Transportation Systems Casebook/Parking

= Parking Innovations: Payment, Reservations, Pricing. =

Summary
Innovations in parking systems across the globe are changing how we view parking especially with major technological developments improving parking systems and strategies both from a user and an industry perspective. Transformation in major areas of parking such as payment, pricing, and reservations change how local and regional governments effectively manage congestion and alter people’s behavior when commuting in and out of central business districts.

From a user perspective, the creation of apps allow individuals to handle payment via mobile devices, locate open parking spaces, and secure parking spaces in advance with a virtual reservation system. These features have made parking in a city more efficient and convenient.

Management of parking systems from a public/private perspective has improved with various parking models that adapt pricing for users based on demand, track and monitor garage capacity with sensors, and promote usage of fuel efficient vehicles by discounting parking rates.

These recent parking strategies are geared toward creating more efficient parking systems aimed at reducing congestion, changing behaviors towards parking, reducing impacts on the environment and providing up-to-date information which allows parking officials to effectively manage the flow of traffic through urban centers.

Annotated List of Actors
Drivers - Parking innovations provide more options and accessibility for drivers. They also generate a demand for parking and play a major role in the design of forecasting models.

City Planning & Building Departments - Local Planning and Building departments play a major role in regulation, oversight and authorization of parking structures, capacity levels and oversee parking requirements and zoning tied to any building or structure.

Payment processing companies (PayPal, iPay, CC, Brainstorm, Swipe) - Companies that provide a centralized payment service for businesses (merchant services).

U.S. Department of Transportation - Federal entity that oversees safety, regulation, and development of transportation systems nationwide. Sets certain requirements and guidelines and provides funding through grants for state transit projects.

Donald Shoup - A subject matter expert in the economics and availability of parking. Shoup proposes a theory that there is no such thing as free parking and it should be priced according to demand. He is a popular figure in the urban planning/transportation community and has followers commonly referred to as “Shoupista’s”.

Carl Magee - Patented the first parking meter. The first meter was installed in Oklahoma City in 1935.

Timeline of Events
1905 First automated parking garages start to appear in the United States

1935 Worlds first parking meter designed by Carl C. Magee installed in Oklahoma City

1974 The first Multi-Space Meter (MSM) was believed to have been implemented in Paris, France

1989 Parkulator, the first portable, personal parking meter introduced in Arlington, VA

1999 Berkeley, CA is the first city in the United States to street test networked Multi-Space parking meters

1999 Parkmobile develops and deploys cell phone payments for parking in Europe

2008 City of Chicago offered the 75-year concession of the city’s metered parking system to Morgan Stanley making it first ever private operator

2011 San-Francisco rolls out SFpark pilot program, a demand-responsive parking system where rates are defined by vehicle occupancy and turnover

Parking Strategies and Management
Perhaps the best way to evaluate current management strategies is to consider the market principles of supply and demand. Research indicates there are as many as 5-8 parking spaces for every car in the United States. The oversupply of parking is a major contributor to the corresponding demand for parking but many planners do not see this connection. Instead, parking minimums are required to meet a perceived demand with no association between parking supply and its ability to drive demand.

Parking requirements are generally set in zoning ordinances, which help to identify land use and subsequently the expected parking demand. There are often parking minimums that are, “intended to improve the traffic circulation pattern by getting automobiles off the street once they have arrived at their destination.” An example of these minimums might be a provision that requires a parking space for every seat in a movie theater. Many argue these parking minimums have contributed to the oversupply of parking.

The District of Columbia has recently abolished parking minimums in favor of more flexibility to provide parking that meets market demand and other cities are reevaluating zoning ordinances to determine best management practices to help reduce the oversupply of parking. Clearly there is a need to examine the relationship between parking supply and the corresponding demand.

San-Francisco Metropolitan Transportation Commission employed local urban planners to study parking codes and come up with suggestions related to parking reforms and innovation.

They outlined a Ten Point Program that sums up the best practices:

1. Reduce or eliminate unnecessary parking requirements. Additional parking requirements for new non-residential development in Downtowns and town centers should be eliminated, wherever feasible, based on local conditions and community plans.

2. Share parking. Ideally, all new non-residential parking in Downtowns and town centers, and around rail transit stations, should be shared parking—spaces that are available for public use, rather than reserved for the tenants and visitors associated with any particular property or set of properties.

3. Promote alternative modes. Incorporate requirements or incentives for free/discounted transit passes in exchange for parking spaces, carshare incentives, and bicycle parking requirements to promote the use of alternative modes and reduce the need for car ownership.

4. Establish parking maximums in transit-served areas and expand the existing supply of parking only as warranted. Maximums can prevent over-building; parking codes also can cap the allowable amount of parking, and require additional permits if a developer believes more are required.

