The City wants to get into the parking business

Condo builders are apparently reluctant to build or operate public parking downtown, so Councilmember McCracken wants the City to take up the slack.  He claims it will be "cheaper" for the City to build public parking:

McCracken believes they could be financially beneficial for the city because it could lower construction costs by issuing low-interest debt and wouldn't have to pay property taxes on the finished product. The city also would be willing to accept lower profit margins than private developers.

This is pretty shaky accounting.  The City's loss of property taxes is part of the cost of operating a City-owned garage, regardless of whether it has its own budget entry.  This also ignores the opportunity cost:  if the City could sell a lot for a gazillion dollars, but instead builds a public garage on it, the lost loss of that gazillion dollars is a cost, too.

I'm also skeptical that these will generate enough revenue to cover the construction and operating costs.  Developers' land costs and property taxes are more or less fixed costs.  The cost to them of adding public parking is just the marginal construction cost.  That they don't think public parking will provide a profitable return on this capital investment is a reliable indicator that it is not.  This shouldn't really be a surprise, since much of the return from parking is captured by merchants, who benefit from the traffic.

Parking is a problem downtown, and I'm not trying to suggest that the City sit on its hands.  But we shouldn't go into this thinking that this will be anything other than a subsidy for downtown property owners and merchants, possibly a deep one.  We also need to recognize that this subsidy will fall most heavily on those without cars.

You can think of downtown as a complex ecosystem, with the different inhabitants in a mutually dependent relationship.  The condo builders need plenty of street-level retail to make their condos attractive to buyers.  The retailers need plenty of condo dwellers.  But they also need traffic from outside downtown, because the condo residents alone won't keep them in business.  It is a fantasy to think that buses will bring enough traffic downtown, at least anytime soon, so the downtown retailers need parking.  The problem is that the condo builders who could build the parking don't want to take the hit for the benefit of everyone else.  It's a classic free-rider problem.

The City can do some things fairly easily.  It can start by charging what the market will bear for existing parking, particularly street parking.  (The price should be set high enough so there is always some free curb space.)  This will maximize revenue and encourage those traveling downtown to consider alternative transportation.

Ideally, it would figure out some way of shifting the cost of new parking to downtown property owners.  Spending some of the density bonuses on parking would be a better use of the money than some of the others uses that have been proposed.  Developers would probably be more receptive to that use, since ultimately it will enhance the value of their property. 

Could the City create a public improvement district to fund parking?  The district would build the off-street parking and assess the owners. That would eliminate the free-riding problem, and eliminate the subsidy.  And if the City put the decision-making in the hands of the downtown merchants and property owners, it could reduce the risk of oversupplying parking -- presumably, downtown owners won't pay to build more parking than they need. 

I'm not a local government finance expert.  McCracken may have already considered and rejected this possibility.  But I'd like to hear that all options have been considered before the City launches into a risky, property-subsidizing enterprise.

P.S.  Shilli at Austinist has a similar take (although he appears to be more skeptical of the need for new parking).

Comments

[M1EK]

The efficiency argument goes like this:

#1. Private entities aren't going to build fully public parking garages. (not because there's no market, but due to other obstacles).

#2. The combination of private garages which allow SOME public use isn't good enough (this is an operating assumption).

#3. The private garages which offer public use at free or subsidized prices for the building they serve aren't of much use. By this I mean that if the garage at 5th/Lamar only allows you to park there while you shop there, and the garage at Whole Foods only allows you to park there while you shop there, neither one is of any use to people shopping at the other.

#4. Building on #3, using both is suboptimal for all concerned. Might as well be out on Anderson Lane where you need to move your car four times to shop at four stores.

#5. There is a very strong natural disincentive to let somebody else free-ride on 'your' free or subsidized parking.

If we could get rid of #1, we'd solve ALL of this, because we could just say that whatever the rate was that the private operator charged would gravitate towards the best one. But we aren't going to get there, so it's reasonable to have a municipal garage, IF AND ONLY IF, there's some profit to the city by doing so.

