July/August 2010 Parking - 63

While it’s easy to understand the need many cities have for additional revenues, imposing oppressive taxes on parking is not the answer. Not only is it discriminating to single out parking operators with excessive tax rates, but it’s also counterproductive as public policy.

parking operators see their profits disappear; and ultimately, fewer parking options for visitors and residents as parking operators close or move out of the city.

Short Sighted Public Policy
These unintended consequences pale when compared to the impact that these taxes can have on a city’s downtown and business districts. When parking taxes are passed along to customers, parking facilities that are already expensive can become unaffordable. When people can’t afford to park downtown, they look for other places to work, do their shopping, and seek entertainment options. Ultimately, it’s the restaurants, shops, theaters, and other local businesses that take the real hit. And that’s the real cost of runaway taxation on parking. Parking taxes inequitably target downtown businesses, and their impact can be devastating. The city of Pittsburgh provides a snapshot of how devastating parking taxes can be. In January of 2004, the city increased parking taxes by 61 percent, making it the fourth most expensive American city in which to park. In less than a year, the increased taxes had decimated downtown Pittsburgh. Within just a few months, parking rates had increased as much as 67 percent in some parts of the city, and 1.3 million fewer cars were parked downtown during that year. The decline was particularly dramatic on evenings and weekends, when more than 700,000 fewer people visited. In that time, numerous businesses were shuttered, including two department stores. And office vacancy rates shot up dramatically. Ultimately, elected officials and city planners must recognize that providing reasonably priced parking resources is a critical component of a vibrant downtown central business district. Local businesses count on their customers and employees having access to convenient, affordable, and safe parking. When that parking isn’t available, or when it is too expensive, local businesses suffer greatly, and that suffering is passed down to the city through lost business tax and real estate tax revenues. And when local
www.npapark.org PARKING July/August 2010

An Unjust Approach
One of the basic problems with these taxes is that they unfairly target parking operators, forcing them to bear the brunt of closing municipal budget gaps. It is discriminatory and patently unfair to single out a particular industry and obligate businesses within that industry to pay more than their fair share of taxes. In many cities, the burden on parking operators is crushing. Pittsburgh’s parking tax is 37.5 percent; Chicago’s is 23 percent; San Francisco’s is 25 percent—and the list goes on and on. When you factor in state and federal taxes, not to mention real estate taxes, it’s not unusual for urban parking operators to have to pay taxes of 50 percent or more to various city, state, and federal governments. And this is in an industry where profit margins are notoriously slim. Many operators anticipate just five to 10 percent margins, and these parking taxes can quickly eat those profits. Furthermore, it’s not unusual for parking operators to take on new leases expecting to lose money the first year or two of a five-year contract. For operators who are already having trouble getting by, the imposition of burdensome taxes can mean the difference between success and failure. Proponents of parking taxes claim that they serve two purposes: raising revenues and encouraging people to turn to alternative modes of transportation, thus promoting sustainability. Plus, they say, the operators will just pass along the cost to their customers. However, there is a limit beyond which people won’t go to pay for parking. In most large cities, parking is already very expensive; it can cost $35 or more to park for just a few hours. While it’s true that parking taxes discourage drivers from using parking lots and structures, there are also unintended consequences. These include lost jobs as parking operators have to cut back; reduced business tax revenues to the city as

July/August 2010 Parking

Table of Contents for the Digital Edition of July/August 2010 Parking