Tradition

I got a piece forwarded to me the other day from the Miami Herald. It seems that a traditional activity of many parking operators has come to light. Well, its been known by those of us who follow such things, but only this past week by notables in Miami.

Central Parking has been "caught" in an audit of its Miami International Airport operations. Seems the parking giant has been charging the airport for payroll taxes even when no taxes are being paid.  It works like this.

There is a limit on the FICA and SDI taxes that you pay. In many cases, these are "matching" taxes, where you pay half the the employer pays half. Once you hit the limit, then the state and feds don’t want any more of your money of the employers.  Some Parking Operators, however, simply continue to charge the owner for the the matching taxes, and keep the difference. I have heard many justifications for this little dance. Some make sense, some don’t.

By the way, PT the auditor has been talking about this little issue for years, but I digress.

One of the biggest justification is that the operator often has to fight medical disability claims and that costs money. By fighting the claims it saves the customer and the operator considerable cash in the long run. Fair enough.

The problem is that the contract with the operator didn’t spell this out.  Had it, I would have no problem with the practice. I understand that Central is changing its contracts to include this clause. If the owners doesn’t like it, he can negotiate it out. Seems fair to me.

The other issue is Insurance. The major operators are self insured and charge those costs back to the owner. Once again fair enough. MIA was "horrified" to discover that their operator had been charging rates that were above the market. HUH? Of course they were. They also had every right to buy insurance on the open market.

I just love it. An owner, in this case Miami Intl Airport, has an audit done and finds that its operator is charging above market rates for a product that it produces, but that the airport could buy anywhere. The airport elected to buy the insurance in house, and it feels that its being shafted.

My guess is that Central does charge more for liability insurance, but that it also provides considerable service for that product. It understands the business, is motivated to keep claims down, and knows how to do that.

In the end, however, its up to the airport, and the free market, to fix these irregularities. As long as we force operators to bid numbers like $6000 a month as a fee to run an enterprise that grosses what, 700 times that much the operators will and frankly should, be able to make up the difference in other ways AS LONG AS the customer is aware of these accounting and pricing practices.

Its not the "doing" that causes the problem, its the "hiding."

JVH