mean it's right, it just means the Solicitor thinks it's okay. And nothing against Ken, Mr. Trujillo, I think he's a fine lawyer and a fine person. But at some point in time, this activity of trying to go around this body in an effort to give contracts away to people for terms longer than a year needs to be addressed because I think it's terribly unfair and I do believe personally that it is 87 5/7/00 - FINANCE - BILLS 010258, 59, 60 against the spirit of what the charter intended.
Yeah, I absolutely oppose going around Council and I am dedicated to upholding the charter and I'd be happy to do continue the discussion.
When these contracts were extended to Terminal F and 1, was the City Council President advised, was the Director of Finance advised, the Chairman of the Commerce and Economic Development Committee that has juris-purview or jurisdiction over the Airport advised, or was it just done as if this legislative body just doesn't matter? I mean I -- you don't have to answer it; I'm just talking here.
If I might address the parking issue. My name's Janice Davis and I'm Director of Finance for the City of Philadelphia. Having been a member of the Airport community in a former life, to the extent that there is a negotiated rate with the FAA, those are 88 5/7/00 - FINANCE - BILLS 010258, 59, 60 determined to be funds that are suitable for taking off of the Airport. To that extent, those are funds that are not available for Airport construction and so would not have been available for use on the Airport. Also, with regard to the parking, I think the parking structures that you see from airport to airport are as varied as the airports themselves. For example, at the DFW Airport, to enter the Airport, you pay a parking fee; whereas at others, there are different structures, depending on the relationship at the airport.
But the FAA did not require us to take a 28 percent cut, did they?
They did not require it, but to the extent that they negotiated the settlement, they are saying that this is something that is okay to be removed; otherwise, it would be viewed as revenue diversion and subject the City to strict penalties, very severe penalties.
But there's nothing that says we have to take 28 percent or 30 percent or 40 percent. We could be taking 10 percent. I mean, that doesn't -- we -- there's no -- the FAA 89 5/7/00 - FINANCE - BILLS 010258, 59, 60 doesn't structure our deal with the Parking Authority and the parking revenues at the International Airport. And the City, if it felt the policy needed to be changed, could change that policy and have those dollars available for issues that go on at the Airport.
First I wanted to join Councilman Kenney in the concern about ignoring Council's role. Even in the presentation, in the basic testimony, there were comments made from time to time that, Well, this doesn't need Council's approval. It seems as if in many matters, every effort is made to not need Council's approval, which means not to discuss things with Council and to kind of rule Council out of the picture. And I join with Councilman Kenney and, I think, the overwhelming number of Councilmembers who feel that Council ought to be much more involved, and that administrations ought not to 90 5/7/00 - FINANCE - BILLS 010258, 59, 60 try to find ways not to have to come to City Council. I further am a little stunned by the pride expressed in the fact that the Airport rates twentieth in passenger traffic, when we are the fifth largest city and the fourth largest media market. And it would strike me as something not to boast about but to be very concerned about that we're so very far behind some other areas. And I wonder what your response is to that.
