High cost of free parking

A prominent “negative externality” of suburban living is the so-called free parking spot. Since the users, that is customers arriving in private automobiles, do not pay for its use economic inefficiencies inevitably result. It is normally supposed that the proprietor pays for parking facilities as a cost of business however that is often perverted by subsidies granted by government

 

(read that; taxpayers. It is robbing the general fund) to private developers.

It [the subsidy] provides Klutznick [the developer] with a rebate of half of the sales-tax revenue generated by stores at CityNorth in exchange for 3,180 free parking spaces – in effect, two parking garages to be built in the center of the project. The rebate would last for 11 years and three months or until the $97.4 million mark is reached.

(The Arizona Republic, Aug. 9, 2007, CityNorth subsidy challenged)

That’s over $30,000 per parking spot by the way. A similar situation exists with roads, and the notion that user fees (gasoline taxes) are used to pay for roadways. That’s true when it is but too often isn’t. Roads, like free parking spots, are also subsidized by governments from general funds. E.g. from the same article news of another cushy deal:

…the city of Surprise agreed to reimburse Westcor $240 million from future sales taxes if it agreed to build a mixed-use retail, office and residential project and build all the roads and infrastructure up front.

This blog entry has some deeper analysis and details of the lawsuit.

Professor Donald Shoup literally wrote the book on the subject: The High Cost of Free Parking (2005). Here is a fairly in-depth review of it by Daniel Klein of the Independent Institute. The book is sortof hard to find, I had to get one through inter-library loan. It is a long read, parts of it are very dry — but the central point is driven home: parking is a major subsidy. Here and here are a couple more “free parking” pieces.

In the same vein, the Institute also published the book STREET SMART: Competition, Entrepreneurship, and the Future of Roads. It is a collection of white papers about various schemes to exert market forces on drivers.

Adam Ruins Everything / Adam Ruins Cars S01E03

The grey-bearded animated gentleman in the youtube inserted above (or full 21 minute episode) is none other than Donald Shoup! Here’s a synopsis from bettercities.net:

The TruTV show Adams Ruins Everything ran an episode on cars (November 2015) that is a good history of American favoritism toward automobile transportation and why that hurts people… The show stars Adam Conover, who mixes comedy and education on real issues—in this case the form of cities and the impact on how we get around… The first four and a half minutes of the episode discusses car dealerships, but the rest is a concise history of how cars took over America. He covers how public rights of way used to belong to everybody, the invention of the term “jaywalking,” the destruction of neighborhoods to build automobile infrastructure, the layout of cities and suburbs to make walking nearly impossible, the end of viable public transportation, and how this affects everyone’s health, safety, and welfare.

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CityNorth subsidy challenged

Think tank sues over Phoenix deal that gives developer rebate of half the sales-tax revenue generated by stores

Michael Clancy
The Arizona Republic, Aug. 9, 2007 12:00 AM
The Goldwater Institute filed suit Wednesday challenging Phoenix’s controversial subsidy of almost $100 million to CityNorth, a luxury development under construction in northeast Phoenix.

The lawsuit, filed in Maricopa County Superior Court on behalf of six plaintiffs, seeks to block the subsidy and similar handouts in the future. It names members of the Phoenix City Council and City Manager Frank Fairbanks.

At issue is a deal that Phoenix and the Thomas J. Klutznick Co. signed last month. It provides Klutznick with a rebate of half of the sales-tax revenue generated by stores at CityNorth in exchange for 3,180 free parking spaces – in effect, two parking garages to be built in the center of the project. The rebate would last for 11 years and three months or until the $97.4 million mark is reached.
Assistant City Manager David Krietor, who had not seen the lawsuit, said the deal was “consistent with other retail details we have done around the city.”

He declined to comment on the suit, as did Marla Ellis, public-relations manager for the Klutznick Co. Neither had seen the suit by Wednesday.

The deal has been contested, with many residents arguing that CityNorth development could have proceeded successfully without the subsidy.

A new state law passed in the wake of the deal prohibits similar subsidies in the future.

The sponsor of that law, Sen. Ken Cheuvront of Phoenix, is a plaintiff in the lawsuit. He was out of town Wednesday and unavailable for comment.

CityNorth will be a mixed-use development with nearly 5.5 million square feet of luxury retail shops and upscale department stores, including Nordstrom, office space, hotels and residences. It will occupy 144 acres at Loop 101 and 56th Street.

“There is no possibility this development will not produce large profits and tax revenues,” said Clint Bolick of the Goldwater Institute, a conservative think tank based in Phoenix. “That makes this incentive very difficult to support.”

He referred to CityNorth as “a fancy shopping mall.”

At the time of the March vote by the City Council approving the agreement, City Councilwoman Peggy Neely said the development would generate $200 million in sales taxes in its first decade.

“These revenues are critical to operating our city,” she wrote in a piece in The Arizona Republic. “Simply put, we cannot allow Phoenix to stagnate as our suburban neighbors continue to grow.”

Neely, whose district includes the development, was out of town and unavailable for comment Wednesday.

Cities throughout the Valley have used similar subsidies to lure major companies to locate within their boundaries.

After the CityNorth decision, the city of Surprise agreed to reimburse Westcor $240 million from future sales taxes if it agreed to build a mixed-use retail, office and residential project and build all the roads and infrastructure up front. Most other cities have used subsidies to attract jobs and taxes.

“The cities have taken one giant step too far,” said Bolick, “and we now believe the pendulum is swinging in the other direction.”

He said the institute would not be suing Surprise on the same grounds.

“We have limited resources, and we have a number of other issues we would like to litigate,” he said.

The plaintiffs own small businesses in Phoenix.

They are Meyer Turken, owner of Turken Industrial Properties, a real-estate development and management company; Cheuvront, owner of Cheuvront Wine and Cheese Cafe and Cheuvront Construction; Zul Gilliani, who owns an ice-cream shop at Paradise Valley Mall; James Iannuzo, who owns a sign company and is a candidate for City Council; Kathy Rowe, who owns Music Together, a program that offers music to children; and Justin Shafer, owner of Hava Java, a coffee shop.