Chapter by Douglas Kolozsvari and Donald Shoup, from The High Cost of Free Parking, a book by Donald Shoup published March, 2005 by The Planners Press of the American Planning Association.

This web version is reconstructed from a photocopy of a 31 page preliminary draft. This is part 1 of 3 parts.



If it is feasible to establish a market to implement a policy, no
policy-maker can afford to do without one
.   J. H. DALES


Cities can change the politics of parking if they earmark curb parking revenue to pay for public goods in the neighborhoods that generate it. Now, the money you put into a parking meter vanishes into thin air, like a sacrifice to the parking gods. No one really knows where the money goes, and everyone wants to park free, so politicians find it easier to require ample free parking than to charge fair market prices for scarce curb parking.1 But if each neighborhood kept all the curb parking revenue it generated, a powerful new constituency for market prices would emerge-the neighborhoods that receive the revenue. If nonresidents pay for curb parking, and the city spends the revenue to benefit the residents, charging for curb parking can become a politically popular policy, rather than the political third rail it often is today. To explain this proposal, I will describe how it might work in two settings: business districts (in this chapter) and residential neighborhoods (in Chapter 17).



Consider an older business district where most stores have no off-street parking, and vacant curb spaces are hard to find. Cruising for free curb parking congests the streets, and everyone complains about a parking shortage. Charging market-rate prices for curb parking would increase turnover, and reduce traffic congestion. The convenience of a few vacancies would attract customers who are willing to pay for parking if they don't have to spend time hunting for it. Nevertheless, merchants fear that charging for parking would keep customers away. Suppose in this case the city creates a "parking benefit district" in which all the meter revenue is spent to pay for public amenities that can attract customers, such as cleaning the sidewalks, planting street trees, improving store facades, putting the overhead utility wires underground, and ensuring public safety. The meter revenue will help make the business district a place where people want to be, rather than merely a place where they can park free. Spending the meter revenue to improve the area where it is collected can convince merchants and property owners to buy into the idea of market-priced curb parking.2

Right Prices Will Attract More Customers

Everyone understands that customers avoid stores that rarely have anything in stock, and keeping a few curb parking spaces vacant is like having inventory in a store. A city can reduce the price of curb parking if there are too many vacancies (too much inventory), and increase it if there are too few (too little inventory). The right price for curb parking is the lowest price that keeps a few spaces available to allow convenient access. If no curb spaces are available, reducing their price cannot attract more customers just as reducing the price of anything else in short supply cannot increase sales. If a toy store is sold out of the hottest toy at Christmas, for example, lowering the price of that toy cannot attract more buyers. So how can lowering the price of parking in an area where all spaces are occupied attract more visitors? A below-market price for curb parking simply leads to cruising and congestion. The goal of pricing is to produce about 85-percent occupancy, so that drivers can find places to park near their destinations.

Underpricing curb parking cannot increase the number of cars parked at the curb because it cannot increase the number of spaces available. What underpriced curb parking does do is create a parking shortage that keeps potential customers away. If it takes only five minutes to drive somewhere else, why spend 10 minutes cruising for parking in a shopping district where all the curb spaces are occupied? Short-term parkers are less sensitive to the price of parking than to the time it takes to find a vacant space.3 Charging enough to create a few curb vacancies can therefore attract customers who would rather pay for parking than not be able to find it, and spending the meter revenue for public improvements can attract more customers.

Parking availability is a key point in attracting customers. Using a survey of 1,704 households in the Netherlands, Harmen Oppewal and Harry Timmermans (2001) examined how parking fees, parking occupancy, and time limits affected the probability that customers will visit shopping centers. Shoppers disliked higher parking fees, as expected, but they also disliked crowded parking and limits on parking durations. Therefore, using prices to eliminate crowding and time limits can improve shoppers' evaluation of parking at destinations that now have underpriced but scarce curb parking with time limits. Market prices can create a few curb space vacancies, increase turnover, reduce search time, and attract customers who are now kept away by parking shortages and time limits. Parking won't be free, but it will be easy to find.

Curb parking duration and turnover depend on how parkers respond to prices. If the price of curb parking increases, shoppers can stay a shorter time, or they can park off-street. Both responses increase turnover, so more cars can park at the curb during a day. Shoppers who want to make a quick purchase will find convenient curb parking spaces available, while those who want to linger or stroll around will find it cheaper to park off-street. Drivers who are unwilling to put a few coins in the parking meter will probably be unwilling to spend much in the adjacent shops, and their places at the curb can be taken by customers who do want to buy something.

