Time to think about the parking problem

Not a lot: The economics of parking

from NewsLink, Vol. 5, No. 2, Winter 2001

This article also appeared in the Boston Sunday Herald on May 5, 2002 under the headline, "Space Race".

You're late for work. It's 8:30 a.m. and you've just arrived at Alewife MBTA Station. There's a line of cars stretching onto Route 2 waiting to park. But you wait 20 minutes, anyway, hoping for a break. Sorry, no luck, the parking lot is full.

It's a bad way to start the day. But it's what hundreds, perhaps thousands, of commuters face each day.

The parking lots adjacent to commuter rail and subway stations are, for the most part, filled to capacity early in the morning. By 7:00 a.m., the MBTA lots at Chestnut Hill, Eliot, Sullivan Square, Waban and Oak Grove are full. The huge (2,378) garage at Quincy Adams Station is full by 8:30 a.m. Despite more than 14,000 parking spaces in 22 garages, (see the table), parking is at a premium.

The new $30 million parking garage at Route 128 Station, which serves commuter rail passengers, does indeed have plenty of available space. But the reason for this may be that although the $3-a-day fee is reasonable, commuters are balking at the $10-an-hour fee that kicks in after 14 hours.

Add to this the strong economy of the past few years which has produced low unemployment and more people in the workforce. This means more commuters seeking a relatively static number of parking spaces.

Commuters to Boston have limited options. For those willing and able, arriving at a parking lot before the fill-up time is a possibility. There are other forms of public transportation, for example, buses or boats, but here too, parking limitations can be a problem.

For those willing to pay $25 or more to park, driving into the city is an option. But Boston's parking crunch makes even this a dicey proposition. The Clean Air Act of 1975 imposed a parking freeze on parking spaces in the city. There are efforts aimed at easing these restrictions, thus allowing for more parking garages to be built, but these are ongoing and still face opposition from environmental groups.

The economics of parking

Like any economic good, parking spaces are subject to the law of supply and demand. Textbook analysis suggests that if demand for a good is strong, producers of that good will rush more of it to the market.

But why isn't the MBTA or any other public agency building more parking lots? And why aren't entrepreneurs turning unused land into parking lots and shuttling people to T stations?

There are at least three possible explanations.

First, the MBTA is unwilling or unable to charge enough for parking. Most of the satellite parking lots do not cover the costs of providing the parking.

A multi-story garage costs about $15,000 per space to construct, not including the purchase of the land. To recoup this investment, operators would have to charge about $4 per day; add land costs, taxes and management costs, and the daily rate would be about $6. The most expensive MBTA garage (Alewife) only charges $4 per day.

The problem is that as long as parking is subsidized, new parking projects must line up for subsidies and compete with other projects – new buses and light rail vehicles, renovations to stations and expanded service. In this context, parking is seen as a low priority. In addition, the MBTA's new forward funding scheme places limits on capital spending.

Second, zoning issues may prevent the development of additional parking at the local level. In effect, local communities have a veto over the siting of parking facilities, and they have little incentive to agree to facilities that traditionally yield little tax revenue for them yet add to local traffic congestion.

Although the not-in-my-back-yard problem has abated somewhat over the years, it is still a significant obstacle to the siting of new facilities. Some public interest organizations oppose the construction of parking lots altogether, calling them blights on the landscape.

Third, the freeze capping the number of parking spaces allowed in Boston means fewer opportunities for entrepreneurs and fewer options for commuters.

There are a number of options.

Operators of MBTA lots could apply full-cost pricing to all new parking facilities. If new parking facilities pay for themselves, then they can be financed more easily. This makes it possible to build more facilities. Existing parking garages could continue to charge lower fees – as they do now – if that were politically desirable.

Economic theory suggests that pricing should vary with the time of day the space is being used and the location of the space. Generally, operators should charge higher prices for the most convenient spaces and for cars that park during rush hour. Lower prices should apply for less convenient spaces and for parking at times other than rush hour. The purpose of this is to generate as much revenue as possible to be applied to the cost of providing the facility (without deterring drivers from parking and using public transportation). For instance, a commuter who wants to take a train at 7:00 a.m. to make a 7:30 am meeting is willing to pay more for a convenient space than, say, a commuter who wants to take a train at 10:00 a.m. to go shopping in downtown Boston. This is an economically rational if politically unfeasible solution.

Another option is to provide shuttle service to MBTA stations from parking lots that are currently underutilized, but are within reasonable driving distance of the T. This is the model used by some privately-owned park-and-ride garages operating at Logan Airport. It could be applicable to the commuter crunch as well and might even encourage the converting of otherwise unused land into parking lots.

A variation of this option is to encourage shopping malls that are located near MBTA facilities and that have spare parking capacity to designate an area for all-day parking on a metered basis. Again, shuttle service could provide transportation to the T.

Finally, apply the equivalent of the Dover Amendment (which allows unduly restrictive local zoning rules to be overturned for religious and educational establishments) to plans for new parking lots.

Price controls are not the answer.

There are some things that we should not do.

Recently the City of Boston has considered two options to deal with the high cost of inner-city parking.

The first would put a cap on the price that may be charged by parking lots. Such a move would not create any additional parking spaces. Busy drivers who are willing to pay a premium to park would find themselves in line with everyone else waiting for a parking spot to open up. Airlines charge premium prices for customers that need convenience, and so should parking garages.

The second questionable idea calls for providing subsidies in order to encourage the building of more parking spots in the city. This would surely boost street traffic. If subsidies are to be considered, a much stronger case can be made for encouraging the building of satellite lots in outlying areas around Boston. This would keep Boston cleaner, quieter and safer.

The creation of more parking spaces could encourage the use of public transportation. Since 1970, vehicle miles traveled have increased by 75% in the region, while the population has increased by only 10%, according to the Office of the Secretary of Environmental Affairs. If current trends continue, the number of vehicle miles is expected to grow at a rate five times faster than the population. The expansion of parking facilities near MBTA rail and commuter line stations would help alleviate the externalities caused by more automobiles on congested roads.

Creating more parking lots will not eliminate traffic jams. Nor will it give everyone a quick, smooth and easy commute. But a well-directed effort to expand public transportation-related parking would greatly improve the quality of life for the average resident who must travel to Boston.

That's certainly better than driving around in circles looking for a place to park.

Format revised on August 18, 2004