Well, my response to your first comment, Councilman Cohen, is that as a 29-year City employee and 7 of those years were spent in the City Procurement Department, I certainly respect the charter and I respect Council, and we will do everything we can to respond to the concerns that you and the other members of the committee have requested. In terms of our ranking, one of the points that was made three years ago in this Council, in this same venue, by Dennis Bouey, one of my predecessors, was the fact that we are not where we should be partly because we do not have 91 5/7/00 - FINANCE - BILLS 010258, 59, 60 enough gates. The airports that rank ahead of us, as we re-illustrated in one of our slides, in some cases have more than twice and almost three times as many gates as we do. So there are various choke points that would prevent us from handling more passengers, and that's primarily terminal facilities, which is what we are building right now. That will enable us to be competitive with airports that serve other metropolitan areas in the country. But in addition to that, we are also working on improvements to our airfield because if and when we solve our gate capacity problem, we still have the problem of getting planes in and out of our airfield efficiently, which certainly needs some improvement, and we will be working on that as our next phase. We are not particularly proud of the fact that we are twentieth in total passengers, but relative to the amount of acreage that our Airport has, which is the second smallest of the top airports, the only one that is smaller is 24 LaGuardia Airport. 25 In terms of the number of gates that we 92 5/7/00 - FINANCE - BILLS 010258, 59, 60 have and in terms of the challenges that we have, in terms of our air space, which is somewhat squashed beneath the air space of the New York and Washington markets in the FAA's air space design, we do, I think, very well with what we have. We certainly want to do more. I don't want to overlook the fact also that there is more than one way to measure an airport's activity. Total passengers is one, and we have jumped from 24th or 25th just five years ago, we've moved up to 20th, so there has been progress there. But if you look at the number of total takeoffs and landings at our airport, we actually have more takeoffs and landings than some of the more highly-renowned airports in the US and internationally, including San Francisco, London Heathrow. We push more planes in and out of our airport, but we don't get the benefit of large aircraft with lots of passengers on them. We have a high percentage of our aircraft traffic that is relatively small aircraft, with 18, passengers 24 on them. So in effect, we're working harder and 25 ultimately getting fewer passengers. 93 5/7/00 - FINANCE - BILLS 010258, 59, 60 These are things that need to be addressed, and they need to be addressed both in the short term and in the long term. So we're trying to build gate capacity in the short term, we want to build airfield capacity in the long term because we'd like to be certainly in the top ten, if not fourth or fifth, in accordance with our metropolitan area's population statistics. And one other thing that I think is important in answering your question is, our geographical location between New York and the Baltimore-Washington area means that a large number of people from Philadelphia who would be traveling to either one of those two locations, they certainly have two other options: they can drive and they can take the train. That has another significant impact on our total passenger traffic. Those are the best answers I can give. I don't know if the USAirways representatives have other thoughts.
Well, it seems to me that from complaints my office receives that another serious problem is that most 94 5/7/00 - FINANCE - BILLS 010258, 59, 60 Philadelphians, or many Philadelphians, are being priced out of the use of the Airport. I find staff members of mine traveling to Baltimore- Washington to pick up relatives and driving them in from that airport to their homes in Philadelphia. I was stunned by the prevalence of that practice. And when I inquired, well, why are you doing that? I thought it was maybe something magical about Baltimore or the Washington Airport. I learned that the price differential is so great that apparently, many thousands of Philadelphians are just not using the Philadelphia Airport because it's too expensive. And I was wondering, is it a City policy, is it a USAirways policy? Why is Philadelphia that expensive and so exclusive?
Let me answer that first and then address it to Mr. Isdell. Obviously, it's not our policy to be expensive. We try to be competitive. We are a high-cost carrier, as you know, and that is the primary reason why we are merging with United Airlines. Having said that, if you book in 95 5/7/00 - FINANCE - BILLS 010258, 59, 60 advance, you will find that our fares are competitive and you will also find that Mr. Isdell has done a good job in attracting new entrant carriers, low-cost carriers to this airport that are providing a variety of alternatives similar to what Baltimore has. And what Baltimore has is Southwest Airlines, and we are not Southwest Airlines. It might be -- some people might like it if we were, but we simply do not have the cost structure to operate like Southwest Airlines. We have labor contracts that that are well-established and that cause us to have costs like other major carriers. American, Delta, etc., and you'll find that our costs and our fares are similar to other major carriers.
Well, I don't dispute the policies of USAirways; they're a private company and I can understand that they may want to, you know, exercise their own judgment with respect to the pricing. But I am concerned about the governmental policy of the City of Philadelphia, which apparently results in denial to 96 5/7/00 - FINANCE - BILLS 010258, 59, 60 Philadelphians of the use of their airport, and I would certainly hope that something is done to correct that policy in the near future. I just think it's shameful that Philadelphians feel they have to use a different airport because the Philadelphia Airport doesn't provide them with enough options. It may not be USAirways' problem but I think it is the problem of the City of Philadelphia.
I'll just tell you one story, which is that Baltimore and Maryland officials come to us and say, Why can't we be like Philadelphia? They have the international service, they have the destinations, they have first class on their flights. And so I very much appreciate what you're saying about fares, but there may be two sides to that issue.