5. Adopt additional strategies for parking management. Some best-practice management strategies are:


 * Require developers to unbundle parking costs in residential projects
 * Implement parking cashout programs
 * Provide transit passes
 * Provide parking credits for on-site car sharing service
 * Require more bike parking

6. Price on-street and off-street parking. Charging for parking is the most direct way to both reduce parking demand and ensure that end-users carry more of the cost of providing off-street accommodations. Pricing can be used to ensure availability and turnover of on-street and off-street spaces.

7. Adopt an on-street parking availability target. The targets can maintain the availability of on-street parking in Downtowns, town centers and transit corridors and prevent spillover parking impacts in surrounding areas. Parking occupancy can be monitored and paired with investment of funds into the local area (see point 10 below).

8. Manage parking to achieve the availability target using pricing or time limits. Expanding on point #7, cities can manage on-street parking demand to achieve the desired availability target either by implementing pricing or time limits, adjusting rates and/or regulations as necessary to ensure that 1-2 spaces per block are usually available.

9. Prevent spillover parking impacts in surrounding neighborhoods with residential permit parking zones. Cities can establish residential permit parking zones to prioritize curb space for local residents and/or businesses, in areas where the availability of parking in surrounding areas is seriously impacted by workers, transit riders, shoppers, business vehicles, and/or visitors.

10. Establish parking benefit districts. Net revenues collected from on-street parking pricing and permit revenues can be dedicated to funding public improvements within designated Parking Benefit Districts, ensuring that revenue is used to benefit the blocks where the money is collected.

Communication
As the parking systems evolve, public awareness campaigns that target parking options available as well as new or updated payment methods, become crucial in managing traffic flow in urban areas. Businesses in areas where new parking technologies are being implemented should work effectively with transportation authorities providing feedback and helping with disseminating useful information to customers. Any changes to parking regulations and rates should be communicated clearly to public using mass media and social media channels.

Privacy
The enforcement of parking policies with tracking systems raises privacy concerns. Two main tracking systems - License Plate Recognition (LPR) and GPS - could be considered indirectly involved in parking technology, and both have been linked with privacy concerns.

License plate recognition, mentioned in greater detail under the Payment section, is widely regarded as the most sensitive as far as privacy is concerned. For street parking in cities, parking enforcement is performed using LPR technology. Currently, only government agencies are permitted to collect and interpret data using LPR (citation needed).

The use of LPR systems and collection of license plate data implicates informational privacy interests. Informational privacy is concerned with the collection and dissemination of data, technology and the public expectation of privacy. Although U.S. courts have not recognized a reasonable privacy expectation in a license plate, the collection and use of license plate data through LPR systems raise concern for informational privacy. While the information on a license plate itself may not be private, the use of such collected information raises privacy concerns. Courts have found that drivers have a right to be free from warrantless GPS tracking. In Commonwealth v. Connolly, the Massachusetts Supreme Judicial Court barred warrantless GPS tracking on public streets, recognizing citizens' interests in keeping their travels private.

Environmental Issues
The production of the materials used in the construction of parking infrastructure, including steel, cement and concrete, release significant amounts of greenhouse gases. Concrete is the second most consumed substance on earth, water being the first. It’s estimated that the production of cement used to make concrete accounts for 5% of global carbon dioxide emissions.

In urban areas, it’s estimated that 50-70% of the surface area is covered by pavement, and parking accounts for much of this pavement. In commercial areas, 31% of the pavement is dedicated to parking. During rainstorms, water that would normally infiltrate into the ground to recharge groundwater, instead runs off pavement. The stormwater runoff carries oil and other pollutants from cars that ultimately outfalls into natural streams, rivers, and lakes. The velocity and volume of water also is compounded by pavement. The EPA lists stormwater runoff as the greatest threat to clean water.

History/Background
The birth of the automobile and parking go hand in hand. Once the automobile reached mass markets, space for parking soon took priority. With Henry Ford’s model T in mass production beginning in 1908, the automobile became an affordable option for the average American family. By 1910, the number of U.S. automobiles reached $9 million, and with that came heavy traffic congestion in urban city centers.

Parking space shifted from open lots, curbside, or farm land to methods such as purchasing daily parking passes or metered parking. While some of these parking management ideas worked with the evolving urban landscape, others were detrimental in preserving historical buildings and cutting down trees to make way for parking space. The initial design of parking garages provided additional services such as gas and maintenance stations. Innovations in construction materials and engineering design in the 1950s improved parking garages with features like a safer ramp system, open-air concept, and solid concrete structures.

As zoning laws evolved with cities urban development, mandates were issued requiring off street parking access for new developments. Local government municipalities became involved in the issue of parking in urban areas. Concerns over unprofitable parking structures and unfavorable urban design negatively affected the city’s landscape.

In the 1920’s and 30’s, major parking garages opened up in cities across the U.S. At the 1933 Chicago world fair, “The World’s Largest Parking Terminal” was put on display as a parking garage of the future. The terminal included capacity levels of 24,000 spaces, lighting and safety features as well as auto and convenience stores.

