Discussion Draft. Not For Distribution. Subject to Change.

Version Date: April 9, 2009

FINANCIAL REVIEW AND OFTHE CllYO, SIXSMAR

. ASSESSMENT

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TABLE OF CONTENTS

Introduction

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Page
1
4
14
29
31
33
39 Physical and Analytical Financial Flows Between Star Park and the City

Garage Operations

Parking Pricing

Summary

(_

Other Matters.

Consolidated Recommendations

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INTRODUCTION

The Portland Bureau of Transportation (PBOT) is the steward of the City's transportation system. PBOT provides for the safe, efficient and environmentally responsible movement of people and goods, and maintains and enhances the transportation infrastructure crucial to Portland's economic vitality and livability.

In November 2008, PBOT assumed management of the six City-owned parking garages in the SmartPark garage system from the Office of Management and Finance (OMF). The SmartPark garages house 3,725 parking spaces and 71,800 square feet of commercial space. PBOT now

oversees the contractors hired to manage the day-to-day operations, provides policy

direction for the parking system and makes decisions rega garage system's business and

public policy goals. The principle contractor is Star Park, anages and operates the garages,

including the subcontracts for security and janitorial significant contractors include

DGM (revenue system hardware and software install nce) and Pictoform (wayfinding

signage). Supporting services provided by oth facility maintenance and

commercial lease management.

OMF resourced SmartPark garage management analyst. As part of the managem garage manager. He started in the n

part-time financial araaes with a full-time

year contract renewal through , 2009 through June 30, 2010

sparent in ing requested information and and in the garages were polite and consistently . e and open access to their records. The for a collaborative relationship with the City nter.

T OVERVIEW

To support the the contract renewal decision, POOT requested AKT to

provide a financial analysis of current management practices for the SmartPark

garages, focusing on 2005-2006, 2006-2007 and 2007-2008. AKT's review was

conducted in four phases. we reviewed the City financial records, contracts and related

documents and interviewed OMF and PBOT personnel. We also conducted a street review of current competitive parking facilities and pricing. An analytical framework was developed from this initial phase to use as the basis for the analysis and assessment at Star Park and the garages. Second, we conducted an on-site review of Star Park operations and financial records, interviewed Star Park personnel and observed operations in all six garages. The financial records sampling was based on three months from each fiscal year (three consecutive months, three random months, three highest revenue months and the semi-annual six month records for all three years. Samples from the current fiscal year were also reviewed. Third, we did in-depth research in specific areas based on initial findings from phases one and two. One month of financial records was traced in detail from garage operations to Star Park records to City records. We conducted an on-site interview and records review at DGM. Finally, we distilled our research to the following assessments and recommendations.

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SMARTPARK FACILITIES AND FUNDING EXPECTATIONS

The SmartPark garage system mission is to support the economic vitality of the central City by providing an affordable system of parking garages that primarily meets the short-term needs of

. .

shoppers, visitors and business clients. Thesecondary purpose is supporting investment in other

transportation improvements.

# of Spaces I Location in downtown

N,ame Floors fortland Primary Busine~~

.

1st & Jefferson

860/9

Naito & Davis

449/4

123/1

See Appendix 1 for a map of SmartPark garage

The Station Place garage is part of Development Commiasion (PDC) and managed by PBOT are also outside the

by the Portland parking lots

The SmartPark garages are debt service expenses associated with the refunding bonds until

contribute $100,000 to rln"ftIt-;~;rt:i\1i/n a stable fu

operating, maintenance and expected to service the debt ce for the parking system revenue million for general PBOT use and

flow is expected to be sustainable, resulting in for the construction of new garages or not used to replace existing buildings or complete major projects so that the existing These financial goals are balanced with the discussed below.

c

Garage facility m Facilities Services of 10th and Yamhill,

adequately funded and consistently executed by the City aragesare considered to be in good condition with the exception

The City has worked with PDC to make improvements to the 10th and Yamhill garage as part of an effort to improve the area around the garage. The City desires that the property be demolished and redeveloped as a mixed use project to improve ground floor retail, seismically improve the parking structure and develop the air space about the parking structure for potential new housing and office/educational/cultural commercial uses, such that the property serves as a catalyst for area investment and improvement. The current financial plan under discussion involves the Parking Fund paying $3.5 million from its major maintenance account as a result of having already planned to make improvements to elevators and commercial space. Tax increment money will fund the balance. Given the current economic situation, it will be difficult for this project to move forward.

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A memorandum of understanding was signed in September 2008 between OMF, PDC and Carroll Investments LLC, the project developer. The Memorandum of Understanding (MOU) is in effect for 18 months, with the major contingency being adequate financing. See Appendix 2 for the MOU. Due to the plans for demolition and redevelopment, major maintenance, such as identified sewer problems, has been deferred. In consideration of the building issues,the commercial lease tenants are not paying rent.

STRUCTURAL CHANCES WITHIN THE

CITY MANAGEMENT OF THE SMARTPARK GARAGES

The City has had a variety of oversight structures for the Sm time or part-time garage manager or a third party intermediaoz Most recently, the garages have been managed as part of range of other duties. He was supported by an OMF duties. The recent OMF structure was established left OMF and the position was eliminated.

garages; including an internal fullsuch as Portland Progress. of an OMF manager with a broad

Iyst with a similar broad range of the full-time parking manager

PBOT has opted to return to a full-time manag hired a parking garage manager to oversee the 0

years experience in the parking in both the

business and operations perspective PBOT's intention to find efficiencies research the benefits of bringing the d

house as away to further

has over 14

inistration of the garages in-

and especially the pa the garage rns

mm ." s, the varying oversight structure,

, has had a significant detrimental impact on

he City's contractors. Star Park and DGM r firms by the City has varied with the City agement and their resulting focus within the of meetings with the City manager decreasing when the communication regarding short term changes in rates, easures for Star Park and no formal evaluation of Star

Strong support for a full-ti . manager position was expressed throughout our discussions with

the City and its garage There was general agreement that the part-time OMF manager

and analyst provided good support and made appropriate trade-ofts within the limited time and resources available to them. The opportunities for improvement are not seen to stem from a change in personnel or the shift from OMF to PBOT but in a change in management structure. The garage business is of sufficient size, complexity and funding impact to merit a return to the full-time management model.

