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PT the Auditor

How Much Free Parking Are You Giving Away?

One of my customers purchased a couple of parking locations in a Midwestern city. They sent me in to sniff around, and I found some rather well-run parking facilities. But one thing bothered me. There were a number, quite a large number, of “free accounts.”
These are monthly parkers who have been “comped.” They have permits, their access cards are turned on and being used, but they pay nothing.
Understand, I know that many times these accounts are the result of business decisions and may mean a lot of good public relations for the garage’s owners or the parking operator.
I know of one location near a police station that comps any cop who wants to park his or her private car in the lot while on duty. The owner feels that having police walking in and out of the facility increases security. That makes good sense.
And maybe giving a parking pass to the mall to your mother-in-law might just keep you in good stead with both her and your spouse.
However, these “freebies” can get away from you.
In each of these garages, whose capacities averaged 500 cars, I found about 40 of these types of accounts. The average charge for parking in this city was $195 a month. That’s nearly $200,000 in free parking being given away each year between these two garages.
(I know of an operator in a major eastern city that audited their comp list and found they were giving away nearly $23 million a year in free parking. It can be a very big deal.)
Some cities require that you pay taxes on these so-called comps even though you collect no money for them. It can be expensive if you are in one of those 20% tax rate cities. Think about it – If the rate is $195 a month and you have 50 comps, you could be shelling out $23,400 a year to the city for the privilege of providing free parking.
When I looked at the garages’ “free accounts,” I found that many had been open for decades. Some were authorized by CEOs long since retired. They were still active and in use, but I’m guessing that the people with those cards were not the same ones who had received them for business reasons many years before.
The problem is, how do you cut them off? It can be very tricky.
I might suggest that you put on your kid gloves and try this. Send a letter to each of your “special” accounts and tell them you are upgrading the card system and need some updated information on them. Enclose a letter than has space for all the “details” of the card holder and ask that they fill it out and return it.
When they do, you can determine whether or not the “special” status should be continued. If so, take them a new card and while you are there, thank them for their continuing patronage, or whatever. You might as well use it as a marketing moment.
For the ones who should no longer receive these types of cards, ask them to drop by, then hand them their new cards with a letter saying their special status has been extended for six months, or a year if you want, and after that date, you will begin invoicing them at the current parking rate.
If you simply don’t feel any PR is necessary, send them a nice letter thanking them and telling them that effective with the next month, they will be invoiced so much per month for parking.
The best thing is not to get into this situation in the first place.
If you must, when you comp parking, put a time limit on it from the get-go. “Charlie, thanks for being a good customer. Here’s a year’s free parking in our garage.” Then at the end of the limit, you can extend it if you like, or you can begin billing them like any other parker.
If you do choose to extend it, you get another “marketing moment.” Simply have your operator notify you when each of the comp parkers runs out and let you decide on a case-by-case basis what to do. If you are the operator, bring this problem up to the owner and suggest these potential solutions. There is no downside.
As a reminder, have your operator compute a “fictitious volume” each month – that is the value of how much these freebies are costing you – and put it right on the monthly report. Staring at that number month after month may have a clarifying effect on you and your largesse.
Parking has value. Giving it away isn’t always the best policy.
Woof!

Article Abstract from June, 2011




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