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Friday, February 3, 2012

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.

Tuesday, January 31, 2012

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?