Tuesday, February 21, 2012

Avoiding parking monopolies: Adaptive Parking encourages competition and improved options

Avoiding parking monopolies: Adaptive Parking encourages competition and improved options
Priced parking often prompts worries about monopoly.

Performance pricing for parking managed by the public-sector should help avoid over-pricing in that part of the parking scene (if parking usage drops at any location, then the demand-responsive prices will soon follow suit).

But governments don't (usually) control private sector parking prices. So, unless the Adaptive Parking agenda includes steps against monopoly or market power, it may be vulnerable to cries of 'gouging!', 'exploitation!', 'abuse of monopoly!'.

We can see these concerns in this letter to the editor in Singapore's Today newspaper about parking  at the Budget Terminal of Singapore's Changi Airport:
"Monopoly parking should be regulated" Heng Zhao Weng, Feb 14, 2012
The underlying reason for the recent complaints of exorbitant parking at the Budget Terminal ... is straightforward. Parking rates in the city are more or less determined by fair market forces based on supply and demand ... The same cannot be said for the business practices in some remote places.  ...  The authorities should act. When there is no alternative parking within so many metres of a charging car park, rates fixed by regulation should apply.

This gives me an excuse to introduce the fifth and final Adaptive Parking reform thrust
Competition and Options: ensure adequate alternatives to driving and/or competition among parking facilities, so that people have options for accessing the area.
CBDs, like Auckland's here, often already have strong competition among parking operators and rich mobility options for reaching the area by various means of transport.

The motivation for including this reform direction in Adaptive Parking is the worry expressed in the letter above. Adaptive Parking points towards a more market-responsive parking system but this would be undermined if there is rampant abuse of monopoly or market power. You should rightly be wary of market pricing and responsive supply unless you get reassurance against monopoly.

Tackling parking monopoly can take two contrasting directions. If direct competition is impossible and if the substitutes are hopeless, then regulation (or public-sector provision) may necessary, as the letter writer above suggests. But in the case of parking, it is probably better to first try to foster more competition and enriched alternatives, rather than resort too hastily to regulation of prices or supply.

So Adaptive Parking suggests that we apply the usual tools of anti-trust or competition policy to parking. This already happens in some areas, especially city centres and airports. Mergers and acquisitions in the parking industry already face scrutiny from competition watchdog agencies. If Adaptive Parking succeeds in spreading a more market-oriented approach to parking, then more locations will need to apply competition policy to their parking systems.

Improving mobility options and alternatives to driving is another way to ease worries about local parking monopolies. After all, market power requires both barriers to entry AND a lack of close substitutes. Enhanced taxi services, public transport, walkability and cycling facilities can all help to reduce the ability of any localised parking monopoly to over-charge or under-deliver.

On a more positive note, enhancing competition and enriching mobility options should give a boost to the market-responsiveness of any neighbourhood parking scene, even if there is no clear-cut monopoly to combat.

P.S.  Actually, I am not quite convinced that the controversy over Singapore Budget Terminal parking fees is a good example of monopoly abuse. But never mind. That letter to the editor was a useful lead-in for this post.
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Tuesday, February 14, 2012

Adaptive Parking lets parking supply choices respond to local context

Adaptive Parking lets parking supply choices respond to local context
This post introduces reform direction number four in Adaptive Parking.

It calls for more responsive parking supply choices: 
Responsive Supply: Let parking supply choices respond more readily to costs, returns (or the lack of returns) and alternatives.
In other words, it is a good idea to encourage parking supply to adapt to local conditions. By the way, I really mean LOCAL. And by 'conditions' I mean all dimensions of market conditions. 

So, this fourth reform direction in Adaptive Parking is actually much more ambitious than just saying we should match parking supply to demand.

It suggests paying attention also to the opportunity costs and the financial returns on parking investments, relative to alternatives. If the costs of building parking are going to be high and/or the returns are going to be low, and there are much better uses of the money, then why supply more parking?

