City Council
Report
City Council Meeting: August 25, 2020
Agenda Item: 3.H
1 of 11
To: Mayor and City Council
From: David Martin, Director, Parking Operations (PCD)
Subject: Approval of First Modification to Contractual Services Agreement with SP Plus Corporation for Consolidated Parking Management Services Recommended Action
Staff recommends that the City Council:
1. Authorize the City Manager to negotiate and execute a first modification to contract #10201 (CCS) with SP Plus Corporation for consolidated parking management services for the Community Development Department. The recommended modification is made as an exception to the competitive process pursuant to SMMC Section 2.24.250 (g) to ensure continuity of operations and revenue collection processes, and would extend the current agreement for up to three years for a new total amount not to exceed $68.7 million over a ten year period, with future year funding contingent on Council budget approval.
Summary
The City currently contracts with SP Plus Corporation (“SP Plus”) to operate a complex citywide parking network, including 24 hour 7 day a week field and office customer services for the 41 Citywide off-street parking facilities (13 parking structures/garages, 28 surface parking lots) with approximately 13,000 total parking spaces. These parking facilities help support the diverse local economy by providing convenient access to housing, retail centers, hotels and restaurants, employment, a public beach and community parks alike. SP Plus also provides monthly parking permit accounting and fulfillment services, online and lockbox payment processing, parking facility maintenance, ancillary traffic mitigation/special event activation and hospitality services, and parking equipment maintenance/support.
Considering the substantial economic disruption caused by the current COVID-19 pandemic, staff anticipates a temporary reduction in parking demand throughout the City. The COVID-19 pandemic has adversely impacted parking demand as a result of 2 of 11
(including but not limited to) reduced travel and tourism, reduced business operations and related employment, increased telecommuting, as well a change in consumer behavior (including the shift from brick and mortar in-person visitations to online and/or curb-side pickup shopping). However, as people begin to travel again and economic activity increases, some consumers may also be reluctant to use public transportation and shift back to automobiles as their primary mode of transportation. Given the uncertainty around future transportation and parking demand patterns, coupled with the need to ensure the continuity and collection of significant parking revenue streams, staff recommends extending the current parking management agreement with SP Plus for up to three years for a new total amount not to exceed $68.7 million over a ten year period.
The annual cost of the agreement will be offset by the annual citywide off-street parking revenues collected by SP Plus on behalf of the City. Extending this agreement as an exception to the competitive bidding process pursuant to SMMC Section 2.24.250 (g) would allow the City the time to maintain operations and revenue collection processes that are currently in place, wait for these COVID-19 related economic disruptions to normalize over the next few years, and then undertake a traditional Request for Proposal (“RFP”) process on the post COVID-19 circumstances.
Discussion
Since November 2015, SP Plus has provided an array of diverse parking services under contract #10201 (CCS). SP Plus also works with City stakeholders such as Macerich, Downtown Santa Monica, Inc, Santa Monica Travel & Tourism, Inc., and the Pier Tenants Association, and is a strategic partner in parking management toward the City’s overall circulation and transportation demand management goals. The work done by SP Plus facilitates the collection of significant annual revenue. In prior fiscal years, SP Plus has serviced up to 10 million annual transient and permit parkers that generated up to $42.4 million in annual parking revenues across multiple funds (General Fund, Beach Recreation Fund, and Pier Fund).
The current agreement with SP Plus is for seven years with a total not to exceed of $38.2 million and is set to expire November 2022. During the first five years of the 3 of 11
agreement, SP Plus provided several service enhancements and materials costs at the City’s direction to address operational needs, thus accelerating the actual annual spending rate over the initial annual contract estimates. As a result, the City has spent approximately $31.5 million, or 82% of the total contract amount through June 2020.
The current contract amount is estimated to carry the City’s parking operation through May 2021, which falls short of the current November 2022 expiration. While the accelerated cost increases were administratively approved by City staff, absorbed within the Community Development Department budget each year, and also entirely offset by parking revenues collected by SP Plus on behalf of the City, the spending essentially reduced the funds remaining on the agreement due to the original $38.2 million not to exceed limit approved by Council. Items that contributed to the accelerated spending over original contract estimates include:
• Phased in cost of living adjustments for Teamsters Local 911 unionized workforce that will align SP Plus employee compensation with the Santa Monica Living Wage Ordinance by the end of FY 2021-22 (SP Plus waived the provisions in the City’s Living Wage Ordinance with a bona fide collective bargaining agreement pursuant to SMMC 4.65.040).
