/9' BOARD OF AIRPORT COMMISSIONERS. rte/1/0ara"4 erida Esguerra-Olivares, Director of Finance. ...-Los Angeles World Airports REPORT TO THE

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1 8/31/2018 I JH Approved by:...00j, 11W-7, Los Angeles World Airports REPORT TO THE BOARD OF AIRPORT COMMISSIONERS -- rte/1/0ara"4 erida Esguerra-Olivares, Director of Finance Reviewed by: I4an P. Y ubik, Chief Fi ancial Officer, Deputy Executive Director City Attor 71Srill.. Deborah Flint - Chief E -cutive Offic r 4.ii Meeting Date: CAO Review: 10/18/2018 1=1 /9' Completed Pending N/A Reviewed for Date Approval Status By Finance :9/10/2018 Procurement 1 CEQA I 8/31/2018 Guest Experience I 9/18/2018 MY 0 N NA RW NY N I NY ON Cond I MT NY ON I BY Strategic Planning I 8/31/2018 MY N NA I KV SUBJECT: Adopt new public parking rate schedule Adopt new public parking rate schedule for Los Angeles International Airport and Van Nuys Airport effective January 1, RECOMMENDATIONS: Management RECOMMENDS that the Board of Airport Commissioners: 1. ADOPT the Staff Report. 2. DETERMINE that this action is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Article III, Class 1 (31) of the Los Angeles City CEQA Guidelines. 3. APPROVE new public parking rates for Los Angeles International Airport (LAX) and Van Nuys Airport (VNY) effective January 1, AUTHORIZE the Chief Executive Officer or her designee to implement alternative pricing strategies as described in the staff report. 5. AUTHORIZE the Chief Executive Officer or her designee to waive parking fees for operational efficiencies and to prescribe conditions associated with waiving of such fees as described in the staff report. Page 1 Public Parking Rate Adj Board Report

2 6. RESCIND Resolutions and that set the prior public parking rates for Los Angeles International Airport and Van Nuys Airport, effective December 31, DISCUSSION: 1. Purpose Approval of the implementation of a new parking rate schedule applicable to the LAX's Central Terminal Area (CTA) garages, LAX Economy Lot / Lot E (formerly Lot C), and VNY FlyAway Bus Terminal Parking and to authorize the Chief Executive Officer (CEO) 1) implement alternative pricing strategies to maximize parking revenues at LAX, and 2) waive parking fees for operational efficiencies and to prescribe conditions associated with waiving of such fees. 2. Prior Related Actions January 8, Resolution The Board of Airport Commissioners (Board) approved the public parking rates for LAX's CTA garages and VNY FlyAway Bus Terminal Parking. January 10, Resolution The Board approved the public parking rates for LAX Economy Lot / Lot C. 3. Current Action LAX LAX owns and operates eight garages in the airport's central terminal area (CTA) providing approximately 8,323 public parking stalls and a surface public parking lot located outside of the CTA and known as LAX Economy Lot / Lot C, which provides up to 1,635 public parking stalls. LAWA is investing in facilities development aimed at reducing CTA congestion and improving guest experience through new services and parking products. Parking operations at LAX are an important source of non-aeronautical revenue that generate incremental cash flow that is used to fund capital and operating expenses that cannot be allocated and recovered from airline cost centers in the terminals and on the airfield. Future expenses from roadway access projects such as the APM will drive significant increases in LAX's future non-recoverable annual expenses. Such expenses for the APM alone in its first year of operation are currently estimated at approximately $33 million. Parking revenue, along with other non-aeronautical revenue generated from ground transportation users (rental cars, TNCs, taxis, private shuttles, etc.) will be a critical stream of revenue needed to support such projects. In fiscal year (FY) 2018, LAX generated a total of $96.6 million in parking revenues. The CTA garages and Lot C represented approximately $80.8 million or 83% of that total. These revenues were offset by approximately $34.4 million in operating expenses and $663 thousand in capital expenses. Page 2

3 Without changes to the existing rates, staff anticipates that net operating income (N01) from public parking will decline by about $10.7 million in FY 2019 due to the 1) expected closures of up to 1,100 parking stalls for the APM construction; 2) Lot C (which was reduced by 3,509 stalls also due to APM construction) relocation to Lot E, which will result in additional operating and capital expenditures, and 3) contractual increases in parking management fees that includes the wage increase mandated through the City of LA Living Wage Ordinance which took effect in July Despite leaving parking rates unchanged since January 2002 for LAX's CTA garages and since January 2011 for LAX Economy Lot / Lot C, public parking revenue has continued to grow solely as a function of the growth in LAX's passenger volumes. In recent years, however, there have been increasing instances of individual garages within the CTA reaching maximum capacity, resulting in temporary closures until spaces are vacated. The frequency of these closures is particularly pronounced during the peak traffic summer months. These closures are problematic for garage users and create operational challenges on LAX's roadways as passengers intending to use the garages are forced back out onto the roads. Staff is recommending increases to LAX public parking rates as detailed in the attached Table A. This recommendation would increase the rate for one hour of parking in the CTA garage from $3 to $5, and increase the daily parking rate from $30 to $40, effective January 1, The increased revenue generated by these increases will support LAWA's investment in new smart-parking systems that are expected to expand LAX's parking service offerings, improve guest experience and enhance operational efficiency. These revenues will also play an important role in supporting LAWA's investment in new airport access improvements currently under way at LAX. VNY The VNY Fly Away Bus Terminal Parking has a capacity to accommodate 2,534 parked vehicles. At the current parking rate which was set in January 2002, it is estimated that VNY parking operations will incur a loss of more than half a million dollar this fiscal year due to the continuing increases in the cost of operating and maintaining the parking garage. Staff recommends increasing incremental parking rate from $1 per two hours to $1 per hour, and increasing the maximum daily rate from $4 to $5, effective January 1, 2019 as shown in Table A. In considering the proposed increases, staff surveyed other local and national airports to gauge current and proposed rates relative to similar products offered by LAX's peer group of airports. The airports surveyed and their rates shown below represent rates for similar product offerings at other airports. Page 3

