# More from Shoup and O’Toole

## More from Shoup and O’Toole

A couple of emails between the two…I find it interesting, and perhaps a teaching moment, that a good way to respond to those who disagree is to simply not address the disagreement. This back and forth took place over the past two weeks.

Dear Randal,

Thanks for your Cato@Liberty post clarifying several points where we agree about parking policies (http://www.cato-at-liberty.org/donald-shoup-on-free-parking/).

You wrote that the Cato Institute offers free parking to its employees. The market price of commuter parking in the commercial garage closest to the Cato Institute is \$255 a month (in Colonial Parking at 901 New York Avenue). At this market price, can you calculate the total market value of all the free parking Cato provides to its automobile commuters?

After examining the data, you may find the market value of the Cato Institute’s free parking is surprisingly high. My rough guess is at least \$10,000 a month. That is one example of what I mean by the high cost of free parking.

But maybe I am wrong. I hope the Cato Institute will tell you the number of commuters who park free so that you can answer this simple question. What is the fair market value of all the free parking for commuters who drive to the Cato Institute?

My point is not to criticize the Cato Institute for its free parking, because 95 percent of all automobile commuters park free at work in the United States. My point is that you could do a great service to free-market transportation policy by using the Cato Institute as a case study to analyze how employer-paid parking distorts commuter transportation choices.

Valued at market prices, free parking at the Cato Institute reduces the cost of driving to work by \$255 a month. If commuters drive the national average round-trip distance of 32 miles a day for 22 days a month, free parking thus reduces the cost of driving to work by 36¢ per mile (\$255/22

days/32 miles). According to the AAA, the average operating cost of a car is about 18¢ per mile. Because the parking subsidy at work is twice the operating cost of driving to work, free parking at Cato reduces the out-of-pocket costs of driving to work by two-thirds. Free parking is therefore a huge price distortion in favor of commuting by car.

The Internal Revenue Code creates an incentive for this price distortion because free parking at work is exempt from both income and payroll taxes. Parking cash out can eliminate this price distortion. Parking cash out is a market-oriented policy whereby employers who offer free parking at work also offer commuters the option to choose its cash value in lieu a parking space. Parking cash out does not mandate parking charges because commuters who choose to drive can still park free. Parking cash out simply gives the same subsidy to every commuter, regardless of travel mode choice, while free parking gives a subsidy to drivers and nothing to other commuters (http://tiny.cc/2x61o). Parking cash out expands choice, which I assume is a core value of the Cato Institute.

A bill now in Congress would alter the Internal Revenue Code to reduce the price distortion in favor of free parking. Section 5 of H.R. 3271

(Blumenauer) would include parking cash out as a condition to qualify for the tax exemption for employer-paid parking. That is, the free parking would be a tax-exempt fringe benefit if employers offer commuters the option to cash it out: http://www.govtrack.us/congress/billtext.xpd?bill=h111-3271.

The bill would allow commuters to make their transportation choices at fair market prices.

Data from the Cato Institute can illustrate how H. R. 3271 would allow market parking prices to influence transportation choices, without eliminating free parking. I hope the Cato Institute will therefore provide the data necessary to estimate the total market value of all the free commuter parking it provides, and how parking cash out would affect the prices for commuting to its building. After all, if the Cato Institute will not make data available to analyze how market prices can improve transportation choices, who will?

Donald Shoup

—–Original Message—–

From: Randal O’Toole

Don,

Thanks for your comments. I’ve been wondering if I would hear from you! Please see my latest post on Cato-at-Liberty at http://www.cato-at-liberty.org/free-parking-revisited/

In it I focus on the difference between “free parking” and “minimum-parking requirements.” I have long supported eliminating the latter. I only object when planners want to eliminate the former.

Since your book and paper are called, “The High Cost of Free Parking,” not “The High Cost of Minimum-Parking Requirements,” I may have been confused by your intentions.

I am sorry if I have misinterpreted your work as recommending that cities require private businesses to charge for parking or limit the amount of parking they can put in. Yet you have to know that most urban planners who cite your work use it to support that goal. Most planners today want to impose maximum-parking requirements. Many, including planners in my former hometown of Portland, want to mandate that suburban businesses charge for parking. (In fact, such mandates are included as an assumption in their models of future transportation needs.)

As you know, my blog post responds to Cowen, not you, and Cowen specifically endorses “imposing higher fees for parking.” I don’t know who Cowen thinks would do the imposing if it is not government.

This is what I object to, and if you don’t agree with it, I hope you will let Cowen know.

“Since you say that many cities do not have minimum parking requirements, can you provide a list of some of these cities?”

I did not say that. As you yourself note, I wrote, “Shoup assumes that every municipality in the country has such parking requirements, even though many do not.” Municipalities include counties, and many counties have no parking requirements. These include all counties in Texas, most counties in Nevada, and many counties in Indiana, among other states. My point is that you can still find plenty of free parking in all of these places, so ending minimum-parking requirements will not end free parking.

Let me know if you have any other questions or want further corrections.

Best,

Randal

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