Parking Pricing
Direct Charges for Using Parking Facilities
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Victoria Transport Policy Institute
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Updated
22 July 2008
This chapter discusses ways
of charging users directly for parking facilities and services, and the impacts
this has on vehicle travel. Parking pricing provides revenue and cost recovery,
encourages more efficient use of parking facilities, reduces parking facility
costs and land requirements, reduces vehicle traffic and encourages use of
alternative modes.
Parking Pricing means that motorists pay directly for using parking facilities. Parking Pricing may be implemented as a TDM strategy (to reduce vehicle traffic in an area), as a parking management strategy (to reduce parking problems in a particular location), to recover parking facility costs, to generate revenue for other purposes (such as a local transportation program or downtown improvement district), or for a combination of these objectives.
Below are specific Parking Pricing techniques:
· Wherever possible, charge motorists directly for using parking facilities. If parking must be subsidized, offer comparable benefits for use of other travel modes, such as Cash Out payments.
· Manage and price the most convenient parking spaces to favor priority users. Charge higher rates and use shorter pricing periods at more convenient parking spaces (such as on-street spaces, and parking near building entrances) to increase turnover and favor higher-priority uses. Prime spaces suitable for short-term use should generally be at least twice as expensive per unit of time as less-convenient spaces suitable for longer-term uses. For example, in a central business district charge 25¢ for each 15-minute period with a two-hour limit, while at the fringe charge $4 per day. The ratio between short- and long-term spaces may need occasional adjustment to optimize use.
· Use variable rates that are higher for peak locations and times. Apply performance-based parking prices, which means that prices are set so that about 15% of parking spaces are unoccupied during peak periods (Shoup, 2006). For example, charge $1 per hour for parking downtown during weekdays, $0.75 per hour for parking downtown during evenings and weekends, and $0.50 per hour for parking in other locations.
· Improve Pricing Methods to make Parking Pricing more cost effective, convenient and fair. For example, use electronic pricing systems that accommodate various payment methods and rates, and allow motorists to pay for just the amount of time they will be parked. For short-term parking change by the minute rather than by the hour, and for long-term parking charge by the hour rather than by the day or month.
· Avoid discounts for long-term parking leases (i.e., cheap monthly rates).
· Use a progressive price structure in more convenient spaces to favor short-term users. For example, charge $1.00 for the first hour, $1.50 for the second hour, and $2 for each subsequent hour.
· To increase revenues, expand when and where parking is priced rather than raising rates at existing priced facilities. This is more efficient and equitable, reduces spillover problems, and usually raises more total revenue.
· Set parking prices to equal or exceed transit fares. For example, set daily rates at least equal to two single transit fares, and monthly rates at least equal to a monthly transit pass.
· Minimize discounts for long-term parking passes. For example, set daily rates at least 6 times the hourly rates, and monthly rates at least 20 times daily rates. Even better, eliminate unlimited-use passes altogether. Instead, sell books of daily tickets, so commuters save money every day they avoid driving.
· Eliminate early-bird discounts.
· Unbundle parking, so people who rent or purchase building space can choose how much parking is included.
· Avoid excessive parking supply. Use Parking Management to encourage more efficient use of existing parking facilities and address any spillover problems that result from pricing.
· Encourage businesses to price, cash out and unbundle parking by providing rewards to those that do, legislating it, or by imposing special property taxes on unpriced parking.
· Unbundle parking from housing, so apartment and condominium residents pay only for the parking spaces they need (Location Efficient Development).
· If parking must be subsidized, use targeted discounts and exemptions, rather than offering free parking to everybody. For example, to subsidize customer parking, allow businesses to validate parking tickets or provide free parking coupons to customers. To subsidize parking for people with low incomes or disabilities, provide discounts directly to those individuals.
· Tax parking spaces, and encourage or require that this cost be passed on to users. Reform existing tax policies that favor free parking. For example, tax land devoted to parking at the same rate as land used for other development.
· Charge a tax on curbcuts comparable to potential revenue foregone had the same curb area been devoted to priced on-street parking. This would encourage property owners to minimize the number and width of curb cuts, through access management and consolidation of driveways and parking facilities, which helps improve traffic flow and create more pedestrian friendly streetscapes.
· Price on-street parking in residential neighborhoods. Create Parking Benefit Districts, with revenues used to benefit local communities (Shoup, 1995).
· Allow motorists to lease on-street parking spaces (Solomon, 1995). For example, let residents and businesses lease the parking spaces in front of their homes or shops, which they could use themselves, reserve for their visitors and customers, or rent to other motorists.
