Review of Valet Parking Operations – Broward County ...

Review of Valet Parking Operations –
Broward County Aviation Department

November 29, 2006 Report No. 07-05

Office of the County Auditor

Evan A. Lukic, CPA
County Auditor

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Executive Summary

This report evaluates the valet parking operation at the Fort Lauderdale-Hollywood
International Airport operated by the Broward County Aviation Department (BCAD).

Our objectives were to evaluate the contract business structure, completeness and
accuracy of valet revenues, and whether expenses were reimbursed in accordance with
the contract.

We concluded that:
• The application and use of the valet incentive fee is inconsistent with other entities

surveyed.
• BCAD has a low valet parking rate and high number of allocated valet spaces as

compared to other entities surveyed.
• Revenue control system reports do not include all valet transactions.
• BCAD does not reconcile actual credit card monies received and amounts reported

by the operator.
• Allocation of overhead and Car Care Services expenses among the parking

operations is lacking which impacts reimbursable expenses and valet incentive fee
compensation.

We recommend the Board of County Commissioners direct the County Administrator to:
• Evaluate the purpose, intent, and application of the incentive fee.
• Determine the appropriate parking rate and allocated spaces to achieve maximum

profitability, customer value, and facility utilization.
• Correct revenue control system deficiencies in the current upgrade.
• Implement controls to verify the completeness and accuracy of recorded revenues.
• Identify and allocate indirect expenses and overhead among the parking operations

and recover any identified overpayments.

Purpose and Scope

The objectives of our review were to evaluate:

• the contract business structure of the valet service,
• the completeness and accuracy of valet revenues submitted to Broward County, and
• whether expenses were reimbursed in accordance with the contract.

Our review encompassed operations and transactions during fiscal year 2006.

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Background
Overview
Annual parking revenues of $40 million comprise approximately 25% of airport
operating revenues for fiscal year 2006. Three garages and twelve surface lots
provide 21,781 spaces offering various parking options and services. USA Parking
Associates III, (the operator) oversees the day to day parking operations at an annual
cost of approximately $6 million including management fees and reimbursed operating
expenses under a multiyear management agreement with the County.
Contract History
On November 12, 1996, the Board of County Commissioners entered into a three-year
management agreement1 (the agreement) for the period December 15, 1996 through
December 14, 1999. The agreement provided for two one-year extensions. On June
22, 1999, the Board approved an amendment exercising the two one-year extensions
and extending the agreement for an additional three years to December 14, 2004. On
February 11, 2003, the Board approved another amendment extending the agreement
for an additional two years to December 14, 2006. On October 24, 2006, the Board
authorized the director of Aviation to execute an amendment extending the agreement
on a month-to-month basis until the Board awards a new agreement. The Board also
approved RLI #20060822-0-AV-01 seeking competitive proposals for a Management
Agreement for Public and Employee Parking at the Fort Lauderdale-Hollywood
International Airport.

1 Agreement Between Broward County and USA Parking Associates III, a joint venture for Management of Airport
Public Parking Facilities Fort Lauderdale-Hollywood International Airport.

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Operator Responsibilities

The operator manages three garages and eleven surface lots (Appendix A) which
provide 21,781 spaces offering short term, long term, remote, overflow, valet, and
employee parking as follows:

Table 1 – Capacity by Parking Facility and Service as of November 22, 2006

Parking Facility and Service Capacity

Palm Garage 566
Hibiscus Garage 547
Total Short Term Parking 1,113

Palm Garage 1,399
Hibiscus Garage 3,976
Cypress Garage 4,423
Total Long Term Parking 9,798

Palm Garage 744
Hibiscus Garage 75
Dollar Lot2
Total Valet Parking 500
1,319
Holiday Lot2
Tower Lot2 1,296
Park N Save Lot2 466
Total Remote Parking
1,248
Red Lot2 3,010
Green Lot2
Orange Lot2 476
Brown Lot2 900
Gold Lot2 600
Blue Lot2 366
Taylor Road & US1 Lot2 850
Total Overflow Parking3 420
150
Employee Lot2 3,762
Total Employee Parking4
2,779
2,779

Total Parking Capacity 21,781

Source: Office of the County Auditor compilation of parking facilities and capacities

2 Surface lots are continuously added, removed, and modified due to changes in lease agreements and facility use

requirements
3 Available only during peak parking events such as holidays
4 Certain employees are also issued garage access cards allowing them access to the garages

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In addition, a car care center is located in the Palm Garage which offers washing and
detailing services to valet customers at various rates and service levels.

