COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 27, 1999 9:25 a.m. - - - BILL 990310 - Bill No. 990310, an ordinance 10 authorizing the Director of Commerce and the Director of Finance, on behalf of the City, to execute further amendments to the contract for parking services in the accompanying lease agreement both with the Philadelphia Parking Authority, dated October 1, 1974, as amended, with amendments revising the description of the leased property to the additional premises to provide for additional parking and related facilities at the Philadelphia International Airport, extend the term and revise certain of the terms and conditions of the contract for parking service and lease agreement PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN W. THACHER LONGSTRETH - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 5/27/99 FINANCE - Bill 990310 I N D E X Whitney Reid, Treasurer. . . . . . . . . . . . City of Philadelphia Rina Cutler, Executive Director. . . . . . . . 5 Philadelphia Parking Authority 3 5/27/99 FINANCE - Bill 990310 P R O C E E D I N G S
Good morning. We will now call up our Finance Committee hearing. This hearing is regarding Bill No. 990310, and we will ask the clerk to please read the title of the bill.
Bill No. 990310, an ordinance authorizing the Director of Commerce and the Director of Finance, on behalf of the City, to execute further amendments to the contract for parking services in the accompanying lease agreement both with the Philadelphia Parking Authority, dated October 1, 1974, as amended, with amendments revising the description of the leased property to the additional premises to provide for additional parking and related facilities at the Philadelphia International Airport, extend the term and revise certain of the terms and conditions of the contract for parking service and lease agreement.
Thank you very much. A quorum being present, to my left is Councilman Longstreth, Councilman Kenney; and to 4 5/27/99 FINANCE - Bill 990310 my, right Councilman Nutter. We will now certainly welcome you this morning and ask you to identify yourself for the record and begin your testimony.
My name is Whitney Reid, City Treasurer. City with me this morning is Rina Cutler, the Executive Director of the Philadelphia Parking Authority. Miss Cutler and I are here today to testify in support of Bill No. 990310. The purpose of the bill is to authorize the Director of Commerce and the Director of Finance, on behalf of the City, to execute a third amendment to the existing contract for parking services and the accompanying lease agreement. Upon approval of Bill No. 990310, the Philadelphia Parking Authority will issue a series of 1999 airport parking revenue bonds for the purpose of building additional parking facilities in addition to making improvements to existing parking facilities. The total size of the proposed bond issue is not to exceed $160 million. Under the 5 5/27/99 FINANCE - Bill 990310 current financing schedule, we are scheduled to price the bonds June 23rd, with closing at the end of June. In addition to our testimonies, I've provided each member of the committee with a copy of the financing team assigned to the transaction, a copy of the ordinance and proposed contract and lease agreement. This concludes my testimony. Miss Cutler will provide testimony on the proposed amendments to the contract and lease agreement in addition to the use of bond proceeds by the Parking Authority. Afterwards, we would be happy to answer any questions you may have. Thank you.
Good morning. My name is Rina Cutler, Executive Director of the Philadelphia Parking Authority. I appreciate the opportunity to testify in support of Bill No. 22 990310. Bill 990310 will permit the Parking Authority to issue bonds, the proceeds of which will be used to build two new garages at the 6 5/27/99 FINANCE - Bill 990310 Philadelphia International Airport and make certain improvements in repairs to existing airport garage infrastructure. The ordinance authorizes the Director of Commerce and the Director of Finance, on behalf of the City of Philadelphia, to execute a third amendment to the lease between the City and the Parking Authority, dated October 1, 1974, amended August 15, 1978, and further amended January 1, 1989; and third amendment for contract of parking services also dated October 1, 1974, amended August 15, 1978, and January 1, 1989. The proposed amendment will modify the existing contract for parking services and its accompanying lease by: Expanding the term "Parking Garage Facilities" to include Garage E-F, which will have 1900 to 2500 new spaces in that garage and 300 new short-term spaces at ground level, and the new Terminal garage, which will have 1500 new garage spaces and an additional 80 new short-term spaces; 420 new short-term spaces will be added in space already leased by the Parking Authority from the City. 7 5/27/99 FINANCE - Bill 990310 Granting leasehold interests in certain premises at the airport, as described more fully in Schedule D, which has been added to the lease and the contract for parking services. Extending the existing contract to December 31, 2030, which reflects the maturity date of the bonds to be issued to construct the new airport parking improvements. It should be noted that the contract for parking services does not include an obligation by the City to guarantee the bonds or to make payments to the debt service reserve fund for the bonds. The bonds are payable soley from the revenues generated by the airport parking facilities. The City is only required to make payments with respect to the bonds if the City terminates its lease to the Parking Authority or any part of the airport parking facilities. Use of proceeds of Series 1999 airport parking revenue bonds: Build a 7-level 1500-space garage across from the airport's new international terminal, which will be the new term Terminal garage; 8 5/27/99 FINANCE - Bill 990310 Build a 5-level 1900 to 2500 space garage adjacent to Garage D, which will be the new E-F Garage; Build a new administration building and a new maintenance facility; Erect a new toll plaza with up to 33 lanes; Demolish a tunnel and expand existing infrastructure at the ground level prior to the building of the two new garages. This will increase the number of short-term spaces based on both this reconfiguration work and the new garages from 492 to 1292 short-term spaces. It is expected that the revenue from the airport garages will more than cover the debt on the new bonds. In addition to this testimony, a briefing package has been prepared and submitted to City Councilmembers. This package reflects my previous comments as well as the Philadelphia Parking Authority revenue numbers at the airport since 1992. Thank you for allowing me to testify in support of Bill 990310. At this time, I will be 9 5/27/99 FINANCE - Bill 990310 happy to answer any questions you may have.
