Magazine

Hundreds of Operators and Owners Must Purchase New Equipment

San Francisco Sets Specs for Revenue Control Equipment

By John Van Horn

The City of San Francisco has become the first municipality in the nation, if not the galaxy, to pass an ordinance that sets in writing specifications for revenue control equipment that must be used in parking facilities located within its limits. Yes, the term is "must be" used.
In addition, the city must first approve the equipment and certify that it meets the specifications before the parking facility owner can purchase it.
On January 14, 2002, the city will begin citing surface lots and garages that do not have approved equipment installed or on order. According to the city's assistant director of the Department of Consumer Affairs Sid Baker, "Parking operators have had since the ninth of July to comply with the city ordinance. We will begin inspecting lots and garages for compliance on schedule."
All this goes back to two issues. First, the city charges a 25% parking tax and is concerned that operators aren't reporting the total amount of income and thus the city isn't collecting its tax. Second, the city has received numerous complaints of operators towing vehicles on honor box lots when the parking fees had, in fact, been paid. Since honor boxes don't issue receipts, there is no way for the parker to prove they paid the parking charges.
Reluctant resistance
Baker says that the parking operators have been "reluctantly resistant" to the ordinance since it requires that they (or the owners of the parking facility, depending on their agreement with the operators) will have to spend $8,000 to $10,000 per honor box location and potentially considerably more for controlled locations.
The city did its research. The new ordinance is explicit. (See the city's Web site at www.ci.sf.ca.us and look under municipal codes, police codes, article 49.) The equipment must provide an audit trail, non-resetting sequence numbers, receipts and reports that allow a city auditor to call up day, month and year-to-date totals AND totals for the past 365 days prior to the date the report was requested. "The goal of the ordinance is to have third-party security of the data," Baker noted.
The ordinance points out that all records must be maintained in "nonvolatile" memory. A memo from Baker's department expands on that to say that the memory must be "read only." It is detailed about the fact that data in PC-based databases can be changed by the user and states specifically that "internal PC systems ... do not provide third-party nonvolatile security provisions and are unacceptable for meeting the RCE security and reporting requirements." This means that the majority of systems currently in production in the parking industry will not meet the city's requirements.
Open architecture and password-protected systems that allow the users access to the data and therefore allow changes and manipulation aren't acceptable.
No parking revenue control manufacturer could meet the requirements completely with an off-the-shelf product, although some came close and with some reformatting were able to be approved quickly.
As of mid-December, four companies, Secom International, Digital Pioneer, CVPS and Guardian Systems/Vanguard, have been approved for purchase by city garages. Three others -- DataPark, Ventek and WPS -- have applied to the city for approval.
The approval process requires not only that the company's documentation be reviewed by the city, but the company must also bring its equipment in and demonstrate that it meets the ordinance's requirements.
Millions of missing dollars
The amount of money involved for the city is substantial. Estimates of under reporting of revenues are in the many millions of dollars, possibly $25 million to $50 million lost annually in tax revenues. In a time of lowering budgets and increased demands, the City of San Francisco is looking for its money. "After all," notes Baker, "a large portion of this money comes from people who don't live in San Francisco."
It is interesting to note that if the city is correct in its estimates, the investment by the operators will garner them or their customers an additional $30 million per year. Of course it will also be a bit embarrassing to them (and potentially the tax collectors in the city) if this turns out to be the case. Industry wags think the number is an underestimate.
Sources tell PT that the city has been remiss over the past decades in collecting the parking taxes. "They have essentially done nothing since we stopped riding horses. The program should have been implemented progressively along the way rather than having to be implemented in one pass."
Many cities across the country collect a parking tax, however San Francisco, with its total of 25%, is among the highest. Municipalities struggle with just how to properly collect the tax since the parking business is done primarily in cash and auditing requires specific knowledge not readily available in most governmental tax departments.
The City of Miami, for instance, has hired an outside firm that specialized in parking audits, to supervise its tax collection. This was done at the time the parking tax ordinance was put in place, as the city understood the unique problems with auditing and collecting monies from primarily cash businesses. The political and bureaucratic problems of trying to implement such a program where parking taxes have been in effect for years could be overwhelming.
The ordinance in San Francisco was unanimously passed by the Board of Supervisors over objections and lobbying by the local parking community. The operators feel that the ordinance puts undue financial stress on their businesses and could result in the closing of some "marginal" surface facilities and thus cost the city much-needed parking space. They also feel that they can put audit procedures in place that would be as effective as the new equipment.
"The operators have been less than upfront in their reporting in the past," says Baker. "They have brought this on themselves. The city is simply looking for a secure system that can be traced and that has third-party accountability. The next challenge to operators will be the auditing of monthly parking permits."
Stay tuned.

Article Abstract from January, 2002




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