The City Councilmembers don't represent the officials in the Baltimore-Washington Airport; we represent Philadelphians, and Philadelphians are the ones that seem to be suffering from an inability to use 97 5/7/00 - FINANCE - BILLS 010258, 59, 60 the Airport. I think we ought to want to be proud of the Airport and we ought to want it to make it available to every Philadelphian. And that's what I'm concerned about as a City policy. As I said, it may not be the concern of a private carrier, but it's certainly the concern of the municipal government.
May I just say also, we are working very hard to try to attract low-fare competition into the Airport, but the bottom line is, if we don't have gates for them to operate on, we can't get them in here. So that's one of the reasons we want to build the gates that we're talking about today. It's the only way we're really going to get some competition and lower fares into the Airport. And the other thing that we do that we work very hard at is to be as efficient as we can be as an organization. And, as I think Councilman Kenney mentioned earlier, we need to keep our costs down because lower-fare carriers have a much lower threshold that they can tolerate in terms of their costs. So we're working in both of those 98 5/7/00 - FINANCE - BILLS 010258, 59, 60 directions to make our airport attractive, but the bottom line is, if there isn't anyplace for people to do business, we don't have a place for them. We're trying to build places for them to do business.
Well, I just suggest, you know, the Airport is not a brand-new venture. We've been at it, as you indicated yourself, for many, many years. And I would have hoped that this problem would have been raised and dealt with a long, long time ago so that we wouldn't be suffering from the complaints of our constituents presently with respect to being denied the use. Also, is there any way of making an analysis? We were told originally on this project that you're presenting to us today that the way to do it the smart way is to have not government do it; government is just an abject failure, we were told, and that private enterprise is the way. Yet I hear the same story about delays and cost overruns that I've always heard about government projects. So apparently, the fact that the project managers are private enterprise and 99 5/7/00 - FINANCE - BILLS 010258, 59, 60 everything is going through a private enterprise has not cured the situation of the delays and the cost overruns. Now, is there any way of comparing what would have been the cost overruns and the delays if it had been managed by the City with what is happening now? It seems to me this is a pretty huge cost overrun that we're talking about.
If I could just comment before Mr. Hazel. I would say one thing that we haven't said today, which was brought out, I think, at the briefing that we had last week, is simply the fact that when this bond, the original bond issue, was brought to Council in 1998, you really had only a conceptual design of what was going to be built. One of the points that was made very strongly at that time, again, by Mr. Bouey, who testified as the director, was that we were trying something new to get the terminals built quickly because we were already way behind what he called "the power curve" in terms of gate construction. So we basically started and we did what we called a phased design process rather than the 100 5/7/00 - FINANCE - BILLS 010258, 59, 60 traditional design completion followed by bid, followed by construction. We were designing while we were building, which is, I think, unique. It was an aggressive approach. It certainly had a cost, which partly had to do with the delays in the initial approvals that were needed by both the federal government and our neighbors in Tinicum Township. But, again, if you look at the result, we have done our own independent analysis -- we, the City. We believe that the cost increases, as a result of our analysis, that they are justified, that they are reasonable, and that the benefit of getting the terminals open in such a short period of time will pay dividends into the future. And there's a certainly a benefit to getting these terminals built as quickly as they were built. So I'll turn it over to Mr. Hazel.
Well, can you tell me what was the amount of the original bond issue?
The original bond issue had $400 million for the project plus another $43 million for capitalized interest and issue -- 101 5/7/00 - FINANCE - BILLS 010258, 59, 60
Did that include the contingency fund that Councilman Kenney referred to before?
We're going to provide the background on the contingency. I would just say when we say any project budget, there's going to be some amount of contingency included. If you asked me how much to build a building and I say it's $10 million, I'm going to have a little bit of contingency planning, but we will get you the exact numbers on the contingency.
Not to diminish your point, what I'm just saying is that when you do the contingency number, it's based on change orders, cost overruns, delays, labor changes. So there were those kind of things in consideration prior to the beginning of this. So, again, I think it's fair that when you take the 175, you add whatever that contingency is, and you're actually, that's what your over-budget because the budget was what it was, plus the contingencies based on delays and all of the other things that create costs. 102 5/7/00 - FINANCE - BILLS 010258, 59, 60 But not to acknowledge it as such, I think it is --
Our original budget was 400 million. I wouldn't say it was 360 million plus a contingency; I would say it was $400 million.