AKT concurs with the need to shift to a full-time manager model. As will be noted below, there are a number of opportunities for improvement in the garage operations and financial flows. Implementation of the recommendations will require the attention of a full-time manager.

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PHYSICAL AND ANALYTICAL FINANCIAL FLOWS BETWEEN STAR PARK AND THE CITY,)

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The major service provider for the garages is Star Park. Star Park not only manages the revenue collection on the behalf of the City, it also manages the largest costs associated with garage management; personnel, janitorial and security services. For this reason, the City's relationship with Star Park has been the major focus of this project.

CONDITION

............................................................................................................................. "' " ;

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Revenue: Recording Process

See Appendix 3 for diagram of the process.

• At Star Park: We observed the revenue Summary transactions from cash register operator. Over rings and errors have spreadsheet. Validations are documented Check or cash payment for n-onnTnl\! ~"" .... v,>~ headquarters are entered into the results of this process. Lot Sums a

Star Park headquarters. spreadsheet by the shift are entered into the another individual. or at Star Park

• At the Garage: At each has a hopper deposit of each day, the day. The main d

are maintained, one of which opened). During the morning is created for pickup later in the

ions, the garage manager and the vault

car driver. Combinations for the garage to 4 months by Paul McCoy. Paul McCoy

Shift

for the busiest lane in the largest garage) which they "pay shift, they make cash drops when cash in their drawer

re p by the operator in the hopper safe. When additional

the garage office where the site garage manager provides it.

Each day, the site and the vault manager count the drops and compare them to

the cash register tapes shift operator. Tickets are bundled with the cash register tapes

and now empty drop envelopes. All the cash is counted at least twice and bundled to create the deposit. Both the site garage manager and the vault manager sign the deposit slip. The armored car driver signs the slip when he picks up the deposit. Tickets, drop envelopes and cash register tapes are senUo Star Park headquarters.

The site garage manager also maintains his/her own "bank" from which he makes change for the shift operators during the day. The site garage manager's fund is to be audited once during the day. Conversations with the site garage managers, inconsistent documentation indicating audit conducted, and the lack of a count during the one month absence of one of the site garage managers indicate this procedure may be followed sporadically and/or vary by garage.

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The supervising garage manager assigns and periodically resets the combinations for the site garage managers and the vault manager. The supervising garage manager also has access to all the keys of each garage office.

•

At the City: The City prints out the daily copies of the bank statement that relate to SmartPark bank accounts. The copies are sent to Star Park for coding the garage location and type of revenue generated. Star Park uses the Lot Sum. reports to make this determination.

Periodically, but at least once per month, a cash receipts journal is created to summarize the activity. No effort is made to segregate the activity by transaction month. The entry is made based on the day it entered the bank.

Revenue: Matching Process Lot Sum reports (Appendix 4) were matched to the m Star Park for each garage. No material discrepancies \nI ... ·,· ....... ".·"

and Loss statements produced by

Lot Sum reports were matched to bank C>T<=ITOnnOr1T for this period are attached as Appendix 5. from those parked past closing hours were n garages or between days. The la Monthly revenues make up 11.7% of

July 2008. Discrepancies the fees collected necessary between monthly parking.

in the daily revenue. Validations p. The City does not receive payment of this portion of its ore than $150,000.

•

to ruri the booths at each garage. Wages,

re cha irectly to the City. Star Park provides internally

distributions from the City.

re to employees and provides the human resource

management n employee evaluations and benefit management. Documents

provided by Star are aware of legal requirements regarding Equal Employment

Opportunity (EEO) a with Disabilities Act (ADA) compliance. Turnover at the garages

is reported to be low by management. Star Park documents the training received by each

shift operator. Site garage managers interviewed have more than 10 years tenure. Star Park reports that site garage managers are rotated every 2 to 3 years. However, conversations with the site garage managers indicate that actual rotation is much less frequent. Star Park attempts to keep family members from working in the same garage, but admits this is a difficult task as relationships are not always identified during the interview process.

Shift operator overtime hours appear to be reasonable, especially considering that the closure of most garages is dependent .on the number of cars remaining in the garage before closing. For 2006 through 2008, Star Park provided reports indicating that overtime has been between 2.7% and 3.5% for the periods provided. Overtime reports are shown in Appendix 6.

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Star Park has reported minimal employee claims during the time period under examination, all of which were settled satisfactorily with employee.

• Janitorial Services: Star Park manages ali janitorial services. A description of services provided is included in the operations review below. Service calls beyond daily maintenance are initiated by site garage managers or shift operators. There is no evidence of a process to acknowledge the service provided. Star Park records the subcontractor invoice in the month received, but pays the

I vendor once it has received reimbursement from the City. Janitorial metrics are provided with the

I monthly summaries.

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Security Services: Star Park manages all security services. included in the operations review below. The security firm m incidents. Star Park records the invoice in the month received reimbursement from the City. Security mt::.'TI"I/'C

A description of services provided is ns a log of all security patrols and , but pays the vendor once it has with the monthly summaries.

•

Other: Star Park is also responsible for purchas preprinted ticket stock and other miscel are all subject to reimbursement from the C

, uniforms for attendants, ints of the contract these

Financial Reporting

Star Park sends a packet of inform packet (Appendix 7) reports on system paid, voided tickets and monthly m".Tnr'I'\1I incident reports for secu activity. Currently, no fi were provided to the and aging reports, nor

the scope of

This

me comparisons to prior year profit and loss statements. :;:--l!:>"'t'nl nts receivable reconciliations the City in the monthly summary report within

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are not fully accrual. Reimbursable expenses the City. The expense mayor may not be for

request is made, '/1\'11'","""" at the garage sites

recorded on a cash basis, not accrual. Fixed assets nor depreciated.

The City records all recei on a cash basis. Some effort is made to adjust revenues to

accrual at the end of the No effort is made to reconcile the differences between Star Park

financial statements and those produced by the City. Expense classifications used by the City do not mimic the classifications used by Star Park.