After WWII, hesitance toward making space for parking garages and metering disappeared, supporting the growth and prosperity of the U.S. automobile. “In 1946, only 70 cities had parking requirements in their zoning plans; a decade later, at the dawn of the interstate age, most did. And, as urban renewal served as a tool for struggling cities to flatten themselves for parking spaces and widen roads to relieve congestion, urban officials themselves lifted up the light rail lines to provide room.”

By the 1970’s the U.S.’s dependence on oil, degraded urban landscape, and consumerism became apparent, creating a backlash which led to stronger efforts in preserving a city’s architectural heritage, public space, and environmental awareness.

Moving into the 20th century, parking has been heavily targeted, especially with new developments, due to parking space saturation and the consumption of valuable real estate. Today employers are offering public transit subsidies and encouraging employees to bike or walk to work in hopes of reducing automobile dependence. Even as parking minimums and zoning requirements fuel the supply of parking, federal agencies are taking action to prohibit further development of parking structures in cities that can’t meet air quality standards.

Portland, Oregon: Imposed ordinances requiring a houses facade to be three-quarters house.

Santa Ana, California: Employers promoting alternative transit options. One company encourages employees to walk to work with an annual shoe subsidy of $50.

Houston, Texas: EPA has blocked parking development structures in Houston due to the city’s inability to meet clean air standards.

Innovations: Payment
Overview

When customers look for a place to park they usually consider the method of payment required to complete the transaction; therefore, parking and payment transactions usually go hand in hand. Ideally, customers would not need to worry about the method of payment every time they park their vehicles, and it seems like this is the direction where parking operators are trying to get to. The 2013 Emerging Trends in Parking Survey, conducted by the International Parking Institute (IPI), found the two leading emerging trends in the Parking Industry were payment related- Move toward innovative technologies to improve access control, and Payment automation and Demand for cashless or electronic payment.

Limitations affecting the Parking Industry

Parking customers frequently encounter frustrations -- not having coins available for the meter, misplacing parking ticket, returning to the car for extending expired parking sessions -- mainly caused by the lack of payment flexibility of traditional Single-Space Meters (SSMs), and parking garages. These limitations not only affect customer satisfaction, they also harm parking operators by leading to increased complaints, and higher management and enforcement costs. Additionally, “it is expensive to administer the collection of cash fares. For every dollar a transit agency receives in passenger revenue, it spends approximately 6 cents on fare collection and processing. Most of the cost is associated with collecting, transporting, counting, and guarding cash. Dollar bill processing is particularly difficult and costly. Reducing the use of cash for fare payment provides a clear benefit for transit operators.”

Parking operators are well aware of this, and by implementing less capital intensive or “asset-lite” solutions, they can increase revenue while reducing operating costs. The idea behind the “asset-lite” movement is to achieve more (revenue, flexibility, etc.) with less (assets, maintenance costs, etc.); parking innovation technology allows for this migration to be possible. Implementing “asset-lite” solutions is a way for parking operators to continuously work towards improving parking access control and payment automation in a more cost effective way.

Smart Cards & the Electronic Purse

A Smart Card works as an “Electronic Purse” (EP) or a prepaid card used to pay for parking. Customers add value to a card using cash, credit or debit cards; the EP card is then used to pay for future parking transactions. A smart card reduces the number of credit card transactions and associated fees for the consumer and parking operator. Often if the EP balance reaches $0, the credit card on file is charged a pre-set amount (as long as the customer has set up an account with the provider). This technology is widely used by transit providers who integrate metro, bus, and parking services into one smart card or EP; it can also be used by municipalities via networked SSMs or MSMs, and by parking garage operators via EP providers such as Parkmobile.

Pay-by-phone/Parkmobile (mobile apps)

The Pay-by-Phone apps may be the biggest parking payment innovation yet; it allows customers to pay for parking using their mobile phone. Currently, the two main providers are Pay-by-Phone and Parkmobile.

Customers set up an account using their name, license plate, credit card and mobile phone numbers, and then enter the designated lot number and the amount of time needed to complete the transaction.

Consumer benefits include increased payment flexibility, and the ability to extend parking sessions without the need of returning to the pay station. Additionally, customers have access to all the transactions and parking receipts online. Customers who don’t want to use the mobile app have the option of calling a designated number to complete the payment transaction.

Pay-by-phone apps are available for all operating mobile platforms including iOS, Droid, Windows, Blackberry, and Amazon. GPS functionality is also integrated with the app; it allows customers to save previously used parking zones for even quicker future transactions. Pay-by-phone functionality allows for other innovative services to be possible- digital parking permits, advance registration and pre-payment of event parking, airport parking reservation, etc.

License Plate-Enabled Parking

License Plate-Enabled Parking (LEP) employs license plate numbers as unique vehicle identifiers, placing them at the heart of a smoothly integrated parking ecosystem.

