In some ways, cities are like households: they must make adjustments in spending based on cash flow. If your income is cut in half, then you may have to dramatically rethink your standard of living. COVID-19 has hit many households and cities hard. A report by the National League of Cities found that average revenues across more than 900 surveyed cities in the United States declined 21% in 2020, coupled with increased expenditures of 17%, which created a combined budget gap of about $90 billion on the year.
Overlooked by many cities, parking management can be a key tool not only in boosting cities’ revenue streams to help fund critical recovery priorities, but in achieving other community and public policy goals, like expanding access to transport and even affordable housing.
If cities charge market rates for the real estate a car occupies, parking can earn substantial revenue even at modest prices. Market-priced curb parking can yield between 5-8% of the total land rent in a city. In Chicago, parking meters brought in $139 million in 2019, an increase of about $100 million since 2008. The city was able to do this by matching price with demand – without increasing supply of parking spots – to maximize profits.
Variable pricing is another, pre-pandemic strategy that more cities have begun to explore. This pricing model also aims to collect more revenue by matching price with demand, but parking operators in this case can adjust the price of parking based on location and time. This approach contrasts with the traditional fixed rate model that places a standard rate on parking regardless of its location, even though the parking demands for a central business district are very different from, for example, a quiet side street.
The City of Seattle provides a great example of effective variable pricing policy. At the height of the recession in 2008, Seattle opted for variable pricing for on-street parking. The city established that identified zones would have variable rates based on their location, demand density and time. The city adjusted rates on an annual basis based on performance and showed a $6 million increase in revenue in 2009. That revenue then increased by 31%, from $25 million to $37 million, between 2009 and 2013. The city proportions most of its parking revenue to its General Fund, increasing the budget for vital infrastructure improvements and services.
Residents who don’t see the benefits of revenue generated from parking may be resistant to parking policies. Raising parking rates is almost always an unpopular move when the public is not informed about how the revenue will be used. Cities can mitigate this pushback by appealing to broader community and public policy goals when structuring pricing, and by transparently communicating these goals and proposed changes with residents. For example, using a certain percentage of parking revenue for public transport projects that provide alternatives to driving a car. In Denver, money raised by parking is dispersed to more than 30 agencies and more than 200 public services and programs in the City and County of Denver.
Another strong use case is affordable housing – a public good that has been particularly strained in the pandemic. Budget cuts in many cities have squeezed out funds that would have helped to build new affordable housing or to maintain current housing. This has led to increased housing insecurity, even at a time of record unemployment. Cities can utilize parking revenues to decrease the financial strain on budgets by allocating a predetermined percentage to a housing trust fund. In 2018, Pittsburgh voted to allocate nearly $7 million in parking tax revenues over 19 years to help pay for affordable housing as part of a $47-million mixed-use project. Under the proposal, 75% of parking fees generated would be redirected to pay a $4-million loan needed to finance construction of 74 units of affordable housing. This allocation was part of 2016 guidelines developed to use parking-tax revenues to help pay for projects that create jobs for Pittsburgh residents, improve infrastructure and enhance social equity in the community. Pittsburgh’s experience shows that cities can successfully use parking revenues to address urgent community priorities.
Revenue generation is a critical component of cities’ ability to provide essential public services, and the pandemic has increased the urgency for cities to rethink how they approach their revenue streams. Cities can strengthen the case for parking management as a recovery tool by tying the strategy to broader city goals and building a coalition of advocates and allies across sectors, like multimodal transportation advocates, in-fill and affordable housing developers, small businesses and even historic preservationists. In Pittsburgh, the Urban Redevelopment Authority developed a plan to divert up to $6.8 million in parking tax revenues over 19 years to help pay for affordable housing. Parking revenue alone will not solve cities’ revenue challenges, but it can be an incredibly useful tool right now to jumpstart recovery and provide much needed funding to vital resources.
Karra Tuluenga is Manager of Government Relations at Passport Labs.
Joni Wickham is Co-Founder of Wickham James Strategies & Solutions and former Chief of Staff to former Kansas City Mayor Sly James.