Topic: Energy and Environment

Free Parking Revisited

Two weeks ago, I responded with dismay to George Mason University economist Tyler Cowen’s op-ed against free parking. This led to a variety of responses in the blogosphere, none of which address my point. Instead, they all argue against the minimum-parking requirements found in many zoning regulations.

In particular, Cowen himself points to a study that found that Los Angeles’ minimum-parking requirements forced some developers to build more parking than they would have without such requirements. But Cowen’s op-ed was titled, “Free Parking Comes at a Price,” not “Minimum-Parking Requirements Come at a Price.” The op-ed was based on a book by Donald Shoup titled The High Cost of Free Parking, not The High Cost of Minimum-Parking Requirements.

Nothing I wrote defended minimum-parking requirements. Instead, I pointed out that, even without such requirements, most businesses still provide free parking for their employees and customers. It is one thing to oppose minimum-parking requirements as an unnecessary form of government regulation. It is another thing to favor government regulation mandating that private businesses charge for parking.

That certainly seems to be what Cowen favors. His article concluded, “if we’re going to wean ourselves away from excess use of fossil fuels,” then “imposing higher fees for parking may make further changes more palatable by helping to promote higher residential density and support for mass transit.” There are a lot of fallacies in those statements. Will higher residential density significantly reduce use of fossil fuels? Probably not. Will support for mass transit significantly reduce use of fossil fuels? Probably not. Even if you believe we excessively use fossil fuels, do indirect tools such as “imposing parking fees” make sense when more direct tools are available? Certainly not.

Claims that parking is subsidized would carry a lot more weight if 5 percent of the people drove and the other 95 percent had to pay 75 percent of the cost. Those are, in fact, the ratios for transit (less than 5 percent of American workers take transit to work but fares cover less than 25 percent of transit costs), which Cowen wants to promote. With driving, the numbers are practically reversed: discounting air travel, more than 90 percent of travel is by car and auto drivers pay more than 90 percent of the costs of driving.

I suspect someone has made the case for minimum-parking requirements: without such requirements, businesses might try to externalize some of their costs by letting someone else provide parking for them. But let’s ignore that. Cities should get rid of zoning codes that have minimum-parking requirements. (Cities should get rid of zoning codes period.) Cities should charge market rates for on-street parking and any publicly owned off-street parking. But even if these things happen, private businesses will still provide free parking to their employees and customers in many areas – in fact, practically everywhere outside of old downtowns.

Note: My previous post on this subject quoted Cowan quoting Donald Shoup saying, “On average [in the U.S.] a new parking space has cost 17 percent more than a new car.” I commented that this was ridiculous. Someone sent an email saying that Shoup actually estimates there are four parking spaces for every car, and the combined cost of those spaces is more than the average car. Without searching Shoup’s 733-page tome to check his arithmetic, I am still not certain why this is important.

Most people who buy homes want to room to park their cars. People also need room to park at work and elsewhere. Should we only have one bathroom for every four houses because the average bathroom is in use only a couple of hours every day? Is it a waste that almost every home in the country has a kitchen, when there are plenty of kitchens in restaurants (not to mention many workplaces) as well? Then why is it a waste that homes, as well as offices, stores, and other businesses, have parking?

Yes, a Free Parking Space Grows in Manhattan

In my recent comments on Tyler Cowen’s op ed on the supposedly high costs of free parking, I boldly wrote, “I defy Cowen to find any free parking anywhere in Manhattan.” That just shows how little time this Oregon resident spends in Manhattan.

It turns out that the western invention, the parking meter (first installed in Oklahoma City in 1935), hasn’t thoroughly penetrated east of the Hudson River. Many streets in Manhattan offer free parking, albeit often with the caveat that you have to move your car from one side of the street to the other every night.

But this doesn’t change my main point, which is that it is one thing for Cowen to argue that cities should not price parking below market rates where there is a market for parking. I have no problem with this. But it is quite another thing to argue, as many urban planners following the Shoup model do, that private businesses should be required to charge for parking (or be limited in how much parking they are allowed to provide) in areas where the market rate for parking is zero.

If Manhattan has so much free on-street parking, why are some people willing to pay hundreds of thousands of dollars for their own personal parking space? The answer is simple. Although Manhattan has one of the lowest rates of per-household auto ownership in the nation – less than a quarter of households own a car – its population is so dense that it has one of the highest rates of auto ownership per square mile. Based on 2000 census data, I calculate that Manhattan has 8,355 locally owned vehicles per square mile, vs. less than 4,000 vehicles per square mile in car-crazy Los Angeles and less than 2,000 vehicles per square mile in auto-happy Houston. So much for the idea that increasing population densities reduces congestion.