License-plate recognition technology (LPR)

Another popular technology used for processing parking payment is License Plate Recognition (LPR), where a vehicle’s license plate number is recognized from an image taken by a color, black and white, or infrared camera[. This technology has been widely used by Law Enforcement (mainly large agencies with over 100 officers) for several years now. LPR includes four main stages - Image Acquisition, License Plate Extraction, License Plate Segmentation, and Character Recognition.

Cameras scan license plates at entry and exit points, the license plate number is then recognized and the information reconciled through a real time database or data management system that is used to confirm parking payment. LPR allows for gateless parking which improves vehicle flow by reducing congestion at entry and exit points. It also reduces operational and collection costs by eliminating the need of a cashier. LPR can also be used to issue citations by identifying unpaid vehicles.

Pay-by-License Plate (PBL) Pay Stations

Customers complete payment transactions using designated pay stations by entering their license plate number (LPR technology is not required on PBL stations to complete payment transactions). This technology eliminates the use of parking permits usually displayed on the driver or passenger side of the vehicle. Customers can also extend parking sessions using their mobile phone.

On-Street Parking

On street parking, also known as curbside parking has been defined as the space along the street between travel lanes and sidewalk. Until recently parking payment options for on-street parking were limited to coin-based Single-Space Meters (SSMs). Fortunately, parking payment innovations embrace a new array of parking meters with increased payment capabilities- targeting cashless and virtual transactions- which result in increased customer satisfaction, revenue generation, and policy compliance.

The new generation of SSMs provides much evolved networked assets with increased payment options such as debit and credit cards, and pay-by-phone. Additionally, the Multi-Space Meter (MSM), believed to have been first seen in Paris in 1974, was first introduced in the United States in 1999. A networked MSM is connected to a data management system that allows for multiple payment options and other capabilities like extending parking sessions remotely. The MSM follows the “asset-lite” principle by consolidating the number of assets (meters) necessary per parking space; each MSM typically manages 8-10 spaces as opposed to the SSM which requires one asset per space. Less meters required result in a reduction of maintenance, operating and collection costs.

Off-Street Parking

Off-street parking includes surface lots and parking structures; these are usually found at educational buildings, airports, offices and other commercial structures such as shopping malls. Payment innovations available for off-street parking include pay-by-foot stations and LEP technologies. Usually pay-by-foot stations are installed in multiple areas throughout the parking structure and sometimes inside the particular building. Parking operators can benefit by a reduction in operating costs since these technologies do not require a booth attendant, and a decrease in congestion at entry and exit points. Additionally, operators may see an increase in revenue resulting from customers overestimating their parking session.

Evolution of Revenue Composition/Mix

Networked meters have only been in use in the United States since 1999 and up until that point revenue composition for parking Single-Space Meters consisted of 100% cash based transactions. Cash based structured systems have a higher capital and operating cost because they traditionally require more assets which in turn require collection associated tasks- collecting, transporting, counting and guarding cash, while cashless parking systems are more cost-effective. Washington DC’s parking cost structure shows that credit and debit card transactions cost about 57% of what cash transactions cost; pay-by-phone transactions are even lower, only costing about 36% of cash transactions. In 2009 DC started a revitalization of their curbside parking policy and ecosystem- updated non-working SSMs with networked assets that allowed payment flexibility-, in 2011 it implemented pay-by-phone capability. By 2013 the city’s revenue mix had drastically changed from 80% coin and 20% credit cards, to 43% pay-by-phone, 31% coin and 25% credit card transactions; at the same time DC’s parking revenue increased by 60%.

The shift in revenue mix by Washington DC is a great example that parking operators are moving in the right direction by implementing innovative and “asset-lite” solutions that allows for increased payment capabilities, reduced cash transactions and increased credit and virtual ones.

Innovations: Reservations
Overview

In the past, parking reservations were geared toward commuters paying a monthly fee to reserve a space in urban city garages or pre-included with an event or destination. Today innovations in parking reservations have developed significantly, offering more options and flexibility when securing a parking spot. Several areas of reservation innovations will be examined, including types and methods used for reservations, reservation systems and models, major components of a reservation system and examples of innovative reservation applications across the country. A reduction in areas of traffic congestion and air pollution stress the need for reservation innovations and could improve current urban planning and environmental concerns.

“…drivers that possess information on parking availability are 45% more successful in their decisions than those without knowledge of this information when arriving at their parking facility.”

Types & Methods used for parking reservations

Parking reservations can be broken down into types of reservations made as well as different methods used to secure a space. Drivers now have the ability to make reservations anywhere from minutes before finding a space to months prior to the event when parking is needed. Along with reserving a space months in advance, the user can make a reservation virtually either by using their mobile device or on a company’s website.

Types:

Methods:
 * En-route: Securing parking while en-route to trip destination
 * Pre-trip: airport or event parking


 * Mobile Device: Downloading apps to a mobile device allows the user to make a reservation mobily in a matter of seconds.
 * Online website: Most reservation management companies now operate virtually, which gives the user the ability to access reservation management systems anywhere virtually.
 * Vouchers/Permits: Permits purchased in advance which allows the user to park in a specified spot for a certain amount of time. Example: Parking permits at Oakland International Airport BART station.

