Almost everyone thinks parking is a problem; either there is too much of it or too little; it’s too expensive or too cheap; it promotes auto-dependence or it promotes the success of retail business. And slap a tax on parking and fireworks are sure to follow. In fact, Seattle has recently started a debate about increasing its Commercial Parking Tax (CPT) by 5 percent to a total of 15 percent for each parking transaction. The extra money is for transportation projects to support walking, biking, and taking transit. Downtown businesses are moaning that the increase will hurt business, which sparked my interest in looking through the literature on the issue. Here’s what I found.
Parking taxes are unlikely to affect parking demand—much of the data point to the fact that demands for parking are pretty inelastic—that is, price will have to go up a lot before people stop buying it. People don’t figure out what parking is going to cost downtown and then decide whether to drive or not drive. People come to central business districts because they want what’s there—shopping, work, entertainment—not because it’s cheap to park.
Parking is a bad use of a scarce resource—parking is expensive to build and maintain. And it takes up a lot of productive space that could be better used for more productive uses. Fortunately, planners are realizing the value of mixing uses together—retail, housing, commercial—rather than pushing them apart and linking them with highways. As downtowns become more dense, property values increase. It makes more financial sense to have customers come in by bus, train, or foot than to build expensive car storage.
No effect on parking demand means no effect on shopping—the economy is facing the worst downturn in more than a generation. If anything is hurting business right now it’s that the retail sector of the economy is struggling across the board. People are staying away from downtown shopping not because parking is expensive, but because they have less buying power. (I couldn’t find anything in the literature that parking taxes drive down retail demand. If there is something, I’d love to see it.) Once the economy recovers, retail sales will go up again, but I don’t see any evidence that un-taxing parking will improve retail sales.
More than fifty cities in the United States have commercial parking taxes of some kind or another. Here in the Northwest, the Washington cities of Bainbridge Island, Bremerton, Burien, and SeaTac—along with Seattle—all have commercial parking taxes ranging from 6 percent to Seattle’s current 10 percent. The Vancouver, BC area also has a commercial parking tax. Pittsburgh, Pennsylvania’s parking tax rate is as high as 50 percent!
The good news is that the magic carpet does exist! It’s called transit, and while it can’t handle all the folks needing to get in and out of the downtown core, it does a lot of what business wants—efficiently delivering customers to shop—without requiring the construction and maintenance of thousands of parking spaces. As it turns out, raising the parking tax by 5 percent raises $10 million to do just that. It’s like magic.
Photo credit: alvimann from morguefile.com.
Des
Always happy to see you guys discuss parking. This article raises a few questions for me though:Is demand for parking inelastic even in areas with good transit? Downtown Calgary AB has extremely high parking costs (top 3 in North America along with Manhattan and Toronto) and coincidentally, also has one of the continent’s highest-ridership LRT systems. Arguably, high parking costs do reduce demand for parking (though not for ‘going downtown’), resulting in a shift to transit. I’m not clear if you guys are talking about demand for parking, or demand for travel to the CBD, which could be by any mode.Assuming that demand for parking is inelastic, why bother developing a new revenue source for transit (the parking tax), given that nobody will switch to transit anyway (they’ll keep driving/parking regardless of price increases)? On the one hand, you say that this tax will support walking, cycling, and transit, but on the other, you say that this will not have any impact on CBD mode split, as parking demand is inelastic.Clarification and further comment on this would be welcome, it’s a hugely important and under-reported topic (as Sightline’s mentioned before).Thanks,-Des
Matt the Engineer
Aw, if you’re going to name an article “Magic Carpet Ride” complete with a picture of a bus you should at least let people know what the Magic Carpet Ride Zone is.
Roger
Hi Matt, Thanks for the comments/questions. What I read indicated that people who drive downtown make the decision to do that. Once they arrive, it becomes a “whattyagonnado” moment. You’re there, you’re driving, and now you’ve gotta park. The studies do show that people in that position will make their decision based on price, even if the difference is 25 cents. But my point is that demand for travel to the CBD is entirely a different issue. That becomes a bit of a Yogi Berra situation: “nobody ever goes there, it’s too crowded.” The opportunity costs of going to the CBD are weighed everyday by thousands of people, and every day most of them decide to come to the CBD using a variety of modes. I’m not sure if that clarifies anything. I think when considering parking there are so many variables that it defies anyone’s ability to predict where the breaking point might be; when does parking price become so high that a person will decide to drive to Northgate or take a bus to the CBD? I don’t think anyone can predict that. But, what we do know is that lots are still full of cars, there’s no place to park downtown on the street, and once you’re in the CBD you’ve gotta put that car somewhere. As for the tax, as long as folks are driving and parking, shouldn’t we be taxing that and putting those dollars to work to make it easier to not drive and park? I think the answer to that question is yes, even if it has no effect on current demand.Suppressing parking demand via parking taxes probably won’t work. But that’s kind of my point. A 5 percent increase in the CPT (an additional 50 cents for a $10 parking charge) yields millions of dollars and doesn’t change the universe of people wanting the product. One can logically and safely conclude that if people park people shop. And I was going to include this but forgot. Glad to keep the conversation going.
