The MBTA generates revenue from a substantial Real Estate portfolio… Telecommunications and Utilities
Concessions
Outdoor Advertising
Transit Oriented Development
Land Agreements
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…and the MBTA is one of the largest proprietor of offstreet parking in the country These facilities are operated by LAZ Parking, which performs the following functions:
We own a total of 102 facilities
Parking payment enforcement
Parking revenue generated by mode
57%
Rapid transit
Commuter rail
Bus and ferry
Non-parking fees1
# of lots
23
33%
4%
77
Snow plowing and landscaping
2
Parking lot cleaning and striping 6%
1 Non-parking fee revenue includes violations revenue and ZipCar revenue. Source: MBTA Parking Department
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We have been charged with identifying the Full Potential for own-source revenue in real estate and parking Definition of “Full Potential” Revenue available to the MBTA if we:
▪ Are willing to adapt, modify, or abandon legacy rules, regulations, and ways of doing business in the way we manage our real estate
▪ Ensure we are doing all we can to maximize revenue generation from land, including transit-oriented development and property sales
▪ Look to best-in-class examples in other systems, especially for concessions, advertising, and land development deals
▪ Work with partners who can support our aggressive growth goals, always under best-in class contracting with favorable contract terms
▪ On parking: consider fee changes, embrace and invest in technology, investigate new partnerships with lot operators, and consider investing capital dollars to expand / modernize existing high-utilization facilities
▪ Today, we are not proposing policy changes. We are laying out the full potential revenue from real estate and parking under the above criteria
▪ The FMCB will discuss and vet our policies in the coming weeks DRAFT Confidential – Proprietary and Predecisional
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Contents
1. Real Estate Revenue
2. Parking Revenue
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Current revenue generation from MBTA real estate
FY15 gross1 revenue from real estate
In-station concessions
Land rental
Property sales2
▪ ▪
Telecom / Utilities
Outdoor Advertising
# of agreements
$8.2M
469
4
$3.3M
80
$2.7M
Right-of-way agreements along MBTA property Top 20 telecom / utility accounts contribute 90% of this revenue. Subway wireless agreement with Insite is the largest at $1.1M
ClearChannel advertising agreement accounts for $2.7M (73%) of this advertising revenue Fixed / kiosk Locations ▪ 52 locations, with an average rent of ~$31k (totaling $1.6M) ▪ 4 ATM master agreements contribute $0.5 M ▪ 23 other locations contribute $0.1M
641
$2.0M
Includes short-term license agreements, which drive the high agreement count
$17.3M
9
3 transactions accounted for 89% of this: South Boston sale to MassPort ($7.0M); Everett / Wynn ($6.0M), and Readville ($2.4M)
1 Before deducting in-house and third party expenses. Does not include “other income” totaling $0.4M 2 The proceeds from the sale of any properties originally acquired or developed with federal funds must be used for capital projects and would not impact the operating budget DRAFT Confidential – Proprietary and Predecisional
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98% of MBTA land is either used for transit operations or revenue generation MBTA land use, acres 4,972
Tracks (rights of way)
Stations
Operations
Other
507
Yards
189
Maintenance
186
Other operations1
38
Access / roadways
31
Bike path / open space / leased
405
Parking
322
1 Other includes power substations, vents, utilities, etc.
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Barriers to full potential revenue in Real Estate
Property development potential restricted by operational needs and local property conditions
Local Zoning & Permitting Influences
Challenges to MBTA Zoning Exemption may affect Outdoor Advertising
▪ Most of MBTA surplus property has been sold off ▪ Development opportunities are limited to properties that require parking replacement or air rights above active MBTA uses -- requiring premium development costs
▪ An expansion of concession opportunities, and upgrades to existing, are often precluded based on costs to provide electrical, water and sewer connections or comply with current fire and/or ADA code standards
▪ Local objections to project density, traffic generation, etc. can result in insufficient value to fund replacement parking, premium development costs and compensate the MBTA for development rights
▪ Local approval processes are often lengthy – longer than a year ▪ MBTA is one of the largest billboard landlords in the Commonwealth. ▪ 160 locations licensed to Clear Channel generating $2.7 Million a year; expiration in 2018 ▪ Legislative challenges exist to remove MBTA zoning exemption on advertising. If approved, this would result in restrictions to grow revenue through new locations or rebid of Clear Channel contract
▪ Requests for dispositions are often in conflict with MBTA operational needs. ▪ MBTA priorities are to operate a transit system, oversight of private development is a Internal processes
second priority – adding to development timelines
▪ Lengthy MBTA review & approval process and premium costs to fund MBTA oversight reduce potential value to the MBTA
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Most categories of real estate revenue have been growing, with property deals driving most of the variation
MBTA real estate revenues
▪ ▪
Property deals experienced a large oneoff spike in FY12 with the long-term lease of the Garden garage The accounting of property deals in operating vs. capital budgets has been a management decision historically
Property deals
Concessions
Telecom/Utilities
Land/Buildings
Advertising1
Other Income
$73.0M $33.9M
$23.4M
$22.5M
$20.4M
3rd party expenses Net real estate revenue
$16.8M
$17.4M
FY10
FY11
-$4.1M
-$3.7M
$12.7M
$13.7M
FY12
-$5.2M
$67.8M
FY13
FY14
-$3.4M
-$4.1M
$17.0M
$19.2M
FY15
FY16 budget
-$5.4M
-$4.6M
