Public Storage 2011 Annual Report Download - page 50

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36
partially offset by decreases in media advertising and telephone reservation center costs in 2011, as compared to
2010. Cost of operations (excluding depreciation and amortization) increased by 0.8% in 2010, as compared to
2009. This increase was due primarily to increases in repairs and maintenance and direct property payroll, offset by
a reduction in media advertising and lower property tax expense.
Property tax expense increased 2.0% in 2011, as compared to 2010, due primarily to higher tax rates.
Property tax expense decreased 1.0% in 2010, as compared to 2009 due to reduced assessments of property values
combined with an increase in refunds associated with appeals for prior years’ tax liabilities that were experienced in
Texas, Illinois, New York, Virginia and Florida. We expect property tax expense growth of approximately 4.5% in
2012.
Direct property payroll expense increased 1.0% in 2011, as compared to 2010, and increased by 2.2% in
2010, as compared to 2009. These increases were due primarily to higher incentives and wage rates paid to property
personnel. We expect moderate growth in payroll expense in 2012.
Media advertising decreased 30.3% in 2011, as compared to 2010, and 27.0% in 2010, as compared to
2009. These decreases are due primarily to reductions in television advertising costs as we continued to decrease the
number of markets in which we advertised. Media advertising primarily includes the cost of advertising on
television, and spending levels can vary considerably depending on a number of factors, including our occupancy
levels, the demand for storage space, and the relative cost and availability of television advertising spots.
Other advertising and promotion is comprised principally of yellow page and Internet advertising, which
increased 6.5% in 2011, as compared to 2010, and 7.1% in 2010, as compared to 2009. These increases are due
primarily to higher Internet advertising expenditures as we continue to invest and improve our positioning on major
Internet search engines by bidding more aggressively on keywords related to our business. These increases were
offset in 2010 by decreased yellow page spending compared to 2009 due to revised compensation fee arrangements
with yellow page providers to better reflect the reduced effectiveness of this media.
Our future spending on yellow page, media, and Internet advertising expenditures will be driven in part by
demand for our self-storage spaces, our occupancy levels, and the relative cost and efficacy of each type of
advertising. Media advertising costs in particular can be volatile and increase or decrease significantly in the short-
term.
Utility expenses increased 4.0% in 2011, as compared to 2010. The increase is due to increased usage
caused by extreme temperatures and, to a lesser extent, increased energy prices. Utility expenses decreased 0.8% in
2010, as compared to 2009. The decrease was due primarily to reduced year-over-year energy prices. It is difficult
to estimate future utility cost levels because utility costs are primarily dependent upon changes in demand driven by
weather and temperature, as well as fuel prices, each of which are volatile and not predictable.
Repairs and maintenance expenditures decreased 1.9% in 2011, as compared to 2010, and increased 16.5%
in 2010, as compared to 2009. The decrease in 2011 is due primarily to a $1.7 million reduction in snow removal
expenses, due to severe weather in 2010, which increased snow removal expenses $1.9 million, as compared to
2009. Repairs and maintenance expenditures are dependent upon several factors, such as weather, the timing of
periodic needs throughout our portfolio, inflation in material and labor costs, and random events and accordingly
can vary considerably from year to year and are difficult to project.
Telephone reservation center costs decreased 14.5% in 2011, as compared to 2010, and 0.7% in 2010, as
compared to 2009. The reductions were primarily due to improved staffing management in our call centers. We
expect telephone reservation center cost to grow moderately in 2012.
Insurance expense decreased 2.7% in 2011, as compared to 2010, and 3.2% in 2010, as compared to 2009.
We expect insurance expense in 2012 to grow moderately compared to 2011.