But there was a line item in the budget that said the --
I know, but I'm not quibbling about the number. What I'm saying is that there was a line there that said "contingencies," and then there's a number associated with that. So that was the cushion.
My memory may be faulty but I don't have any recollection of anybody suggesting that this is a specially aggressive approach that may cost us a lot of money but it's worth taking the risk. I didn't hear any of that at all. We heard that it was a very conservative estimate that was being given, that it could be achieved at that figure. Now, I understand that there are cost overruns; I'm just indicating that apparently 103 5/7/00 - FINANCE - BILLS 010258, 59, 60 doing it by private enterprise or government, it still doesn't seem to make much of a difference.
I mean, we could go back and debate that point perhaps, but I think the one thing that is pretty clear is that the speed of this project is unprecedented using traditional governmental methods. And in our view, the projects are desperately needed now. And so while we might debate the benefits, the cost benefits, of using private- sector approaches, and I would still suggest that it makes sense to do it that way. And by the way, other airports are using those same methods. I think if you look at the speed with which these projects are being built -- the commuter terminal is being built in year and a half year, or a year and a half, plus one month. And by the way, that commuter terminal will also accommodate AirTran, a low-cost, new-entrant carrier, one that opens next month. The international terminal is being built in just a hair over two and a half years in terms of 104 5/7/00 - FINANCE - BILLS 010258, 59, 60 construction period, and it is an enormously complex project. It is -- there are few airport projects in the country that are as complex as the international terminal. Not only environmental issues, not only the Wetlands issues, not only building over the train line, not only moving the road. It is a enormously complex project. And, yes, we did run into the difficulties that Chuck Stipancic has described.
The last airport director had some concerns about whether the Parking Authority was the best agency for running parking at airports, saying that airport people know the special problems of airports and can adjust parking schedules and all of the activities related to parking in a much better way, since they're used to doing it, they know their field, while the Philadelphia Parking Authority concentrates mostly on other kind of airports. Has there been any consideration given to that thinking? Is there any merit to it?
Councilman Cohen, I was actually with the Parking Authority when that 105 5/7/00 - FINANCE - BILLS 010258, 59, 60 whole notion was raised, and if the City was seriously interested in having the Airport assume the operations of parking facilities there, there would be a very detailed process in which to do that, and that would include having some entity assume the debt of the Parking Authority with respect to the Airport garages. Currently, the Airport garages were built by bonds that were issued in prior years, and the debt service is being serviced by the rates that are charged for parking at the garage. So in order for -- whether it's the City or through the Division of Aviation to take over the Parking Authority, there would have to be a form of defeasance of the bonds, which I'm not sure the City's prepared to do at this time. And I think that was one of the reasons why that whole notion was put to rest.
I'm confused by that answer. I understand it, but I'm confused as 106 5/7/00 - FINANCE - BILLS 010258, 59, 60 to the policy direction behind that answer. I would ask USAir -- I mean, are you guys happy with the parking charges at the Airport as we speak compared to other airports where you operate? I mean, are your customers flying out of Philadelphia paying comparable rates in parking as they are in other areas where you have, you know, a lot of business? Are you guys happy with the rate structure at the Airport? I mean, you are a customer there.
Not to evade the question but, again, parking rates are all over the lot. If you look at LaGuardia or Boston, you're going to get some very high rates. If you look at some other airports, you're going to get lower rates. And it's the kind of question that some analysis has to -- you really need to look at a spreadsheet. And, again, I don't mean to be invasive.
But the 28 percent that's being taken out of the Airport on the parking charges to the Parking Authority, all of that's going to debt service? 107 5/7/00 - FINANCE - BILLS 010258, 59, 60
Councilman, may I just clarify? I gave you a wrong impression a few moments ago. The 28 percent -- the cap is on -- the Parking Authority cannot charge the Airport any more than 28 percent of its administrative costs.
It's not 28 percent of our total gross parking revenues at the Airport. The Parking Authority has to, on an annual basis, provide us with a justification for whatever costs they assess before they give us the net.