Reservation System and Models

The basis for parking reservation systems is a prediction of anticipated demand while taking into account major factors such as capacity and pricing during peak hours. Innovations in parking reservations look at area’s of demand in parking which focus on locations such as airport parking, urban city garages or near attractions.

Reservation systems

Intelligent Parking Reservation Systems (IPRS) – taking customer preferences into consideration and provide users with real time information on space availability, sometimes using a drivers navigation system.

Parking Guidance Information (PGI) - Provides drivers with real time information of available parking through a wireless device or the vehicles GPS system and directs the driver to the parking space location.

Reservation Models

Real-Time Availability Forecast algorithm (RAF)

Major Components of availability, time (peak hours), and reservation pricing are taken into account when building a reservation model. Based on these factors, a reservation fee can be applied (and determined by calculating drivers willingness to pay for available parking while decreasing search time).

Staggered parking reservations The staggered parking reservations model would disperse commute times and reduce congestion. Drivers must arrive before the expiration of the reservation in order to secure desired parking.

Components factored into reservation systems

Reservation systems use a variety of methods for operational functionality. One of which is using various formulas to predict and anticipate fluctuating capacity and pricing strategies (willingness to pay for convenience-time saved looking for parking). Others include forecast parking and focuses on a discrete choice model to predict future demand.

Components impacting model:

Components of parking reservation models such as availability (capacity), time, and pricing greatly impact the outcome of a user’s parking reservation. Depending on capacity levels, time frame desired, and what the user is willing to pay, a reservation system generates the best option for the driver by using their selected criteria.

- Pricing models: Pricing varies due to shifts availability and time. Updated prices create dynamic pricing structure.
 * Availability: Parking capacity levels within a certain area
 * Time (peak hours): Time frame desired
 * Reservation pricing: Price the user is willing to pay. Additional fees could apply during peak hours along with reservation fees.

- Reservation fees: Determining amount the user is willing to pay for convenience of removing search time.

Data components within capacity, time, and pricing variables also factor into the reservation management system which can impact the user’s reservation. Reservations take into account both the criteria of the user as well as the parking facility/curbside restrictions. Numerical values such as duration, how far in advance the reservation can be made, hold time, when reservations are applicable (sometimes only offered during peak hours) and advanced payment all generate data criteria which factor into the reservation model.

Examples of innovative reservation applications

Examples of parking reservations can be found across the country. When looking for innovations in reservation management systems, several cities stand out in their use of modeling implemented in areas such as urban city centers as well as airport or facility parking.

Parking Innovation Center - Boston, MA. Park Mobile has built a facility designed (opening 2015) to enhance all aspects of parking management using the latest technology. “The Boston facility will be the first of a series of new Parking Innovation Centers to be established across the United States, and will also serve as the flagship technology center bringing together Parkmobile's integrated platform supporting on demand and pre paid parking, parking reservations, event parking, valet parking, residential parking permits, and deep parking industry and payments integrations.”

Click and Park reservation system - Click and park is owned and operated by ParkMobile and provides parking management for major sporting and entertaining events. The company recently started servicing the city of Boston and is deployed in cities/venues across the U.S. The company service’s parking for major sporting/entertainment events.

Reagan National Airport - ePark. A virtual parking management company that allows drivers to make a reservation at DCA airport from 24 hours to 6 months in advance. The user can scan their reservation code to open garage. By combining hourly and daily parking lots into one facility, Metropolitan Washington Airports Authority (MWAA) claims that the reservation system opened up an additional 100-200 spaces.

Innovations: Pricing
The True Cost of Parking

A comprehensive pricing policy must first address the costs of parking before considering pricing strategies. The following categories make up a majority of the costs associated with parking: Infrastructure Costs, Operations and Maintenance, and Environmental Costs.

Infrastructure Costs

One aspect of parking infrastructure costs that is commonly overlooked is the value of land. It’s estimated that a typical parking space requires about 300-350 square feet, including access aisles and landscaping. The value of that space is dependent on location. In central business districts, where space is at a premium, the value of land can be as high as $6,000,000 per acre.

Infrastructure costs vary depending on the type of parking. On-street parking requires the least amount of infrastructure with average costs estimated at $5,000 per space. Structured parking is more infrastructure intensive with costs averaging $19,650 per space. Estimates for the price of condominium parking, typically underground and requiring the most infrastructure, averaged $45,400 per space.

Operations and Maintenance

Operations and maintenance costs for structured parking include cleaning, lighting, security, fee collection, insurance, and labor among others. Re-surfacing is required every 5-10 years and major reconstruction or replacement is required every 20-40 years, depending on the potential for harsh climate impacts. Annualized commercial operating expenses have been estimated at $500 per space.