In summary, profit and loss reports from Star Park cannot be matched to those produced by the City, for the following reasons:

• Star Park records revenues on an accrual basis for daily collections and validations. Monthly revenues and carpool revenues are recorded on a cash basis. The City records all revenues on a cash basis.

• Classifications of expenses used by Star Park and submitted to the City are not mimicked when the payable is recorded at the City.

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• Star Park records reimbursed expenses in the month the request for reimbursement is made. The City records the expense in the month it is paid. Neither is consistently using the accrual method of

---~. accounting for disbursements.

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• The City incurs expenses and some revenues not associated with Star Park.

Appendix 8 and 9 contain full year Profit and Loss statements produced by the City and by Star Park respectively.

Bad Debt and Collection Processes

Accounts receivable billed and collected by Star Park and due to the City have not been processed as

dictated by the internal procedures reported by Star Park, whlchI the process is conducted on a

regular basis (Appendix 10). The manager in charge of Star Park indicated that write ofts

and collections first occurred in mid 2008 for receivables as early as July 2005. In addition,

the process of bad debt collections and write ofts may Iy applied. Appendix 11 is a

summary of the client and amounts written off. A and a number of others

are existing businesses and current receivable deemed uncollectible be sent to the

ay require that accounts

Projections The City contract with Star Park created by Star Park and presented tn9;'fb.=;"?~;if.\'~,

methodology used to develop the projectio the methodology is the C

five year revenue projections will be to provide an explanation of the the projection data and indicates

security invoices

'I"IQlmQlnT fees, reimbursement for janitorial and reimbursement for other expenses. These ~l"'IniTr<>,""'T terms as follows:

• Man

mu",,,,rr,nm the annual fee to be presented at the end of the month the first of the month with July 2007 contract extension.

•

costs - Due to the City by the 5th of the following month, bill to be received by 15th.

costs incurred.

• Security and janitorial ents - Due to the city by the 10th of the following month. Security

and janitorial invoices to be paid within 5 days of receipt of City reimbursement City's payment date not specified.

Star Park management indicated that payments to janitorial and security vendors are made shortly after receipt of the reimbursement from the City.

Payment of the invoices presented to the City are erratic and may include invoices paid in advance, or invoices presented, but not paid timely. In one case an invoice may have been paid twice. The lack of a regular schedule to receive and pay invoices is evident in the graph below, and makes management of the garage financials more challenging for management.

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Payments Made to Star Park

300000

250000

200000

150000

100000

50000

-+-2004 ..... 2005 .......,..,2006 .....,.....2007 ~2008

Scope of Services The contract with Star Park exoncm details and the responsll~m\!~§: decreased, but contin

, Appendix 12 provides presented to the City has

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recommendations to the City on monthly, all for 2008 and prior.

Security The City contra The City is unawan receives sufficient package (Appendix 7).

for sub-contractors to provide reports directly to the City.

such documents on a regular basis, However, Star Park sub-contractors to provide a summary of activity in the monthly

CRITERIA AND EFFECT

......................... 0 •• r.' •••••• , ~., ' .. , •.•••• _, .•..••••..•••• _ •••• _ •• , __ •.•• _ •• _ _. r.O _,. _, •••• __ •• r._ ••••• ' •• __ , <b ••••• dO "., •• '.' •• H •• 'H, U n.u •• H. roo •••• 0 •• rHO n •. , .0 •• .," •• "q" .,.~ •• _, , •••••

Financial Statements

Among the items Star Park is required to provide the City are monthly financial statements prepared in accordance with generally accepted accounting principles (GAAP). A set of financial statements generally consists of the followingiterns:

• Balance Sheet

• Profit and Loss statements

• Accounts Receivable Aging

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• Accounts Payable Aging and other Liabilities

• Cash Flow

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} • Budget to Actual analysis

Balance Sheet

For each garage the balance sheet would

r: Accounts Payable and Earni to Date.

"-_ j assets, payroll liabilities

Until mid 2008, Star Park provided Profit and loss statements in their monthly package to the City. However, no aging schedules, balance sheet, cash flow or budget to actual analysis have been provided during the fiscal years of 2006 through 2008. In addition, the schedules have not been fully accrual based statements.

To this list, we would add lot Sum reports as they are a pivotal piece of understanding accrual based revenue recognition.

Both for contractual and management reasons, full sets monthly to the City. The financial record keeping s accrual, basis.

statements should be delivered on at least a shared, if not full

EFFECT: Without a shared basis of acco their information. The City loses its ability internally generated financials.

ot reasonably reconcile Park by comparing to

for prepaid expenses, fixed rocetner the billings, collections tJ'>i(,!,soxtJ,cture of all the activity.

EFFECT:

"'<:II"JII~Ul track non revenue and expense items such as are important material items that City needs

needs to recom provided for compa current year, year to prior years is also useful. Star Park and the City.

ents for the City monthly package. This practice statements are most useful when prior period information is example, current month, this month last year, year to date

Another column providing the difference between current and statements analysis can be made and discussions held between

EFFECT: Much of the ability to manage financial information comes from higher level analytics. Developing trends is one kind of internal control as well as management tool.

Accounts Receivable (AR)

There are three major categories of accounts receivables; validations, monthly parkers and carpool. Each of these categories has a different process surrounding the billings and collections. Segregated reporting of the categories is necessary for a manageable understanding of the status of the customer base.

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When AR aging reports were requested from Star Park, wewere provided with hard to read schedules showing a combination of all City related receivables. When queried, management stated they didn't

normally provide AR aging reports to their clients. 't

)

EFFECT: Collection efforts will be less successful and errors will be less likely to be caught, and therefore corrected in a timely manner. AR cannot be effectively managed unless segregated by

income stream and reported to the City on a regular basis.