Thank you very much. We're certainly glad to receive this information. It would have been helpful if we had gotten it earlier so that we could review it to determine if we had any concerns. Let me note presence of Councilwoman Tasco also to my left. With that, you say there's an independent study? Who conducted the study to determine our need for about a little over 4,000 now?
The study was conducted by Walker Parking Consultants. And I do apologize for your not getting it in advance. It just got completed and Fedexed yesterday. But it basically outlines two things that I think are important for the City Council to know. The first is that without any expansion at the airport, there is currently a parking shortage. At this point, we are generally full in both the short-term and the garage parking four 10 5/27/99 FINANCE - Bill 990310 days a week. While there is some excess capacity currently at the remote economy lot, the main facilities are, in fact, full at this point four days a week. With the new international terminal coming on line and the new computer terminal coming on line sometime in mid-2001, we are projecting at this point that without building any new supply, we will be short over 4,000 parking spaces. It is our expectation to try to build these garages and bring them on line at the same time as the two new terminals. The other piece that I would like to make note of is at the very back, the very last page of the Walker study, which you have in front of you, lays out the financial analysis for the bonds. The reason the City is not being asked to guarantee these bonds is because the revenues are sufficient enough, somewhere between 3.2 times all the way up to 4.1 times the amount of debt service coverage that's necessary to issue these bonds. So that the City is not being asked to guarantee these; they will be paid solely out of airport parking revenues. 11 5/27/99 FINANCE - Bill 990310
Who will be doing the work, and have all the minority requirements been met?
None of them have been met because none of the contract have been let yet. We expect the first set of professional services contracts -- architectural, structural, and civil engineering -- to be let by the end of the summer. Those will all be publicly bid as per the law. And all of those, as well as the construction -- general construction contracts, which will be let starting in the fall, will meet both the City and the Parking Authority's MWBE requirements.
What are the projected, then beginning and ending dates for all of this construction?
We expect to have the garages completed pretty close to the same time as the terminals, which at this point is mid-2001.
All right. How will this impact -- or will it have an impact on the traffic flow and parking available now at the airport? 12 5/27/99 FINANCE - Bill 990310
There actually will be some impacts, Councilwoman, both on the traffic side as well as the parking side. On the traffic side, there is money in both these bonds and in the bonds issued previously by the Division of Aviation to do a lot of roadway widening and reconfiguration so that, in fact, the traffic will flow more smoothly at the end of the construction period. On the parking side, there will be impacts, as once we begin garage construction, we will need to close portions of the existing garages in order to do that. That is one of the reasons we expect sometime late summer 1999 to begin an airport valet parking program, which we believe will be widely used and take some of those vehicles out of the current facilities.
What is the current annual net revenue from existing parking facilities? And once completed, what will the additional revenue be?
Current total revenue for the Parking Authority's fiscal year '99, which ended March 30th of 1999, was just over 13 5/27/99 FINANCE - Bill 990310 $39 million. We are projecting revenue out through the year 2010 based on both historic parking information and enplanement data from the Division of Aviation, which ranges from 30 million in fiscal year 2000 up to 41.5 million in year 2010.