Parking rates, including sales tax, are as follows:

Table 2 – Parking Rates

Parking Rate

Short term $1.00 per half hour

$36.00 daily maximum

Long term $1.00 per half hour

$12.00 daily maximum

Remote $6.00 per day

Overflow $6.00 per day, specified lots

$10.00 one time charge, specified lots

Valet $16.00 per day

Employee $10.60 per month, based employees

$37.10 per month, non-based employees

Source: Office of the County Auditor compilation of parking rates and services

These services are provided twenty-four hours a day, seven days a week, including
holidays. The operator is required to provide qualified, competent, and experienced
employees including an active, qualified competent local resident manager.

The operator’s primary responsibilities in managing these services is to charge
applicable rates to users of airport public parking facilities and collect, account for, and
deposit daily all gross revenues into a bank account designated by the County. These
responsibilities are performed utilizing the Parking Access and Revenue Controls
System (PARCS). Other responsibilities include:

• General maintenance, monitoring, and custodial services for the public
parking area including routine physical vehicle inventory counts

• Maintenance of separate books and records for valet, self parking, and Car
Care services and submission of various routine financial reports, annual
operating budgets, annual special reports prepared by an independent
certified public accountant, and various operational reports

Compensation and Operating Results

The operator manages day to day operations of the parking facilities in exchange for
management and incentive fees and expense reimbursements. As shown in table 3,
the operator received approximately $205,000 in management fees and $345,000 in
valet incentive fees. Reimbursed expenses totaled approximately $5,350,000. The
operator reported that it retains a percentage of revenues generated by the car care
center which is managed by a joint venture between the operator and a third party.
The operator reported that it received 35% of the gross revenues from Car Care

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Services which is approximately $110,000 based on the operator’s monthly recap and
BCAD accounting records.

Table 3 – Operating Results for Fiscal Year 2006

Self Valet Total Operator
Parking Parking Fees &
Expenses

Gross Revenue $ 35,772,000 $ 4,611,000 $ 40,383,000 $ 5,350,000
Reimbursed Expenses 4,288,000 1,062,000 5,350,000
Gross Income 3,549,000
31,484,000 35,033,000

Management Fee 192,000 13,000 205,000 205,000
Incentive Fee 192,000 345,000 345,000 345,000
Car Care Retention 110,0005
Operator Fees 358,000 550,000
660,000

Net Revenue $ 31,292,000 $ 3,191,000 $ 34,483,000 $ 6,010,000

Source: Office of the County Auditor compilation from BCAD accounting records.

Under the agreement, the operator is not reimbursed for corporate overhead cost,
interest costs, or insurance claims over $2,812.50 per month. The operator is also not
to be reimbursed for any Car Care Services expenses.

Valet Operations

Valet operations utilize 819 allocated spaces. Annual valet parking revenues of $4.6
million comprise 11% of parking revenues for fiscal year 2006. Valet services are
operated from three booths located within the parking garages. The booths are
supervised by a valet manager and assistant manager. Each booth is staffed with
cashiers who process transactions, ramp supervisors who accept and deliver vehicles,
and runners who transport vehicles.

Customers drop off their vehicles at one of these booths after entering the garage.
They retrieve an automated ticket upon entry which is provided to the valet staff. The
valet staff record the customer’s expected time of arrival and any car care services to be
provided. When a customer returns, the valet staff returns their automated ticket after
validating it. Based on the entry date electronically recorded on the ticket, the revenue
control system calculates and records the applicable charges. Payments are made at
the valet booth and the customer uses the validated ticket to exit the garage.

Each day, the operator deposits collected monies directly into the BCAD bank account
and provides BCAD with daily revenue reports.

5 Estimate based on operator’s monthly recap reports, BCAD accounting records, and operator representation that
“[third party] receives 50% of gross revenues and all associated expenses, BCAD receives 15% of gross revenues
and USA receives the remaining 35%”

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Findings and Recommendations

Finding 1 – The application and use of the valet incentive fee is inconsistent with
other entities surveyed.

Compensation to the operator for the valet operation consists of a base management
fee plus an incentive fee. The management fee is an annually fixed amount while the
incentive fee is determined by the profitability of the valet operation. The incentive fee
is calculated as “ten percent (10%) of the annual net revenues received by the County
from all valet services”. Net revenues include all revenues less credit card transaction
fees, reimbursable expenses, and the base management fee. As shown in table 3, the
base management fee for fiscal year 2006 valet operations was approximately $13,000
while the incentive fee was approximately $345,000.

Our survey of the ten largest U.S. airports and five largest Florida airports indicates that
a variety of fee structures exist for those entities which have valet operations.