Accounts receivable management is dependent on the timeliness of information. Statistically, the success rate of collections is directly related to how quickly and frequently collection efforts are made. Star Park did not make any effort to collect on bad debts until mid-2008 for receivables due to the City

from July 2005 forward. Star Park classified $58,004 as bad and in this same effort collected

$23,418. As indicated above, a number of the customer de off belong to existing businesses

and other businesses show a credit write off. Both indi I for past errors being written off

rather than researched. When receivables are , errors are caught quickly and

corrected. Old receivables are more difficult to

EFFECT: The exact dollar of the' loss to assumed it is higher than it would have been h'!;il:::!',(Q!'tnF"tct

It can be

Validation Income Star Park appropriately garages. Once the validations are rQr·c.I\.,a and accumulated for some responsible customer. average $150,000 per indicate a more careful

one factor to r. ColI<;;;v~I~1J1I

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City accounts. Validations ity of these transactions would and adhered to. Time value of money is only n billing is more frequent.

ation income on the Lot Sum reports and the due to a lack of clear monthly cutoffs between billing occurs. The City, however, needs to receive a between redemption and collection. The City also customers which ties to balance sheet accounts.

EFFECT: The City of the income due to it from validations. Star Park has no

all validations are billed appropriately because there is no

reconciliation of validation Lot Sums. The risk to the City is high as the amounts are material

and the controls are insufficient.

The City records validation reyenue only when deposited. The City has no process in place to track the receivables balances related to validation revenue.

EFFECT: The City cannot accurately estimate the coming from validation customers. The risk to the City is high as the amounts are material and the controls are insufficient. The time value of cash is a factor with validation customers. Customers have the use of City funds for more than one month between the time the validation is issued and the payment is received. The cost is between $500 and $750 per month.

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Monthly Parkers

Star Park records revenue from monthly parkers when received (cash basis). Star Park maintains the list of monthly parkers, but does not provide that list to the City. Star Park does not provide an AR aging report for Monthly parkers. Monthly parking income averages $92,000 per month or 12% of the revenues generated by the garages, The materiality and regularity of these transactions would indicate Star Park should be accruing these revenues and collecting against the accruals.

During the month, monthly parker payments are received in cash, credit card or check at garages, in cash or check at Star Park headquarters and as credit card or ACH payments directly to Star Park bank accounts. Funds received at the garages and cash and check received at Star Park are deposited with

the daily deposits to City accounts. However, credit card or payments from monthly parkers

received directly into Star Park bank accounts are accumu per month they are remitted

to the City. These payments average $50,000 per month.

EFFECT: Star Park has use of City funds for an in Star Park accounts and deposited to City per month. The contract with Star Park req 5 days; current conditions are in violation.

between the time it is received City between $150 and $250 passed to the city within

Star Park does not provide areca billing and collection of those funds. however, needs to receive a monthly customers list, billing and collection. The which ties to balance sheet

er list and the

of accruing income. The City,

e relationships between the monthly AR aging for monthly customers

EFFECT: The City processes in place City is high as the

parkers. Star Park has no given to the City. The risk to the are insufficient.

The City track the

uO'Ju~ited. They have no processes in place to

customers.

ate or monitor funds due from monthly parking ",,,,',rng amounts are material and the controls are insufficient.

Carpool I ncome We did not explore this in inside the City and Metro. either the City or Star Park.

as it is not material to the City and much of the process is done I the same basic processes described above can be applied from

Accounts Payable (AP) and liabilities

Star Park accumulates and records expenses incurred on behalf of the City into the month the reimbursement request is generated. Our sampling of invoices found instances where expenses from one or more months prior to the current month were included in the reimbursement request and recorded to the current month. While the impact to the City from month to month would not normally be material, processes should be in place at Star Park to accrue invoices that are material.

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Cash Flow

The City does not have sufficient information to create a cash flow statement and Star Park does not provide one. In addition, the method of record keeping for both Star Park and the City are too inconsistent to provide a meaningful statement. At a minimum Star Park and the City need to share an understanding of the accounting basis and preferably move toward a full accrual based accounting process. While cash flows are not the part of every internally generated financial package, they provide the user with a useful management tool.

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Budget to Actual Analysis

Star Park assists the City in the preparation of annual budgets and revenue-only projections for

quarterly and five year reporting. However no monthly by ga are prepared by either Star

Park or the City. The contract with Star Park states no res beyond budget are allowed

without approval. In the current situation, that agreement possible to monitor or fulfill.

The City needs to develop or receive from Star Park received from Star Park needs to include budget

EFFECT: The City cannot effectively m meaningful comparisons to anticipated reve

provide a tool to catch errors and costs

garages without analysis can

Projections

Contract specifies that five City. Star Park is to provided in writing and-garage manager, UI;:) ..... U,);:)t~ requirement.

Star Park and presented to the above, the projections are n statements from the City's prior sractorv. Star Park complies with this

c.

for reimb When rigorously also transmits an i be presented at the presentation in advance

and supplies on its behalf. Star Park presents invoices n Star Park receives payment they pay the vendors. r Park benefit from good vendor relations. Star Park .... orY>O .... T fee on the first of each month. In 2004 the invoice was to for services rendered. In July 2007 that was amended to reflect

Appendix 14 provides the delivery dates of invoices and the dates of payment made by the City for management fees. The table below presents averages, by year, of the difference between payment date and invoice date. This calculation was based on the invoices dated on the first day for the month of service. The net result is Star Park is receiving its management fee 7.91 days before the commencement of services for the month.

EFFECT: The City is paying in advance for services not yet delivered which is in conflict with City policy.

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Discussion Draft. Not For Distribution. Subject to Change. Version Date: April 9, 2009 Star Park Average Management Fee Payment Schedule

Appendix 15 provides the delivery dates of invoices and the City averages payment within 2.89 days of invoice delive vendor insists on picking up the check, and presses . expressed concern that the tight turn around does not

payment made by the City The . OMF and PBOT report that the n""'IY\,,,,nt each month. PBOT has

EFFECT: The City is forced to accelerate short. OMS and PBOT report internal quick turnaround.

n the payment cycle is too Star Park's request for

As noted above, the City has, in recent operational management of financial records 08I'iNefm turnover within OMF.