Free Markets for Free Parking

I am disappointed that the distinguished George Mason University economist, Tyler Cowen, has fallen for the “high-cost-of-free-parking” arguments of UCLA urban planner Donald Shoup. Shoup is an excellent scholar, but like many scholars, he has the parochial view that the city that he lives in is a representative example of what is happening everywhere else.

Should free parking be a thing of the past?

Shoup’s work is biased by his residency in Los Angeles, the nation’s densest urban area. One way L.A. copes with that density is by requiring builders of offices, shopping malls, and multi-family residences to provide parking. Shoup assumes that every municipality in the country has such parking requirements, even though many do not, and that without such requirements there would be less free parking. This last assumption is extremely unlikely, as entrepreneurs everywhere know that (outside of New York City) 90 percent of all urban travel is by car, and businesses that don’t offer parking are going to lose customers to ones that do.

Shoup portrays such free parking as a “subsidy” because not all people drive and so the ones who don’t drive end up subsidizing the ones who do. But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service. How often do you actually swim in the swimming pools or work out in the exercise rooms of the hotels you stay at?

Shoup also supposes (and Cowen accepts) that universal parking fees would greatly reduce the amount of driving people do. “Minimum parking requirements act like a fertility drug for cars,” Cowen quotes Shoup as saying. Metro, Portland’s regional planning agency, submitted this question to its transportation model and concluded that requiring all offices, shopping malls, and multi-family residences to charge for parking would reduce driving by about 2 percent. The model showed that charging for parking has a greater effect on driving than spending billions on light rail, building scores of transit-oriented developments, or increasing the urban area’s population density by 20 percent. But 2 percent still isn’t going to do much to relieve congestion or solve any of the other problems Cowen associates with driving. Plus he never really explains why he thinks reducing mobility is a good idea in the first place.

Shoup claims that a single parking space costs, on average, 17 percent more than the cost of an average car, and as a result, the cost of parking greatly exceeds the value of all automobiles in the country. This is ridiculous. Most free parking is surface parking, which costs about $2,000 a space plus the cost of land. In areas that have not used urban-growth boundaries and similar tools to create artificial land shortages, vacant suburban land with urban services typically costs about $20,000 an acre. Since each acre can hold about 100 parking spaces, the total cost is about $2,200 per space. From the point of view of a business owner, this cost can be amortized over 30 years at 6 percent, for an annual cost of about $160. If that parking space is used by just two customers a day, the cost is about 22 cents per customer. That’s pretty trivial, and the costs of collecting fees for such parking would probably be greater than the parking itself. Even structured parking typically costs only about $10,000 a space (or, using the above assumptions, $1 per customer), but structured parking is rarely provided for free.

Strangely, one of the examples Cowen uses in his article is Manhattan, where (he claims) “streets are full of cars cruising around, looking for cheaper on-street parking, rather than pulling into a lot.” Give me a break! I defy Cowen to find any free parking anywhere in Manhattan, where ownership of a single parking space can cost more than a median home in other parts of the country.

Cowen’s complaint about Manhattan is not about free parking but that the government is pricing on-street parking below the market. If that were the extent of Shoup’s argument, I would have no problem, as I noted in my blog last week. But Shoup’s goal isn’t market pricing of public parking; it is to create artificial shortages of private parking. He doesn’t want to simply eliminate the minimum-parking requirements that are found in many zoning codes; he wants to replace them with maximum-parking limits so that places like WalMart will not be allowed to provide their customers with as much parking as they like.

The empirical question is: do shopping malls, office parks, and companies like WalMart provide parking for their customers and employees because of zoning mandates, as Shoup claims? Or would they and do they provide parking just because it is good for their businesses? Texas counties are not allowed to zone, yet shopping centers and office parks in unincorporated Texas still provide plenty of parking. Much to planners’ annoyance, many developers elsewhere routinely provide more parking than zoning codes demand. This suggests that free parking is a free-market choice, and Cowen, who generally supports free markets, should have no objection to it.

Making Transit More Cost-Effective

The Federal Transit Administration (FTA) has asked for public comment on Transportation Secretary Ray LaHood’s proposal to eliminate a rule that limits federal funding of particularly wasteful rail transit projects. The Cato Institute has submitted comments arguing that, instead of eliminating the rule, the FTA should strengthen it, but also give transit agencies more flexibility in defining the goals of new projects.

Since 1970, American cities have spent nearly $100 billion building new rail transit projects, and tens if not hundreds of billions more running them. While new rail lines appeal to the egos (and campaign coffers) of elected officials, they do little that could not be accomplished for a lot less money by simple improvements in bus service. Even Peter Rogoff, the Obama administration’s appointee in charge of the FTA, recently admitted that “paint is cheap, rail systems are very expensive,” meaning that painting buses a special color and running them on specific routes can accomplish just as much as spending billions on new rail construction.

