QUANTITATIVE ANALYSIS
SURPLUS PARKING MEMORANDUM for the City of Elmira, New York
To: Property owners of Elmira Walgreens & Rite-Aid at N. Main and W. 2nd St. From: Geslin George, Caitlin Elliot Subject: Analysis of Surplus Private Parking at Walgreens and Rite-Aid SUMMARY The goal of this memorandum is to assess the problem of excess private (customer-only) parking at the RiteAid and Walgreens pharmacies (at N. Main Street and W. 2nd Street) located in downtown Elmira, NY. The purpose is to demonstrate how surplus private parking may be used to its highest and best use. To analyze this issue and propose the best course of action, we calculated the private benefit-cost-analysis (BCA) for three different scenarios: status quo, metered parking and renting the excess parking spaces. Based on our analysis, we propose the metered public parking alternative since this yields the highest net present value (NPV) for both pharmacies. BACKGROUND On the initial site visit, we recorded the exact number of parking spaces at both pharmacies. Next, we determined the amount of required parking spaces based on the City of Elmira Zoning Ordinance (pg. 97), which stipulates that a retail store, such as a pharmacy, should provide one off-street parking space per 300 square feet of gross floor area. We considered any parking spaces in excess of the amount required by zoning to be surplus parking spaces. Please see Exhibit 1 for detailed property information and Exhibit 2 for a list of assumptions. OVERVIEW Both pharmacies have a surplus of parking. Since we assume that free customer parking is not the highest and best use for excess parking spaces, there is an annual opportunity cost of not doing something else with this land. To quantify these costs, we completed a private BCA for both sites over a 10 year period. Walgreens and Rite-Aid were the only stakeholders in each private BCA. This analysis considered three alternative uses for the excess parking spaces,including: status quo, metered public parking and renting the space, for example to a mobile food business. The central location of the pharmacies is attractive for people trying to park downtown and for entrepreneurs hoping to take advantage of the daily demand for an informal lunch or coffee from employees and shoppers in downtown Elmira. Finally, the only costs and benefits considered in the BCAs relate to the foregone or realized net revenue of each alternative. PROPOSAL The two pharmacies have the following three alternatives for the use of their surplus parking spaces: s tatus quo, metered public parking and renting the space. The best alternative is the one with the highest NPV. Since the status quo is negative, this implies that there is a better use for the excess parking spaces. The following table shows the NPV of the three options for both pharmacies over a period of 10 years, assuming a revenue realization of 50% and an annual discount rate of 9%: Assuming 50% Revenue Walgreens (NPV) Rite-Aid (NPV) Realization and 9% Discount Rate Status Quo BCA -$73,437.45 -$63,201.54 Metered Parking BCA $73,437.45 $63,201.54 Renting BCA $13,027.98 $12,161.53 Please see Exhibit 3 for detailed Cash Flow, BCA and Sensitivity Analysis charts. Geslin Reeba George | Spring 2015
CONCLUSION Based on the chart above, the highest and best use of the excess parking spaces is to create metered public parking, since this option yields the highest net present value. Furthermore, this alternative has the potential to achieve the optimum utilization of an underutilized resource (excess parking) for both public and private benefit. This conclusion is supported by primary evidence from our initial site visit in Elmira, where key stakeholders described their perception of the parking problem in downtown as a shortage of “adequate” parking. Key stakeholders defined “adequate” parking as medium to long-term parking (1-3 hour limits) with suitable meters. For example, meters that are maintained and that accept multiple forms of payment, including credit cards. Although Elmira appears to have a surplus of parking downtown, most of this parking is reserved for private customers or restricted by short time limits or broken meters. The potential benefit of turning excess private parking into paid public parking is twofold. First, it may benefit the public by alleviating the perceived problem of “inadequate” public parking in downtown Elmira. Secondly, it offers the pharmacies (and perhaps the city, depending on how revenue is split) an additional source of revenue. In conclusion, we recommend the adoption of a citywide policy to allow private businesses, such as Walgreens and Rite-Aid, with surplus private parking to be re-purposed as metered public parking. This will help generate additional revenue for the businesses, while also alleviating the perceived problem of “inadequate” public parking in downtown Elmira. Sources 1.City of Elmira, NY. Zoning Ordinance. Updated: February 2010. Adopted: December 21, 1998, as amended. 2.City of Elmira, NY. A Citizens Guide to Parking: Short Term Parking. Retrieved from: http://www.cityofelmira.net/policedepartment/parking Exhibit 1: Property Information Walgreens Address: 402 Main St N., Elmira, NY 14814
Rite-Aid Address: 119 2nd St W, Elmira, NY 14901
Existing Parking
55
Existing Parking
49
Walgreens Building Area (GFA sqft)
13,980
Rite-Aid Building Area (GFA sqft)
12,435
Zoning Required Parking (space per GFA sqft)
1/300
Zoning Required Parking (space per GFA sqft) 1/300
Required Parking Spaces
47
Required Parking Spaces
42
Excess Parking Spaces
8
Excess Parking Spaces
7
Exhibit 2: Assumptions 1. The ideal supply of parking spaces for a business is defined in the Elmira Zoning code. 2. Excess parking spaces are not being used to their highest and best use. 3. There is a demand for public, paid parking in downtown Elmira, which could be satisfied with the excess parking spaces at Walgreens and Rite-Aid. 4. Revenue realizations of 75%, 50% and 25% and annual discount rates of 11%, 9% and 7% are reasonable assumptions for a sensitivity analysis. 5. To calculate the base case BCA for this analysis, we will present the scenario where revenue realization is 50% and the annual discount rate is 9%. 6. There is an annual 5% increase in revenue. 7. The installation of a pay-and-display meter will cost approximately $2500, and annual operation of the me tered parking will cost $1000.
