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 property tax."

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?



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