Parking is real estate

Maybe you are thinking that this sounds obvious and that there is no need to labour the point? Well, it may be obvious but that doesn't prevent most jurisdictions around the world having parking policies that ignore such costs and returns and which force real-estate developers to ignore them too.

This reform direction points towards treating parking like any other real estate investment, so that we at least consider its costs, returns and alternatives. Unfortunately, treating parking investments as a real-estate investment decision is in fact NOT the conventional thing to do.

Key examples of policies that limit responsiveness in parking supply include: 
  • the building of taxpayer-subsidised public parking structures in town centers;
  • minimum parking requirements (especially if these are set at high levels);
  • policies that make all parking (even parking in excess of the requirements) exempt from counting towards the zoning plan's gross floor area limits for the building (or from counting in the floor area ratio, FAR, also known as plot ratio or floor space index, FSI).
Transit-oriented locations need less parking and the opportunity cost of building it there is high.

So what can we do to make parking supply choices more responsive?

I don't want to go into details today. But here is a short list of examples. 
  • abolish (or just reduce) subsidies for public-sector parking investments
  • abolish (or just refine or make more flexible or reduce) parking norms
  • confront parking suppliers with stronger trade-offs (for example, by counting parking, or at least more parking, as part of the floor space allowed under zoning rules).

You may have noticed that this reform principle is a more general version of Donald Shoup's suggestion to abolish minimum parking requirements.

Note that the short list of policies above includes both bold reforms and timid ones. This reform principle points in a direction for reform but does not insist on taking it to its extreme. Some places might be ready for bold steps but many may need baby steps to try. Fortunately, even modest steps along the lines of these suggestions should be helpful in making parking supply choices more responsive to local market conditions.

Uh oh! An example of going in the OPPOSITE direction

Is there really any need to push for more responsiveness in parking supply decisions? How bad could the status quo be? Very bad, I am afraid. See here, here, here, here and here for examples.

Here is some news from Andhra Pradesh in India about a new policy which will make parking supply extremely unresponsive to local conditions.  According to the Deccan Chronicle
Builders constructing malls and multiplexes, even in district headquarters across the state, have to leave a whopping 66 per cent space of the total built-up area for parking. It is mandatory for all municipalities, municipal corporations and urban development authorities in the state to follow this rule while approving building plans for malls and multiplexes. Presently, the space reserved for parking varies in municipalities and corporations.
Oh dear! This ruling doesn't just tie the hands of developers, it ties the hands of all local governments. It imposes a one-size-fits-all norm across the whole state of Andhra Pradesh, forbidding local governments from taking local circumstances into account. If a mall is proposed in Hyderabad near one of the Metro stations now being built, it will have to follow the norm on parking, despite heightened accessibility by public transport. If a developer wants to build a down-market mall in a low-income segment of any Andhra city, sorry, parking must follow the norm.

How much responsiveness in parking supply choices does your city or town allow for?

In case you missed them, here are the links to explanations of Adaptive Parking reform directions Numbers One (Public Parking), Two (Performance Pricing), and Three (Stakeholder Compromise).

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Saturday, February 11, 2012

Adaptive Parking and the need for stakeholder compromise

Adaptive Parking and the need for stakeholder compromise
This post introduces the third reform direction in Adaptive Parking.

It is relevant around the world but San Francisco provides a current illustration

San Francisco's parking reforms have met an obstacle. There is stout opposition to proposals to bring parking meters to new areas:
Faced with fierce opposition from newly organized residents and business owners, San Francisco transportation officials are tapping the brakes on a plan to install thousands of new curbside meters on streets where drivers now park for free. The proposal calls for one of the largest expansions of parking meters in city history.
The prospect of getting priced parking for the first time in an area is always controversial and is often resisted. Having the pricing take the form of demand-responsive SFPark-style pricing (as in this case) adds a further twist.
Initially, the proposed hourly charge would be 25 cents. But under city policy, the price can be increased in 25-cent increments every month or so, based on demand. 
Image from SFGate's City Insider blog
By contrast, the districts under the earlier phases of SFPark's performance-pricing trial generally already had on-street parking meters (please correct me if I am wrong on that).