$28.5M
$17.9M
1 Includes only outdoor billboard advertising. All station and vehicle advertising reported through MBTA marketing and communications department
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To move towards full potential revenue, we are evaluating short-term increases across all categories Potential increases in net real estate revenue $18.8M
$17.9M
$1.1M
FY16 budget
Advertising
Increasing advertising income from digital and other locations
$1.0M
Land rental
Known transactions that will increase revenue
$0.8M
Telecom/ Utility
$0.4M
$21.2M
Concessions Projected FY17 recurring revenue
Implementation of increased fees for Telecom and Utility agreements
$40.0M
Implementation of ATM program, placing 30 new ATMs in the MBTA system
Property sales
Projected FY18 FY17 revenue Aspiration incl. property sales
Known property deals, expected or negotiating to close in FY17
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Contents
1. Real Estate Revenue
2. Parking Revenue
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As we consider options to achieve full potential parking revenue, we must be mindful of concerns
▪ Stakeholder concerns
Financial concerns
▪ ▪ ▪
Changes to parking fees and violations / fines policies have historically lead to public and political resistance That said, the MBTA has not raised parking fees on a system-wide scale in 7 years Operational improvements require expenditures to purchase, install, and maintain technology Expansion of facilities would require capital outlay
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Parking revenues have held steady over time, apart from a dip due to snow removal costs last winter
Expenses Securitization Net revenue MBTA parking revenues
$40.3M $9.3M
$15.4M
$43.1M
$42.0M
$10.7M
$10.7M
$15.4M
$41.7M
$41.7M $9.2M
$16.4M $15.4M
$15.4M $15.4M
$15.6M
$17.0M
FY12
FY13
$15.9M FY14
$17.2M $9.9M FY15
The remainder of this discussion will be based on net parking revenue
FY16B
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There is still room to grow parking revenues compared to our peer group Parking revenue peer comparison
Parking fee peer comparison
$ net revenue per unlinked passenger trip
$ daily rate
0.17
8.60
MBTA revenue before and after securitization. We are not sure how other agencies report their revenues
0.12
7.50 7.00
6.75
0.11 5.00
5.00
0.09 4.00 3.45 0.06 4.85 4.00 0.05
3.25 0.01
0.01
2.00 0.01
CaltrainSF W SEPTA Metra MBTA MTA NJ BART MATA Metro- Transit North
1.50
1.30
1.00
1.00
Caltrain SF MBTA MTA NJ W SEPTA Metra BART MATA Metro- Transit North
In addition, our peers raised parking fees 1-5 times since 2008, when the MBTA had its last significant parking fee increase SOURCE: National Transit Database, 2013 data
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Potential approaches to increasing revenue vary across different parking facilities
23 Highly-utilized lots, generating 67% of revenues
▪ ▪
High (over 80%)
▪ ▪
Utilization % of spaces filled per day
Low (under 80%)
Expand capacity where possible Raise prices on capacity constrained lots Introduce tiered pricing during peak hours & discount weekends Expand premium monthly pass program
43 under-utilized lots, generating 13% of revenues
34 moderately-utilized lots, generating 20% of revenues
▪ ▪
▪
Consolidate locations Decrease lot size
Low (less than $500)
License to private vendors, allowing them to operate and develop spaces to increase profitability
High (over $500)
Space productivity Annual $ / available space
Source: Source
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Four ways to increase parking revenues will be considered
Potential actions
Capacity adjustment
Price adjustments
Operational improvements
▪ Expand capacity in over-utilized lots ▪ Reduce capacity or consolidate under-utilized lots
▪ Increase prices in the most highly utilized lots ▪ Increase prices system-wide ▪ Introduce tiered pricing based on demand ▪ Restructure parking violation fines ▪ Improve operations, accounting and customer experience by investing in technology.
▪ Identify additional cost savings opportunities ▪ Allow private and local agencies to manage
Outsourcing
parking facilities, eliminating maintenance costs and negotiating minimum payments and/or a net revenue split.
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Applying all four approaches could increase parking revenue by $10-15M Projected net parking revenue after securitization and operating expenses1 $M Short term, easier to implement
$6.6 - 9.6M
$1.1 - 1.3M
$0.7 - 0.9M
Operational improvements
Outsourcing
Longer term, difficult to implement $1.4 - 2.9M $27.0 - 31.9M
$17.2M
FY16 budget
Price adjustments
There are three scenarios of parking increases: ▪ Targeted utilization parking increases only ▪ System wide increases ▪ Targeted utilization parking increases + system wide
Examples of initiatives include: ▪ Operations efficiencies ▪ Violations fine increase
Capacity adjustments
Partnerships with public and private agencies
FY17 aspiration
To fully adjust capacity, we expect: ▪ $5-10 M of capital spending along with land costs ▪ $3-3.5 M of one time land sales value
1 Analysis assumes securitization and operating expenses will remain at the level projected in our FY17 pro-forma model DRAFT Confidential – Proprietary and Predecisional
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Two Levers to Balance FY17 Deficit:
Control Costs or Increase Revenues
We will discuss each topic in an FMCB session over the coming weeks– all figures apart from the deficit and advertising are illustrative
$242M
$5-9M $27-32M1
Cost Control Revenue Increase
$52M
Projected FY17 Deficit Baseline Pro-Forma
Increased Advertising Revenue
Increased Real Estate, Concessions and Parking Revenue
Internal Efficiences and Cost Control
State Assistance on Legacy Debt
Lower Cost Delivery Models / Service Adjustments
Fare Policy and Collection
Adjusted FY17 deficit ($55M in Transferred Capital Employee Expense)
1 $19M of this comes from property sales or up-front payment of long-term leases
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