Roger
Sorry Des, Thank YOU for the comments and questions. Roger–
Michelynee
Oh, I thought ya were thinking of this one. 🙂
JoshMahar
Good post and I’m glad you began this discussion from more of a research perspective. I want to add a few of my own observations to keep it going (disclaimer, sorry about the length here):First, I think it is really important to note that NOT ALL PARKING IS EQUAL. I feel like the debate is often reduced to parking is bad or parking is good but the reality is, some parking will always be necessary (in the foreseeable future) so the goal should be to encourage utilization of the least costly parking, and discourage use (and construction) of costly parking. To develop a strategy we need to understand the different levels of parking.1. Street ParkingIn my opinion, street parking is by far and away the most efficient type of parking. It is evenly distributed between all possible destinations, its real costs are low since maintenance can be done in tandem with road repairs, and its opportunity costs are low since it distribution makes it less valuable for other purposes (it is unlikely someone would build an office building where a parking strip now sits)2. Commercial LotsThere is no doubt that the opportunity costs of commercial parking lots are high, they take up valuable space that could be housing, businesses, etc. If it is a garage then the real costs are high too: up to $50,000 dollars a space, money that could be spent on a variety of arguable more productive things. But, a commercial lot, is simply satisfying a market demand. A commercial lot, by definition is simply a business that makes profit off providing people a place to park. They want to maximize profits and thus, will always charge the highest possible price that the market can bear. If, at some point the demand drops low enough that the price they charge doesn’t cover costs, they will inevitably get out of the businesses and move on to something more lucrative. Commercial lots, while not enjoyable to look at, are simply a product of market preferences.3. Free Parking LotsThis is the real evil in the parking hierarchy. Not only do they have the same real and opportunity costs as commercial lots, these lots, which fill places like Northgate Mall, U-village, and Safeway, have nothing to do with parking. They are simply a tool to get people to purchase and consume other products. These businesses are based on bulk consumption and impulse buys, and a car is much more prone to these consumption patterns than mass transit or biking. For example, if your commute runs up 99 from North Seattle, you get within a mile of Northgate mall. However, if you’re on a bus the effort it would take to make that 1 mile detour are much higher than in a car. Similarly, you can carry a heck of a lot more home in your car than you can on your bike (think about grocery stores that will literally carry your groceries out to your car for you). These businesses have a direct incentive to encourage people to drive, and this is why Kemper Freeman is utterly opposed to light rail.Knowing this then are goal should be to discourage the use of these free lots while maximizing the efficiency of street parking and commercial lots.The proposed commercial parking tax does not do this. As a tax that ONLY effects commercial parking lots (#2 on my list) it actually encourages landowners to provide free parking, because they can just externalize the costs to commercial tenants. It also disproportionately effects older neighborhood commercial hubs which rely on independent lots for parking, and provides a competitive advantage to places like Northgate and U-village.The increased on-street rate is in the right direction but also misguided. For example, why would pay parking rates end at 8 o’cloc in Belltown on a Friday night when parking demand will be high and adjacent lot prices are at a premium.Instead, I have two suggestions:1.) We should be looking at, what I think Dan Bertolet has suggested, a simple across-the-board tax on parking spaces, or even better, that plus an additional tax on spaces above and beyond what code requires. This would be much more equitable because it not only would put a fair tax on everyone, it would also be a disincentive to oversupply parking, something that malls do frequently because currently the benefits outweigh the costs doing it.2) The city should look at heavily expanding the e-park system. In fact, I would suggest that commercial lot companies and the city simply combine efforts, creating a single public-private partnership that navigates people to available parking (on or off street) and sets variable prices based on real geographic and hourly demand. This would ensure that parking efficiency is at a reasonable max (80% utilization) and allow people to find spaces easily.Sorry that was so long, if anyone made it this far, I look forward to your responses!