" .... , •. "' .... + its resources away from the had resources to reconcile ition, there has been some and/or eliminating key pieces of

e full benefit of the revenues the garages are .IIV·iS:;SI(:l.CK of resources is telling in that the reporting actions taken.

minimal volume. Maintain to demonstrate the ne~:a~land

provioes similar services. These include other large

clients. Star Park has developed processes that require opportunity for Star Park to gain efficiencies through meet City requirements will require ongoing focus from the City City.

The shift to a full-time g and to be participating in or di

is an opportunity to regain control of the financial transactions ng how revenue streams are managed.

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CARACEOPERATIONS

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Star Park was established in 1997. In 2003,Star Park teamed with the Alliance of Minority Chambers to form the Contract Management Group, LLC (CM Group). The CM Group includes the African American Chamber, the Hispanic Metropolitan Chamber and the Philippine American Chamber. In July 2003, Star Park I CM Group was awarded the Garage System Services contract. In August 2004, the CM Group was awarded the contracts for Parking Attendant and Revenue Services for the City of Portland SmartPark garage system. Both contracts were for terms of approximately five years through June 30, 2008, with options of two one-year extensions. The first option has been exercised, extending the contracts to June 30, 2009.

The garage system services contract includes hiring and janitorial services. Those subcontracts are included in the

subcontractors for security and below.

The Star Park contracts, sub-contracts and . follows:

• Star Park Management Contract - Agreem

o Contract #34879 .

o Ordinance #177316 ..

