Making Paid Parking Pay

Spring 2016
The Ann Arbor Downtown Development Authority encourages drivers to use public garages with electronic signs at the entrances that show how many empty spaces are available inside. The DDA’s parking profits help pay for a wide range of transportation programs. Courtesy of Ann Arbor, Michigan, DDA

Parking can be a catalyst for economic development, creating benefits for developers, investors and businesses.

A PARKING BENEFIT district is a quasi-government organization — usually a public-private partnership with local business participation — that has some authority over parking rules and revenues. It uses those revenues to enhance the district in a variety of ways. In some cities, these districts are known as transportation benefit districts; in others, existing downtown development authorities (DDAs) or business improvement districts (BIDs) serve many of the same functions. In fact, a neighborhood doesn’t even need a special-purpose “district” designation to enhance parking convenience, as long as businesses and the municipality cooperate on charging for parking and improving the commercial, residential and retail environments.

Ann Arbor, Michigan

Businesses in Ann Arbor, Michigan, for example, used to hear daily complaints from residents that there wasn’t enough parking downtown. The Ann Arbor Downtown Development Authority tackled this problem by making it easier for drivers to find garage parking and by making street parking more expensive and limiting it to short-term stays. Susan Pollay, the DDA’s executive director, says that from the outset the board decided that both street and off-street parking should pay for itself, and that a good public parking “product” should cover its costs as well as help pay for other ways of getting downtown.

To encourage drivers to use garages, the DDA put up signs directing them to the nearest garage. It also installed electronic signs at the entrances to six garages that show how many empty spaces are available inside. Because street parking now costs more than garage parking, street spaces are likely to be available most of the time. As a result, customers spend less time “cruising” and looking for a space.

Pollay reports that “Ann Arbor’s perception that there was not enough parking is now almost completely gone.” This is true even though the city’s downtown zoning does not generally require developers and tenants to provide parking. The DDA’s parking profits have helped pay for commuter bus passes, supplemental transit service, bike parking and bike shelters, car-share spaces, electric car-charging stations and a late-night shared cab program. Most of these reduce the need for parking, so the DDA’s parking program also operates as a successful parking demand management program.

Current Best Practices

Other cities are adding electronic technology that enables them to vary parking fees by time of day and by block so that street spaces are always available, eliminating cruising and enhancing convenience. New meter systems with just one or two pay pillars per block that record license tag numbers and expiration times can be linked to smart cameras in meter readers’ cars to ensure that shoppers are parked legally. Electronic signs can tell drivers how many spaces are available on each floor of a garage.

Since the purpose of parking benefit districts is to provide local benefits, most districts help pay to improve and maintain sidewalks and streets as well as to improve and restore storefronts. Because these districts serve as catalysts for business and real estate investment without using tax revenues, they can experience bipartisan support. They can also charge nonresidents market rates for street parking and use some of the money to fund free or low-cost parking for residents, creating further political support. For most new parking policies to be a success, a single authority or district must administer both on-street and off-street parking so it can approach problems strategically.

Thinking about parking in new ways can offer other business benefits. Some districts have pooled employers’ and stores’ unused spaces into “virtual” parking capacity, eliminating the need to build additional garages or parking lots and creating revenue for owners while protecting their private property rights. Others have built parking garages that can be retrofitted as commercial or residential space as residents drive less and walk more.

The biggest pro-business change in parking policy is the reduction or repeal of local parking minimums for new construction and new uses in existing buildings. These minimums can add tens of thousands of dollars per parking space to the cost of new construction or to the startup costs of a new business. Parking costs can discourage developers from putting up new buildings and prevent merchants from starting new businesses. Parking minimums require businesses to subsidize the cost of parking. Eliminating parking minimums means that the free market will provide parking at prices businesses and customers will pay.

exterior view of old retail space
before photo of old office

Before: top photo. After: bottom photo. Revenue from parking meters installed by Old Pasadena, California’s parking benefit district has helped fund facade restorations and street plantings.
Courtesy Nelson/Nygaard, Patrick Siegman

Some cities, rather than repealing parking minimums, allow businesses to pay cash for the city to build parking. This “payment in lieu” can reduce surface parking blight; instead of each business providing parking by leveling adjacent buildings, the city provides structured parking nearby. Other cities require employers to “cash out” free employee parking by offering workers the cash equivalent rather than a parking space. For each employee who takes the cash, the employer is relieved from having to provide or pay for a space.

