Magazine

What's it Cost To Run Your Garage?

Matt Inman

The projected expenses for a new parking structure can have a significant impact on the financial feasibility of a project. Operational and maintenance expenses can vary from one location to another, even within the same city.
The amount of money spent on garage expenses will depend on several variables, including the method of operation, staffing needs, hours of operation, facility utilization, taxes, maintenance needs and financing costs.
To make matters more confusing, some parking systems must cover all of the necessary expenses for a parking garage, while others are required to cover only a portion.
These variances make it difficult to quote average garage operating costs on a per-space, per-year basis. Therefore, it is more reasonable to estimate parking operational and maintenance expenses on a garage-by-garage basis, using the following criteria:
Method Of Operation
Parking garages are operated in many different ways. A parking garage could provide any combination of valet parking, self-parking (transient parking), monthly parking (card or decal access), and/or special event parking. The first step in estimating parking facility expenses is to determine how the garage will be operated. That will impact facility expenses in three ways:
Number of staff required. A hotel garage offering valet parking will spend far more in staffing costs than an office building garage offering only monthly parking with card-controlled access. Staffing costs can be reduced, but not eliminated, through the use of an automated parking access and revenue control system.
Insurance costs. For example, a garage providing valet parking will incur higher insurance expenses, as the liability of the parking operation is higher.
Cleaning. Because it is used more frequently, a garage that provides transient parking will require additional cleaning and sweeping as opposed to one that provides monthly parking. Also, equipment and garage system maintenance costs can be higher.
Typical Operational Costs
Although operating costs will vary from one facility to another, they can typically be broken down into five major categories:
Staffing. Staffing costs should include all staff assigned to the facility, including cashiers, maintenance, supervisors, manager(s), and bookkeeping and security personnel. In a typical cashiered facility, staffing costs can account for 50% to 70% of overall expenses. Based on the selected method of operation and anticipated operating hours, staffing costs are projected by making a preliminary work schedule. Staffing costs can be reduced by using available technologies, such as automated cashiering equipment and passive security systems.
Facility maintenance. Regular maintenance ensures that the service life of the facility is maximized. This includes routine maintenance/cleaning, equipment maintenance, elevator/escalator maintenance, wash-downs, sweeping, snow removal, painting and structural maintenance. Facility maintenance expenses can account for 10% to 20% of total facility expenses. A maintenance reserve fund of approximately $50 per space, per year is recommended to fund future large-scale maintenance projects.
Facility utilities. This expense category can include electricity, telephone service, high-speed Internet, water and sewer. Typical utility expenses account for 10% to 15% of a facility's total expenses. They can be reduced by limiting daytime facility lighting and by bundling services with a single provider (e.g., bundling mobile phones, telephones and Internet services).
Other expenses. Additional expenses can include taxes, insurance, operational and office supplies, uniforms, and marketing and advertising, and postage. These can account for approximately 8% to 12% of a facility's total expenses.
Management fees. If the services of a professional parking operator will be utilized, there may be a management fee. This cost could be calculated as a monthly flat fixed fee, as a percentage of the gross revenues, or through a lease or contract agreement.
Financing Costs
While not an operating expense, bond debt will obviously impact net facility income. The amount of bond debt will depend on total project costs, interest rates, credit ratings and bond items. Regardless of whether bond debt must be covered by parking revenues, including bond debt in determining net income will help illustrate the true cost of providing parking.
In summary, when projecting potential expenses, less importance should be placed on national averages or cost comparisons with other facilities. The more logical approach is to determine projected facility expenses based on specific operating conditions.

Matt Inman is with Carl Walker Inc. He can be reached at
mInman@carlwalker.com

Article Abstract from May, 2005




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