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Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Dovetown Parking Authority
Vancil, R. F.
Taylor, Graeme M.
Functional Area(s):
   Finance/Financial Management
Difficulty Level: Intermediate
Pages: 3
Teaching Note: Available. 
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First Page and the Assignment Questions:

In January a meeting was held in the office of the mayor of Oakmont to discuss a proposed municipal parking facility. The participants included the mayor, the traffic commissioner, the administrator of Oakmont's Downtown Parking Authority, the city planner, and the finance director. The purpose of the meeting was to consider a report by Richard Stockton, executive assistant to the Parking Authority's administrator, concerning estimated costs and revenues for the proposed facility.

Mr. Stockton's opening statement was as follows:

As you know, the mayor proposed two months ago that we construct a multilevel parking garage on the Elm Street site. At that time, he asked the Parking Authority to assemble all pertinent information for consideration at our meeting today. I would like to summarize our findings briefly for you.

The Elm Street site is owned by the city. All that stands on it now are the remains of the old Embassy Cinema, which we estimate would cost approximately $40,000 to demolish. A building contractor has estimated that a multilevel structure, with space for 800 cars, could be built on the site at a cost of about $2 million. The useful life of the garage would be around 40 years.

The city could finance construction of the garage through the sale of bonds. The finance director has informed me that we could probably float an issue of 20-year tax-exempts at 5 percent interest. Redemption would commence after three years, with one seventeenth of the original number of bonds being recalled in each succeeding year.

A parking management firm has already contacted us with a proposal to operate the garage for the city. They estimate that their costs, exclusive of the fee, would amount to $240,000 per year. Of this amount, $175,000 would be personnel costs; the remainder would include utilities, mechanical maintenance, insurance, and so forth. In addition, they would require a management fee of $30,000 per year. Any gross revenues in excess of $270,000 per year would be shared 90 percent by the city and 10 percent by the management firm. If total annual revenues are less than $270,000, the city would have to pay the difference.

I suggest we offer a management contract for bid, with renegotiations every three years.

The city would derive additional income of around $50,000 per year by renting the ground floor of the structure as retail space.

We conducted a survey at a private parking garage only three blocks from the Elm Street site to help estimate revenues from the prospective garage. The garage, which is open every day from 7:00 a.m., until midnight, charges: 75 cents for the first hour; 50 cents for the second hour; and 25 cents for each subsequent hour, with a maximum rate of $2. Their capacity is 400 spaces. Our survey indicated that during business hours, 75 percent of their spaces were occupied by ``all-day parkers''--cars whose drivers and passengers work downtown. In addition, roughly 400 cars use the garage each weekday with an average stay of three hours. We did not take a survey on Saturday or Sunday, but the proprietor indicated that the garage is usually about 75 percent utilized by short-term parkers on Saturdays until 6:00 p.m., when the department stores close; the average stay is about two hours. There's a lull until about 7:00 p.m., when the moviegoers start coming in; . . .


  1. Using the information presented at this discussion, should the city of Oakmont construct the proposed garage?
  2. What rates should be charged?
  3. What additional information, if any, should be obtained before making a final decision?