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Non-Toll Pricing—A Primer

Overview of Parking and Access Pricing Strategies

Off-street parking is typically not priced in part because zoning requires that it be provided in quantities sufficient for it to be offered for free. This approach, though, has been shown to have very negative consequences, making it important to explore pricing alternatives. A one-of-a-kind before–after study of a 1961 Oakland, CA, ordinance that required one parking space per apartment-building dwelling unit showed an 18-percent rise in construction cost per dwelling unit and a reduction in housing density of 30 percent after the requirement was imposed. Reduced density in itself increases the need for and ownership of automobiles as it spreads destinations and creates an environment less hospitable to walking and other alternative transportation modes. A doubling of residential density, for example, reduces vehicle ownership by 32 percent to 40 percent, which also reduces VMT (Holtzclaw et al., 2002).

The fact that parking appears to be free in the United States to most users most of the time and yet is very expensive to provide means that there are many opportunities available to charge for parking directly or to offer financial rewards to those who do not use parking. Parking pricing takes many forms, including employer-provided parking “cash-out” benefits, variable on-street meter charges, and off-street pricing strategies. Parking cash-out allows employers to offer their employees the option of receiving taxable cash in lieu of any parking subsidy offered, providing employees an incentive to find alternatives to drive-alone peak-period commuting. Pricing of street and municipal parking is an excellent strategy to encourage alternatives to drive-alone trips to and from congested urban areas and to manage limited parking supply. A related strategy to discourage freight-related congestion is variable port-access charges.

Parking Cash-Out

The vast majority of employers provide their employees free parking at work; a minority offer transit or other commuter benefits, and even where such alternative benefits are offered, they are generally capped at a far lower value than the parking subsidy that is provided. For these and other reasons, most employees choose to drive alone to work.

Parking cash-out is an especially good parking-pricing strategy to realign existing employer commute benefits so as to reward employees for using alternative transportation. Parking cash-out allows employers to offer their employees the option of receiving taxable cash in lieu of a parking subsidy, providing employees an incentive to find alternatives to drive-alone peak-period commuting. In most cases, employers offer their employees the cash value of a monthly parking space in lieu of the space itself. Employees may decline the cash and keep the tax-free parking space or accept tax-free transit or vanpooling benefits in its place—with any difference between the value of the parking and the alternative benefit being provided in taxable cash to the employee. Both employers and employees ultimately benefit from implementing parking cash-out, because employees’ incomes rise by using savings from employers’ reduced business expenses (i.e., from not having to subsidize as much parking), which helps employers in recruiting and retaining good employees. The potential congestion-reduction benefits can be quite high. Among 1,700 employees in eight case study firms in southern California, parking cash-out implementation led to an 11-percent reduction in commute trips and a 12-percent reduction in commute VMT (Shoup, 1997). Studies of parking cash-out in Seattle, WA, and the Minneapolis–St. Paul, MN, metropolitan area yielded similar results, with a 10-percent reduction in employee parking demand in Seattle (Glascock, Cooper, & Keller, 2003) and an 11-percent shift to alternative transportation modes in Minneapolis–St. Paul (Van Hattum et al., 2000).

Variably Priced Metered Parking

Photo. Close up of a parking meter showing “Time Expired,” with the rear of a car in the background.

Free on-street parking provides a perverse incentive for motorists to circle around congested urban blocks in search of a space and to bypass commercial garages that do have space but for which the driver must pay. This worsens already congested conditions. The results of 16 studies of cruising for on-street parking in 11 cities were summarized in the book, “The High Cost of Free Parking” (Shoup, 2005). The share of city traffic cruising in these studies ranged from 8 percent to 74 percent and averaged 30 percent, with an average search time of 3.5 minutes to 13.9 minutes, or an “average of the averages” of 8.1 minutes. If cruising for parking could somehow be eliminated, its congestion-reducing benefits would clearly be very substantial. It could reduce the need to provide additional costly roadway infrastructure (where such expansion might be possible) to serve travel needs.

The obvious solution is to price parking to achieve a particular occupancy standard; thus, at least a few spaces will always be readily available. University of California, Los Angeles, professor Donald Shoup, the preeminent U.S. authority on parking policy, has regularly called for prices to vary in order to yield 85-percent curb–space occupancy, leaving about one in seven parking spaces per block available for the taking. New technologies, such as pay-by-cell-phone systems and mid-block parking-ticket-dispensing machines that accept credit cards, can facilitate such pricing. Shoup suggested that residents of an area with new street parking charges share in its revenues. Redwood City, CA, has enacted and is implementing a law that requires city staff to set and adjust parking meter charges to achieve an 85-percent curb–space occupancy rate. The U.S. Department of Transportation (DOT) has begun funding projects in San Francisco, CA, and New York City, NY, to vary meter charges to meet specific curb–space occupancy objectives.

Pricing of Off-Street Parking

Even for employees who purchase their own monthly parking spaces, once they have made the decision to purchase such parking, there is no financial benefit to using it sparingly. In fact, it would often cost them more not to use the parking, because taking a transit alternative would require the payment of a fare, whereas driving would incur no incremental cost for parking. One strategy to change this would be to sell more flexible parking passes. Rather than monthly passes, parking operators could sell passes for a limited number of uses (e.g., 10 or 20), or operators could continue to sell monthly passes (perhaps at a higher rate) and provide a rebate for unused days. In a similar vein, a monthly parking pass could include free transit, in which the transit agency and parking operator could agree to some revenue apportionment scheme. A monthly transit pass could also include a few days of free parking as a sales enticement.

Photo. A large truck in a freight yard at a port facility, surrounded by large shipping containers, with a crane in the distance.

A time in which turnover of off-street parking spaces may not be a good thing from a public-policy perspective is in the middle of rush hour. Ideally, motorists will have an incentive to avoid driving at such times. Although congestion-priced tolling is one appropriate strategy, another approach is to place a surcharge on entering or leaving a parking facility during and near the rush hour. The City of Chicago is considering implementing just this strategy by placing a surtax on off-street parking that is accessed or vacated at peak-travel times.

Variable Port Access Charges for Trucks

A freight-related strategy that has been successfully demonstrated is variable port access charges for trucks. It is not unusual that trucks must pay for the privilege of transferring loads at a port facility, but it is rare that the rates vary to discourage peak-period use and to encourage use during off-peak times.

The PierPASS OffPeak Program at the Ports of Los Angeles, CA, and Long Beach, CA, is an exception, providing a financial incentive for cargo movements to shift away from peak-traffic periods and into nights and weekends. Prior to the launch of the program, between 17 and 21 percent of port traffic moved during off-peak hours. In a July 8, 2008, report on the program, about 45 percent of port traffic was found to move during such hours (BST Associates, 2008).