• Star Park Operating Contract -Ag Garages and Surface Lots

in the Appendix as

......... Appendix 16

.. Appendix 17

and Revenue Services for Parking

o

~~~"" .. Appendix 18

................ .. , Appendix 19

ntr~>riti:ii{ith'·"ugh June 30, 2009 Appendix 20

Business Alliance, further subcontracted to

'.' Appendix 21

CleanScapes Appendix 22

•

•

•

in operations review below is for the revenue system

software and supporting the City garage revenue system since 1997.

Concurrently with existing contract, signed March 2003, is being amended to

accommodate changes the City conversion to a SAP business system, provide an

updated equipment the scope of services provided for a fixed monthly fee, define

response and repair times and to add City-standard clauses to make this Contract consistent with current City contract and procurement policies.

The current DGM contract #34769 is found in Appendix 23.

CONDITION

Management and Personnel

Management Fees: Per the City's agreement with Star Park, the annual management fee is adjusted per the Consumer Price Index, published at ww.bls.gov, with authorization from the City.

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The management fee was established on a total contract service basis. The monthly management fee invoice allocation across the garages appears to be a percentage split established to support a Profit and Loss statement by garage. No evidence for the allocation basis was found. There is no detail to identify the specific Star Park personnel and tasks included in the monthly invoicing. The City has not conducted a market comparison of management fees for comparable garage management services.

Operations Wage Costs: The Office of Management and Consumer Price Index - Wage Earners (CPI-w) as well as Portland to determine allowable wage increases for ho contracts.

ance reviews the Portland/Sale II financial picture of the City of under the terms of the Star Park

• The Star Park operations . n titles per the City contract.

1.

a.

~,_:..!.:=~~~=~::!.!..:::!~'. 1 page of performance and instructions on completing a performance evaluation, conduct notice and exit interview

b.

c.

i. One page: Fair Wage Policy ii. One page: Health Benefits

iii. 19 pages: "Working at Star Park" personnel policies

2. General Operations not specific to SmartPark operations

a. Cash Control, Accounting and Auditing: 1 page, summary definitions and list of tasks. Not consistent with SmartPark practices. Examples: Cash drop level stated at $200 however practice is $100. Deposit transport stated as armored car service however Naito & Davis and Q'Bryant Square are transported by vault manager.

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b. Operating and Maintena.nce Procedures for Reven~e Control Equipment

i. One page

1. List of operating procedures for revenue control equipment. Each is a list of steps such as "insert ticket," "push enter," "follow steps #4-#6 in exhibit A".

a. Exhibit A is not explained or included in the manual.

2. A paragraph stating that the Amano equipment and McGann software is maintained by DGM under contract to the City of Portland. lnstructions reference the Exhibit Gof the SmartPark management contract with the City of Portland.

a. Exhibit G is not explained or included in the manual.

ii. One page

1. Listing of four revenue equipment machi puter with maintenance steps for

each, frequency of maintenance and (DGM or Garage attendant I

assistant manager).

a. No instructions included

completed: On time policies, er service protocols, fee validation machine, cash handling ticket dispenser, booth appearance and closing

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c.' Personnel Training Plan i. . One page overview of training process.

1. A list of three manua cashier booth: Fee handbook outlining

2. A list of

for new employee to work side by side with

d.

ists for cashier, manager/lead cashier, supervisor. Examples: of shift, check ticket inventory, inspect overnight log weekly.

e.

i. One page with steps for approving lost ticket and sample of a form to be filled out and attached to the blank ticket.

1. No evidence was found during site garage observations that a separate form is filled out and attached. All exceptions written on a ticket. No attached forms were seen in ticket bundles.

f. . Emergency Procedures

i. Two pages of general procedures to follow for robbery, fire prevention, bomb threat, stolen l vehicles and earthquake.

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ii. Two pages of example robbery identification form and fire extinguisher descriptions. 1. No garage specific content, such as evacuation routes.

3. Specific to SmartPark Operations

a. Overview of SmartPark garages .... one page

b. . Personnel Staff Schedules and Job Description

i. Contains only the garage manager job description. No date.

ii. Staffing schedules for 4th & Yamhill, 1st & Jefferson, O'8ryant Square only. All dated October 2004.

c. Staffing Plan including Special Events

l. One page overview of Star Park's intent to Ii. Staffing schedules for 3rd & Alder, 4th & Y Square, all dated November 2004.

e and special event staffing.

mhill, 1 st & Jefferson, O'8ryant

d.

The manual's lack of relevance .and observations. One manager found the assumed the manual was in the office but ~''''V.'.UJ'

found it in a corner under anual.

Site Manager and staff rotated every one to .. described the

. that the site garage managers and years. However, the site garage managers for illness and vacation coverage. One for 14 years, then 10th and Yamhill for the

was no evidence of

Ilt:I~~!g)lV::', new Star Park employee are trained through initial ide with a seasoned cashier for the first few days. There :cc,r\l,,.,c training, as required by the City contract.

Local Office: Star Park compliance with the City

e city garages from its central office in downtown Portland, in

Garage Management Communication: Star Park and DGM both noted that their interaction with the City diminished when the garage management structure shifted to being part ofa job. The Star Park performance measures have not been developed and performance evaluations for Star Park have not been done. The City has not complied with its stated contract responsibilities.

DGM's primary contact with Star Park is with the City Contract Manager, Tom Rudig, on an almost weekly basis. The Contract Manager's focus is on the numbers and reporting with little site operations involvement. DGM has very little interface with Paul McCoy, the supervising garage manager. DGM's primary communication for garage operations occurs with the site garage managers.

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Daily Operations

Opening and Closing the Garages: The office and cashier booths open between 6:30am and 7:30am. The opening processes are dominated by the cash handling and revenue reporting procedures outlined in the Financial section above. The largest garages close their shift booths in the early morning hours when there are approximately 20 cars remaining. Naito and Davis andO'Bryant Square have hard building access gates that close at defined hours regardless of the number of cars remaining. All the garages except 4th and Yamhill are closed by one shift operator. 4th and Yamhill is closed by two operators who lock up and leave together. No reason was stated for this difference. The closing operator places an envelope on each remaining car and logs the license plate; Payment is made on an honor system, with the exception of O'Bryant Square. O'Bryant Square is a valet attendant operation. The ticket is paid when the car is claimed. As noted' Financial section, the overnight parking is not reconciled for payment pursuit.

Revenue System Operations: Both the City ,...n"",T"<:>I~" system training for the garage staff. As noted experienced cashier. DGM provides training

training is difficult to document as only three of months are documented as training. It is but the extent cannot be estimated. The DGM

require revenue ing consists of working with an The extent of the DGM calls over the past 16 . during other calls

dix 25.

During the on-site interview, DGM rna operator skills (technical and language) hardware and software upgrade, the gap speaking staff with te Unfortunately, this gap

with the growing gap between booth exity of the equipment. With each Star Park needs an English pport the operations staff.

This gap between shift PBOT oroceeos

irements will become more critical over time if in the most recent proposed Budget. While reduce some of the garage-attendant labor of cash transactions handled through parking the transition to more sophisticated equipment will staff. DGM noted that this is a systemic issue

require a hi across the parki

Car Occupancy site garage managers monitor occupancy via the revenue

software, with the Square that has manual occupancy tracking. Vacancies are

counted at least once and multiple times per day, and the computer count adjusted as

necessary. The site garage manager determines that the garage is full at a level appropriate to the garage mix of daily and monthly parkers, as noted in the Site Garage Interviews and Operations Summary in Appendix 26.

Parking Tickets: The City contract requires pre-numbered sequential time stamped tickets, printed to City specifications and a daily recording of ticket numbers issued, batch number and total tickets sold at the garages, recorded in a daily log. The tickets do have serial numbers but this numbering system is not used by Star Park. The revenue process is based on the number stamped on the ticket when it is issued from the gate ticket dispenser. The first and last tickets printed by the ticket dispenser each day are included in the ticket bundles submitted with the revenue system reports.