That's where I get to my position of supporting it. I also do this from the perspective of growing up in a town that had a fee-in-lieu program to handle downtown businesses which had done relatively well at allowing them to survive against suburban strip malls. (Rather than being forced to build a garage with N spaces, or show that they had leased N spaces from somebody else with a garage, they paid $X per year to the city who would use that fund to build and operate municipal garages).

[AC]

The fee-in-lieu program sounds very much like a public improvement district, which is what I'm advocating.

[Shilli]

Yeah, I don't see any need for more parking downtown.

First, I think there is plenty already - I have seldom had trouble finding a meter spot, and never had trouble finding an open garage or lot where I could pay to park (I'm not trying to park on sixth street at 10pm on Fridays, but I don't think we should take the church-parking-lot-on-Easter sizing approach).

Second, I think this is the wrong way to encourage downtown retail (and I don't see any other reason we would want more parking downtown). If we want to encourage/subsidize downtown retail (which I want to do) then we can do so directly by eliminating property taxes on retail space. I think making downtown retail more reliant on downtown residents is a good thing. That way we get more restaurants/delis/dry cleaners, etc. that downtown residents need and use everyday, making downtown more livable and encouraging more people to live downtown. A subsidized parking program combined with high property taxes on retail space leads downtown to become a high-end shopping mall (like Second Street and the Domain) where people from Westlake come to by $75 t-shirts, but where it is hard for normal people to live.

[M1EK]

Shilli, realistically, the natural (pre-subsidy) pattern had BOTH. Towns typically had ALL their retail downtown, save a few corner stores - and the people shopping there were a combination of urbanites and suburbanites.

It was quite common to have privately-owned completely-public no-building-attached parking lots or garages, too. We can't do that any more, for some stupid reason, so we ought do the next best thing - which is at a bare minimum a municipal parking garage or two.

Leaving things up to the market in the current environment of "you can't build a parking garage by itself" just leads to having to move the car six times to shop at six different blocks downtown. There's never going to be enough "public parking in private building" spots to keep retail healthy; and we're obviously not going to get to the "people come in on transit" state with crappy commuter rail and crappy shared-lane streetcar; and even 25,000 downtown residents isn't enough to overcome decades of sprawl inertia for retail.

[heyzeus]

The "city owned parking garage(s)" idea has been bumping around long enough now that the idea itself has likely dissuaded private investment in public parking. If you were constructing a condo tower and were allotted only a certain number of square feet to work with, and you know that the price per square foot is higher for living space and retail space than parking space, AND you know the city is toying with the idea of building lots of parking, why on earth would you include open-to-the-public parking in your building?

[M1EK]

heyzeus, the problem with that theory is that most private garages were built without substantial leftover space even a decade ago when the city wasn't talking about building a public garage.

Building a garage that must serve both residents/tenants and paid customers is a much bigger challenge - with residents/tenants only, all you need is a gate. No design cost; no ongoing operating cost; much less liability insurance; etc.

Note for instance that the buildings which are run by condo associations typically don't allow paid-by-day parking. I suspect this is because the extra hassle of managing payment and the other stuff above is just too much to deal with. (Many do, however, sublease parking spaces to people who rent by the month, but that doesn't apply to the situation being discussed here).

[Chop Chop]

Shilli is right. There is no parking shortage downtown. Parking all over the city is already through minimum parking requirements. This creates an over supply of parking spaces. Almost every development builds the minimum required spaces and not one more. If it were profitable to put in commercial parking lots, a developer wouldn't need to create stand alone garages. She would simply need to offer a dozen extra spaces. She doesn't because the profit earned from these extra spaces would not exceed the cost.

The only people calling for government supplied parking are the condo developers who want to the public to pay for the costs of development and privatize all of the profits. Corporate welfare, pure and simple.

[M1EK]

Chop Chop, the condo developers aren't interested at all in this plan - it's the retailers who want it. (Condo buildings would continue to have their own private parking garages just like they do today - and just like today, most won't be open to the public for daily or hourly parking).

