Point of View
Sewickley, LaLa Land and Landlords
By John Van Horn
Last year, the town of Sewickley, PA, collected $92,000 during a two month or so period in May/June. This year, they stopped charging for Saturdays (at the behest of merchants, who wanted to attract more customers). This year during the same period, they collected the same amount of money, even though they reduced their charging period by 20%. Hmmmmm ....
They were ecstatic, and the town decided to continue as long as revenues didnít decrease. But how could that happen? One would have thunk that Saturday would have been a big income day for parking. But assuming it was the same as the five weekdays, then how could the income have been the same? No one seemed to be concerned about that question or, more important, its answer.
My correspondent Mark muses that, all things being equal, they must have experienced a 20% increase during the other five days. Where did that come from? Maybe parking wasnít the problem all along.
I note that if business did increase on the weekends, could it possibly have been due to the increased promotion put on by the Chamber of Commerce and not the free parking? Increases in customer numbers on Saturday may have nothing to do with free parking. If you build it, they will come.
As for the increase in parking revenue for the other five days, I have an idea. What if, due to the free parking on Saturday, and the resulting decrease in available parking, some people began to change their habits (the Costco effect, where a busy Saturday trains people to come on other days of the week) and began parking on other days, when parking wasnít free, but it was more available?
The City of Los Angeles Finance Department has published its top debtors list, as of the middle of July. I have been asked to comment on why 10 of the top 30, and the highest amounts owed, are from parking companies. Ah, in fact, I can turn a tale on this topic.
The city charges a tax on the monies collected by private parking operators. This 10% tax is determined just as your income tax is computed. They ďtrustĒ the businesses to report their income and then attach a check. The problem is that with parking, it is extremely easy to ďadjustĒ the total collected and under-report the monies due.
A few years ago, the city realized that this was a potential problem and hired an outside firm to audit parking companies and provide the finance department with the results. I have been tracking this process and find that the auditing firm has found hundreds of millions in under-reported revenue and thus under-reported tax.
The problem is that itís now the cityís problem to collect the back taxes, and in that task they have been incredibly remiss.
For a number of years the cityís finance department has basically ignored the problem. The audits would be turned in, bills sent, and the companies owing the money Ė many of whom had close relationships with the city powers that be Ė would simply ignore the bills or negotiate with the city and settle for as little as 10 cents on the dollar.
(In one case, the city employee responsible for reviewing the tax forms of a parking company actually worked Ė moonlighting Ė for that parking company filling out their tax forms, but I digress.)
Recently, a number of individuals in the finance department retired, and the new group is attempting to get a handle on the problem. The debtors list shows the magnitude of the issue.
The top 50 tax cheats in Los Angeles (not all parking) owe more than $100 million in back taxes. Whatís with that? If I didnít pay my taxes, there would be a big sheriff at my door with a chain and I would be out of business. Iím sure the city could use that $100 million. Where are the sheriffs when you need them?
Remember, parking is a cash business. If you are a crook, itís not difficult to under-report your income. Itís easy: Collect $1,000, report $200. Who is to challenge you? Who is to know? Someone would have to go out and look at your operation.
Letís see. You run a lot in downtown LA, near the Halls of Justice where all the lawyers park. You charge $25 a day. You park 250 cars a day. Thatís $6,250 a day in cash, or $1.5 million a year. You owe $150,000 in taxes.
What if you run 10 lots like this? The numbers go up fast. If the city ignores you, you simply report a quarter of that amount, or less, and pocket the rest. (Some report nothing. It boggles the mind.)
This process puts legitimate parking operators at a tremendous disadvantage. The crooked operators can under-bid parking operations because they donít have any intention of paying the taxes. The legit companies bid a fair price, but they donít play on a level playing field.
Most operators I talked to about this problem say that the best thing the city can do is enforce its laws and force these back-street operators to pay their legitimate tax bills. The city would benefit (more income) and the parking business would benefit, as all would be bidding by the same set of rules.
Hopefully thatís beginning to happen.
I recently got an e-mail from a correspondent in Southern California that was on another topic. However, hidden within the message were these gems:
ē A property manager of a 700-car garage told the operator to unplug beeping CO monitors, rather than have them serviced.
ē A government agency that owns a 1,000-space open lot that does over $3.5 million a year in revenue wonít let me buy a revenue control system with an historic database feature (unnecessary and too expensive, they said), so we wind up with nothing more than a cigar box operation.
ē And the medical office building owner who demanded that the operator integrate his old and simple office building card access system with the 300-car garage access system, thereby giving everybody who has access to the building access to the garage, too. He wanted to save the $15,000 cost of upgrading the garageís card system.
All the best,
Article Abstract from September, 2009