Paying for transit in the GTHA,1: Commercial Parking Levy

In this series on the different options for raising the $2 billion/year needed to pay for new transit in the GTHA, I am starting with the idea of a parking tax because it is probably the option that has most often been proposed by politicians, including those on the right.

The idea would be a charge a levy to commercial property owners (e.g. malls, offices) for each parking spot on their property. They would presumably pass this cost on to their customers/staff in some manner.

Even Mayor Rob Ford himself briefly opened the door to the idea of a parking tax to fund his Sheppard subway proposal (before quickly backing down). Budget chief Mike Del Grande also flirted with the idea. In John Michael McGrath’s article in the new issue of Spacing, councillor Peter Milczyn is quoted as noting the advantages of such a tax.

A levy on commercial parking spots to fund The Big Move would need to be significantly larger than what they had in mind, of course.

Amount charged

The CivicAction report (PDF) estimates that a dollar-a-day levy on commercial parking spots in the Greater Toronto and Hamilton Region would raise $1 billion a year.

Cost to implement

Rating: Good, but …

The cost to manage a commercial parking levy shouldn’t be onerous. The amount could be charged through the property tax system, with municipalities collecting it and passing it on to Metrolinx.

However, municipalities or Metrolinx would face one up-front cost because they would need to build an exact inventory of parking spaces on each commercial property across the city. Cities do not  currently have such an inventory, but they ought to have one in order to do coherent transportation planning. So pushing them to do so is an added advantage, although it does create an initial cost.

Retail malls, paid parking lots, and many corporate headquarters already know how many parking spots they have, but factories and business parks may have more informal parking lots so there would be some work required coming up with an assessment system for such cases.

Behaviour incentives

Rating: Good, but …

A parking levy works as a pretty good indirect tracker of road use — if you drive somewhere, you usually need to park at your destination. So a parking levy can provide a useful nudge towards using another mode of transportation.

However, its effectiveness on driving behaviour would depend on how property owners pass it on to their customers. Where parking is already paid for, a small increase would cover the cost. For employers, it would be easy to pass the cost on to their staff, which would encourage staff to explore alternative modes of commuting.

For retail parking that is currently free, however, property owners would have a choice between changing their free parking to cost-based parking (which could entail some adaptation costs) or absorbing the costs through raised prices in stores or other means. If the costs are absorbed, then the positive impact on driver behaviour would be largely eliminated in these cases (since people would pay the cost no matter how they got there).

A parking levy also provides an incentive to landowners and developers not to create more parking spaces than they really need. As Donald Shoup has famously shown (PDF), free parking creates a lot of hidden costs. In turn, less parking available further encourages people to reconsider driving as an option.

However, the GTHA municipalities would, in turn, have to re-examine their minimum parking requirements for all buildings, since these would now impose ongoing costs to the owners. This re-examination should be done anyway, since these regulations often require unproductive and unneeded parking spaces, so this would also be a positive behaviour change.

At the same time, municipalities would want to consider some kind of incentive program to make it easier for landowners to remove unneeded parking spaces and replace them with something that contributes to the city (e.g. trees; bioswales to manage water runoff and provide green space; improved pedestrian access; bike parking). Some of the revenues from the parking levy might be diverted to cost-sharing for this purpose.

The negative behaviour associated with a parking levy is looking for free parking on nearby residential streets. In parts of town where main street parking is already charged, communities are already habituated to this issue, and experience has shown people still use the pay parking. In areas where a lot of free parking is currently available, businesses may choose to absorb the cost. If not, the charge for parking to cover the levy would be low (since the cost is only $1 a day per spot). In these areas, residential areas are often an inconvenient distance from destinations in any case. So this behaviour change may not be as significant as feared. It may be, however, that municipalities will need to review parking regulations on residential streets in suburban areas.

The other negative behaviour associated with a parking levy is sending drivers outside its bounds in search of destinations with free parking. This impact would be greatly reduced if the entire GTHA was subject to the levy, because most people would have to drive a great distance to escape it and there are fewer alternative destinations outside the GTHA. It would also be minimized because the daily rate is low, so the impact would be minimal on any individual driver and less likely to be worth the extra effort.

Political viability

Rating: Good

As noted above, a parking levy has had support even from conservative politicians. The idea of paying for parking is something people are used to. It is administratively simple and, given the low charge-per-day, the costs per person are not all that significant.

The most significant opposition would come from property owners who currently offer free parking, who could see a significant increase in the costs they pay on their property and would need to figure out some way to cover these new costs.

Another source of opposition could be suburban residential communities near commercial properties who fear an influx of drivers seeking free parking. This would not be an issue if retailers absorbed the cost, and would not likely be an issue if the cost remains low.

What do our readers think of this option? What are other advantages or disadvantages to a commercial parking levy?

(Note: as many of our readers know more about aspects of these issues than I do, I am also hoping that some crowdsourcing will happen in the comments section in terms of links and resources on each option).

Tomorrow: Highway Tolls