In order for this plan to be a BAD subsidy, you have to be willing to assume that a lot of private parking garages who don't want the hassle of dealing with payments and liability insurance for general public use are suddenly going to change their mind. Or that the 10,000 people living downtown now are enough to keep retail healthy. Or, maybe, you think commuter rail will bring in tens of thousands per day - which would require people to be hanging off the side of the rail cars like they do in India. Either way, not gonna happen.

[M1EK]

That should be "10,000 people living downtown by the time the garages would be built". We're not at 10K yet.

[Chop Chop]

M1EK,

Good subsidies openly and efficiently encourage behavior that the public has determined to be desirable. Bad subsidies use inefficient methods to encourage behavior, generally because open and efficient means would be rejected by the public.

Providing government subsidized parking to encourage downtown retail is inefficient. Some of those parking spaces will be used by lawyer's clients dropping off papers, friends of condo dwellers going to baby showers, and groups of suburban housewives power-walking around Lady Bird Lake. There will probably be a mail room clerk or two whose perks didn't include a parking space. These gophers used to take the bus, but now that the price of parking has been reduced, they'd rather drive.

Of those shopping, some would have paid for parking in one of the existing commercial lots, but will now use the free lot instead. Of the total costs of the parking, only a small percentage will actually make it into the cash register of any retailer.

It would be much more efficient to subsidize the retail directly. Open a grocery store downtown and get $100,000!

Of course, when the city proposed giving a direct subsidy to Las Manitas the public screamed. The truth is, local tax payers don't want to subsidize downtown retail. So Brewster and company created a complex parking authority where the costs were concealed. How much property tax are we giving up? How much revenue will the private parking lots lose? How will the additional drivers headed downtown strain existing arteries? No one knows these answers, and these costs won't be on the parking authority's balance sheet. On paper, it may even appear to be a revenue generator, and so there will be little public outcry.

But in the end, this program has exchanged efficiency for complexity because it is designed to hide the cost of a subsidy to downtown property owners. This deception was necessary because the public would never support direct payments.

Personally, I like downtown. (I love Las Manitas). I'd gladly subsidize retail, but I'd rather have a government that operated efficiently and openly.

[M1EK]

Las Manitas doesn't help downtown, and they suck. I'd gladly pay a subsidy for a downtown grocer, though.

As for the rest of it - I agree in general terms that subsidies for behavior we want to discourage are bad. The problem is that we're identifying different behaviors here: you're seeing it as a subsidy for driving. If that's how I saw it, I'd agree completely. I think we need to be discouraging driving, not encouraging it.

But I think that absent this parking plan, and without loosening restrictions on commercial public garages, we'd see the same amount of driving - just not to downtown. We'd see it to four different strip malls on Anderson Lane instead of to one city garage downtown with a lot of pedestrian or bus use after that. There is no credible information to suggest that suburbanites will drive downtown to this messy patchwork of semi-available spaces to shop - especially when the garages the retail actually lives next to are mostly private (think about 6th/Lamar, where if you were scared enough of getting towed, you'd have to move the car 4 times to go to Book People, Waterloo Music, the coffee shop, and Whole Foods).

So, the thing I think I'm subsidizing is a chance to expose suburbanites to a healthy urban environment in the hopes it will dispel some of the idiotic things they believe. I've seen a lot of healthy downtowns which have provided municipal parking garages, and very few which have not - it seems a critical bridge to keep those downtowns alive against the subsidized suburban sprawl that would otherwise kill them.

Once we get the 25,000 downtown residents, and if we ever get light rail (instead of this commuter rail crap or useless streetcar), would I change my mind? Hell yes.

[M1EK]

Oh, and you've also incorrectly stated that the parking would be free. I've not seen anywhere where McCracken has said anything other than that it would be profitable to the city - yielding revenues sufficient to contribute to rail and other needs. You can't get there from "free", so he's obviously not talking about free and probably not even cheap.