To place some limits on the most wasteful rail projects, the Bush administration wrote a “cost-effectiveness rule” in 2005. This rule requires transit agencies to calculate how many hours of people’s time major new transit projects will save each year, and divide that into the amortized capital cost plus the annual operating cost of the project. If the resulting cost is more than about $24 per hour (the actual amount varies with inflation), the FTA refused to fund it.

This rule was controversial within the transit industry and Congress immediately waived it for a few particularly expensive projects such as a Washington Metrorail line to Dulles Airport and a BART line to San Jose. So rail advocates were thrilled when LaHood announced in January that he wanted to repeal the rule. Before he can do so, however, the rule has to go through a public review process.

Since January, however, Rogoff gave his speech questioning whether the nation should build new rail projects when an FTA report found that cities with rail transit are unable to keep the lines they have in a state of good repair. So it is possible that the FTA will be open to new ideas. In 2005, the original rule generated only 50 comments, mostly from transit agencies, so a strong public response to the proposed new rule could sway the agency to actually make it stronger, thus saving taxpayers lots of money and heartache in the future.

The main thing fiscal conservatives want is a requirement that agencies proposing rail transit consider a full range of alternatives, such as bus improvements, reduced transit fares, and converting high-occupancy vehicle lanes to high-occupancy toll lanes that are dynamically priced to insure that buses (and others) using the lanes are never delayed by congestion. The main thing the transit agencies want is the ability to calculate cost effectiveness based on factors other than the amount of time people save. The Cato Institute’s recommendations meet both these goals by allowing agencies to use any true outputs, such as cleaner air, energy savings, or increased personal mobility, and requiring them to calculate the cost per unit of each output for a variety of alternatives.

The deadline for comments is August 2. People who want to comment can go to regulations.gov to type their ideas directly on the web or submit comments in a Word or text file. You don’t have to write comments as long as Cato’s. The most important things to say are that the FTA should require transit agencies to consider a full range of alternatives and that the FTA deny funding to any alternatives that are significantly more expensive than the others in meeting environmental and social goals. You can also simply endorse the Cato Institute’s comments.

And Your Point Is?

Matthew Yglesias is somehow offended by my recent post about the huge decline in the productivity of our socialized transit industry since 1970. He never addresses or even acknowledges any of the arguments made in my article. Instead, his problem is that the article “fails to acknowledge any government role in promoting the usage of private automobiles.” Since my article was about transit, not automobiles, I don’t see why I need to acknowledge government’s role in driving any more than I should acknowledge government’s role in our failed education system or any other government failing.

It could be that Yglesias is arguing that I am somehow inconsistent because I object to socialized transit without objecting to socialized highways. If so, he would be wrong: In books, papers, and policy statements I have argued that highways should be funded out of user fees, not taxes; that states should encourage private highway construction; and that the federal government should get out of the highway business. That isn’t in any way inconsistent with my article on transit.

It could be that Yglesias is going further and arguing that “government’s role in promoting the usage of private automobiles” somehow contributed to the huge decline in transit productivity since 1970. If so, he would be wrong. Since 1970, government’s role in transportation has mainly been to steal money from the users of roads that carry 85 percent of American passenger travel and spend that money supporting transit systems that move barely 1 percent of all passenger travel. In 2008 alone, more than $15 billion in federal, state, and local highway user fees were spent on transit, which did highway users little good (see cell O17).

Yglesias says that government land-use policies have caused “regulatory impediments” to creating transit-friendly cities. I’ve previously invited Yglesias to join me in calling for the elimination of all government land-use policies, but he has remained silent about that. Instead, he would rather rant about things I didn’t say.

Since Yglesias is so fond of attacking me for things I haven’t said, let me return the favor by pointing out that one of the most common arguments that people like Yglesias use against highways (and he himself may not have made this argument) is what they call “induced demand.” That is, they say we shouldn’t build more roads (even if paid for entirely with user fees) because they will just lead people to drive more. This is supposed to be a bad thing because driving is supposed to be bad. But really, they are admitting that Americans want to use and are willing to pay for more roads, whereas in their demands for more subsidies to transit they are admitting that Americans are not willing to pay for their transit-oriented utopias.

Public Transit: A Classic Example of Government in Action

Since 1970, the number of workers needed to operate America’s public transit systems has increased by 180 percent while the inflation-adjusted cost of operating buses, light rail, and heavy rail (the only modes whose costs are known back to 1970) increased by 195 percent. Yet ridership on those modes increased by only 32 percent.

Flickr photo by Bradlee9119.