Geslin Reeba George | Spring 2015
8. The public parking option would be metered at an hourly rate of $0.75, over a 10 hour day for 365 days. The hourly rate of $0.75 is used for simplicity and is based on the price of parking in Elmira’s Public Garage. *T ​h e revenue realizations of 75%, 50%, and 25% reflect parking space occupancy levels. 9. The renting option also considers revenue realizations of 75%, 50% and 25%, which is respectively equal to 9, 6 and 3 month leases. This sensitivity analysis considers different demands an entrepreneur may have, based on the weather conditions in Elmira. 10. Rent per month is $38 per parking space. 11. In the renting option, we assume a 5% annual increase in rent. 12. We incur our initial costs for each option in year 1. Exhibit 3: Benefit-Cost-Analysis Summary BCA Assuming 50% Revenue Realization and 9% Discount Rate
Walgreens (NPV)
Rite-Aid (NPV)
Status Quo BCA
-$73,437.45
-$63,201.54
Metered Parking BCA
$73,437.45
$63,201.54
Renting BCA
$13,027.98
$12,161.53
Detailed CashFlow, BCA and Sensitivity Analysis Charts Status Quo Cash Flows- Walgreens Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $3,500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,500
Foregone Revenues at 75% Realization -$16,425.00 -$17,246.00 -$18,109.00 -$19,014.00 -$19,965.00 -$20,963.00 -$22,011.00 -$23,112.00 -$24,267.00 -$25,481.00 -$206,593.00
Foregone Revenues at 50% Realization -$10,950.00 -$11,498.00 -$12,072.00 -$12,676.00 -$13,310.00 -$13,975.00 -$14,674.00 -$15,408.00 -$16,178.00 -$16,987.00 -$137,728.00
Foregone Revenues at 25% Realization -$5,475.00 -$5,749.00 -$6,036.00 -$6,338.00 -$6,655.00 -$6,988.00 -$7,337.00 -$7,704.00 -$8,089.00 -$ 8,494.00 -$68,865.00
Sensitivity Analysis: Status Quo BCA- Walgreens Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization -$128,397.84 -$114,381.08 -$102,011.30
NPV with Revenues at 50% Realization -$82,537.89 -$73,437.45 -$65,409.99
NPV with Revenues at 25% Realization -$10,950.00 -$11,498.00 -$12,072.00
Status Quo Cash Flows- Rite-Aid Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $3,500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,500
Foregone Revenues at 75% Realization -$14,371.88 -$15,090.47 -$15,844.99 -$16,637.24 -$17,469.10 -$18,342.56 -$19,259.69 -$20,222.67 -$21,233.80 -$22,295.50 -$180,767.90
Foregone Revenues at 50% Realization -$9,581.25 -$10,060.31 -$10,563.33 -$11,091.49 -$11,646.07 -$12,228.37 -$12,839.79 -$13,481.78 -$14,155.87 -$14,863.66 -$120,511.93
Foregone Revenues at 25% Realization -$4,790.63 -$5,030.16 -$5,281.66 -$5,545.75 -$5,823.03 -$6,114.19 -$6,419.90 -$6,740.89 -$7,077.93 -$7,431.83 -$60,255.97
Sensitivity Analysis: Status Quo BCA- Rite-Aid Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization -$111,199.89 -$99,026.81 -$88,285.44
NPV with Revenues at 50% Realization -$71,072.93 -$63,201.54 -$56,259.63
NPV with Revenues at 25% Realization -$30,945.96 -$27,376.27 -$24,233.81
Metered Parking Cash Flows- Walgreens Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $3,500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,500
Foregone Revenues at 75% Realization $16,425.00 $17,246.00 $18,109.00 $19,014.00 $19,965.00 $20,963.00 $22,011.00 $23,112.00 $24,267.00 $25,481.00 $206,593.00