It's 28 percent of their administrative cost centers; it's not 28 percent of our total revenues.
Well, what's the percentage of total revenues that they requested last year?
And is that justified -- I mean, what justifies that number? 108 5/7/00 - FINANCE - BILLS 010258, 59, 60 How many employees of the Parking Authority are there at the Airport?
I don't know the answer to that question, but it's easily discovered. I would also say, though, just to kind of get back to one of your previous questions, we participate -- every year, there is a survey of airports through the Airports Council International that survey parking costs throughout the country. And they are -- they really are all over the place, and a good number of airports just simply do not respond to the survey so that when you get the results of the survey, it's some what skewed. It's pretty much -- the statistics are based on those airports that want to respond because they feel like they have something to brag about, and those that don't respond. So I don't have a real good answer for you.
What's reflective, what's the components of the rates? What makes up the final rate of a person parking at the Airport? What are the components involved in that? Is it employee costs, is it -- what are all 109 5/7/00 - FINANCE - BILLS 010258, 59, 60 of the issues involved?
It would be a combination of the debt service that the City Treasurer spoke of and this --
Debt service just for facilities built at the Airport only? So there's no other --
That is correct. The garages at the Airport are governed by an indenture specifically relating to the facilities, the parking facilities at the Airport. The downtown garages operate under a totally different indenture.
But the Parking Authority doesn't operate -- the Parking Authority operates the garages at the Airport?
They contract, exactly. They have a contractor who manages the operations at the Airport, but they --
And do we know what 110 5/7/00 - FINANCE - BILLS 010258, 59, 60 those costs are as it relates to the contract?
And is it more? Is what the Parking Authority -- is what the Airport provides to the Parking Authority more than what the cost of operating the parking is?
The way the indenture is set up is that the Parking Authority is required to set rates and charges sufficient to pay the debt service on the bonds as well as to maintain the facility in a good operating condition. That's the general set statement. Based within the covenants under the indenture, the Parking Authority sets those rates and charges sufficient to meet the requirements.
So it's the Parking Authority that sets the rates and charges.
And then they bill 22 the Airport and they get paid from the Airport revenue for people parking at the Airport?
No, no, that's not how 111 5/7/00 - FINANCE - BILLS 010258, 59, 60 it works.
Does the Parking Authority send us the bill and we pay them?
But they're a Parking Authority subcontractor. The Parking Authority employees or their private parking company?
Okay, so it's between the Parking Authority and the private operator --
Well, that -- when they set rates based on their costs, those rates must be approved by the Commerce Director.
They were most recently reviewed and approved this spring, and a rate change took effect on April 1st of this year. Before we did that rate change, we did some comparisons with other airports on the East Coast, and we felt that our rates in some cases were actually well below some other airport rates, particularly in the economy-parking area. But in general, they were within what we thought were reasonable ranges of comparable airports in this 113 5/7/00 - FINANCE - BILLS 010258, 59, 60 part of the country. And in some cases, when we made the rate adjustments in April, some of the rates went down and some went up. The reason -- the other thing that's important in setting the parking rates at the Airport once you get beyond the cost issues is that you also have the same type of challenges that you have, say, at metered parking in Center City, where part of what you're doing in establishing a rate structure has to do with changing behavior, that if you want to have short-term parking available and people not monopolizing it all day, you have to make those rates high enough so that people will get in and out. So it's not a hundred percent based on costs, but it has to be supported by a cost structure that's reviewed and approved by the FAA, or, as the Finance Director said, they would label any additional money that's taken off of the Airport and not used for Airport purpose as revenue diversion. And we went through that scrutiny --
So they argued that 114 5/7/00 - FINANCE - BILLS 010258, 59, 60 we were diverting revenue from the Airport, was their position.
In 1996, they at least raised the question as a result of an audit that they did, and we entered into a dialogue with them that ultimately was settled in 1999, and I believe that we did a good job on that.
Do you believe that the Airport should be setting its own charges for parking?