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Star Park uses the revenue system generated numbering and their revenue reporting as the daily log. For this reason, ticket inventory is kept in boxes in each garage office. There is no log or control on the inventory.

Access Cards: Access cards are provided to monthly parkers and other authorized persons. Cards are issued by Star Park and the City. The City sends a list of issued cards to Star Park monthly. The McGann system is used to activate and deactivate the access cards. As noted in the Financial section, monthly parking, and thereby Star Park access card inventory, is not routinely reconciled by Star Park. A full reconciliation of the access requires an additional step of a coordinated reconciliation routine with the City card inventory and authorized users. No evidence of such a reconciliation was found. During the on-site observations, one site garage manager provided an exception report used to log access

given for lost or malfunctioning cards. There was no evidence . log was cross checked with a list

of valid access card holders. In another garage, a cashier giving access to a monthly

parker who forgot the access card. There was no being noted on a log or exception

report.

Validations: Downtown merchants will valid The SmartPark website lists <>y,,",rrYVI

e parker patronizes their However, the Star

No evidence was found to confirm the

customers.

Online Access to Revenue System:

hardware and software was ng onl

City Bureau of lnformatlor manager did not push operations was only a access to the garage

upgrade of the revenue system management. However, the reasons. The OMF garage e!;!~~~~ that he would use it as the garage and the City does not have online

Office I responsi brochure All areas

::.n~'n"'iii:ijX., Per the City contract, Star Park is directly nue equipment, restrooms and information

environ and welcoming, professionally run appearance.

during the site observations.

Permits, Examples include

Park provided certification promptly upon request. and elevator operating permits.

Revenue Hardware a

DGM: DGM provides service to repair, replace and upgrade existing parking access and revenue

control hardware and software. Per the interviews with Star Park personnel and the OMF garage

. manager, the technician support is timely and effective. The profile of maintenance calls from

November 2007 to dataa period of 16 months, includes:

• Average number of calls per month: 31

• Number of calls not billed from Jan 2008 to June 2008: 98, 44% of the 220 total calls

• Number of call not billed from July 2008 to Feb 2009: 21, 10% of218 total calls

• Total service hours logged: 490.75

o By garage:

• 3rd and Alder

129.25 hours

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• 10th and Yamhill 121.50 hours
• 4th and Yamhill 107.50 hours
• Naito and Davis 64.50 hours
• 1 st and Jefferson 61.50 hours
• Q'Bryant Square 6.50 hours
0 By stated reason for the call
• Computer 197.25 hours
.' Ticket Dispenser 138.00 hours
• Gates 59.00 hours
• Prevention 27.50 hours
• Validators 22.00 hours
• Other 48.00 hours DGM maintains a spare parts inventory in one of the contract, DGM is to maintain a Preventive Mainte manager. There is no evidence, that DGM records of the service calls, DGM created ana, specific request.

requirement. Per the City this monthly to the City garage When AKT requested ng,system,to meet this

DGM management reported that Park. This is typically the site garage office staff. DGM has not been requesting the work is noted in the work recently being included in technician performing work order tracking.

s accounting system, which is are entered directly by the [fI~!F<:0\JyorK performance substantiation or n the accounting system. DGM I process. The work records also flow to the , ces with no additional verification. AKT noted ,'arage, a repetition feature within Quickbooks. in the service records as was demonstrated

being attributed to the site garage manager, Ziena,

DGM management documentation of service calls was done at the outset of the

City garage support in was discontinued after a short period. Reasons stated were

the paperwork provided the City garage management staff, and the person on site at the

garage not knowing what been done and hence, the City not seeing any value in the

signature authorization. Examples of complex situations for signature authorizations include a central management authorization for updating all the cash registers for a new cashier, repairs done remotely over the network that do not require site visit and providing a temporary part replacement while the original is taken for repair at the DGM shop.

DGM is the only dealer with rights to install and service Amano equipment in the State of Oregon. (See Appendix 28 for the dealer authorization letter.) For this reason, service relationships with DGMare typically of a long term nature as they are with the City.

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Star Park: Per the contract with the City, Star Park is expected to ensure routine maintenance is performed by DGM, to be the primary party responsible for addressing all equipment breakdowns and malfunctions and to make the initial contact with DGM. Per the DGM management interview and records, Star Park initiates their service work. Star Park is also required to report DGM maintenance and repair activity to the City. However, no tracking of DGM calls or service is done by Star Park. Nothing is signed by the Star Park employee initiating a service call from the central office or the garage at the conclusion of the service work. All the shift operators as well as the site garage managers have keys to the gate equipment and are expected to do minor trouble shooting repairs.

Security Services Star Park Subcontract: In March 2005, Star Park Vincent de Paul Enterprises to the Portland Business subcontracted the security services to Portland Patrol, Inc. of armed security officers in the SmartPark garages. Alliance / Portland Patrol expires June 30, 2009 and

security subcontract from St. and Business Alliance in turn me, the City authorized deployment bcontract with Portland Business dix21.

The subcontract provides for full service secu officers. Portland Patrol is expected to coordi

occasional use of Clean and Safe Secu Program

and unarmed security ces, Inc. (PDSI) for

Compensation is paid based on actual dictated by Star Park's garage manaoemsr payment terms in the current subcontract

9.5%

.97

3.8%

increased service hours in combination with an hourly Price Index - Wage Earners (CPI-w) guideline.

The Star Park nce reviews of Portland Patrol had overall performance

evaluations of Very G ing, respectively, based on Portland Patrol's experience in the

garage system, their align the downtown Clean and Safe program and the responsive and

flexible prevention network of and foot patrols. This positive assessment is consistent with the

comments from OMF garage management, Star Park management and the site garage managers.

Portland Patrol has developed an extensive operation manual for SmartPark security that is consistent with contract expectations, performance evaluation and Star Park interview commentary. See Appendix 29 forthe SmartPark Operation Manual for SmartPark Security.

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Star Park Contract with the City: Star Park is providing security and incident management per the terms of its contract in all areas except reporting. Examples of the requirements for reporting to the City include incident reports due within 24 hours, activity reports due electronically by noon the following day with hard copy to follow, weekly inspections reports of disrepair, and a log of all written complaints received and their resolution. Limited evidence was found of reporting to the City in these areas. This lack is not in compliance with the City contract but there was no evidence of any lack being felt on the part of the City.

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Janitorial Services

Star Park Subcontract: In July 2005, Star Park moved the janitorial subcontract to CleanScapes, a

firm based in Seattle and San Francisco. The contract with Scapes expired June 30, 2008.

There is no formal extension to support the contract The unsigned contract

provided to AKT is available in Appendix 22.

CleanScape's primary business is street cleaning garages. The cleaning focus is on the high ped no garage sweeping by machine. A staff n~r''''nm trash on a weekly cycle. The parking decks are Work in the sub-contract is quite detailed, in

janitorial subcontract includes d~~~llI~~~~~~

nt scaled for large parking Ich'~~!airs and elevators. There is ~/itl-l"fffi:i!\n\llIt:>r blower and picks up

cycle. The Scope of

contact access, Opl;~r&HJon notices for heating, lights, doors, se,3sc>nall~J[~!$)as, graffiti removal, daily check off ing tasks and a task frequency

Compensation is paid dictated by Star Park's aa'fiati'e,

22.9%

June 2008

8750

$29.84

July 2008- 2009

$6.85

519 40.2% $36.69

'I The significant increase in the annual fee is partially explained by the 40% increase in hours due to the, expanded service level noted below. The 22% increase in average cost per hour is due to two factors: a percentage increase greater than the allowed Portland Consumer Price Index-Wand a higher mix of more costly services. No evidence was provided for the high percentage increase authorization.

$54.31

$4.31

8.62%

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Feb '06-June'08 July 2008 - June Incr $ Cost I Incr % Cost I

Task Hourly Rate 2009 Hourly Rate Service Hour Service Hour!

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Pressure wash stairs /Iobbies

