IRELAND 26 September 2018
Value for Money Examination 42; Car Parking at Beaumont Hospital Summary
During the course of my audit of the financial statements of Beaumont Hospital Board for 1999, I encountered difficulties in establishing the circumstances surrounding the development of a multi-story car park by a subsidiary of the Hospital. In order to avoid further protracted delay in certifying the financial statements of the Hospital, I issued my audit report thereon on 31 July 2002. In the audit report, I indicated that I was undertaking an examination of the provision of the multi-story car park with a view to preparing a special report on the matter. This is the resulting report.
In 1998, Beaumont Hospital arranged for the construction of a multi-story car park on the hospital campus. The arrangement involved
- procuring construction of the car park at a fixed price through a tendering process
- separately awarding a concession to a developer to finance and operate the facility.
The multi-storey car park provided 600 spaces. However, it was built on the site of the existing main ground car park and therefore eliminated 370 ground parking spaces. Thus, the number of additional parking spaces provided was 230. The total cost of construction of the facility was ?8.6 million (including VAT). Annual income from existing car parking charges was around ?500,000.
The Developer took over the construction contract and bore the costs of providing the facility. In return, the Developer was granted a lease over the site and the right to charge parking fees to customers. The arrangements provide for the reversion of the facility to the Hospital after 13 years. The financing of the facility included the availing of substantial tax breaks provided by the State to encourage the construction of multi-storey car parks.
After the completion of the facility, staff parking continued in existing designated ground level parking areas while the multi-storey car park was to be used by the public. To provide for an orderly parking regime, parking regulations were agreed between the Hospital and the Developer and a parking protocol put in place.
Results of Evaluation
My evaluation raises three main concerns.
- The tax-based funding method was more costly than direct provision of the car park by the Hospital.
- The concession was awarded to a company which offered less income at higher turnover levels.
- The Hospital has not received the expected rental income.
The method of financing the project involved the State in considerable tax expenditure. The analysis indicates that public finances were worse off by between ?9 million and ?13 million, in net present value terms, as a result of choosing the tax-financed option rather than direct provision of the parking facility.
The pre-project appraisal did not include any analysis of the relative merits of the proposed tax-based deal and direct provision. While it is acknowledged that health agencies may not be required to carry out such analysis and funding may not have been available for direct provision in 1998, the failure to carry out such an appraisal, and to choose the most economic funding option, clearly cost the State money in the longer term.
Return from Concession
Three proposals to develop and operate the facility were short listed for consideration. Each proposal included a ?guaranteed' income level and a profit share. All three proposals provided a reasonably similar level of income at the lower levels of turnover. The two proposals which were unsuccessful were assessed as inferior in terms of deliverability. However, the rejected proposals appear to have offered better rental income in the event of higher levels of turnover being achieved, but this was not recognised in the financial ranking of the proposals.
The parking facility opened in June 1999. Subsequent operation of the facility did not yield the expected level of income to the Hospital. Based on the accepted proposal, the Hospital expected to receive income of at least ?1.8 million in respect of the period between June 1999 and 31 March 2002 but only ?120,000 was received because an almost equivalent amount of fines were levied on the Hospital in respect of ?illegal parking'. A combination of a failure to properly manage parking in the Hospital grounds, a lack of management awareness and the inappropriate application of agreed terms contributed to the unanticipated shortfall. While the Hospital initially accepted fines levied for all periods up to 31 March 2001, it is now in the process of taking advice on retrieving historical losses and minimizing future ones.
Views of the Department of Health and Children
It remains the Department's policy that, where appropriate, new parking facilities at major hospitals should be funded by income derived from the facilities. However, the Department shares my concern in regard to the overall management of the project. As a result, it has established a group to examine the lessons to be learned and prepare guidelines for the proper management of such initiatives in future. The group will also examine the potential for direct provision using loan finance.