Is the situation hopeless? Is extending parking pricing always political suicide? Maybe not! This bit of the SFGate article suggests room for compromise:
Susette Blackwell, who has lived in and owned a small building in the northeast Mission for more than a decade, now faces the prospect of having new meters planted on her street. "The days of free parking are over. We get it," she said. "We're willing to compromise, but they have to be willing to work with us."

So this sounds like a case for Adaptive Parking reform direction number 3: stakeholder compromise! 

Adaptive Parking has five basic reform principles or directions. I have been writing a bit about numbers one and two.

Here is number three again: "compromise with stakeholders when necessary, in ways compatible with the wider reforms".

So what is the thinking behind this reform direction? Regular readers may remember that the central thrust of Adaptive Parking is to expand the role of market responsiveness in local parking arrangements. This includes fostering park-once districts with more parking being made open to the public, pricing parking in more market-responsive ways, and accepting that supply might adjust in ways that produce spillover (which will now be seen as natural and normal).

Obviously, such changes often face resistance.

Local stakeholders care about their local parking. Some get territorial about it. This reform suggestion aims to be realistic that people feel a sense of ownership about public spaces in their neighborhoods, including the parking in the streets. They don't "own" these streets but local governments soon learn that it is foolish to ram through parking reforms that ignore territorial sentiments about parking.

The folks opposed to change also tend to feel more strongly about it than anyone else. So, in social-science-speak, this reform direction is also about defusing the collective action problems associated with parking reform.

So Adaptive Parking reform direction #3 is about giving local stakeholders more reasons to like the reforms and fewer reasons to fear them. It is about accepting that people feel territorial about "their" streets and that we may need to placate those feelings. But it urges us to do so without losing the spirit of the reform. Any compromises should be consistent with the goal of Adaptive Parking to increase the market responsiveness of the local parking system.

Parking Benefit Districts and variations on the theme

Fans of Donald Shoup's book, The High Cost of Free Parking, may have noticed something. A great example of what I am talking about here is Shoup's suggestion to return on-street parking revenue to local ‘parking benefit districts’ to be spent on local public improvements. So you could think of the third Adaptive Parking reform direction as a more generalized take on Shoup's idea.

Parking benefit districts are indeed one way to bring this reform direction to life. They are an institutional form that may resonate for countries that already have similar beasts, such as Business Improvement Districts. Around the world, we will need to find variations on the idea to suit local circumstances.

By the way, Shoup and colleagues have a similar suggestion for overcoming collective action problems standing in the way of congestion pricing.

So what about San Francisco and its current problems? 

The opposition to expanding the priced parking areas in San Francisco demonstrates the importance of Stakeholder Compromise as a reform principle in Adaptive Parking.

However, San Francisco has a problem. It's city charter says all parking revenue must go towards public transport service (as pointed out by Pedro Brown in the Shoupistas facebook group). This ties the hands of the SFPark experiment. San Francisco can't use the parking revenue in its local compromises with the immediate stakeholders. So a Shoup-style parking benefit district cannot help I guess.

Of course, spending parking revenue on transit is itself an attempt to make parking pricing more palatable by having it contribute to the improvement of travel choices. But it seems not be enough to mollify locals faced with new parking meters for their area.

Maybe SF will find other ways to win crucial local support for the expansion of priced parking? It will be interesting to see how this develops.

Any suggestions? One obvious line of thinking involves residential parking permits. Can they be made compatible with Adaptive Parking?

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Friday, February 3, 2012

Performance pricing is NOT pricing for "traffic restraint"

Performance pricing is NOT pricing for "traffic restraint"
Early reactions to proposals for demand-responsive pricing of parking are often plagued by confusion.

