Comments on Parking “Theft”

My friend Cooper Marcus takes me on in his comments on my blog about the Washington Post’s comments about meter resets here.

I don’t disagree that overcharging is a bad practice, however, this isn’t theft, nor is it over charging. When a person parks, they agree to certain terms. One is that they buy space by increment. Operators and cities do this to cover the costs of parking a car. Its like buying a car — you must pay a certain amount up front so the dealer can get their up front costs out.

When a parking space is taken, it is taken for a period of time.  Parking operators need to know what that time is so they can properly plan and run their businesses.  Its not taken for an unspecified period.  The only way to do this is to sell space by increments. If you go into a garage and purchase a longer time (say an early bird all day rate) you will pay less than if you buy a half hour at noon.  Its simply how supply and demand works. Most operators charge for a full day after only a couple of hours even though the person may only stay for three hours, they pay for eight.  This is good business.  When the person comes and takes the space, they remove it from the available pool of spaces.  Since the operator doesn’t know how long that is going to be, they cannot predict their income.

On street its much the same.  Between 8 and 10 AM the streets are empty. They begin to fill around 10:30, are full till one, and then are open again between 1 and 3, and fill again till 5 and then are open until 10:30 the next morning.  (I’m making this up, don’t write in and tell me I’m off an hour here or there). So when someone comes in and parks at 10. The city doesn’t know whether that person will stay until 10:15, or 3 PM.  However the administrative costs to the city to provide that space are essentially the same. Lighting, enforcement, cleaning, etc are there whether or not the space is occupied. So the city must collect its costs no matter how long the car stays. Lets say the space is taken for 15 minutes. During that time, 10 cars may have driven by, any of which may have stayed 3 hours.  Since the space was taken, they could go to the local private off street lot (a good idea, by the way) and park there. That income is lost to the city forever.  In 15 minutes the space is open, but the available parkers are gone. The city therefore must collect at least some of its costs up front.  They do this by charging for a specific period of time (increment). If you don’t stay the entire time, that’s your problem, since the business and in this case the city, must get its costs covered. Perhaps it would be more "fair" to approach if from a refund point of view, but the costs won’t go down, most likely they will go up.

When you cut your deal with a parking company or a city, you agree up front that you will pay for a certain period of time, you also agree to forfeit any money you paid and you allow the owner to use the space any way they want.  This procedure keeps the price of parking down.

The costs a parking operator or owner have are loaded into the average term a person uses the space.  If that is 3 hours in a shopping center or 1 hour near an office building, most of the money charged is going to be charged in that time.  So if you arrive and stay five minutes, you are going to pay for that first increment, whether it be a hour, two hours, or 15 minutes.  The operator must get his costs out. 

If you take Cooper’s approach, the charges will simply be set to ensure that the costs are collected in the first minute.  $1 and hour will become $1 for the first minute, and then something, say one cent, for each minute after that (after all, it wouldn’t be "fair" to provide parking and not refund anything for the time they didn’t park.)  So for a person that stays 40 minutes, we will collect $1.60 for the first hour, and refund 20 cents for the 20 minutes they didn’t use. And so forth.

Cooper wants refunds for unused time.  And the technology just may exist for that to happen.  However is a city willing to part with the income it has become accustomed to collecting? Most likely not. When approached by the "reset" parking meters, cities fall all over themselves to sign up. It means more income.  However I wonder at the success of systems that offer refund for unused time? We shall see.

(Come to think of it, the difference between on and off street is that the money is collected after the person parks off street so fees can be computed based on the time stayed, although increments are also used. On street, the goal is to collect the money up front, since its much more difficult to put controls in place. The enforcement officer needs to know, somehow, that you are "gonna pay" before you drive out. Its better to get the money up front.)

Don Shoup is in love with the "in car" meter.  When you park you turn it on and it deducts money from the amount that has been loaded on to it.  However, the city has all the money up front.  They have millions in the bank earning interest while you have your bit stored in the meter, waiting for you to use it to park. The cities like it because they get the $$ up front, and frankly there will be a lot of money that will never be used, as meters find their ways into glove compartments and people move away with money still on the clock.  Debit cards are the same. (Isn’t this the same concept as paying $1 to park for an hour and then leaving after 30 minutes, only worse). I guess Cooper would say that at least its your decision to leave the money on the meter. The Washington Post would say that at least it isn’t theft.

It isn’t theft to get your costs out of providing a product or service. Parking owners get their costs out in the beginning. We have used time honored methods to do that, mostly because we didn’t have the technology to do it another way. It wasn’t reasonable to ask an attendant to instantly compute the costs to park down to the minute, so we installed increments.  Technology has changed that, however comparing it to the phone company, as Cooper did, isn’t the same.

When a person passes a space that is taken, they pass it forever.  (Or they cruise, another issue). They go to a competitor to park. You have lost that customer.  If the space frees up 1 minute after the customer passes, they are still gone, and that space may be open for the rest of the day. This works for on street as well as off street. When was the last time you didn’t get a dial tone? Phone companies never lose a customer. 

Therefore parking owners have to build in a way to counter this effect.  And that is to charge in increments or preload the parking costs up front.  Cities charge in increments to take care of this problem.  To make that go away, would force them to preload.  Fees would be forced to go up. Instead of everyone paying a bit more to park (the amount of the unused increment) everyone would pay a lot more on arrival.

Of course, one must absolutely take into consideration the use of the money by the owner. In the private sector, garages that are well built, clean, bright, secure and the like attract more business. Putting the dollars back into the facility is just good practice.

In the public sector its the same. Putting the money back into the neighborhoods from which it came with better lighting, security, infrastructure, and lower taxes would change the entire conversation about parking charges. Shouldn’t people who are using the neighborhood, whether they live, work, or play there, pay for it.

When the city takes the money and puts it into the "general fund" or uses it for pet projects away from where its collected, the payers don’t see direct results from their payments, and complain. When they see the result, they love the idea.

J