And would you explain again in terms of the revenues from this, you said it shouldn't cost any more money and how this additional revenue will be used. All this is tied back into the project? Would you explain that again?
That is correct. It will certainly cost more money to pay for both the additional spaces and the bonds that we will be issuing. But we believe that with an increase of over 4,000 new spaces at the completion of construction, the revenue will be more than sufficient to cover the debt. And since debt coverage, when we are issuing bonds as a minimum, try to hit one and a half times what the debt coverage is, we are projecting in fact that the debt coverage on these bonds will hit somewhere between 3.0 and times and 4.1 times the amount of 14 5/27/99 FINANCE - Bill 990310 debt. So we are not in fact requiring -- being required to have the City guarantee for these.
Thank you. Are there any other questions? Councilwoman Tasco?
The garages are operated by contract, with a contract through the Parking Authority. In fact, the current contract is being bid as we speak. And we expect to have a new operator or have the current operator win the bid, as the case may be, by late fall.
They will operate it under a contract with the Parking Authority, that's correct.
The contract that's going out now will include the new 15 5/27/99 FINANCE - Bill 990310 facility, or you will probably have to rebid by then?
All of the information on new spaces is part of the bid package. We expect to award a three-year contract, with two additional one-year renewals. So that will be part of this current contract.
There's some talk about the possibility of making the airport an authority. What impact would that action have on this bond deal with any other bond deals?
It will have an impact on the City as it relates to the bondholders. The bondholders, both for this set of bonds that are being sold as well as the current bonds which exist on the airport parking facilities, the City will, because they have a contract with the Parking Authority to provide -- not only to 16 5/27/99 FINANCE - Bill 990310 provide the parking services at the airport, but in fact also have an exclusive right to do all of the parking services at the airport, I believe the City would need to pay off all of the existing bonds in order for that to happen.
Thank you, Madam Chair. Miss Cutler, from the two documents that we received this morning -- well, I know we got the parking study this morning. This other one, the one with the charts, did we have that before or did we see that this morning as well?
Okay. On , the annual parking demand, your chart headlines 17 5/27/99 FINANCE - Bill 990310 showing a 33 percent increase from 1990 to 1998. But I would ask, between 1997 and 1998, the chart at least seems to indicate a decrease in parking demand. Can you tell us what happened between '97 and '98?
Yes, Councilman Nutter. We have been undergoing construction for the last months at the airport. That required -- 11
The airport has 12 been under construction for the last 30 years. 13
These are the airplane 14 garages. We had to redo all of the electrical 15 systems and painting and a variety of other 16 things, and that required us to close one level at 17 a time for the last 18 months. And that's why 18 that's reflected that way.
Okay. In terms of the parking study just in the time that we've been here, on of the study, in the middle, it talks about -- Figure 2 details where these 18 5/27/99 FINANCE - Bill 990310 patrons actually parked at the airport. "Though 62 percent of drivers are parked for 3 hours or less, only 35 percent of all the parking patrons utilize short-term parking facilities. And according to the report, this is an indicator that there is a shortage of short-term parking for patrons." You know, everything I know about parking just comes as a motorist. I don't claim to be a parking expert. But the statement and then the conclusion out of it, quite honestly, doesn't necessarily compute for me. All I can conclude from that is that 62 percent of the drivers did park for 3 hours or less, and they decided to park somewhere in contrast to the short-term parking facilities. It does not necessarily lead you to the absolute conclusion that there's a lack of short-term spaces.
Let me see if I can explain this, Councilman. As an industry standard, most airport parking facilities have about 15 percent of their spaces which are short-term, or in our case, 19 5/27/99 FINANCE - Bill 990310 ground-level parking. We currently have percent of our spaces in that category. And even after we add an additional 800 as part of this new construction, we will still only have percent of our spaces in short-term. What happens now is that short-term fills up first, and then people start moving into the garages. So while you've got 62 percent of people parking 1 to 3 hours, as you can see from the 35 percent parking in short-term, the remainder of them are parking under 3 hours in the garage facilities, which is the only place at that point they can go. So even after construction, based on the current envelopes that the garages sit in, we will actually not be able to achieve a 15 percent short-term parking number, which is really where, in the best of all worlds, we would be.