Old Pasadena, California

One pioneering example of a parking benefit district is Old Pasadena. In the 1990s, the city and downtown merchants reached “one of the smartest political and parking solutions of the last 25 years,” according to Jason Schreiber of Nelson/Nygaard Consulting Associates. The solution shifted the consensus from “charging for parking will scare away our customers” to “meter revenues will dramatically improve the retail and pedestrian streetscape.” Old Pasadena added meters, raised street parking prices high enough that short-term customers could always find a space, allowed businesses to make modest cash payments in lieu and provided off-street parking in city-owned garages. Pasadena manages the parking benefit district by means of agreements among the city, the BID and a Parking Management Zone advisory committee.

Revenue from the meters helps fund sidewalk improvements, facade restorations, trees and tree grates, traditional light fixtures, public safety and downtown promotion efforts. Retail sales in Old Pasadena increased 900 percent in nine years. Schreiber says that “for a first-time customer, being able to feel comfortable in a streetscape, see an attractive storefront and park close to it is everything. This is especially true for restaurants. … Parking has to be priced at a level that ensures there will be a short-term space [nearby]. Once the customers come in and become fans, the next time they’ll happily park in the garage and stay longer.”

Haverhill, Massachusetts

Haverhill was trying to attract more residents and businesses to its downtown, so the city decided to add a parking garage. Schreiber pointed out to Haverhill that the proposed garage was surrounded by free street parking spaces. William Pillsbury, Haverhill’s director of economic development and planning, says that “the city was opposed to paid street parking at first, but we eventually realized that bringing back paid on-street parking — after a free-parking policy that lasted 50 years — would encourage use of the garage (and help pay for it) and help keep a reasonable number of street spaces open. Our restaurants were clamoring for more convenient street parking in the evenings, so our paid street parking now extends to 8 p.m. to make sure spaces turn over. This has been very helpful to the restaurants.” The city plans to use some of the parking revenue to “spruce up the sidewalks and streets,” explains Pillsbury, adding that “we understood early on that a paid parking strategy would help both restaurants and other businesses.”

There is plenty of evidence that market pricing for street parking enhances convenience for shoppers, makes retail locations more accessible and provides nontax funds to enhance the retail environment as well as the overall streetscape. For retail, office and residential developers, investors and business owners, parking benefit districts offer a chance to do good and do well, as well as an opportunity for leadership.

Advantages of Parking Benefit Districts

Parking benefit districts — or just plain better parking policies — can provide a wide range of benefits to commercial real estate developers, property owners, business owners, employees, residents and shoppers. Tools for achieving these benefits include the following:

  • Put in place remotely programmable, variable-cost street parking pricing, as well as parking systems that accept payment via credit cards and smartphones, both of which can make parking easier and more convenient.
  • Expand both on-street and structured parking.
  • Eliminate parking minimums for developers and businesses; allow in-lieu payments to support public garages, if needed.
  • Reduce surface parking blight by eliminating inefficient surface parking lots; build new underground or wrapped structured parking.
  • Allow parking “cash-outs” for employees; unbundle parking fees for tenants and condo owners.
  • Promote walking, biking and transit as other ways to reduce parking needs.

Parking benefit districts can also create revenue to pay for a variety of neighborhood improvements — in addition to the provision of more and/or more convenient parking — including the following:

  • Sidewalk cleaning and repairs.
  • Sidewalk furniture (planters, benches, bike racks, banners, wayfinding signs, traditional streetlights).
  • Facade improvements (signs, awnings, cleaning, repair and/or restoration of period storefronts).
  • Restriping streets and crosswalks for pedestrian safety, more parking spaces and/or bike lanes.
  • Reducing the number of curb cuts to enhance walkability.
  • Installing and landscaping safety islands, medians and other traffic-calming devices, raised crosswalks and sidewalks.
  • Undergrounding utilities.
  • Free transit and commuter bus passes.
  • Bike-share programs and bicycle parking.
  • Car-share parking spaces.
  • Electric car-charging stations.
  • Programs that offer late-night and emergency mid-day cab rides home for transit riders and others.