· Use TDM Marketing and other information resources to provide information on parking prices and availability, and on alternative travel options.
· Develop and utilize Transportation Management Associations to provide parking management, user information and brokerage services in a particular area.
· Use parking pricing revenues to Fund Transportation Programs.
· Provide free or discounted parking to Rideshare vehicles.
Parking Pricing represents a significant change from current
practices. Most vehicle parking is provided free or significantly subsidized.
Of the 95% of
Parking Pricing can provide significant revenue. Parking facilities represent 5-15% of the annualized cost of a typical building, so charging motorists directly for using parking rather than incorporating parking facility costs into building rents and mortgages could increase property revenues or reduce building rental charges by nearly this amount (additional revenues minus any costs associated with collecting fees). Although a 10% increase in building rents may seem modest, this is equivalent to normal return on investments, indicating that recovering parking costs directly from users could double profits on typical building investments. Similarly, charging for public-owned parking facilities can provide significant revenue to governments. Shoup (2002) estimates that charging market-rate prices for curb parking could yield more revenue than total property taxes in many neighborhoods.
Given a choice, motorists usually prefer unpriced parking. But unpriced parking is not really free, consumers ultimately bear parking costs through higher taxes and retail prices, and reduced wages and benefits. The choice is actually between paying for parking directly or indirectly. Paying directly for parking is more equitable and efficient (Market Principles). There are an estimated 2 off-street and 1-2 on-street parking spaces per vehicle in the U.S., with total annualized value of $1,500 or greater per vehicle (Litman, 2000). This averages 12¢ or more per vehicle-mile, about equal to average vehicle operating costs (Transportation Costs). In other words, charging motorists directly for all parking would approximately double the perceived cost of driving.
This underpricing results in inefficient use of parking facilities and excessive parking demand. In particular, the most convenient parking spaces (such as on-street spaces in commercial areas) are often filled, while less convenient spaces (such as commercial fringe area parking, and in parking lots behind buildings) are often unoccupied. This reduces motorist convenience and increases traffic problems that can be reduced with more efficient pricing (Arnott and Rowse, 2007). Surveys indicate that 8-74% of urban traffic congestion is caused by vehicles cruising for on-street parking, and motorists spend an average of 3.5 to 13.9 minutes finding a curb parking space, both indications of inefficiency due to underpricing (Shoup, 2004).
Much of the resistance to Parking Pricing reflects the inconvenience of current payment methods, and obstacles to using alternatives. Parking Pricing can become more accepted if:
· Better Pricing
Methods are used that make pricing more convenient and fair.
· Transportation and Parking Management strategies are used to improve
consumers’ Transportation Choices.
· Marketing
provided better information on parking prices and availability, and
transportation alternatives.
Parking price changes are usually implemented by local governments or individual businesses, either as part of a TDM program or for revenue generation. Off-street Parking Pricing is often managed by specialized companies that serve many property owners.
Implementation depends on the objectives. As a Parking Management strategy, prices for the most convenient parking spaces (such as on-street spaces in commercial areas) should encourage turnover, with lower prices or unpriced parking at other locations. As a Congestion Pricing strategy, to address local traffic and parking problems, rates should be higher during peak periods, and the rate structure should be applied consistently throughout the area (such as a commercial center). As a regional TDM strategy, to reduce congestion problems and pollution emission, pricing should be applied throughout a region to avoid simply shifting travel from one location to another, and coordinated with other TDM strategies that encourage use of alternative modes. If implemented for revenue generation, parking prices should be set as high as the market will bear, and competition (such as nearby free parking) should be minimized.
To implement Parking Pricing it is helpful to develop an area-wide parking policy and plan that coordinates parking supply, pricing and management, and addresses spillover parking problems (TDM Planning). Parking Pricing can encouraged by reducing parking supply, for example, by reducing minimum parking requirements for new development, so businesses find pricing cost effective (New Urbanism).
Table 1 summarizes parking Pricing Methods. Newer methods tend to be more cost-effective, convenient and fair. They allow various payment options (coins, bills, prepaid value cards and credit cards), and more adjustable prices. Some systems allow motorists to pay for just the amount of time they are parked, rather than requiring users to prepay for a block of time.
