Pegula Ice Rink Parking Garage

Group 5 Alex Greenawalt Sam Dell Seth Elicker William Grkman (Project Manager) Mike Dudinyak Submittal Date: March 31, 2014

The Pennsylvania State University Department of Civil and Environmental Engineering

TABLE OF CONTENTS
Project Executive Summary 3 Project Description...4 Assumptions/ Decision Points.5 Risks.8 Discussion of Financing.10 Cash Flow Diagram and Computations.11 Summary of Project...12

Project Executive Summary

The proposed project is the installation and construction of a new parking garage to accommodate the new Pegula Ice Rink. This parking garage will serve Beaver Stadium, the BJC, the Indoor Track Facility/Lacrosse Fields and the new Pegula Ice Rink. By performing an economic analysis of the proposed building and associated expenses, it was determined that the project would require an Equivalent Uniform Annual Cost (EUAC) of $1,300,944.73 over a period of twenty-five years. This figure includes construction, maintenance, and loan costs, as well as generated income from the new parking garage.

Project Description
The purpose of this project is to provide an economic analysis of the installation of a proposed parking garage. The garage will house 1,200 vehicles at capacity and will provide parking for university/sporting events as well as daily commuters. The analysis will include all expenses and incomes associated with the construction, maintenance, necessary loans and operation of the parking garage. Any assumptions related to the expenses and incomes of the project will be defined in full. Additionally, any risks that may affect the completion and/or financing of the parking garage will be described. A Cash-Flow Diagram will be designed in order to provide a visual representation of the projects financing timeline. Finally, an EUAC will be determined for the construction process of the garage as well as for twenty-two years after the completion of the garage.

Assumptions/ Decision Points

Income: The yearly income for the parking garage will come from many different places. The following is a list of assumptions that allowed us to come to the decisions that we did concerning the yearly income: The garage will be used for commuter parking and will charge the same rate as a resident student lot. Assuming full capacity for the spring, fall, and summer we will be able to $381.00 per spot.1 Football games are currently charging $20.00 to park in an open field so we will be able to charge slightly more per spot and with the proximity to Beaver Stadium we will be able to assume full capacity. We feel that $30.00 per spot will still feel the garage. Most seasons have 7 home football games.2 Hockey games will be located right next to the parking garage. The price of $8.00 per spot seems in order with other sporting events. The full 1200 spots will not likely fill up for each hockey game. The capacity of Pegula Ice Rink is approximately 6,000 and with this number and taking into consideration that about 1,000 of these are students, we feel that assuming 85% capacity is reasonable. The hockey team had 22 home games last season.2 Basketball games currently charge $5.00 to park in the open parking lots next to the Bryce Jordan Center so we should be able to charge the same. Average basketball attendance over the past ten seasons is approximately 9,000. Taking into account that approximately 1,000 are students and that many will park in the lots next to the BJC, we

feel that we can assume 50% capacity for basketball games. The basketball team had 18 home games this past season.2 Concerts are held at the Bryce Jordan Center every year and these essentially always sell out the roughly 16,000 tickets available. With this amount of people we can assume that the parking garage will be at maximum capacity for concerts. The parking lots typically charge $20.00 to park in them for concerts so we will charge the same. Over the past ten years the average number of concerts, rounded to the nearest whole number is 8.2

The assumptions and decisions listed above are summarized in the table below.

Event Football Games Hockey Games Basketball Games Concerts Commuter Parking

Income per parking spot $30.00 $8.00 $5.00 $20.00 $381.00

Annual Income Number of Events per Year 7 22 18 8 1

Percent Capacity 100% 85% 50% 100% 100%

Income Generated per Year $252,000.00 $179,520.00 $54,000.00 $192,000.00 $457,200.00

Total Income per Year

$1,134,720.00

1-Source: www.transportation.psu.edu 2-Source: www.gopsusports.com

Expenses: The total maintenance cost will be assumed to be $600 per parking space per year.3 The staffing costs for the parking garage will be assumed to be 60% of the total maintenance cost.4 The facility maintenance is assumed to include regular cleaning, equipment maintenance, wash-downs, sweeping, elevator maintenance, snow removal, painting, and structural maintenance. The costs for maintenance will be assumed to be 20% of the total maintenance cost.4 The facility utilities are assumed to be 10% of the total maintenance cost and include electricity, Internet, water, sewer and telephone.4 It is assumed that 10% of the total maintenance cost will be put towards other expenses. The other expenses are assumed to include taxes, insurance and operational supplies.4

Task Staffing Costs Facility Maintenance Facility Utilities Other Expenses (taxes, insurance, operational supplies) Total Maintenance General Assumptions:

Annual Costs % of Total Maintenance 60% 20% 10% 10%

Cost Per Year $432,000.00 $144,000.00 $72,000.00 $72,000.00

100%

$720,000.00

The i value for the EUAC calculations is assumed to be 5% The interest rate for the loan will be 2.5%

3- Sources: http://www.mtc.ca.gov/planning/smart_growth/parking/6-12/MTC_Parking_Structure.pdf 4- Source: http://www.parkingtoday.com/articledetails.php?id=263

4- Sources: http://www.parkingtoday.com/articledetails.php?id=263

Risks
With a project as large as this, Penn State needs to make sure they consider all of the risks that will be present during the life of the project. There will be risks for the entirety of the life of the project, and all need to be looked into equally to determine if the reward is worth the risk taken by the school.