4 11 CT A I GARAGES AIRPORT CODE 1ST HOUR MAXIMUM RATE DAILY RATE Chicago-O'Hare International Airport ORD $2 $40 John F. Kennedy International Airport JFK $10 $39 San Francisco International Airport SFO $8 $36 Hartsfield-Jackson Atlanta International Airport ATL $3 $36 McCarran International Airport LAS $3 $36 Seattle-Tacoma International Airport SEA $4 $35 Newark Liberty International Airport EWR $8 $34 Phoenix Sky Harbor International Airport PHX $4 $27 Denver International Airport DEN $4 $25 Dallas/Fort Worth International Airport DFW $3 $24 William P Hobby Airport HOU $5 $22 ECONOMY/ REMOTE PARKING AIRPORT CODE 1ST HOUR MAXIMUM RATE DAILY RATE San Francisco International Airport SFO $8 $25 Hartsfield-Jackson Atlanta International Airport ATL $3 $19 Chicago-O'Hare International Airport ORD $2 $17 Denver International Airport DEN $4 $16 Dallas/Fort Worth International Airport DFW $1 $12 As shown in the tables above, LAX's proposed parking rates are comparable to similar offerings at other airports. In addition to surveying parking rates, LAX was able to obtain additional information from Airports Council lnternational's (ACI) most recent (2016) statistical database to compare LAX's total parking revenue per stall relative to other airports. After removing LAX's employee parking stalls and revenue, its $5,610 revenue per stall lagged several other comparable airports, providing a further indication that LAX's current parking rates are too low. Alternative Pricing Strategies CTA Parking garages experience different levels of utilization over the course of a year. Peak air-travel seasons typically come with greater parking demand, resulting in periodic garage closures (poor customer experience) and traffic congestion on the CTA roadways (where parking customers are forced to stay on the road due to garage closures). Conversely, non-peak seasons experience surplus parking in the garages that may be tapped for greater revenue generation. Staff and ABM (LAX's Parking Manager) have also identified conceptual opportunities to incentivize higher utilization of the CTA garages during the non-peak seasons and reducing demand during peak-seasons by periodically implementing a reduced or higher alternative parking rate schedules during select time periods. Page 4 Public Parking Rate Acij Board Report.docx

5 Staff estimates that the higher utilization of the garages during these periods, despite the lower maximum daily rate, may result in an overall increase in revenue of up to $700,000 annually over the current rate structure. Should the increased revenue fail to materialize following the implementation of the alternative schedule or demand for the spaces increase independently of the implementation of the alternative schedules, the CEO can, with proper notice, end the effective period for the alternative rates. Staff requests the Board approve the authority for the CEO or her designee to, with advance notice, increase or decrease parking rates within the CTA (as a whole or in individual garages) by +1-25% of adopted rates to improve revenue and congestion management around the CTA garages. The implementation of this authority will be subject to a future management report to the Board with a detailed strategy for implementation prior to exercise of such authority. Staff believes that the implementation of the above recommendations will help sustain and improve LAX's parking revenue streams through the period of APM construction, preserving funds that will be critical for the future payment of APM and roadway costs. Waiving of Parking Fees There are instances that parking fees may need to be waived for operational efficiencies. Staff requests the Board to authorize the CEO or her designee to waive or reduce parking fees and to prescribe conditions associated with waiving or reducing such fees, as detailed below: Extreme Hardship Staff every once in a while receives requests to waive parking fees from the public experiencing extreme hardship defined as death or incapacity due to health reasons that resulted in extended parking and accumulation of parking charges in the CTA or remote lots that was reasonably beyond the individual's control. Staff recommends that parking fees in these situations be waived or reduced provided legal documentations are presented and accepted by the CEO or her designee. License Plates Issued by the U.S. State Department In the interest of safety, security and operational efficiency, staff recommends parking fee exemption of up to 24 hours for vehicles with license plate or pre-registration issued by the U.S. State Department containing "Consul" or "Diplomat" designation. How this action advances a specific strategic plan goal and objective This action advances this strategic goal and objective: Sustain a Strong Business: Diversify and grow revenue sources, and manage costs. Increases in the public parking rates are expected to increase LAWA's net operating income (N01) from public parking operations by up to $15.34 million in FY Page 5