Table 1 Summary of Parking Pricing Methods (Pricing Methods)
|
Type |
Description |
Equipment Costs |
Operating Costs |
User Convenience |
Price Adjustability |
|
Pass |
Parkers purchase and display a pass. Common for leased parking. |
Very low |
Medium |
Medium |
Poor to medium. |
|
Single-Space Meters |
Parkers prepay a mechanical or electronic meter located at each space. |
High |
High |
Low to medium. |
Mechanical meters: poor; electronic meters: good. |
|
Pay Box |
Parkers prepay into a box with a slot for each space. |
Low |
Medium |
Low |
Poor to medium. |
|
Pay-And-Display Meters |
Parkers prepay a meter, which prints a ticket that is displayed in their vehicle window. |
Medium |
Medium |
Medium |
Mechanical meters: poor; electronic meters: good. |
|
Electronic Pay-Per-Space |
Parkers prepay an electronic meter. |
Medium |
Medium |
Medium |
Very good. |
|
In-Vehicle Meter |
Parkers prepay to use a small electronic meter displayed in the vehicle when it is parked, that counts down minutes. |
Medium |
Low |
High |
Moderate |
|
Attendant |
Parkers pay an attendant when entering or leaving a parking space. |
High |
High |
High |
Good |
|
Automated Controlled Access System |
Parkers pay a machine when entering or leaving a parking space. |
High |
Moderate |
Moderate |
Good |
|
Valet |
Parkers pay an attendant who parks their car. |
Low |
High |
High |
Good |
|
Automatic Vehicle Identification |
System automatically records vehicles entering and leaving a parking area and can bill for use. |
High |
Medium |
High |
Good |
This table summarizes various methods that can be used to collect parking fees.
Several factors should be considered when setting parking rates.
Parking prices can be set to achieve transportation and parking management objectives:
·
Price the most convenient parking spaces for customers and clients,
with minute or hourly rates.
·
Use time variable rates (higher prices during peak periods and lower
prices at off-peak times).
·
Price less convenient parking spaces for employees and residents, with
weekly or monthly rates.
·
Use Parking Pricing to encourage mode shifting. Integrate Parking
Pricing with other TDM strategies that support transportation alternatives.
Prices can be set to recover parking facility costs. For example, a business or government may want to price parking to recover costs, without making a profit. Table 2 indicates typical base costs of providing parking facilities (i.e., wholesale costs). Full cost recovery must account for load factors (not all parking spaces are rented each day), and return on investment (borrowing and risk costs).
Table 2 Typical
Parking Facility Costs (Parking
Evaluation)
|
Type of Facility |
Land Costs |
Land Costs |
Construction Costs |
O & M Costs |
Total Cost |
Monthly Cost |
|
|
Per |
Per Space |
Per Space |
Annual,
Per Space |
Annual,
Per Space |
Per Space |
|
Suburban, Surface, Free Land |
$0 |
$0 |
$1,500 |
$100 |
$242 |
$20 |
|
Suburban, Surface |
$50,000 |
$455 |
$1,500 |
$100 |
$284 |
$24 |
|
Suburban, 2-Level Structure |
$50,000 |
$227 |
$6,000 |
$200 |
$788 |
$66 |
|
Urban, Surface |
$250,000 |
$2,083 |
$2,000 |
$150 |
$535 |
$45 |
|
Urban, 3-Level Structure |
$250,000 |
$694 |
$8,000 |
$250 |
$1,071 |
$89 |
|
Urban, Underground |
$250,000 |
$0 |
$20,000 |
$350 |
$2,238 |
$186 |
|
CBD, Surface |
$1,000,000 |
$7,692 |
$2,500 |
$200 |
$1,162 |
$97 |
|
CBD, 4-Level Structure |
$1,000,000 |
$1,923 |
$10,000 |
$300 |
$1,425 |
$119 |
|
CBD, Underground |
$1,000,000 |
$0 |
$22,000 |
$400 |
$2,288 |
$191 |
This table illustrates the financial costs of providing parking facilities under various conditions. (CBD = Central Business District)
Table 3 indicates typical cost recovery parking prices. This includes costs for facilities construction, operations and pricing, assuming a 70-90% load factor (portion of parking spaces that are rented during any month).
Table 3 Typical Cost Recovery Parking Prices
(Parking
Cost Spreadsheet)
|
Parking Facility |
Payment System |
Annualized Costs |
Monthly Rate |
Daily Rate |
|
Surface, Free Land |
Pass |
$300 |
$35 |
$1.75 |
|
Suburban, 2-Level Structure |
Pay-and-Display |
$800 |
$115 |
$5.75 |
|
Urban, Surface |
Pay-and-Display |
$725 |
$75 |
$3.75 |
|
Urban, 3-Level Structure |
Pay-and-Display |
$1,285 |
$135 |
$6.70 |
|
CBD, 4-Level Structure |
Attendant |
$1,600 |
$150 |