Thursday, November 20, 2008

San Francisco's Differential Parking Fee Structure: Efficiency or Price Gouging?

Cruising for free parking exacerbates urban congestion and creates local and global pollution. When demand exceeds supply prices usually rise but in the case of urban parking spots, this hasn't been the case. The good news is that a city not known for its free market adherence, San Francisco, is showing the good sense to take a step toward Milton Friedman. Milton Friedman lived in San Francisco for many years and perhaps his thoughts diffused through his adopted hometown.

I am fascinated by guinea pigs and policy experimentation. The rest of the nation can free ride here and watch San Francisco's experience with this idea. If it works, judged by increased government tax revenue and less street congestion and pollution, then other cities will jump in and mimic SF. Just as buildings of the same size cost different amounts to purchase depending on their "location, location, location" within the city, parking (a 100 square foot (?) piece of vacant land) should differ in price across the city.

My colleague Don Shoup is a consistent man who can stay on message. See his quote below.

Will there be a back-lash against this policy? Behavioral economists would say yes. This is price-gouging given our reference point of "free parking". We will see.

New York Times
November 20, 2008
A Costly City Tries Pricing Its Parking by Popularity

SAN FRANCISCO — In a city known for its pricey property, and terrible parking, some of the most valuable real estate may soon be curbside.

Under a trial plan passed Tuesday by the board of the San Francisco Municipal Transportation Agency, 6,000 of the city’s precious parking spots will be priced on a sliding scale depending on how popular they are. And while the worst locales will go cheaply — as little as a quarter — a handful of premium parking spots will be worth $18 an hour, or nearly a pound of quarters.

Other cities have dabbled in such pricing, but Nathaniel P. Ford Sr., executive director of the transportation agency, said San Francisco’s plan — due to start in the spring with the aid of new meters, sensors and $18.4 million in federal financing — would place the city at the forefront of parking technology. Mr. Ford cited the various benefits it would reap, including reducing congestion and carbon emissions from circling cars and ensuring pedestrians are not sideswiped by parking-obsessed drivers.

“It’s an exciting time,” said Mr. Ford, who also pointed to advances in payment technology, including the ability to buy parking time with a cellphone.

Under the 18-month pilot plan, meters in six of the city’s most trafficked neighborhoods will be remotely monitored for “occupancy,” transit officials said. Mr. Ford will then have the prerogative of lowering or raising rates on four-to-six-week cycles as supply and demand requires. While most meters would be capped at $6 an hour, rates during big events like concerts or a game could enter the $18 range.

Not everyone shared Mr. Ford’s enthusiasm for the plan. “That’s outrageous,” said Louis Issac, a San Francisco resident who works for a towing company and was feeding a meter at City Hall on Wednesday. “With things right now, the economy, people losing jobs? It’s a lack of consideration.”

Donald Shoup, a parking expert at the University of California, Los Angeles, said San Francisco’s plan would provide incentive for using mass transit and discourage those searching for the perfect — and cheap — spot.

“I think when we look back on this period 20 to 30 years from now,” said Mr. Shoup, who consulted on the plan, “We’ll say, ‘My God, what were these people thinking having free parking?’ ”