Environmental Costs

Direct impacts to the environment include the pavement required for on and off-street parking, which commonly impacts green space. It also increases impervious surface area, which results in increased stormwater runoff and prevents the recharge of groundwater. The production of steel, concrete, and asphalt needed for parking structures also release considerable amounts of greenhouse gases.

There are indirect environmental impacts that result from increased traffic spurred by free curbside parking. A UCLA Environmental Impact Report estimates external congestion costs of $73 per month per space and pollution costs of $44 for a total external cost of $117 per month per space.

Summary of Costs

It’s difficult to estimate the total number of parking spaces within the United States but research indicates there could be as many as 8 parking spaces for every car in the US, or approximately 2 billion spaces. The estimated cost is $500 billion annually, more than three times total expenditures on public roads, and more than half as large as total expenditures on private vehicles.

Pricing Methodology

When comparing the public and private management of parking, the most distinguishing characteristic is how costs are recovered. Most public parking is provided free or at a subsidized rate. In these instances, the costs associated with parking are recovered indirectly. When parking is managed privately, the cost is recovered directly with fees. The distinction has implications on parking turnover, utilization, and traffic.

Public Pricing (Indirect)

There currently is a general lack of pricing policy for parking within most cities in the United States. “Of the 95% of U.S. employees who commute by automobile, only 5% pay full parking costs, 9% pay a subsidized rate and parking is un-priced at more than 98% of non-commute trip destinations.” At commercial and retail destinations, the hidden costs of parking are recovered through higher taxes or higher retail prices. In residential construction, parking represent 5-15% of the annualized cost of a typical building. This cost is recovered indirectly through higher rents or lower returns on investment.

Private Pricing (Direct)

In contrast to most public parking, costs of private parking are recovered directly through fees. Most users are accustomed to the up-front cost in private structures, but when asked about pricing public spaces, there is overwhelming support to keep them free. Business owners commonly support subsidized parking and fear driving away customers with high parking prices but many economically successful areas, such as large commercial centers, have limited parking and high parking prices (Martens 2006). Real estate market analysis suggests that traditional urban areas, where parking is limited and priced, often experience greater economic growth than suburban areas (LLREI 2000). This suggests that parking pricing and other management strategies are not necessarily harmful to local economic development if an area is attractive and accessible in other ways (Roth, 2004; Martens, 2006).

Pricing & Utilization

The lack of pricing policies has fed parking demand which results in overutilization and inefficient use of existing parking infrastructure. Uniform prices also keep turnover rates low in the most convenient spaces, while less convenient spaces remain empty. The search for the perfect parking space often results in increased traffic and congestion. “Surveys indicate that 8-74% of urban traffic congestion is caused by vehicles cruising for on-street parking, and motorists spend an average of 3.5 to 13.9 minutes finding a curb parking space.”

Pricing & Traffic

Pricing Policies can directly impact traffic, especially when applied to commuter parking. A fee increase from $1.37 to $2.73 has been shown to reduce auto commuting 12-39%. Other studies indicate that, “about 35% of drive-alone commuters would likely switch modes in response to $20 per month parking fees.”

Reducing traffic by pricing parking may be a prudent policy in congested corridors and central business districts but in suburban areas, price hikes can shift business to surrounding areas, a common fear of many business owners. This shift can be avoided and business activity increased when parking revenues are used to improve business district street conditions or fund transportation alternatives.

Pricing Innovations

The potentially high costs and lack of pricing policy have created conditions ripe for innovation. Parking within central business districts is often over utilized and there are ample opportunities to recover costs by implementing appropriate pricing policies. Cities that are ahead of the curve are considering demand-responsive pricing models to increase turnover in congested central business districts and performance criteria to ensure objective pricing policies.

Cost Recovery

Parking that is over utilized is often unevenly distributed. Implementing pricing policies in central business districts can help redistribute demand for parking and can also help recover costs associated with parking infrastructure. In other parts of the world, cities like Madrid are also recovering environmental costs by considering impacts to the environment when pricing parking.

Demand-Responsive Pricing

One of the major problems identified by research of underpriced curbside parking, is the traffic induced by drivers in search of the perfect parking spot. This is especially problematic during peak periods and research indicates demand-responsive pricing can effectively increase turnover rates, but finding the right price can be challenging.

One suggestion is to apply performance criteria so an objective price can be identified to increase turnover rates for priority users. An example of a performance criteria is ensuring 15% of parking is left unoccupied at any one time. This would ensure that users who are willing to pay an appropriate price for convenient parking can do so.

The challenge is to convey the dynamic pricing to users in real-time so and informed decision can be made. Without proper information, drivers could be left circling the block trying to figure out the current price for a particular spot, which is no different than the traffic created in search of the perfect spot.

Revenue Reinvestment

If pricing policies can be developed to meet performance criteria, additional revenue should be generated during peak periods. This revenue can be reinvested in central business districts to further drive demand and revenue. The reinvestment can also overcome the fear of driving away customers because of demand-responsive pricing. The revenue can be used for street cleaning, security, landscaping and other public improvements.

