The City of Austin sells valet parking companies the right to use a parking space for $250 per year. Is that the right price? I doubt it.? The appropriate price would be the?opportunity cost – which is at least the revenue raised if the slot were open to the public and metered. It may be much more than that. The only sensible way to determine the appropriate price would be by some kind of auction, including allowing private citizens to bid.? Their bids, plus the competition among valet parking companies and the restaurants that contract with them would help the price reflect the value of the space more closely. As it is, the average driver/parker is probably subsidizing restaurant customers who use valet parking, the restaurants themselves and the valet parking companies.? A classic problem – the same one that used to describe spectrum giveaways before we started auctioning frequencies. (HT: CW)
The Right Price for Parking
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How can the author fail to understand that parking space pricing is INTENDED to be a service to the restaurant industry and its customers? This is more than a little simple. Duh.
If the City of Austin’s sole purpose was to raise money it could auction them off to the highest bidder, whomever that may be. If the City, however, wanted to allow a larger number of citizens the ability to park in a certain area, then a mixture of metering and valet might seem appropriate. Valet parking allows for the sustainability of businesses that lease them, which benefits the community in jobs , taxes, and quality of life.
Where does the city of Austin make its real money — on parking fees or on sales tax from having a vibrant eating and shopping district?
When parking becomes onerous in relation to the value of the attractions, customers head to the suburbs where parking is free. A handful of cities with excellent mass transit, very high density, and strong tourist value seem to avoid this effect (NY, San Francisco, Chicago), but most cities have to worry about maintaining a healthy sales tax base within the city limits.
There are a few problems with this analysis.
The first poster hits the first issue, which is that there is no way that the $250 a year is to own the rights of a parking space all the time. Some valet companies may operate for large hours – lunch and dinner runs at a restaurant – but a great many probably only operate during dinner hours.
That’s not to say that meter-rates might be higher even with those limited hours in place. But the opportunity cost isn’t just the revenue given up in the form of meters. It may also consist of the decrease in costs of parking enforcement by having high volume streets with steady turnovers paid in front. Instead of requiring on several traffic enforcers to focus on one or two strips of street that are constantly changing, those officers could cover a wider area.
All of these things still may not make the opportunity cost in balance with the $250. But since this is a government decision, it also has to take into account how this program may help its constituency. Restaurant-goers who don’t have to keep an eye on the meter and business-owners that rely on convenient parking to thrive might see these services as a benefit.
All of these issues make it possible to have that $250 be a more balanced price than presented. Any number of market forces that make up government policy and accounting could account for this other than the raw data of how many quarters would’ve been collected. An auction may seem nice, but it could end up creating a fake market as opposed to satisfying a real one.
By “right” price, you presumably mean the price that would maximize city revenue.
However, if what we mean by “right” is socially optimal accounting for all externalities (congestion, air and noise pollution, accidents, intimidation of pedestrian and cyclists, etc), then the “right price” would probably involve a much higher price on publicly provided parking spaces along with a tax on privately-provided ones. Afterall, parking and miles driven are highly correlated.
PS. Really like your work on the beauty premium. classic stuff.
Given the unfortunate lack of worthy dining in Austin, this is a windfall….or an incentive to sample.
I’d buy a downtown spot for $250 a year. Even at $6*300 days/year, that would be a handy profit and convenient. You think I could hire a urban gentleman to work my spot for $1 an hour? Or even on the flip side, $5 per car + security as well? Either would still be profitable.
Chris
That would make sense if you are against small business subsidies. The parking spaces likely provide an affordable means for restaurants to gain extra customers and provide low cost valet parking. This probably makes them more successful and viable, while simultaneously increasing tax revenues for all layers of government.