Thursday, January 24, 2008
Is PAT Stuffing its Pockets With Money?
Two weeks ago we wrote an entry noting the celebration that was about to erupt over the Port Authority’s South Hills garage reaching 50 percent capacity. The authority decided to close down and lease the land where they had offered 600 free parking spots and many of those commuters have opted to forgo driving into other park and ride lots and pay to park in the garage for a $2 per day fee or a $22 monthly rate.
We noted in that blog that many of these users were taking the path of least resistance and parking there for a fee. Albeit anecdotally, those sentiments were expressed in a newspaper article today by at least one driver, who noted that going to another lots is “too much trouble” because “They're all full by the time you get there.” Another noted that “Ninety percent of the people just had to bite the bullet and use the garage.”
Fair enough, but the assertion by the byline of the article that the garage is “finally making money” is just plain wrong. Let’s assume that the current average daily rate of 1,100 daily parkers holds: at $2 per day for 300 days per year, that translates into $660,000 in parking revenue. The authority may still be receiving $56,000 a year from a nearby Giant Eagle which leased a number of spots. They are also getting $131,000 for leasing the land where the free parking used to sit. That equals $847,000 in total revenue.
Now look at the costs—in 2006 the authority was paying Parkway Parking $250,000 a year to operate the facility. Toss in the annual opportunity cost of the capital expense of the garage (it cost $21 million to build) at 7 percent which is $1.4 million and that comes to $1.650 in total costs. That leads to a loss of $803,000 for the garage. Sure, it is better than losing $1.3 million as it was nearly two years ago but the authority is certainly not making money on the garage.
We noted in that blog that many of these users were taking the path of least resistance and parking there for a fee. Albeit anecdotally, those sentiments were expressed in a newspaper article today by at least one driver, who noted that going to another lots is “too much trouble” because “They're all full by the time you get there.” Another noted that “Ninety percent of the people just had to bite the bullet and use the garage.”
Fair enough, but the assertion by the byline of the article that the garage is “finally making money” is just plain wrong. Let’s assume that the current average daily rate of 1,100 daily parkers holds: at $2 per day for 300 days per year, that translates into $660,000 in parking revenue. The authority may still be receiving $56,000 a year from a nearby Giant Eagle which leased a number of spots. They are also getting $131,000 for leasing the land where the free parking used to sit. That equals $847,000 in total revenue.
Now look at the costs—in 2006 the authority was paying Parkway Parking $250,000 a year to operate the facility. Toss in the annual opportunity cost of the capital expense of the garage (it cost $21 million to build) at 7 percent which is $1.4 million and that comes to $1.650 in total costs. That leads to a loss of $803,000 for the garage. Sure, it is better than losing $1.3 million as it was nearly two years ago but the authority is certainly not making money on the garage.