• Increased SP Plus contractor staffing at the Civic Center, Downtown, and Beach facilities to improve operations and revenue control measures, including weekend coverage, special event management, and expedited vehicular egress • Increased SP Plus contractor staffing to respond to City stakeholder requests for enhanced facility maintenance at the various Beach and Downtown facilities • Off-street surface parking lots parking equipment replacements, software updates and system patches, as well as on-going software maintenance agreements subcontracted through the SP Plus contract which allow the City to receive a significant discount on equipment
• Aged elevator infrastructure repair resulting in improved uptime services of the Downtown and Civic Center Parking Structures including subcontracting ongoing repairs and services
4 of 11
• Increased demand for plumbing, electrical, painting, fire protection, sewer and waste filtering subcontracted services as the parking facility infrastructure continues to age
• Increased demand for Go with the Flow Traffic Management Special Event Activations (i.e. Twilight Concert Series, COAST, Los Angeles Marathon, Genesis Open Golf Tournament), as well as ancillary winter and holiday activations above and beyond original contract estimates • Demand for ancillary Bike Valet Services, Farmer’s Market services, Santa Monica High School crossing guard services, and event ambassador services (i.e. Annenberg Beach House special events)
• Initial on-boarding of a data analytics subcontractor to aggregate the City’s parking data from the various systems into one holistic data analytics platform that supported parking rate changes that generated about $4.5 million in new General Fund parking revenues
As one of the nation’s largest parking management service providers, SP Plus can pass along market-share leveraged cost savings and corporate discounts up to 50% to the City for necessary equipment. For example, for the FY 2020-21 City Council approved Capital Improvement Program (“CIP”) replacement of the various parking multi space pay stations and point of sale systems deployed at the off-street surface parking lots (Beach, Main Street, Mid City, and Downtown), SP Plus is able to provide the necessary equipment at a deeply reduced cost to the city, saving the City approximately $1.0 million. However, the equipment purchase would result in further overspending on the contract’s current total not to exceed amount like the items above, thus reducing the amount of time left on the agreement. In order to get the equipment savings, the current contract would need to be amended to include the necessary equipment purchase so that it does not further detract from the ongoing service agreement with SP Plus.
Due to the prior year accelerated spending, staff anticipates that the total not to exceed spending threshold on the existing agreement with SP Plus will be exhausted by May 2021. If the contract is not extended and amended, staff would have to undertake an 5 of 11
RFP process immediately. The bidding process for this high-profile contract would require stakeholder outreach, staff report preparation, and contract negotiation and execution that would involve multiple City departments. In the event that SP Plus is not selected as the recommended bidder, staff would have to onboard and familiarize a new service provider with the City’s unique parking network on or before May 2021, which would require the contract process to be completed by March 2021. This presents a significant challenge for staff given the currently reduced in-house staffing levels.
Additionally, given the limited amount of time left on the current agreement due to prior year accelerated spending, staff may not be able to complete the entire onboarding process by May 2021, putting the City’s valuable parking revenue streams and collection processes at risk.
Therefore, staff recommends extending the agreement as an exception to the competitive bidding process pursuant to SMMC Section 2.24.250 (g) for up to three years for a new total amount not to exceed $68.7 million over a ten year period (approximately $6.9 million per year average contract cost). The SMMC regulations allow for procuring services as an exception to the competitive process if it is determined that the time necessary to undergo a traditional solicitation process would substantially disrupt City operations or result in substantial economic loss to the City.