Foregone Revenues at 50% Realization $10,950.00 $11,498.00 $12,072.00 $12,676.00 $13,310.00 $13,975.00 $14,674.00 $15,408.00 $16,178.00 $16,987.00 $137,728.00
Foregone Revenues at 25% Realization $5,475.00 $5,749.00 $6,036.00 $6,338.00 $6,655.00 $6,988.00 $7,337.00 $7,704.00 $8,089.00 $ 8,494.00 $68,865.00
Sensitivity Analysis: Metered Parking BCA- Walgreens Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization $128,397.84 $114,381.08 $102,011.30
Geslin Reeba George | Spring 2015
NPV with Revenues at 50% Realization $82,537.89 $73,437.45 $65,409.99
NPV with Revenues at 25% Realization $10,950.00 $11,498.00 $12,072.00
Metered Parking Cash Flows- Rite-Aid Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $3,500 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,500
Foregone Revenues at 75% Realization $14,371.88 $15,090.47 $15,844.99 $16,637.24 $17,469.10 $18,342.56 $19,259.69 $20,222.67 $21,233.80 $22,295.50 $180,767.90
Foregone Revenues at 50% Realization $9,581.25 $10,060.31 $10,563.33 $11,091.49 $11,646.07 $12,228.37 $12,839.79 $13,481.78 $14,155.87 $14,863.66 $120,511.93
Foregone Revenues at 25% Realization $4,790.63 $5,030.16 $5,281.66 $5,545.75 $5,823.03 $6,114.19 $6,419.90 $6,740.89 $7,077.93 $7,431.83 $60,255.97
Sensitivity Analysis: Metered Parking BCA- Rite-Aid Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization $111,199.89 $99,026.81 $88,285.44
NPV with Revenues at 50% Realization $71,072.93 $63,201.54 $56,259.63
NPV with Revenues at 25% Realization $30,945.96 $27,376.27 $24,233.81
Renting Cash Flows- Walgreens Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $350.00 $105.00 $110.25 $115.76 $121.55 $127.63 $134.01 $140.71 $147.75 $155.13 $1,507.79
Foregone Revenues at 75% Realization $2,700.00 $2,835.00 $2,976.75 $3,125.59 $3,281.87 $3,445.96 $3,618.26 $3,799.17 $3,989.13 $4,188.59 $33,960.31
Foregone Revenues at 50% Realization $1,800.00 $1,890.00 $1,984.50 $2,083.73 $2,187.91 $2,297.31 $2,412.17 $2,532.78 $2,659.42 $2,792.39 $22,640.21
Foregone Revenues at 25% Realization $900.00 $945.00 $992.25 $1,041.86 $1,093.96 $1,148.65 $1,206.09 $1,266.39 $1,329.71 $1,396.20 $11,320.10
Sensitivity Analysis: Renting BCA- Walgreens Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization $22,120.19 $20,046.57 $18,249.01
NPV with Revenues at 50% Realization $14,382.32 $13,027.98 $11,854.08
NPV with Revenues at 25% Realization $7,441.47 $6,839.50 $6,310.72
Renting Cash Flows- Rite-Aid Year 1 2 3 4 5 6 7 8 9 10 Total
Foregone Operational Costs $350.00 $105.00 $110.25 $115.76 $121.55 $127.63 $134.01 $140.71 $147.75 $155.13 $1,507.79
Foregone Revenues at 75% Realization $2,358.00 $2,475.90 $2,599.70 $2,729.68 $2,866.16 $3,009.47 $3,159.95 $3,317.94 $3,483.84 $3,658.03 $29,658.67
Foregone Revenues at 50% Realization $1,572.00 $1,650.60 $1,733.13 $1,819.79 $1,910.78 $2,006.31 $2,106.63 $2,211.96 $2,322.56 $2,438.69 $19,772.45 $
Foregone Revenues at 25% Realization $786.00 $825.30 $866.57 $909.89 $955.39 $1,003.16 $1,053.32 $1,105.98 $1,161.28 $1,219.34 $9,886.22
Sensitivity Analysis: Renting BCA- Walgreens Annual Discount Rate 7% 9% 11%
NPV with Revenues at 75% Realization $20,391.02 $18,777.86 $17,360.03
Geslin Reeba George | Spring 2015
NPV with Revenues at 50% Realization $13,211.66 $12,161.53 $11,238.68
NPV with Revenues at 25% Realization $7,403.64 $6,905.89 $6,463.20