http://la.streetsblog.org/2014/03/30/editorial-why-raise-metro-fares-while-giving-away-metro-parking/
By Joe Linton, March 30, 2014
Metro’s Culver City Expo Line Station parking lot: 586 spaces, free for
drivers who get there early enough, but not free for Metro to build,
operate, and maintain. Metro is proposing to raise rider fares, while
continuing to let cars park for free.
Metro is proposing to increase, or
restructure,
its $1.50 base transit fare to $1.75 later this year, with further
increases planned in 2017 and 2020. Metro anticipates that this will
increase its fare recovery – the percentage of operations costs that are
paid for by fare revenues – from 25 percent to 33 percent.
Metro
foresees that this fare increase will “deflect” riders; a small
percentage of people who currently take Metro will opt not to ride.
Officially, Streetsblog Los Angeles neither supports nor opposes
Metro’s proposed fare increase. We hold that robust transit service is
needed, and that fares need to be affordable, and that those two
important ends can be in conflict. When inflation drives operating costs
up, at some point, it can make sense for agencies to increase what they
charge for what they provide. Reasonable fare increases are generally
preferable to significant service cuts.
I am not going to wade into all the
issues in the fare increase, but want to explore another revenue source
that Metro doesn’t seem to be paying attention to: parking.
Metro has large amounts of parking
that it gives away for free. For more than 90% of the spaces it owns,
Metro’s parking “fare recovery” is zero percent. Parking
revenue isn’t likely to cover the entire operating deficit Metro is
asserting, but it can amount to millions of dollars, enough to delay or
soften fare increases.
Charging for parking will also
deflect a small number of the riders who drive (driver-riders are a
small percentage of Metro’s overall ridership – fewer than 10 percent),
but, if revenue is used to offset fare increases, parking charges should
lessen overall deflection. In some cases, charging for parking and
keeping transit fares reasonable could deflect some drivers out of their
cars and on to buses, carpools, bikes, and walking.
I recently attended a meeting where
Metro staff presented their fare increase proposal. When I asked if
Metro was also looking at parking revenue, Metro’s presenter responded
that Metro didn’t have much parking, and that it fills up quickly anyway
– as if that meant there wasn’t anything that could be done. On the
contrary, this high demand shows that Metro’s parking is a revenue opportunity. The
Transit Coalition’s Bart Reed confirms that “[Metro Red Line] parking
for free is gone by 7 a.m. in the valley.” Streetsblog’s Damien Newton
states that, at “Culver City [Expo Station] after morning rush hour, I
generally see people cruising for parking. There’s no space.”
What’s wrong with free parking? Isn’t that good?
I can’t explain all of Donald Shoup’s The High Cost of Free Parking.
Suffice it to say that, generally, when an expensive, in-demand
resource like parking is given away for free, it will run out and there
won’t be enough to go around. Shoup
generally recommends that public agencies raise (or lower) the price of
parking, to manage availability – to make sure people who want to park
can find open parking spaces. When free parking runs out, then
people drive around “cruising” for spaces, which is generally bad for
transit, bicycling, walking.
Building and maintaining parking spaces isn’t free for Metro.
If
driver-riders (less than 10 percent of Metro’s ridership) are not
paying for parking, then non-driving-riders are subsidizing drivers.
One way to explain this is to look at overall fairness. Metro is a
public agency tasked with providing transportation services. In
providing a public good (transportation), Metro can and should choose to
subsidize. In Metro’s user fee structures, the agency makes policy
choices regarding what it subsidizes. Right now, Metro subsidizes 99+
percent of the cost of parking, but only roughly 75 percent of the cost
of riding transit. Metro is proposing to continue to subsidize parking
at 99+ percent, but to only subsidize transit at 67 percent. Metro is
proposing that “fare recovery” for transit needs to go from 25 percent
to 33 percent, but parking “fare recovery” can remain at zero percent
indefinitely.
Metro says that fares need to go up
to cover operating expenses, so it’s only fair that drivers pay
expenses for resources they use.
What can we learn from other transportation agencies?
In 2013, The San Francisco Bay Area’s BART system proposed fare increases to cover inflation.
The
BART board approved raising both fares and parking fees (both daily and
monthly), indexed to inflation. Parking increases at BART are expected
to raise $7 million a year in 2014. A
BART spokesperson explained the increase by stating “The bottom line is this: we don’t charge enough to cover the cost to provide the parking space right now.”
Minneapolis’
streets.mn reviewed
its transit agency’s parking investments, and found that investing in
Bus Rapid Transit served 7.5 times more users than investing in parking
structures.
A look at the numbers
I compiled
parking space quantities from Metro’s website. Looking at Metro rail lines, as well as the BRT Orange and Silver Lines, Metro has a total of
19,450 parking spaces.
Nearly twenty thousand spaces! That’s just on the rail and BRT lines, I
am sure there are more parking spaces in Metro’s holdings. That’s just
today, I expect that there’s more parking coming on line with Metro rail
expansion under construction.
Of those 19,450 Metro spaces, 18,048 are completely free. That’s 93%
of the total. Metro only charges for 1402 spaces – more on that below.