Chicago Parking Meters, LLC: Public vs. Private Pricing Policies
There is no clearer example of the stark difference in public and private pricing of parking than the City of Chicago concession agreement with a Morgan Stanley conglomerate in 2008. The city released a Request for Qualifications in February and a bid by Morgan Stanley was chosen in December of 2008. The concession agreement leased the revenue of 36,000 parking meters for a period of 75 years in exchange for a payment of $1.2 billion. The Morgan Stanley conglomerate later formed Chicago Parking Meters (CPM), LLC to manage the 3rd largest parking system in the US, the largest under management of a Public-Private Partnership.

Benefits

Since acquiring the lease in 2009, CPM has invested $35 million to improve parking infrastructure within the city. 36,000 individual meters were replaced with 4,700 pay stations that accept debit and credit cards. In 2014, CPM introduced a new cell phone app called ParkChicago that allows users to feed and reload the pay stations offsite. In the first month of release, more than 15,000 users had downloaded the app.

A new rate-structure was introduced shortly after the lease agreement that helped increase turnover in the central business district. The new investments in infrastructure and the new rate-structure are helping to reduce traffic in congested parts of the city.

Drawbacks

A new 3-tiered pricing structure was formulated: A central downtown loop was created with rates of $6.50 per hour, a second central business district was created with rates of $4 per hour, and the rest of the city retained the original average rate of $2 per hour. Some areas of the city saw immediate four-fold price increases.

The infrastructure investments were not immediate and many of the existing parking meters quickly filled with quarters and stopped working. Many drivers received tickets because of the broken meters and businesses worried the new rates would drive away customers.

In July of 2009, the Chicago Inspector General released an analysis of the lease agreement and conservatively concluded the City was underpaid approximately $974 million. In 2008, the last year parking was under management of the city, revenues from parking meters totalled $23.8 million. In 2013, CPM reported revenue of $135.6 million and many believe CPM will repay the original investment within two decades.

Conclusion

The city had not increased parking rates in 20 years for more than 70% of the 36,000 parking meters. Rates were quickly increased after the lease agreement, suggesting the curbside parking was under priced. CPM reinvested revenue to improve parking infrastructure and released a cell phone app for mobile payment. The ease of payment has helped relegate the rate shock of the new 3-tier pricing structure. “IBM’s Global Parking Survey awarded Chicago top honors for best on-street parking based on the least “emotional and economic pain.” The global survey, which analyzed 20 of the world’s most populous cities, evaluated the length of time and amount of difficulty involved in locating a parking spot, frequency of disputes over parking, the likelihood of receiving a parking ticket, and the number of parking tickets distributed. Chicago earned the top spot in the survey’s overall parking rankings, placing at or near the top in every category.”

San Francisco SFpark: a demand-responsive parking system
One of the causes of congestion in tight urban areas is drivers looking for vacant curbside parking, or “circling”. San Francisco was the first in the U.S. to try and address the circling issue by designing and implementing a pilot program called SFpark. SFpark system helps to free up curbside parking spaces by offering demand-based parking rates: higher demand areas during peak hours would become more expensive thus effectively reducing demand. Vacant curbside parking spots would in turn reduce a number of drivers circling around and looking for street parking.

Benefits

Easier parking

SFpark makes finding and paying for parking faster and easier. Demand-responsive pricing information online, via text, and through smartphone apps helps drivers find a space. Longer time limits and new meters that accept credit/debit cards, SFMTA parking cards and coins make parking more convenient and result in fewer parking tickets.

Faster public transit

Decreasing the number of drivers circling and double-parking will help keep roads clear so Muni and emergency vehicles can get through streets faster and more reliably.

Safer bicyclists and pedestrians

Drivers looking for parking are frequently distracted and fail to see bicyclists and pedestrians. Less double-parking and circling means fewer accidents and safer roads.

Better businesses neighborhoods

With parking faster to find and pay for, it’s easier to enjoy the City’s commercial areas. Less congested, safer and more pleasant neighborhoods mean better business. Plus, with less smog and greenhouse gas, we’ll all breathe easier.

Drawbacks

The introduction of SFpark system improved traffic and parking availability in the tourist locations of San Francisco, but out-of-pocket expenses for locals and visitors increased substantially. Another inconvenience is primarily related to city visitors as they have little understanding of the system and the best time slots when the parking rates are reasonable.

Conclusion

Demand-responsive pricing for parking could be one of the “fixes” for most congested cities with ample curbside parking, especially business districts where drivers can and will pay premiums for free-flowing traffic and a “guaranteed” spot.

Madrid: Pricing strategy based on environmental factors
Madrid has implemented a “parking based on pricing by vehicle fuel emissions strategy”, which is dependent on fuel type as well as fluctuations during high congestion periods on certain streets. “Making people think about the price of pollution.” City officials hope to bring about awareness as well as change motorist’s behavior as a way to improve the city’s congestion issues and reduce pollution levels.