6 Action Requested Staff requests the BOAC approve the following recommendations: Approve the proposed parking rate schedule for the CTA garages, LAX Economy Lot / Lot E, and VNY Flyaway Bus Terminal Parking detailed in Table A. Authorize the use of the CTA daily parking rate of $40 for ancillary stalls conveyed to tenants or the public on a temporary basis. Authorize the CEO or her designee to implement alternative pricing strategies described in the staff report. Authorize the CEO or her designee to waive parking fees for operational and organizational efficiencies and to prescribe conditions associated with waiving of such fees, as detailed in the staff report. Rescind Resolutions and Fiscal Impact Based on the current mix of short-term and long-term parking experienced in the CTA garages, and accounting for a potential decrease in overall demand due to increased price, staff estimates that revenue in the CTA garages will increase by up to $14.73 million in FY 2019 as a result of the proposed rate increase. Additionally, VNY Flyaway Terminal Parking will post higher revenue of up to $615,000 in the same period. 4. Alternatives Considered Take No Action Staff forecasts continued growth in expenses for CTA garages to the tune of $1.65 million in FY Additionally, parking revenues are projected to go down by as much as $10.04 million during the same period as a result of spaces being taken out of service due to LAMP constructions. By taking no action to address these impacts, the estimated reduction in LAWA's net operating income (N01) from the three public parking operations (i.e., CTA, LAX Economy Lot, and VNY Fly Away Bus Terminal) of approximately $11.50 million will decrease cash available to reinvest in the LAMP projects. Furthermore, this will negatively affect LAX's debt service coverage ratio -a key metric in determining LAX's credit ratings. Increase rates to the highest level seen at other peer airports Staff, in consultation with ABM, considered various factors in identifying the recommended level of parking rates. This included other rates at other peer airports, competing offerings available off airport and potential impacts on demand for parking in the garages. The recommended rate structure balances the goal of increasing revenue while recognizing some level of elasticity of demand. Should staff experience no decrease in demand in relation to the recommended increases, staff may return to the Board in the future to discuss further rate increases. APPROPRIATIONS: No appropriation of funds is required for this action. Appropriations for future improvements to the parking lots and for costs of their operation will be requested through separate actions. Page 6

7 STANDARD PROVISIONS: 1. Establishment or modification of any rate, fee or charge is categorically exempt from California Environmental Quality Act (CEQA) requirements pursuant to Article III, Class 1 (31) of the Los Angeles City CEQA Guidelines. 2. This action does not require the City Attorney's approval 3. Actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section This action is not subject to the provisions of the Worker Retention and Living Wage Ordinances. 5. This action is not subject to the provisions of the Small Business Enterprise, Local Business Enterprise/Small Local Business Enterprise, and Disabled Veterans Business Enterprise Programs. 6. This action is not subject to the provisions of the Affirmative Action Program. 7. This action does not require a Business Tax Registration Certificate. 8. This action is not subject to the provisions of the Child Support Obligations Ordinance. 9. This action is not subject to the insurance requirements of the Los Angeles World Airports. 10. This action is not subject to the provisions of City Charter Section 1022 (Use of Independent Contractors). 11. This action is not subject to the provisions of the Contractor Responsibility Program. 12. This action is not subject to the provisions of the Equal Benefits Ordinance. 13. This action is not subject to the provisions of the First Source Hiring Program. 14. This action is not subject to the provisions of Bidder Contributions CEC Form 55. Page 7

8 TABLE A - PROPOSED PUBLIC PARKING RATE SCHEDULE CENTRAL TERMINAL AREA (CTA) Grace Period/Free Parking First 60 Minutes CURRENT First 15 Minutes $3 EFFECTIVE JANUARY 1, 2019 Every 30 Minutes Thereafter Maximum Daily Rate Exemptions $2 $30 None $4 $40 Described Below* *Up to 24 hours of free parking per entry for any vehicles with license plate or pre-registration issued by the U.S. State Department containing the "Consul" or "Diplomat" designation as Consular Parking Exemption *Exemption due to extreme hardship defined as death or incapacity due to health reasons that resulted in extended parking and accumulation of parking charges LOT C / LAX ECONOMY LOT** Grace Period (Free Parking) First 60 Minutes Every 60 Minutes Thereafter Maximum Daily Rate Oversize Vehicle Daily Rate CURRENT None $4 $4 $5 EFFECTIVE JANUARY 1, 2019 First 15 Minutes $12 $110 ** Includes Lot E or other non-cta surface public parking lots as may be identified in the future VAN NUYS FLYAWAY BUS TERMINAL PARKING Incremental Rate Maximum Daily Rate CURRENT $1 Per 2 Hours $4 EFFECTIVE JANUARY 1, 2019 $1 Per Hour $5 Note: Daily parking rate of $40 shall also apply to ancillary parking stalls conveyed to tenants or the public on a temporary basis Page 8