When people hear about performance-pricing for the first time, they often confuse it with another (more familiar) parking policy: using high prices to restrict traffic. 

If you are a regular Reinventing Parking reader, then you probably won't make that mistake. But be aware of it whenever you try to explain performance pricing to anyone else. Your audience is likely to jump to the conclusion that you simply mean higher parking prices to limit car use.

Comment threads for articles on Donald Shoup's demand-responsive pricing suggestions often have examples of this misunderstanding. For example, this article prompted this comment:
... If, today, you raise the price of parking in most places (Boston included), you reduce mobility. Somehow public transit has to simultaneously be improved while parking is reduced. ...
Even this supportive comment on the same item blurs the distinction between performance pricing (for vacancies) and pricing to deter car use:
... What policies such as congestion pricing, parking pricing, and road diets do is make people switch from driving to not taking the trip or to taking public transit ...

Now I am not against city-center parking restraint and the fact that it leads to high parking prices. It is often a good idea. But it is NOT performance-pricing! It is something else.

For decades, London has been gradually restricting the supply of parking in order to increase parking prices and reduce traffic. It limited its central-area parking as part of its Travel Demand Management (TDM) policies. Sydney too. In fact, many cities in Europe and Australia do this to some extent. According to ITDP:
Amsterdam, Paris, Zurich and Strasbourg limit how much parking is allowed in new developments based on how far it is to walk to a bus, tram or metro stop. Zurich has made significant investments in new tram and bus lines while making parking more expensive and less convenient.
Seoul is one of the few Asian cities to deliberately limit parking supply in its business districts. In the USA, EPA regulations also prompted a few cities to restrict parking supply, producing high prices in their central business districts (CBDs).

Buildings in Seoul's CBDs have tight limits on the parking spaces they can provide.

Such policies are often a great idea, especially for central areas that are well served by mass transit, but they are not performance pricing.

Now, let's try to be clear about distinctions (and connections) between a) performance pricing and b) using parking as TDM:

1.  The two policies have different aims.

A key claim for performance pricing is indeed that it would reduce traffic. Uh oh... there is fuel for confusion there. But the key to this is its goal of reducing CRUISING for parking. It does NOT aim to reduce car travel itself (although it should help that agenda indirectly in the longer term). By contrast, parking restriction does aim to deter car-based visits to central areas.

2.  The two policies are compatible (this is good but it could also cause confusion)

Parking restrictions nudge off-street parking prices upwards. If such parking restraint were COMBINED with performance-pricing for on-street parking then the on-street parking prices will also be a market outcome and should also rise as supply shrinks. So even though the two policies are not the same thing, they are actually compatible.

In fact, many of the cities that are most urgently in need of on-street parking reform (such as performance pricing or something similar) are those whose CBDs do restrict parking but which still have under-priced on-street parking  (think of the business districts of New York City). This produces a toxic combination of very expensive off-street and very cheap on-street parking, causing extreme levels of cruising for parking. This obviously undermines the benefits of the parking restraint.

San Francisco has also been a case of this! And SFPark is being tried as an answer to the problem. So it is no accident that SFPark is being tried in a city which has a "transit-first" transportation policy that includes parking maximums in the central area.

Unfortunately, this also adds to the confusion. Many people seem to think, "hmmm ... if San Francisco is doing demand-responsive pricing for parking then it must be about restricting cars".

3.  But the two policies need not go together

Many CBDs around the world that restrain parking don't use performance pricing. As mentioned above, some still underprice their parking. Others manage on-street parking quite well but don't use explicit performance pricing. Most of them manage their on-street parking on a zonal basis in order to achieve on-street prices that are similar to, or higher than, the market-based off-street parking. The outcomes of this are probably similar to a simple version of demand-responsive pricing (since the market-based off-street prices are a benchmark) but vacancies are not the explicit target in setting prices.

And cities could certainly do performance pricing even without restricting parking supply. In fact, this is a key point I am trying to make with this post.