Clean & stock

5.18

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The Star Park 2007 and 2008 performance reviews evaluations of Very Good, based on CleanScape's qua garage environment, a conscientious and well-train to both routine and unexpected needs. These from the OMF garage management or the Star a need for strong daily supervision, recurring l;:>i~H~C""

.00

8.63%

Not in contract

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had overall performance proper equipment for the parking . nstrated willingness to respond GlP¢:~J!JJ~l consistent with comments

e System that ons in the contract. Given the mixed the standard operating procedure is Procedures for the SmartPark

janito ces perthe terms of its contract

al fee increase and the quality of service being

EFFECT: The City has no ability to assess actual management and support costs by garage. Relative market competitive pricing is difficult to monitor on an ongoing basis, limiting cost management to the inflation based guidelines in the contract.

Star Park Operations and Procedure Manual for SmartParkGarages

An operations manual is an important tool for establishing and maintaining consistent processes and service levels across operations and over time. The manual can also be a safety tool by providing appropriate escalation, assistance and escape guidelines.

Management

A single fee for a across the SmartPark garages and subcontracts reflects

the shared services management supervision and back office processing. The

differences in support garage and subcontractor are not visible. Given the different

garage sizes and ticket/mo rking business models, the differences may be significant. A single

fee is more difficult to compare market priCing than individual garage management fees due to the

SmartPark garages being a unique combination of garages.

Not in contract

CleanScapes has developed a ST~lnrl<=l is at summary expectation level, in co performance reviews noted above, it is n sufficient. See Appendix 30 for the CI Garage System.

Star Park Contract

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Obsolete, contradictory and irrelevant contents result in lack of useandemployees turrling to each other forguidance,leading to practices which ~ary bylocatio~and overtime; The presenceota manual creates an impression of consistency and support which does not exist when the manual is not used or the content will misdirect the employee.

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EFFECT: Although the letter of the contract is in compliance, given that the manual contains all the required section headings, the spirit of the contract is not in compliance. The City has no assurance that policies and procedures are routinely reviewed, updated and communicated to the garage staff.

Staff Training

Similar to the operations manual, a staff training program is maintaining consistent processes and .service levels across an opportunity for supervisory staff and central strengthen the organization culture and establish start up training on a peer to peer basis, Star benefits.

'. portant tool for establishing and and over time. It also provides interact with operations staff to Based on limited one-time not provide any of these

EFFECT: Star Park is out of contract com beyond the initial cashier start up.

Site Manager and Staff Rotation By having the site operations manaoern .... r errors that could result consistent workgroup can also result in local

groups, the inconsistencies and

0'";'<:11"'" training is partially offset. A and issues. However, this stability . Lack of routinely updated manual rV.6f,\;i .. ",1 Star Park management.

(

garages have stable operating staffs

but

Manual,

both in indirect This is amplified by the benefit from awarding both

staff is distant from the site garage operations, anual and in direct methods such as leading training sessions. The City is receiving limited

Internal Management Communication

Management communication within an organization is essential for adequate understanding of practices carried on throughout the firm. Inconsistent practices allow for unforeseen gaps in control. Star Park management will not see gaps in their processes because their assumptions are unproven and not valid.

EFFECT: Star Park, and hence the City, is at risk of preventable issues and/or liabilities occurring due to their reliance on practices that are not in fact.occurring.

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Cross-Organization Management Communication

Management communication is essential in an operating environment with responsibilities distributed across multiple organizations. It is easy for overlaps and gaps to go undetected, or issues with uncertain ownership to go unresolved. The management communication between the City, Star Park and DGM is limited, fragmented and of limited depth. This has resulted primarily from management structures within the group. The part-time City garage manager has not had time to provide integrating leadership at an operational level. Star Park's management staff is disconnected from their operations staff and does not engage with DGM on operations. DGM maintains their role ata technical assistance level.

EFFECT: The potential benefit of the parking expertise collected in the vendor group is diminished

by the management communication gaps. The City is at curring unnecessary cost due to

overlapping services, issues not resolved at all or surface level.

Revenue System Operations

High quality and consistent use of the revenue to deliver anticipated revenues.' This imoortanc and DGM requiring revenue system training for to start up, as noted above. The extent, co determined. The Star Park supervis in daily revenue operations and could become more problematic as the

e SmartPark garages ability contracts with Star Park Park training is limited training cannot be are not engaged These limitations

training or more may have limited be

~n.~rgltnr errors. The City may be . garage staff had more effective Future system upgrades

", r- I.t·r"'·"'£~''''''/C'tO''''''. Closely coordinating and controlling the cards is equivalent to closely controlling cash sales for without a card and no cross check of a current ,....n.'"l1: .. 'M'. ntended through central system card management.

na1tlm1:?JI)ervveem the City and Star Park for issued and authorized cards, to the McGann database and tracking of garage access granted a sales process with significant opportunity for loss of revenue ..

Validations

The downtown merchant validation program is a significant marketing tool for the SmartPark garages. The 10 fold gap between advertised participants and authorized merchants materially misrepresents the breadth of the program.

EFFECT: The City is missing an opportunity to communicate the extent of the downtown merchant participation, thereby reducing its effectiveness in drawing shoppers downtown and to the SmartPark garages.

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Online Access to Revenue System

Efficient oversight tools are essential for adequate and affordable supervision of a high volume multisite operation such as the Smart Park garages. Online access to the revenue system would significantly increase the City's ability to engage in real-time monitoring on a sustainable basis.

EFFECT: Due to the lack of online system access, the City is limited to system report distribution. Even with email transmission,system reports will be more limited and less timely than online access. This limitation will reduce the benefit of the City's investment in a full-time garage manager. Should the technical security issues prove to be insurmountable; the City garage manager can go to the Star Park office for system access due to its proximity to the City building.

DGM Service Calls Adequate documentation and reporting of service calls on important for a number of reasons. Service calls are _ . .''''''=>~~ garage operations, highlighting systemic issues th Examples of potential issues within the DGM se hours that are not consistent with the size

perating system for the garages is d effective window into the daily ressed at a root cause level. to AKT include service call

r";;'I:).j:i'nn garage, a high level of staff, a lack of training anagement and a

EFFECT: Lack of routine reporting management to the basis for the This is especially ,...rltll""~1 service call req

from taking corrective action. receive any feedback on their

response. As randomly a that limit and may type of servrce-reaues

an effective control for highly distributed call

ite garage managers, the service calls occur require urgent attention due to malfunctions adjustments require central staff authorization For these reasons, a range of authorized persons by ate the scope of potential service call situations.

EFFECT:

list of Star Park management and staff by type of service managing the service call level. Routine management with service call review discussed above would provide an ce call costs that the City lacks today.

Another important control for service call expense is customer validation of service delivery. One of the fundamental fraud prevention controls isa widely known process that creates the potential for detection. Customer validation provides rapid feedback on issues requiring a service call. This may highlight an emerging situation needing management attention and/or may notify the customer of unbudgeted expenses being incurred.

EFFECT: Lack of any form of customer validation creates the risk of being charged for work that was not done. The importance of customer involvement in the validation is highlighted by DGM documenting multiple service call authorizations by an absent site garage manager.

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