The first risk that everyone needs to consider is financing. Without proper financing, a project will not be able to be paid for, which in turn will cause a great deal of trouble for the school. If for some unforeseen reason the school cannot get a loan from a private lender, the project will not be able to be started. All of the financial aspects of the project should be completed in entirety before any work begins.

Another major risk in dealing with construction is incomplete work. To protect the school from any work that is incomplete, the contract signed with the contractor must include a bond. This bond will allow Penn State to go out and find another contractor to come in and complete the work that is unable, or just was not finished by the initial contractor. This bond is purchased by the contractor through a bonding agency, and will cost them about 2% of the total cost. This will ensure that the project is completed in any case the contractor cannot finish.

A large portion of the expected revenue for the garage will come during football season, which lasts from September till November. It is essential that the garage is complete for football season. The contractor will have a strict deadline, which should be agreed on by Penn State and any parties working on the project. If at the time of the strict deadline the work is not complete, the contractor will be issued a weekly penalty that must be paid to the school. These penalties will continue until the completion of the Pegula Parking Garage.

Along with these risks that are all relevant now, there are additional risks that the school needs to also consider. These include but are not limited to:

Decrease in University Park attendance

Possible changes to the length of athletic seasons

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Discussion of Financing
The new Pegula parking garage will be built near the Pegula ice rink. To be able to build this garage, multiple costs will be in effect. The cost to build the garage, payment to civil engineer for land development, payment to architect, and relocation of current facilities are the four major costs for the project. These major costs come out to be a total of $35.81 million to be paid off by the end of the third year into the project. The following are methods of receiving money to pay off these costs: Cash from the university Loans at an inexpensive interest rate Donations

The university is able to use $2.5 million cash on this project. Donation bricks will be sold at a profit of $1,000 per brick. The maximum amount of donation bricks able to be sold is 5000 bricks which will be placed instead of the brick faade. These brick donations will bring in a total donation of $5 million. The university is also able to borrow money very inexpensively at a rate of only 2.5%. A loan of $28.31 million will be needed to pay off the $35.81million by the third year. The income from the new Pegula parking garage after it is opened is greater than the cost to maintain open. The approximate revenue per year is $1,135,000.00 while the maintenance cost is $720,000.00, for a total profit of $415,000.00 per year. The profit will be the fixed payment for the loan.

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Cash Flow Diagram and EUAC Computations

The cash flow diagram is attached at the end of the report. Below are the EUAC computations. P0 = -2,500,000 5,000,000 + 1,300,000 + (80%)(10%)(600,000)(P/F,i,1) + (20%)(10%)(600,000)(P/F,i,2) + (80%)(6%)(32,500,000)(P/F,I,2) + (20%)(6%)(32,500,000)(P/F,i,3) + (32,500,000)(P/F,i,3) + (150,000)(P/F,i,8) + (190,000)(P/F,i,13) + (280,000)(P/F,i,18) + (425,000)(P/F,i,23) + (600,000)(P/F,i,18) + (125,000)(P/F,i,15) (1,135,000)(P/A,i,22)(P/F,i,3) + (720,000)(P/A,i,22)(P/F,i,3) = $18,323,165.22 EUAC = P0(A/P,i,25) = (18,323,165.22)(.071) = $1,300,944.73 (i = 5%)

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Summary of Project
The new Pegula Ice Rink parking garage is an ideal project to provide parking for multiple school functions. The project will take a total of three years to be complete. Once complete, the garage will be open for use by the public. The garage will have a maximum capacity of 1,200 cars. The construction will be paid at the end of the third year in full from loans, donations, and borrowed money from the university. The cost of construction for the garage is $32,500,000, with the architects being paid 6% of the construction cost. The cost of land development will be $600,000 with the engineers being paid 10%. The revenue created from the garage from events such as athletic events, commuter parking and concerts will exceed 1.135 million. This money will go towards paying the annual maintenance fee, of $700,000. The remaining amount will all go towards the repayment of the loan. When accounting for all incomes and expenses over a 25 year window, the EUAC for the Pegula Parking Garage is $1,300,944.73.