4.  Performance-pricing SHOULD be more politically palatable than parking restrictions

Actually, I should say first that even parking restraint CAN be clever politics, at least in city centers and at least compared with some of the other ways to tame traffic. For example, parking restraint is one of the secrets behind Berlin's traffic limitation strategies and was achieved without much political backlash. CBD parking limitation is certainly much more widespread around the world than congestion pricing, for example!

But beyond transit-oriented CBDs, parking restrictions tend to be unpopular. There are many places where it is currently politically impossible to restrict parking supply and to deliberately drive parking prices higher.

This confusion is an obstacle to performance-pricing reform

Now you should be able to see why I have tried so hard to emphasize that performance pricing is NOT the same thing as using parking for travel demand management or traffic restraint.

Performance pricing SHOULD be possible even in places that have no local political appetite for traffic restraint. But not if the two keep getting conflated in people's minds.
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Tuesday, January 31, 2012

An overpricing trap in simple versions of performance pricing for parking?

An overpricing trap in simple versions of performance pricing for parking?

In my last post I asked if imperfect versions of performance pricing are better than none at all.  My answer: generally yes. Taking small steps towards demand responsive pricing for on-street parking is usually a good idea (for reasons to be explained in future posts).

But I can see at least one mistake to avoid: over-pricing. 

In imperfect approximations of demand-responsive parking pricing, it would be easy to over-price parking. This would create too many vacancies and make the whole idea vulnerable to objections that it is killing local businesses.

High-quality performance pricing has an answer to that:  if motorists really stop coming, then the prices will drop again until the problem is solved and, in any case, the prices will not rise past the point that gives 15% vacancies.

But rough-and-ready versions of demand-responsive pricing might indeed need to be careful not to over-price at certain places and certain times. This mistake could be tempting for at least two reasons. Today I will talk about one of them.

Simple versions of performance pricing can only vary their prices on a coarse scale. 

For example, you might have just three prices (zero, basic and peak) with two pricing zones and two time periods in which to apply these prices.

For example, the American town of Nashua, NH, has just started a basic version of performance pricing. Its downtown area now has three pricing zones: Zone 1 (red): 25 cents per 15 minutes (or $1 an hour), Zone 2 (blue): 25 cents per 20 minutes (or 75 cents an hour), and Zone 3 (green): 25 cents per 30 minutes (or 50 cents an hour).

Now, if you aim for vacancies at the really busy places and times within a large zone and over a long pricing-period, you would end up accidentally overpricing parking for part of the zone and for some of the time. Oops.



We don't yet have many examples to analyze but I think the danger is real.

After all, overpricing can happen even when on-street pricing is NOT demand responsive. For example, Donald Shoup was critical of the City of Los Angeles last year.
Two years ago the city doubled meter rates everywhere, and I’ve since seen entire blocks where there isn’t a single car parked at a meter. The prices should come down on these blocks...
...
Meter rates were based on revenue when the city doubled meter rates everywhere, with a minimum $1 an hour, two years ago.  Since most meters had been 25¢ an hour, that meant quadrupling the price at most meters.  Rates at most of the city’s meters had not changed at all in the previous 18 years. Inertia had been the city’s policy, not maximum revenue or good management.
The SFPark trial in San Fransciso is also revealing that the previous flat parking prices must have involved overpricing many streets at many times. How do we know? Because many of the price adjustments under SFPark have been price REDUCTIONS due to very low occupancy rates. 

These arguments also suggest that performance pricing should be introduced step-by-step and cautiously. And, in fact, even though SFPark is 'gold standard' performance pricing, it is being introduced in small steps, with only small price changes allowed, and only once per month. The discussion above suggests that such caution could be even more important if your pricing is not 'gold standard' and will not be varying much in time or space.

Do you have any examples of cities falling into the trap of over-pricing when adopting simple performance pricing? Or maybe I am wrong to worry about this?

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