Table 4 – Compensation Fee Structures of Surveyed Airports with Valet Operations

Airport Fee Structure

Los Angeles, CA (LAX) Management Fee

Chicago, IL (ORD) Management Fee

Minneapolis/St Paul, MN (MSP) Management + Incentive Fee

Denver, CO (DEN) Incentive Fee

Tampa, FL (TPA) Management Fee

Orlando, FL (MCO) Management Fee

Las Vegas, NV (LAS) Concession6

Fort Lauderdale, FL (FLL) Management + Incentive Fee

Source: Office of the County Auditor survey

Two of the entities surveyed also use an incentive fee7. However, their fees are based
upon the operating results of total operations whereas the BCAD incentive fee is based
upon the operating results of only the valet operations. Basing the incentive fee on the
operating results of only the valet operations places an emphasis on valet parking.
Because of the profit differential to the operator between self parking and valet, this
application may encourage the operator to divert resources from the self parking
operation, for which there is no incentive fee. As a result customers may be diverted
from self park to valet.

Furthermore, the net revenues used to calculate the incentive fee do not consider the
full costs of valet parking. The valet parking operation utilizes allocated spaces within

6 The operator retains a portion of the revenues but does not receive expense reimbursements
7 Denver provides an incentive fee of 1% of total net revenues and Minneapolis/St Paul provides an incentive fee of

up to $0.03 multiplied by total transactions

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the garages (See Table 1). Those spaces would otherwise be available to the self
parking operation to charge a daily rate of $12. The net revenues used to calculate the
incentive fee do not reflect any actual or opportunity costs associated with the use of
those spaces by the valet operation. As a result, the incentive fee for valet operations
comprised 52% of the operator’s total fees from all operations for fiscal year 2006.

Recommendation

We recommend that the Board of County Commissioners direct the County
Administrator to:

• Evaluate and define the purpose and value to the county of the incentive fee.
• Ensure that any future incentive fee based on net revenues reflect the full costs of

the valet operation.

Finding 2 – BCAD has the lowest valet parking rate and highest number of
allocated spaces for valet parking as compared to other entities surveyed.

Tables 1 and 2 show the rate and allocated spaces to each parking service. Parking
rates and allocated spaces should be established to achieve airport goals among which
are maximizing profitability, customer value, and facility utilization. The parking rates
and allocation of spaces for each parking service impacts the entire parking operation in
the following areas:

• Quantity demanded
• Revenues
• Cost of operations
• Customer value (e.g. choice)

For example, valet parking rates impact a customers decision whether or not to utilize
self parking options and vice versa. Ultimately, parking rates and allocated spaces are
factors in a customer’s decision to utilize valet parking, self parking, or other alternatives
including offsite parking.
Some factors indicate that the current rate and allocated spaces for valet parking may
not be appropriate. For example,

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• Our survey of the ten largest U.S. airports and five largest Florida airports
indicates that those entities with valet operations have, on average, higher valet
rates and fewer allocated spaces for valet parking:

Table 5 – Parking Rates and Allocated Spaces of Surveyed Airports with Valet Operations

Airport Valet Rate Allocated

(Daily Max) Valet Spaces

Los Angeles, CA (LAX) $38 150
Chicago, IL (ORD) $32 8008
Minneapolis/St Paul, MN (MSP) $289 470
Denver, CO (DEN) $27 657
Tampa, FL (TPA) $24 250
Orlando, FL (MCO) $21 140
Las Vegas, NV (LAS) $16 1000
Fort Lauderdale, FL (FLL) $16 819

Source: Office of the County Auditor survey

• A September 2004 survey conducted by USA Parking of 100 valet customers
showed that 19% reported that valet parking was not their first choice and 10%
reported that they would be satisfied if valet parking was discontinued.

• Although the Palm Garage is usually at peak capacity, 27% of spaces remain
allocated for valet parking.

• A July 2006 consultant report, The Public Parking Development Report prepared
by Integrity Parking Systems, LLC, stated “the present rate of $16 a day is low in
comparison to other premium level and short term parking lot rates across the
state. Further, rates must be set at a high enough level that will ensure Long
Term/Short Term customers are motivated to use the appropriate parking lot.”
This report was requisitioned by USA Parking and paid for by BCAD as a
reimbursed expense.

Recommendation

We recommend that the Board of County Commissioners direct the County
Administrator to:

• Evaluate and implement the appropriate parking rate and allocated spaces to
achieve the maximum profitability, customer value, and facility utilization.

• Implement the recommendation of the Integrity Parking Sytems, LLC which was “an
initial rate adjustment to $18 per day, with incremental adjustments planned for the
next two years.”

8 378 spaces are allocated to valet parking; however, average inventories consist of 600-800 vehicles with the excess
being parked in self parking
9 The daily parking rate is increased to $40 November through April each year

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Finding 3 – Revenue control system reports do not include all valet transactions.

Transactions are recorded by the County owned Parking Access and Revenue Controls
System (PARCS).

We noted instances where PARCS did not record all transactions. In addition, PARCS
reports lack appropriate detail, structure, and formatting necessary for day to day
operations. Reports do not present all cashier / shifts on a single concise report.

