Saturday, November 15, 2014

Professor Shoup's Parking Book

An Analysis with Applications to Philadelphia
Professor Donald Shoup's The High Cost of Free Parking is 800 pages long, and it will make a nice doorstop when I'm done with it.  I'm just not sure I'll ever be done with it.

However, as I was working my way through the appendices, it occurred to me that many people who are never going to read this book would benefit greatly from knowing about the ideas that are in it.

I started off thinking I would do a chapter by chapter synopsis, but as I got into it my approach changed. Call this an analysis of some of the book's salient ideas, with applications to Philadelphia.

A Parking Paradox
Let's have a look at Philly's Central Business District.  Let's say mid-morning on a Wednesday  You're walking down the street, and the place is jammed.  There are no parking spots to be seen.  We've got a parking problem.  Time to build some more garages.

Actually, there is no shortage of parking spaces.  It just looks that way.  At their busiest, the garages in Center City are only 74 percent full (Philadelphia City Planning Commission, 2010 Center City Parking Inventory).  You could take all the cars parked at meters in Center City and sweep them into the garages, and you'd only get the garages to 85 occupancy.

So why doesn't that happen?  Price.  An hour at the curb is $2.50.  An hour at the William Penn House garage, on 19th below Market, is $16.  This is simply too big a gap, and I think both prices have to move.

The Parking Garage Mess
Let's talk about parking garages first.  You'd think, with 74 percent peak occupancy, they might be interested in attracting a few more customers.  Professor Shoup says the socially optimal occupancy of a garage is 85 percent.  Above that level you start having congestion problems, with panicky drivers doing dumb things abruptly.  If you've ever been in the Whole Foods garage on South Street, say around lunchtime on a rainy Saturday, you'll know what I'm talking about.  But, as Professor Shoup puts it, "Commercial operators aim to maximize profits, not social benefits." (Pp. 301-302.)

To simplify his example, let's say you own a 100-car garage, and you can fill 50 spaces by charging $20 a day.  To fill 85 spaces, you will need to lower your price to $10 a day.  But filling the 50 spaces earns you $1,000, and filling 85 spaces only earns you $850.

So Center City's garage operators may be quite content with a 74 percent peak occupancy.

In addition to the profit motive, I would like to suggest that garage operators have another motive -- operational convenience.

I mentioned the William Penn House charges $16 to park for one hour.  Pretty much all the garages do something like this.  I was walking down 13th Street a while ago, and I watched a man in a nice car (perhaps an Audi) head into the garage entrance in the Wanamaker Building.  He stopped short and sat in the entrance for a moment.  Then he backed up a little.  Then he sat some more.  And then he went in.  Once he got over the shock, he decided he could afford it.

Other people may stay home, or go to a mall in the suburbs.  What would John Wanamaker say to the people running his garage?

The Early-Bird Special
Meanwhile, back to the William Penn House.  It charges shoppers $16 an hour, and I think that means it doesn't like shoppers and other short-term visitors.  Meanwhile, it loves commuters.

There's an early-bird special.  In by 8:30 a.m., out after 2 p.m.  You can stay up to 12 hours, all for $18, or $1.50 per hour.  OK, $1.50 per hour for a commuter, $16 per hour for a shopper.

So garages love commuters, and they hate shoppers.  Did you notice that the early-bird price is only 60 percent of the price for parking on the street?

Clearly the garages could make a lot more if they catered to shoppers, but that would lead to a lot of in-and-out hustle and bustle during the day.  The garage would have to work harder.  The motive here is not profit-maximization.  It is operational convenience.  In the morning, you suck them in, and in the afternoon, you vomit them out.  During the day, you take a nap.

This is in my opinion a mess, and I don't know what to do about it.  The city's merchants should be unhappy.  If you have an office in Center City, and you ask people to come to meetings, you should be unhappy.

There ought to be a constituency for change.  But what's a poor City Council Person to do?  How do you make change here?  What are the tools?

Price controls have a habit of backfiring.  But you could tax empty parking spots in garages.  For the first 15 percent, the tax could be zero.  Below 85 percent peak occupancy, the tax would be greater than zero.  Just a thought.

