Common Sense Public Policy
Edward J. Dodson
GroundSwell, January-February 2005]
Along with the core effort to show elected officials and other
community leaders the wisdom of raising revenue by "land value
taxation" rather than the taxation of property improvements,
there are several important peripheral issues that need to receive
greater attention. These involve the utilization of public places
for private benefit.
The construction of our cities has long accommodated the presence
of private automobiles. Larger cities have created parking
authorities to manage parking garages, surface parking lots and
curbside parking along city streets. Most cities impose taxes on top
of base parking fees charged by private garage and lot owners. And
yet, remarkably, demand continues to outstrip supply. Many
commuters, even when there is a significant financial benefit to
using public transportation, continue to choose the daily use of
their private automobile. A consistent result is congestion on the
streets, particularly at peak times of arrival and departure.
These dynamics have not gone unnoticed by researchers. An
important study on the subject by University of California Professor
of Urban Planning, Donald Shoup, is available on-line at
http://www.sciencedirect.com. Professor Shoup's paper, "The
ideal source of local public revenue," provides very common
sense advice to city officials seeking to raise revenue and at the
same time reduce congestion on city streets. His abstract succinctly
states the case:
"Free or underpriced parking creates a classic commons
problem. Studies have found that between 8% and 74% of cars in
congested traffic were cruising in search of curb parking, and that
the average time to find a curb space ranged between 3 and 14 min.
Cities can eliminate the economic incentive to cruise by charging
market-clearing prices for curb parking spaces. Market-priced curb
parking can yield between 5% and 8% of the total land rent in a
city, and in some neighborhoods can yield more revenue than the
Congestion is only one problem that can be greatly mitigated by
market-clearing prices for curb parking spaces. Huge savings in
reduced consumption of gasoline as well as its addition to air
pollution can be achieved. In most cities today, the driver chooses
between "sav[ing] money by parking on-street, or sav[ing] time
by parking off-street." Short-term on-street parking is most
often priced far less than in lots or garages. In New York City, for
example, one hour of parking on the street costs $1.50 but over $14
off-street. "If a city charges prices that are just high enough
to keep a few spaces open on every block," writes Prof. Shoup, "drivers
can always find an available place to park near their destination."
The failure in understanding, he notes, is a failure "to manage
a scarce resource."
Admirers of the economic writings of Henry George will be pleased
by the credit Professor Shoup gives to George for pioneering the
advocacy for public collection of rent associated with resource
scarcity, curb parking being one form thereof:
"Curb parking spaces are bare land in fixed supply, so the
revenue derived from them is rent. Demand determines the rental
value of curb spaces, the revenue comes from public land, and the
city can use it to pay for public services. Charging for curb
parking fits well with Henry George's proposal, and is actually far
simpler than taxation as a way to collect land rent."
The case for market-clearing pricing for automobile parking on
public streets is clearly made by Professor Shoup. We can think of
other public spaces that should be allocated similarly. The one that
occurs to me most readily is that of sidewalk locations taken by
food vendors each day. They drive into the central business
districts each morning, set up their food carts to serve breakfast
and lunch, then close up shop, hook up their cart to an automobile
and drive away. Cities issue vendors' licenses to the owners but the
vendor association works out the distribution of locations. The city
government gets a flat license fee, and the location rents are
privatized. When a vendor decides to retire and "sell out,"
the informal claim the vendor has to the location carries a price.
Cities need to take a close look at this system and create a process
for awarding locations based on competitive bidding by the vendors,
so that the location rent comes back to the community. This is only
one additional example. Can you think of others?