The proposed agreement extension with SP Plus would allow staff to continue to build on the relationship and further operate in a more sustainable manner, as well as capitalize on the recently implemented cost cutting measures in light of the COVID-19 impacts on City parking operations. Additionally, the proposed extension would also allow the City to capitalize on SP Plus’s intricate understanding of the city’s current operational needs across the off-street parking portfolio and intimate familiarity with the various parking access and revenue control equipment systems, which enables a more efficient and responsive operations utilizing the systems in place, thus ensuring the protection of the City’s valuable revenue streams. This efficiency of building upon operational improvements is important due to the recent reduction of Parking Operations Division staff from 9.0 FTE to 5.0 FTE. Finally, extending this agreement up to ten years would avoid the need to do a lengthy and time-consuming RFP at a time when parking resources are stretched thin and COVID-19 has disrupted both the 6 of 11
parking market and the City’s traffic and parking patterns. Staff believes that it is prudent to extend the existing agreement, and then issue an RFP considering the postCOVID-19 circumstances.
Moss Adams Internal Audit Review
A recent audit of the SP Plus operations in the City, conducted by Moss Adams, the City’s internal auditor, noted that parking revenue collections and deposit processes on behalf of the City are accurate, well controlled and automated, resulting in minimal human interaction and overall protection over revenues collected. The results of the audit were presented to the Audit Subcommittee of the City Council on August 18, 2020 (Attachment B), as well as staff’s intention to extend the contract to a total term of up to ten years. Staff is working with SP Plus to address findings and recommendations for improvements that were also made by the auditors. The priority improvements are in the areas of monitoring of City employee parking access permits, clarifying reporting timelines, and parking equipment inventory control. The Audit Subcommittee members were in agreement with the proposed management responses and concurred that it was prudent for the contract to be extended with the understanding that the modified contract would specifically incorporate improvements in the findings and processes highlighted by the internal audit report. The audit report was noted and filed by the Audit Subcommittee, with the intent that staff would return within the year with progress reports indicating how the recommendations were integrated into the extended SP Plus agreement.
Vendor Selection
Exception to Competitive Bidding
Staff now recommends extending the SP Plus agreement for up to three years to provide consolidated off-street parking management and ancillary services throughout the City as an exception to the competitive process pursuant to SMMC Section 2.24.250 (g). City regulations allow for procuring services as an exception to the competitive process if it is determined that the time necessary to undertake a traditional solicitation 7 of 11
process would substantially disrupt City operations or result in substantial economic loss to the City. Extending this agreement as an exception to the competitive bidding process pursuant to SMMC Section 2.24.250 (g) would allow the City the time to maintain operations and revenue protection processes that are currently in place, wait for these COVID-19 related economic disruptions to normalize over the next few years, and then undergo a traditional Request for Proposal (“RFP”) process on the post COVID-19 circumstances.
By extending the agreement with SP Plus, staff anticipates achieving up to $0.5 million in ongoing cost savings beginning in FY 2020-21, and up to an additional $0.3 million beginning in FY 2021-22 in the following areas:
• Approximately $0.3 million in ongoing cost savings based on a COVID-19 parking demand analysis that supports the strategic reduction of 25.4 FTE SP Plus staffing beginning in FY 2020-21
• Approximately $0.2 million in savings due to a COVID-19 related reduction in City program services (i.e. Santa Monica High School crossing guard services, Farmer’s Market support, and Go with the Flow special event activation/traffic mitigation services including elimination of LA Marathon services) beginning in FY 2020-21
• Up to $0.2 million in ongoing cost savings due to further reduction of up to 8.0 FTE SP Plus staff once the new multi-space pay station equipment is strategically deployed in the Beach surface parking lots beginning no later than FY 2021-22
• Up to $0.1 million in ongoing cost savings due to elimination of facility maintenance and elevator services related to the demolition of PS #3 beginning no later than FY 2021-22
This service was formally bid out in 2015 and SP Plus was the clear and unanimous choice of the evaluation committee as the best qualified to provide the full scope of parking operations and management services based on the company’s ability to meet the requirements of the RFP, including SP Plus’s extensive experience in parking operations, staffing service plan, customer service plan, operational plan, internal controls and event experience. The evaluation committee, which included City members from Finance, Public Works, and Community Development, as well as the Vice President of Macerich and the Executive Director of Downtown Santa Monica, Inc., was 8 of 11
unanimous in selecting SP Plus. Council ultimately awarded the agreement to SP Plus.
