The Parking Meter Deal: Right Idea, Wrong Reasons

Parking is the gender-bender of urban policy issues. It has the capacity to make free-market Republicans slam their fist on the table in defense of subsidized parking anywhere and anytime, while making social democratic types of a green coloration passionate at the prospect of allowing market-clearing prices for curb parking.

But, like Chicago's notorious Blue Bag recycling program, the higher rates for curb parking that will accompany the privatization of the city's 36,000 street meters give only the appearance of taking the lead of the civilized world, while in fact doing nothing of the sort, and disappointing both of the above constituencies.

London has implemented congestion pricing of roadways by zone; Paris has reduced the total number of parking spaces in the city, and has actually increased sidewalk space and built separated bike lanes by removing lanes from major boulevards.

New York City recently debated congestion pricing on the London model. The RAND Corporation has determined that the only realistic policies for congestion reduction in Los Angeles are road pricing and higher parking fees. San Francisco is pioneering a high-tech pilot program that will let parking meters charge a true market rate, based on hourly variations in demand (from $0.25 to $6) at individual meters in a given neighborhood.

If a parking system actually did that -- letting the true market cost of public curbside parking vary with demand -- then, as parking researcher and guru Donald Shoup argues, you would considerably reduce congestion, as well as the frustration of circling for a parking spot at ungodly hours in ungodly conditions. You could then channel the revenue, through neighborhood parking benefit districts, to projects in the district area, or to related public goods such as a modernized transportation system in Chicago.

The latter prospect, however, is entirely lost in the Morgan Stanley privatization deal. What could be a long-term revenue generator for a city in budgetary crisis and with an enormous backlog of deferred public transportation maintenance has been traded for a one-time fix in operating revenue.

And it leaves one of the most powerful of transportation planning tools -- parking policy -- in the hands of a privately held company that specializes in parking garages. Is anyone at LAZ Parking, in which Morgan Stanley has an equity stake, thinking about Shoup's parking benefit districts? Will they be monitoring San Francisco's experiment with a true free market in street parking?

It's not clear, though there could be some positives. The fact that Chicago's meters will be owned in part by Morgan Stanley, the former investment bank that has since become a "financial services company," leads one to speculate that LAZ Parking may, at some point in the future, be taken public.

There would be every reason, prior to any IPO, for fully modernizing Chicago's street metering. This could go far beyond the contracted promise of non-cash metering by 2011, to include the San Francisco model of a block-by-block spot market in parking.

For Chicago, the benefits would be real but unintended, and the cash benefits more diffuse. Congestion currently costs Chicago commuters approximately $3,000/year, so any congestion reduction resulting from the reform would have the effect of a tax repeal. But the direct revenue benefits from the higher rates themselves would be foregone.

In the City's press release, not a single word mentions transportation, public transit, or any of the innovations in parking charges that are being tested in other areas to deal with these problems.

With long-term higher gas prices likely, and flat property values in suburban regions, people will still need to come and to stay in Chicago. Devising a system of metered parking that adequately prices that demand would be a great boon to the city, in terms of revenue; in terms of freeing up the supply of parking; and in terms of mitigating congestion and the CO2 emissions given off by cars circling for a parking spot.

If the new deal for parking should make anything clear, it is that street parking is not free. It has been massively subsidized for over half a century (Shoup estimates that in 2002 "the subsidy for off-street parking alone was between $127 billion and $374 billion) such that several generations of Americans have grown to maturity believing that street parking is like air or water -- free and plentiful. But, as our economist friends will tell you, there is no such thing as a free lunch.

And in an age of climate change, unstable oil prices and the foreign wars they generate, the unintended consequences of cheap parking are becoming less and less palatable.

There is thus some solace to be taken in the fact that, despite the bad deal that Chicago signed with Morgan Stanley, cheap parking is obviously going the way of cheap oil and cheap credit -- and largely for the better.

But as always, the devil is in the details. Raising parking meter rates is much easier than raising property taxes. If the City had the will to do this itself, instead of outsourcing the dirty work to a "bank holding company", it might have kept the revenues and used them to make Chicago the sort of world city worthy of hosting the Olympic Games.

[This post also appears at Hyde Park Progress]