Madrid is the second worst city for pollution in Europe. With an increase in air pollution of 20% over the past 20 years, Madrid is pressed to find a solution which will bring about awareness while also making an effort to decrease pollution levels. The EU has threatened Madrid with high fines/penalties due to its lack of action in reducing the city’s high pollution levels. With 1 million cars enter the city every day, Madrid faces serious environmental concerns that may require a stronger approach than the current parking strategy.

Components of Parking Strategy

Madrid’s parking system uses parking meters that link license plate numbers with Spain’s DMV system. Implemented in July 1, 2014, the new fuel pricing strategy is based on engine and year of car. The pricing structure imposes a 20% increase on Diesel cars (before 2001), 20% decrease for hybrid cars and free parking for electric cars. Less congested streets in the city center will have lower parking rates vs. higher congested streets closer to the city.

Benefits

Madrid hopes to reduce nitrogen dioxide levels, which are 5 times higher than the maximum EU level. The city also hopes to bring about awareness of fuel efficiency and its environmental impact.

“While the smart meters won’t affect the majority of drivers, Madrid estimates that one in four drivers will notice an increase in price.”

Drawbacks

Critics of Madrid’s environmentally conscious pricing model for parking argue that only the wealthy can afford newer, fuel efficient cars and takes advantage of people who can’t afford a newer car.

This case study brings up an underlying issue with the political attitude toward congestion. An example being the mayor of London, Boris Johnson riding his bike around the city whereas the former mayor of Madrid and now head of the country’s political party was seen parking in a bus lane to withdraw cash from an ATM.

Conclusion

Madrid is taking a step in the right direction by imposing a fuel based pricing strategy on parking in the city center. The adjusted rates based on fuel efficiency will hopefully bring about the environmental awareness the city needs in order to make improvements in consumer behavior as well as a reduction in traffic congestion and air pollution levels.

While this strategy imposes restrictions to increase awareness and alter consumer behavior, political support and city ordinances focused on improving congestion and air quality standards are necessary in order to meet EU regulations.

Innovation found elsewhere: reduce traffic instead of adding more parking
The City of London (United Kingdom) was the first megapolis in Europe to start charging private vehicles access or “congestions” fees to enter city center. The historically narrow streets and the lack of parking spots, in addition to the ever-increasing traffic flow, kept London balancing on the brink of transportation crisis, until 2003. The Conservative Mayor Ken Livingston pushed for and introduced the program of charging congestion fees for private vehicles entering the 8-mile (radius) zone in Central London.

Benefits

Congestion charge revenues contribute a substantial amount to City’s transportation budget and the funds can be used for improving public transportation, adding more bicycle routes, etc. London’s congestion fee revenues account for about 10% of total transportation revenue. “Congestion Charging revenues increased from £222m in 2012/13 to £235m in 2013/14.”

Drawbacks

Introduction of congestion charge scheme for a large city is an expensive project and annual costs of maintaining the system (video cameras, etc.) are high.

Conclusion

A number of other large cities around the globe, with similar traffic problems, followed London’s example and introduced congestion control programs. Among those early and successful adopters are Singapore, Milan, Stockholm, and a few others. Moscow, one of the most congested mega-cities in the world, is considering the program but, like many other megalopolises, politics play an important role in decision making, thus postponing the adoption of congestion fees.

Conclusion
Parking availability, pricing and payment options are relevant issues affecting car owners, businesses and local governments. Parking zoning strategies are often a heated topic of debate at local town hall meetings. Parking enforcement strategies are neither inexpensive nor effective while Infrastructure Costs, Operations and Maintenance, and Environmental Costs are often left unaccounted from pricing strategies, leaving local government parking systems in a vicious cycle. Luckily, parking innovations in the areas of payment, reservations, and pricing have drastically improved efficiency in the parking industry. Parking operators- public and private- are moving towards cashless parking systems that allow for increased options and services, and result in higher revenue by reducing operational costs. Others, like the City of Chicago, have decided to implement unconventional strategies such as leasing public curbside spaces to a private company. Whether through innovative and integrated technologies or through more structured and creative strategies, the parking industry has undeniably improved the way it services customers.

Additional Readings

 * http://www.streetfilms.org/mba-the-right-price-for-parking/
 * http://sfpark.org/about-the-project/
 * http://greatergreaterwashington.org/post/684/shoupism-arrives-in-dc/
 * http://www.telegraph.co.uk/technology/news/10573651/Smart-parking-app-begins-rollout-in-Londons-West-End.html
 * https://www.tfl.gov.uk/cdn/static/cms/documents/congestion-charge-factsheet.pdf
 * http://www.vtpi.org/vickrey.htm
 * http://www.vtpi.org/tdm/tdm26.htm
 * http://www.vtpi.org/tdm/tdm72.htm
 * http://www.vtpi.org/tdm/tdm83.htm