SP Plus operates more than 4,200 locations in over 400 cities throughout the United States and Canada. It is a publicly traded company, collecting and reconciling over $4 billion in annual parking revenues on behalf of its clients. SP Plus is subject to oversight by the United States Securities Exchange Commission (“SEC”) and has a Municipal Services Division with key staff that are certified Administrators in Public Parking (“CAPP”). Below are just some of the other municipalities comparable to Santa Monica that also contract with SP Plus for off-street parking management services:
City of Anaheim City of Glendale City of San Jose
City of Antioch City of Los Angeles City of San Leandro City of Fremont City of Mountain View City of San Mateo City of Fresno City of Oakland City of Alameda
City of Fullerton City of Sacramento San Francisco MTA
Miami Parking Authority
(Florida)
Port of San Francisco City of Jacksonville
Beach (Florida)
Several municipalities have been very satisfied with the performance of SP Plus and have extended their existing agreements with SP Plus. The City of Denver, Colorado is the most recent example in which an existing agreement was extended for time due to exceptional performance.
SP Plus has routinely demonstrated their commitment to partnering with the City as various challenges arise. With the advent of the COVID-19 emergency, SP Plus brought corporate level resources to bear to provide Personal Protection Equipment (PPE) for all field and office employees, instituted daily disinfectant procedures at points in the system in which the public interfaces with the parking equipment, introduced public outreach and signage communication to instruct visitors on proper PPE and Social Distancing measures, introduced COVID-19 response measures including employee testing, and quarantine procedures in the event an outbreak should occur amongst its workforce, all by the middle of May 2020. Additionally, to further assist the City with achieving cost savings, SP Plus agreed to enact a temporary 5% reduction in their 9 of 11
salaried SP Plus positions through December 2020. Considering the City’s unique and highly complex operational needs and expectations SP Plus has demonstrated their commitment to partnering with the City and maintained high customer service ratings, as well as being frequently recognized by various City Departments and external stakeholders. As the incumbent service provider, SP Plus has a thorough understanding of the City’s needs, and with that familiarity facilitates higher level of dedication and increased potential for streamlined improvements in the long term. The modified agreement would continue to afford the City the flexibility to strategically adjust operations and provide fine-tuned service levels more frequently, thus increasing the City’s ability to achieve immediate cost savings in the event of unanticipated budget shortfalls.
SP Plus is the leader in the parking management field, introducing key best practices through national and regional forums, sponsoring managerial and planning research to improve parking operations, hosts tutorials for its staff and municipal partners to encourage in their development, and has corporate policy to engage in broader community service engagement beyond the contractual services it provides through sponsorship of youth sports activities and donations to public service agencies in struggling communities.
Past Council Actions
Meeting Date Description
10/13/2015 Original Award of Parking Management Services Contract to SP Plus
Financial Impacts and Budget Actions
Staff seeks authority to approve funding from the General Fund to increase the amount of the contract with SP Plus Corporation for consolidated parking management and ancillary special event activation services.
Contract Modification Request
10 of 11
Agreement #
Current Authorized
Amount
FY 2020-21
Budget
Modified Request
Amount Dept/CIP Account #
Total Revised
Contract Amount
10201 $38.2 million $7.7 million 01700008.550010 $68.7 million Staff anticipates that the strategic reductions in SP Plus staffing, and investment in new multi-space pay station parking equipment will result in up to $0.5 million in ongoing cost savings in year one, and up to an additional $0.3 million in cost savings in year two going forward. As the City continues to respond to COVID-19 impacts on City services, staff anticipates a temporary reduction in parking transactions, shorter parking stays, and associated parking revenues. As the economy begins to recover, staff anticipates that parking transactions and revenues will slowly begin to return to prior year levels.
FY 2020-21 citywide off-street parking facility revenues were projected to total approximately $30.4 million across multiple funds. Staff is actively analyzing the COVID19 impacts on these revenue sources and will include updated revenues as part of the FY 2020-21 midyear budget.
The annual costs of the SP Plus agreement are entirely offset by parking revenues captured in the General Fund, Beach Recreation Fund, and Pier Fund. Future year funding is contingent on Council budget approval.
Prepared By: Michael Towler, Principal Administrative Analyst Approved Forwarded to Council
Attachments:
A. SP+ Oaks Form
B. 2020-08-18 Moss Adams SP+ Parking Operator Contract Review 11 of 11
C. 2015-10-13 Item 3-O Award to SP Plus