Well, I understand if you're trying to achieve a particular industry standard. All I'm saying is, as we were sitting here, I started reading through the report, and the report says that 62 percent of the people park for a certain amount of time, only 35 percent park 20 5/27/99 FINANCE - Bill 990310 in short-term parking. Their conclusion out of that, automatically by their own statement, is that now there's a lack of short-term parking. All I'm saying is that based on reading this report over the past minutes, those two 7 statements don't necessarily lead to that 8 conclusion. If there's another analysis that 9 shows that, that's fine. 10
Well, I think there is 11 other analysis that shows it. But the fact that 12 even the garages are full at this point four days 13 a week means you do not, as a parking customer, 14 even have the ability to park short-term in the 15 garage. In the short-terminal analysis -- and they did a fairly extensive number of count days -- the ground level fills up first. And one of the things we're actually considering is whether we should take the first level of garage parking and actually designate it as short-term parking as well. But it's not price-sensitive in a way you would normally assume it would be.
Okay. On 5/27/99 FINANCE - Bill 990310 and in your verbal statement, you talked about a valet parking program at the Parking Authority. Would this be run by the people who operate the garages, or would this be run by a separate company that does valet parking?
No, this would be run by whoever has the airport parking contract as part of their contractual services with the Parking Authority.
And the company that presently has the contract, you say, is Aerolink?
If they maintain the contract. As I said earlier, it was out to bid, so whoever the winning bidder is will be responsible for both that and the valet.
And what would be the City's or the Parking Authority responsibility or liability as it related to running or having a valet parking program run out of the Philadelphia airport? 22 5/27/99 FINANCE - Bill 990310
In some respects, it's slightly greater than -- liability is slightly greater than in self-park facilities where you handle your keys than it is in self-park facilities. But --
Our present responsibility is usually on the back of the ticket; it will tell you you're getting a space. Anything else that happens to your car -- you know, acts of God, locusts, pestilence, or anything else, that's kind of on you, right?
That is correct. And I assure you that even on the backs of valet parking tickets, that same sort of language exists.
But once you turn your cars and your keys over to someone, you do expect a slightly higher level of car care.
You do. And we have -- the way the program, at least at this point, is envisioned to work, and we're still in the planning stage, is that there will be a valet booth set up on the departure roadway. A jockey 23 5/27/99 FINANCE - Bill 990310 will get in the car with you at that point, drop you at the terminal you will be leaving from, help you unload your luggage, and then they will take that car to an area that we've designated in the old employee parking lot, which is near the economy lot. That facility is being completely renovated. It will be secured and staffed 9 hours a day. 10 So we expect a level of security to 11 exist there that -- that I think will limit our 12 liability exposure. 13
All right. My last 14 question is on parking rates on in the 15 study. Why are the rates at Philadelphia 16 International Airport higher than other 17 similar-sized airports? 18
In fact, these rates, I 19 believe, have not been raised in -- since, I 20 believe, 1980 -- late 80s. 21 The rates are higher because there is, 22 A, more demand; and, B, you try to set prices to 23 move people into the parking areas you have 24 capacity in. So for instance, you will note that 24 5/27/99 FINANCE - Bill 990310 economy is priced at 6.50 a day because there is excess capacity there and we need to try to move some of our parkers out of the short-term-end garages. But these rates have actually been high based on demand and trying to modify behavior as to where people park at the airport; and have in fact not been raised in well over ten years.
Well, that just means that they've been high for the past ten years.
Well, yeah, but I mean I'm sure that originally they were priced to meet the price of the bonds that were first issued back in the '80s.
And it is part of the reason why the pricing will drive the debt coverage, even on the new bonds. If you are full at these prices, these prices being lowered will only make that situation worse. You will --
Okay, I just wanted to -- I mean, again, your report says that our rates are higher than other similar-sized 25 5/27/99 FINANCE - Bill 990310 airports, and I just wanted to know why.
I didn't set them originally. I certainly am not in favor of lowering them. Although, at this point, I'm not in favor of raising them either. I think they sit in a market --
Thank you. Are there any other questions from members of the committee? (No further questions.)
Then this will conclude our public meeting. - - - 5/27/99 FINANCE - Public Meeting
We will now enter into our public meeting. And the Chair recognizes Councilman Kenney for a motion to report this bill out of committee.
Thank you, Madam Chair. I move that Bill No. 990310 be reported out of committee with a favorable recommendation.
All right. This will conclude our hearing and our meeting for this bill. And, certainly, we thank all of committee members for attending, and this hearing is adjourned. (Adjourned at 9:53 a.m.) - - - 27 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, May 27, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FINANCE BILL NO. 990310 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter