Friday, February 5, 2010

Two-tiered parking fees at the Coliseum?

Tony Wilkins blogs about a proposal he made to the Coliseum Commission to study discounting parking fees for local residents. The proposal was turned down, and we should be grateful that it was. While lower parking fees sound great, they actually cause a number of problems.

The first problem is that lower parking fees are likely to lead to a loss in revenue to the Coliseum. Clearly, revenue per car (at least revenue per local car) will go down. Tony correctly argues that the lower prices would likely induce some additional local residents to attend Coliseum events, which would mitigate some of these losses. However, we have to ask how large this response will be. Unless demand for Coliseum parking by local residents was unusually responsive, the losses associated with lower per-unit revenues would offset the gains associated with increased demand. In economic terms the demand for parking by local residents would have to be price elastic; there is no reason to believe that this is the case.

Even if demand were elastic (and again there isn't any reason to think that it is), parking capacity at many events is limited. Revenues from local attendees can't increase unless there are empty spots for them to fill. If the Coliseum's parking lots are already full (i.e., if demand already exceeds supply), there's no scope for increased parking utilization. Along the same lines, there would also be losses to the extent that lower-paying local attendees crowded out any higher paying non-local attendees. There may be other behavior on the margin that leads to losses (if a local and non-local person are going to a Coliseum event together, they now have an incentive to go in the local person's car--the term "designated driver" takes on a whole new meaning). For a variety of reasons, the plan will likely hurt revenues.

The second problem is that checking an attendee's "local" status complicates the process of collecting a parking fee. Let's assume that parking attendants will determine a driver's status by checking his or her license. This interaction will add a small amount (no more than a minute) to each parking entry. Although the time cost to a single parking entry is minuscule, the large number of such transactions would cumulate into a tremendous time loss. If there were no adjustments in the number of parking attendants, congestion entering the parking lots and backing out onto the roads would increase. The extra time spent waiting and the congestion on the roads present real costs in terms of convenience and safety. Alternatively, more parking lot attendants could be hired, but that would raise money costs. Either way, Coliseum parking, which is already a frustrating and time-consuming process, would become even less efficient.

A third issue is that the scheme is likely to shift the incidence of paying for Coliseum events away from those who actually use the facility and toward other local residents. As mentioned, the scheme is likely to cause revenues to drop. The Coliseum already operates at a loss and requires subsidization from local residents. Lower revenues mean that a greater subsidy will be needed. The incidence of the subsidy is distributed across all local taxpayers; the incidence of parking fees is not. Tony describes his proposal as a major "thank you" for taxpayers; the non-attending taxpayers who would have to pony up more money are not likely to say "you're welcome" to this.

To sum up, Tony's proposal would likely reduce parking revenues; add to congestion, waiting times, and traffic problems (or alternatively increase parking attendant costs); and result in greater transfers of wealth from residents who don't attend Coliseum to residents who do. Put another way, it's costly and socially inefficient.