To compensate for the system deficiencies, the operator routinely compiles manual
reports and reconciles those reports to PARCS, identifying any transactions which the
system failed to record.

BCAD is currently upgrading PARCS.

Recommendation

We recommend that the Board of County Commissioners direct the County
Administrator to complete the current upgrade ensuring that the PARCS records all
transactions and produces reports with appropriate detail, structure, and formatting
necessary for day to day operations.

Finding 4 – BCAD does not reconcile differences between actual credit card
monies received and amounts reported by the operator.

To ensure that all credit card monies are deposited and accurately recorded, BCAD
should reconcile differences between actual monies received and amounts per the
operator revenue reports, which the operator reconciles to PARCS on a daily basis.

BCAD does not reconcile differences between actual monies received and amounts per
the operator revenue reports. Although BCAD records valet credit card revenues from
the operator revenue reports, differences between those reports and actual monies
received are not tracked in a separate account. Instead, they are grouped into and
netted against self parking revenues. Those differences are not subsequently identified
or reconciled.

As a result, BCAD does not verify that all credit card monies are received and
accurately recorded. Furthermore, differences between the BCAD accounting system
and the operator revenue reports are not reconciled. Those differences, for fiscal year
2006, are as follows:

Table 6 – Differences in Recorded Revenue

Valet Self Park
$ 35,771,659
BCAD Accounting System $ 4,611,420
36,135,222
Operator Revenue Reports 4,529,503 $ (363,563)

Difference $ 81,918

Source: Office of the County Auditor analysis

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Staff has indicated that the differences are primarily caused by the timing in which
transactions were recorded and when monies were received but have not provided a
supporting reconciliation. Although this explanation appears reasonable and possible,
differences could also be caused by missing deposits, theft, data entry errors, etc. It is
imperative that County staff reconcile revenues received to the revenue reported in
PARCS to ensure the County receives all revenues.

Recommendations

To ensure complete and accurate reporting, we recommend that the Board of County
Commissioners direct the County Administrator to:
• Implement procedures to track and monitor differences between recorded revenues

and actual deposits received.
• Reconcile the fiscal year 2006 parking revenues to the operator’s reports.

Finding 5 – Allocation of overhead and Car Care Services expenses among the
parking operations is lacking resulting in at least $11,573 overpayments to the
operator for fiscal year 2006.

Methodologies and practices should be in place to identify and allocate overhead
expenses among the respective cost centers (self park, valet, and Car Care Services).
Such expenses include wages for general manager, human resource manager,
accounting staff, and maintenance staff as well as operating costs such as utilities and
supplies.

Methodologies and practices should also be in place to identify and allocate indirect Car
Care Services expenses, which are not reimbursable. Such expenses include
applicable labor costs of self park and valet employees who perform Car Care Services
tasks.

The agreement states “Any and all salaries and expenses associated with Car Care
Services shall not be Reimbursable Expenses…. The County shall not be responsible
for any salaries or any other expenses whatsoever incurred by the Operator or any
subcontractor in connection with the Car Care Services”. The contract also states that
“separate books and records shall be kept for the valet parking services, self parking
services, and the Car Care Services…” and that “salaries of managers and supervisors
shall be allocated based on the proportionate time devoted by each such person to the
respective category of parking service.”

Our review disclosed that there is no methodology or practice to allocate certain
overhead and Car Care Services expenses to the respective cost centers. This
causes an understatement of valet expenses and overstatement of valet incentive fees.
This also causes reimbursements of Car Care Services expenses, which are not

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reimbursable under the contract. We identified the following specific overpayments
related to the lack of proper allocation methodology:

• $7,798 Expeditor Wages: Valet expeditors are responsible for scheduling and
performing vehicle drop offs and pick-ups from the Car Care Services operation.
They are also responsible for ensuring that the service was properly performed.
The parking operator has represented that 20% of their time is allocated to these
tasks resulting in $7,798 out of $38,992 in wages (excluding payroll taxes) that
should be allocated from Valet to Car Care Services.

• $3,775 Credit Card Transaction Fees: Car Care Services charges and Valet
charges are combined onto the same transaction for customer payment. Credit
Card transaction fees associated with these payments are recorded as valet
expenses. Car Care Services revenues account for 6.4% of total Car Care
Services and Valet revenues resulting in $3,775 of $58,981 in transaction fees
that should be allocated from Valet to Car Care Services.

Recommendation
We recommend that the Board of County Commissioners direct the County
Administrator to implement methodologies and practices to appropriately allocate
overhead and Car Care Services expenses to the respective cost centers and recover
identified overpayments including:
• Non-reimbursable Car Care Services costs included in reimbursable valet or self

park expenses
• Adjustments to the valet incentive fee

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