Each transit worker produced 53,115 transit trips in 1970, but only 26,314 trips by all modes in 2008. The real cost per rider grew by 124 percent, while subsidies (fares minus operating costs) grew by more than 8 times. Though capital cost data prior to 1992 are sketchy, capital costs also grew tremendously, almost certainly by more than operating costs. By any measure, then, transit productivity has declined more than 50 percent. “It’s uncommon to find such a rapid productivity decline in any industry,” noted the late University of California economist Charles Lave.

(All transit data are from the 2010 Public Transportation Fact Book, tables 1, 12, and 38. 1970 dollars adjusted for inflation using the GDP deflator.)

What accounts for this huge decline in productivity? Simple: government ownership. Prior to 1965, most transit systems were private and the industry as a whole was declining but profitable. In 1964, Congress passed the Urban Mass Transit Act, which promised federal capital grants to any government-owned transit systems. Cities and states quickly took over private transit systems, and transit agencies soon discovered that the federal government was just as willing to fund expensive transit systems as inexpensive ones, so they overbought, purchasing giant buses where small ones would do and building expensive rail lines where buses would do.

To cover their operating losses, transit agencies taxed as large an area as they could, but were then politically obligated to provide transit service to the entire taxed area. While transit’s main market is in the dense inner cities, agencies began running buses and, in many cases, building rail lines to relatively wealthy low-density suburbs that have three cars in every garage. The result of overbuying and extended service was lots of nearly empty buses and railcars: the average transit vehicle load is only about one-sixth of capacity, so if you are the sole occupant of a five-passenger SUV, you can be smugly proud that the car are driving has a higher occupancy rate than public transit.

On top of this, to be eligible for federal transit grants, Congress required transit agencies to obtain the support of local transit unions, giving unions leverage to negotiate generous pay and benefits packages. The highest-paid city employee in Madison, Wisconsin last year was a bus driver who earned nearly $160,000. The New York Times recently documented that more than 8,000 employees of the New York Metropolitan Transportation Authority (MTA) earned more than $100,000, with one collecting $239,000, last year.

Union employees reach such lofty pay levels by putting in lots of overtime. MTA even pays $34 million a year in overtime to employees who are on vacation, on the theory that if they weren’t on vacation they would probably be working overtime. When Los Angeles’ transit agency tried to save money by hiring more employees so it won’t have to pay as much overtime, union workers went on strike for 30 days and forced the agency to back down.

The American Public Transportation Association (APTA), a lobby group whose budget is several times larger than all of the highway lobby groups in DC combined, promotes increased subsidies for transit by claiming transit is better for the environment than automobiles – a claim the Cato Institute has refuted. Per passenger mile, transit and cars actually use about the same amount of energy and emit the same amount of pollution. In fact, all but a handful of transit system are far worse for the environment than cars. Moreover, cars are rapidly becoming more energy efficient, while transit has grown less energy efficient as agencies run more and more empty buses and trains into remote suburbs.

Urban transit buses are some of the most energy-intensive vehicles around because they are mostly empty. Yet private, intercity buses are some of the most energy-efficient vehicles in the country because the private operators know to run them where people want to go, and thus they average half to two-thirds full.

APTA’s other argument for transit is that it saves people money. Many transit agencies have a calculator on their web sites purporting to show how much people can save riding transit instead of driving their cars. But all these claims ignore the huge subsidies to transit.

This Cato briefing paper compared the costs of different forms of travel in 2006. Updating to 2008, auto owners spent about 22 cents a passenger mile driving, and subsidies to highways added another penny a passenger mile. Airfares averaged about 14 cents a passenger mile, and subsidies to airports added another penny. Amtrak fares averaged 30 cents a passenger mile, and subsidies brought the total to nearly 60 cents. Urban transit is about the most expensive form of travel in the United States, with fares averaging only about 21 cents a passenger mile but subsidies of 72 cents a passenger mile. This makes transit 4 times as expensive as driving.

In short, those who want to get people out of their cars and onto transit are trying to get people from an inexpensive, convenient, and increasingly energy-efficient form of travel to an expensive, inconvenient, and increasingly energy-wasteful form of travel.

The real solution for transit is privatization. Private operators would use smaller buses and would mainly serve the dense inner cities that have low rates of auto ownership. At a broader level, the transit industry offers lessons for anyone who thinks that government can do a better job at providing goods and services than the free market.

EPA on Guard against Spills

Well, at least of the dairy kind:

New Environmental Protection Agency regulations treat spilled milk like oil, requiring farmers to build extra storage tanks and form emergency spill plans….

The EPA regulations state that “milk typically contains a percentage of animal fat, which is a non-petroleum oil. Thus, containers storing milk are subject to the Oil Spill Prevention, Control and Countermeasure Program rule when they meet the applicability criteria.”

Peter Daining of the Holland Sentinel (Holland, MI) has a report, including predictions that smaller dairy producers could be driven out of business by the cost of the containment rules.