Additional revenue might not make a difference

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The city is seeking $1 million annually from a new Pikes Peak concessionaire, but will the increased revenue make a difference?
Past performance suggests that it will not.
During 2007, the city projected operating revenue from tolls and concessions of $2,708,069 — and estimated operating expenses at exactly the same number.
Vehicle toll receipts, estimated at $1.9 million, amount to two-thirds of expected cash flow, while revenue from the concessionaire, at $612,000, make up the rest.
Estimated costs included salaries and benefits, at $1.54 million, and other operating expenses, at $1.08 million.
Such performance is not atypical. During the past six years, the enterprise’s operating ratio has averaged 96 percent, meaning that 96 cents of every dollar received is used for daily operations on the mountain.
These figures do not include the multi-year program to pave the highway and combat erosion and sedimentation, which has been funded by annual payments of about $1 million from the city.

Better management?

San Francisco investment banker (and Colorado Springs native) Timothy Collins analyzed the enterprise’s financial data, as presented in the city’s annual budget. He said that Pikes Peak could be a “gold mine.”
“All they have to do is cut expenses,” he said. “The labor costs seem high. Why do they need 21 FTEs (full-time equivalent employees) to run 20 miles of highway? And why city employees? You’re paying high salaries with great benefits. Do you need to? If it’s really an independent enterprise, send the city employees back to the city and hire from the private sector — maybe even do it through private contractors, so you don’t have a year-round work force. Do you really have to operate the highway year-round?”
Digging deeper, he found even more areas where there could be savings.
“And look in the budget detail at ‘administrative pro-rated charges’ for $146K,” he said. “They’re paying the city to ‘administer,’ whatever that means. I guess that means accounting, budgeting — who knows? It seems excessive.”
Told that the Mount Evans Highway, a paved road to the top of a 14,000-foot-mountain near Denver, operates with a budget that is about 15 percent that of Pikes Peak, and that much of the savings may be attributable to lower maintenance costs associated with paving, Collins expressed surprise that paving has taken so long.
“If you can shed close to $1 million in operating expenses by making a big capital investment, you ought to do it up front, not draw it out over 15 years,” he said. “You could pay down the loan with cash from operations and the city wouldn’t have to keep dumping money into the mountain.”

Apples to oranges

Dave Nickerson was the city’s enterprise manager from 1995-2002 and oversaw Pikes Peak.
“There’s really no comparison between Pikes Peak and Mount Evans — they’re very different,” he said. “We examined costs, and determined that it’s actually cheaper to keep it open year-round. Shared administrative services include things like accounting, payroll, legal services — it was our belief that the city could do it more cheaply.”
But, Nickerson said, the road should have been paved long ago.
“It’s no secret that it was just politics that kept the city from paving the road,” he said. “As far back as the ’70s, it was clear that we ought to do it.”

Master plan

Vice Mayor Larry Small hopes that, despite past experience, the peak will finally see the improvements that have so often been promised.
“There does need to be a master plan, and we need a building up there which is consistent with the quality we need to represent the community,” he said. “And it shouldn’t just be a concession stand — we don’t really need that. It should be the facility we hoped it would become in 1992.”
Bill Carle, whose family was the concessionaire on Pikes Peak for more than 50 years before losing the contract to ARA Services 15 years ago, agrees that the summit desperately needs improvement.
“My opinion is that until the facilities on the peak are a source of local pride, that the mountain will suffer,” he said.
And if things don’t work out?
“Well, maybe someone else ought to try,” Small said. “As I tell (El Paso County Commissioner) Jim Bensberg, we’ll make the county a heckuva deal, if they’d like to take it over.”
John.Hazlehurst@csbj.com