How much did this parking cost Metro to build? I did some
back-of-the-napkin calculations. For surface parking, which varies based
on real estate costs, I’ve used a conservative
national estimate
of $4,200 per space. For parking structures (the ones that I know of:
Willow Blue Line Station, Sierra Madre Villa and Del Mar Gold Line
Stations, and La Cienega Expo Line Station), I’ve estimated $27,000 per
parking space, a Los Angeles estimate directly from Donald Shoup. Using
these estimates, for Metro’s nearly 20,000 parking spaces, the
total construction cost for Metro parking comes to about $150 million. That’s a conservative estimate, and the actual amount is likely higher. That’s a lot of transit money going to park a lot of automobiles.
How much revenue could Metro earn from their 19,450 spaces? I am no
economist, but I did another back-of-the-napkin estimate. I made some
assumptions that I think are pretty conservative. Below are my revenue
assumptions:
- Metro can actually sell 25% of its spaces. I am
assuming that three out of four spaces might be empty if Metro charges
for them. Some popular lots will fill up; outlying lots that don’t fill
today won’t fill in the foreseeable future. Metro should be able to keep
occupancy higher by using pricing strategies, and should probably aim
for Shoup’s 85% occupancy target, but, for purposes of a conservative estimate, I am assuming that Metro can fill at least one space in four system-wide.
- Metro’s parking spaces will only be sold once per day. In the real world, some spaces will turn over, so they could be charged for a few times each day.
- Metro can do this every weekday of the year – 260 days per year.
These are fairly low assumptions. They’re certainly not my
recommendations, nor a good business plan. I am using a
one-size-fits-all formula, and parking pricing should vary based on
demand. Desired locations at desired times should charge more than this.
Even with these conservative assumptions, I estimate Metro’s potential
parking revenue at just over
$3.5 million per year.
A proactive agency should be able to do significantly better than this.
That number is for gross revenue, and there would be some costs to
administer and enforce this program, so the net revenue is somewhat
less, but it’s clearly a lot of money. Millions of dollars every year.
But Metro already charges for parking!
What about those 1402 spaces where Metro already charges for parking? 610 of them are at the
Del Mar Gold Line Station, which is unique in the system, charging $2 per day.
The remaining 792 non-free spaces are available by purchasing a
monthly parking permit, which costs $20-$39. The permit guarantees the
user a space when arriving before 10:30 a.m.
After 10:30 a.m., all Metro parking spaces are free.
When I write that these spaces are “available” by permit, that’s not
quite true. Of these 792 spaces, 534 spaces (67 percent) are listed as
“sold out” on the
Metro Parking Pass website.

Most
of the parking spaces that Metro sells by the month are “SOLD OUT”
indicating that they are priced below market value. Screenshot
https://www.parkmetro.com/monthly/ March 27 2014
So many “sold out” locations mean that, for the small percentage of
non-free spaces, Metro is selling them for less than their market value.
To manage these spaces more efficiently (meaning Metro actually selling
parking to people who want to purchase parking), Metro can either raise
the price or increase the supply. In every lot listed as “sold out,”
Metro can increase the supply by converting existing free spaces to
permitted ones.
I calculate that Metro grosses roughly $250,000-$350,000 per year
from its monthly parking permit system. Some of these moneys would go
into administering and enforcing the program. Assuming that monthly
parking revenue is roughly $300,000 each year, and that this is the only
revenue Metro is getting from these lots, then it will take nearly 500
years for Metro to recover its $150 million in parking construction
costs.
There’s also a
Park-by-phone system that sells Metro spaces for $3 per day.
It’s unclear to me how this fits into the Metro parking system. Is
there another chunk of spaces, or re-selling permit spaces, or something
else? I’ll look into this more in the future – or if someone out there
knows, please tell us in the comments below.
Conclusions and a look at the big picture
Charging for parking is prudent fiscal policy and good transportation policy.
Changing Metro parking subsidies won’t happen overnight. Charges can
be phased in over time, lot by lot, starting with the most popular
sites, where drivers are already frustrated and cruising today.
The parking revenue processes might get underway with a board motion
directing Metro staff to report on parking revenue. What does it cost to
build, operate, and maintain Metro’s parking? How is Metro’s monthly
permit program working: how much revenue does it bring in, and how does
the program respond to parking demand? Similarly, how about Metro’s
Park-by-phone program: revenue, response to demand? What other parking
does Metro own, in addition to the rail and BRT lots this article
focuses on? Perhaps, as Metro sets its target for fare recovery for
operations cost, it can also set a target for parking cost recovery,
with phased-in deadlines for meeting targets.
There are plenty of good reasons for Metro to charge for its parking: revenue,
fairness, effectiveness, usefulness, environmental benefits, etc. Let’s
look at just one more: charging for parking helps Metro track usage
data. Data is needed to help Metro make accurate projections for where
parking will be needed. If Metro gets a better handle on parking demand,
then it can reign in excessive spending on parking in some locations,
and dedicate limited funds to what’s most effective in providing
transportation.
(My spreadsheet calculations are here. As I’ve mentioned, these are rough estimates – please let me know if I’ve made any errors.)