I think that the current system works very well. And my only experience with it has been this time, this spring. And I think I've said this before earlier this year at a budget hearing when you asked some questions related to the Parking Authority. I mentioned that I thought we had a marriage, and you asked me it was a good marriage at the time, Councilman, and I sincerely believe that the efforts of our Commerce Director, Jim Cuorato, to bring the Parking Authority management and the Airport management together in a businesslike like way that works for our customers and meets all of the local and federal standards has been successful. 115 5/7/00 - FINANCE - BILLS 010258, 59, 60 And I think that, you know, we're doing very well. We're also bringing in on a monthly and annual basis, our revenues have really increased over the last three or four years significantly.
Does the Parking Authority hold a number of slots for its own use at the Airport? Are there a number of spots that only the Parking Authority controls at the Airport? Are you aware of any?
They have some areas not in the garages, for example, not in our short-term areas. They have some employee parking areas that are separate from what they call "the revenue control system."
How far away are they from the terminal? I mean, are they remote?
The ones that I'm thinking of are actually in the vicinity of their toll plaza and administration building, which is a little bit further away than the baggage claim building, sort of between baggage claim and the 116 5/7/00 - FINANCE - BILLS 010258, 59, 60 rental-car areas.
Might I also add that the Parking Authority cannot reserve parking spots for any entity because that would constitute a private use, and you can't do that.
No, no, in the parking system -- in the garages, off the garage -- they're not part of the garage system. (Unintelligible, parties talking over each other.)
Okay, so there's no 24 segregated parking spots in the garages --
There should not be 117 5/7/00 - FINANCE - BILLS 010258, 59, 60 any.
The garages that were built by bonds issued for it, you cannot have private parking spaces. But if there are other areas under the control of the Parking Authority that were bought outright, that are not subject to any bond requirements, you could allocate them will as you will. I mean, you --
Just a couple of questions. Let's go back to the 1998 transaction for a second. That authorized up to $500 million in bonds for this particular project? Is that 118 5/7/00 - FINANCE - BILLS 010258, 59, 60 correct?
Okay. And was the earlier testimony that you actually did 443?
That's right. It was 400 million in project costs and the other 43 was for the capitalized interest and the transaction costs.
Well, my understanding at the time was that the preliminary budget indicated that $400 million would be enough to cover both projects. And I think, you know, with hindsight, we can say that that was probably incorrect. But at the time, my recollection was, the kind of rule of thumb that we used in talking about the two terminals was that the international terminal would cost 325 million and the regional terminal 119 5/7/00 - FINANCE - BILLS 010258, 59, 60 would cost 75 million, for a total of 400. Those are just round numbers, but that's what was in my mind three years ago, when this --
I think we're close to 450 million on the international terminal and probably close to 100 million on the regional terminal.
Mm-hmm. On the presentation, I don't know whether that was your regular slide show or Power Point or, you know, we get so many presentations, it's hard to keep track of 'em. One of the slides, or the screen, showed something about some industry averages or just -- actually, I think it's in this thing -- about, you know, we were at 7 percent of something and, you know, 10 to 15 or something like that was the norm. Yeah, represents only 7 percent of the total project costs were scope changes/change orders, not uncommon to experience project changes of 10 to 20 percent in projects. And then you 120 5/7/00 - FINANCE - BILLS 010258, 59, 60 talked -- in another one, you had this PM/CM. What is that, project management, construction management?
At percent. And 7 it's not uncommon to have 15, 20 percent for that 8 range. 9 Now, 175 million is what percent of 10 400? What's that, about 40? 11
Okay. So is it normal to have about a 40 percent underestimation of costs?
We're obviously not glad to be here asking for authorization to sell additional bonds.
Well, we're always pleased to have you in the room, it's no problem. 121 5/7/00 - FINANCE - BILLS 010258, 59, 60
But if you look around the industry at projects of this type, I think you'll find that this sort of cost increase is found elsewhere. And, again, I'm not glad to be here asking for this amount, but San Francisco starts at 500 million and winds up well over 800. Look at Miami, it's probably more than doubled. And, by the way, it took five years for it to get started.
It's hard to compare project to project to tell you what's typical.
But I'm sure you can appreciate that the "everybody-else-is-doing- it" excuse is probably not going to get you very far.