Prices on the Street
Meanwhile, prices on the street have to go up.  They're currently set by City Council.  The maximum is $2.50 per hour, and there is a very noisy constituency opposed to raising the price.

But at these prices, pretty much all the spots are taken all the time.  So, again, access is denied.

Professor Shoup notes (p. 297) on-street parking works best with 85 percent occupancy at the curb.  This is the same figure as with garages, and for the same reasons.  Below 85 percent you're wasting space, and above 85 percent you get congestion craziness -- people circling the block, choking traffic as they look for a spot that isn't there.

Cruising Causes Congestion
How much does cruising for parking contribute to traffic congestion in the downtowns of America?  A lot.  The first study of cruising, in 1927, found that "between 19 percent and 34 percent of the cars traveling in downtown Detroit were cruising for curb parking."  Later studies have come up with figures from 8 to 74 percent (pp. 275-291, 358).

In 1984, Professor Shoup and his research assistants at UCLA studied cruising in Westwood Village, a small commercial area that borders the UCLA campus.  They found that, on average, 68 percent of the cars on the road were cruising, with a peak of 94 percent between 7 and 8 in the evening.  The amount of cruising was directly related to occupancy levels at the curb (pp. 348-370).

Access Is the Key
The solution?  Raise prices until you get average curb occupancy down to 85 percent.

So who's against this?  Well, merchants traditionally have a horror of charging for parking.  They're afraid they'll lose customers to suburban malls or other areas that don't charge for parking.

The counterargument is that customers are more interested in convenient parking than free parking (p. 400).  And numerous studies have indicated that higher parking prices will not inevitably reduce employment and trade downtown.  People may park a little further away, or go into a garage, or take the bus or trolley or train or subway (pp. 639-640).  Or they may bike.

And the higher prices lead to more turnover in an individual parking space, so the merchant will actually see more customers.  "Underpricing creates the incentive for solo drivers to 'squat' in scarce curb spaces, reduces turnover, and deters visitors by creating a shortage of convenient short-term parking.  Market-priced curb parking will reallocate the curb spaces to visitors who place a higher value on their time.  More spaces will also be available to short-term parkers who come for a quick purchase and leave immediately, so the curb parking spaces will generate more customers for local businesses.  A low price for curb parking may sound good for business, but it is not."  (Pp. 365-366.)

I certainly hope the merchants at the Italian Market hear about that paragraph.

So How Do We Do This?
When it comes to getting curb parking right, Professor Shoup has two basic maxims:  Charge market prices for on-street parking; and return the revenue to finance neighborhood public improvements (p. 548 and passim).   Market prices will get you 85 percent occupancy at the curb; and returning revenue to the neighborhood will generate political support for the new approach.

So who do you give the revenue to?  In the case of Philly's Central Business District, the obvious candidate is the Center City District.  In addition to being a Business Improvement District, CCD would become a Parking Benefit District, meaning it would receive revenue from the parking meters and spend it on improving the district, something it already knows how to do.  With more money, it could do more.

One of the first Parking Benefit Districts was in Pasadena, California.  At the time, the downtown had no parking meters.  When the meters went in, the new district got all the funds (pp. 403-418).  Later cases have proved more complicated.  In San Diego, for instance, the meters were already there, and the city was accustomed to receiving the revenue from them.  And hence was born the phenomenon of Parking Increment Finance (pp. 418-427, 528-530, 694-695), whereby the district and the city share the larger pie that comes from raising prices.

One big obstacle remains.  You're asking City Council to raise the price on parking meters, which it does not want to do.  As Professor Shoup puts it, "councilmembers naturally hesitate to raise the price that voters pay for parking."  And he provides the solution:  "One way to skirt this conflict is to redefine the goal of parking policy.  Instead of voting directly on the price of curb parking, a city council can establish a target occupancy rate -- such as 85 percent -- and instruct the parking authority to set the right prices to achieve this average rate." (Pp. 304-305.)

We can do this in Philadelphia.

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