The purpose of charging market prices for curb parking is not to maximize meter revenues, but to allocate curb spaces more efficiently-to drivers (and their passengers) who are willing to pay for parking if they don't have to waste time cruising for it. If meter prices are just high enough to ensure a few vacancies on each block, shoppers who stay for only a short time will pay little for their curb parking per trip, and those who arrive in higher-occupancy vehicles can split the parking cost, so they won't pay much per person. Therefore, the right price for curb parking (1) ensures that everyone can park without cruising, (2) encourages short-term parking, (3) increases turnover, and (4) favors shoppers who arrive in higher-occupancy vehicles. Right-priced curb parking can therefore attract more customers who spend more money while shopping.

One Side of the Street at a Time

Right-priced curb parking can spread in the same way that parking meters spread after their debut in 1935. Cities did not simply plant the meters all over the city on one day and then start collecting revenue from them on the next. Instead, cities usually installed meters on only one side of the downtown streets, to show people how the meters worked. Oklahoma City's city manager explained the process:

The two sides provided comparisons which are obvious. On the unmetered side is confusion. On the metered side is order, sufficient room for every car to be parked and driven out quickly and easily, and there are usually parking spaces open.

By 1937, only two years after the first meters were installed in Oklahoma City, 20,000 meters had sprouted on the sidewalks of 35 cities, and they were well received. After surveying the use of parking meters in these cities, Leon Brown (1937) reported in American City,

Merchants and shoppers both are in favor of them. When one side of the street has them, merchants on the other side demand them. When one town has them, the merchants of nearby towns demand them, showing that they draw out-of-town shoppers rather than driving them away.4

Parking benefit districts can be introduced in the same way. Suppose the city charges the market price for curb parking on one street in a commercial district, just high enough to ensure a few vacant spaces. Everyone who wants to shop on that street can easily find a space, and the meter revenue is earmarked to clean the sidewalk, trim the trees, or improve storefront facades on that street. Parking remains free on all the other streets, and all curb spaces are occupied, with slow turnover. Everyone complains about the parking shortage on the free streets, and cars cruising for free parking congest traffic on them. No meter revenue is available to clean the sidewalk, trim the trees or improve the storefronts. On which street would you want to have a business?

Merchants typically oppose charging for parking on the grounds that it will drive away customers, but this fear is often unfounded. One of the nation's leading parking consultants, Mary Smith, explains that most customers are short-term parkers who care more about convenient parking than about free parking:

When Circle Centre, a public-private joint venture, retail and entertainment center in downtown Indianapolis was about to open, there was much speculation in the press regarding whether or not it could succeed with the relatively modest parking fee of $1 for the first three hours. The fee structure then jumps to $2 per hour .. . However, in the end, the parking fee was not an issue to shoppers; and the project is among the top five percent of retail centers nationally, in terms of annual sales per square foot.... If there is any negative effect of parking in downtowns vis-a-vis the suburban shopping center, it is the lack of convenient parking, not lack of free parking.5

If merchants realize that many customers value convenient parking more than free parking, and know that the business district will receive all the meter revenue, they will soon see the advantages of market-rate prices for curb parking spaces.6


Curb parking revenue is a benefit in search of a beneficiary: the funds need the right recipient to generate political support to charge for curb spaces. In commercial areas, Business Improvement Districts (BIDs) are the logical recipients. BIDs are special taxing jurisdictions that finance public improvements in commercial areas. In Business Improvement Districts, Lawrence Houstoun explains the process of organizing and managing these self-governing public/private partnerships:

A Business Improvement District (BID) is an organizing and financing mechanism used by property owners and merchants to determine the future of their retail, commercial, and industrial areas. The BID is based on state and local law, which permits property owners and merchants to band together to use the city's tax collection powers to "assess" themselves. These funds are collected by the city and returned in their entirety to the BID and are used for purchasing supplemental services (e.g. maintenance, sanitation, security, promotions and special events) and capital improvements (e.g., street furniture, trees, signage, special lighting) beyond those services and improvements provided by the city. In essence, the program is one of self-help through self-taxation.7

BIDs have multiplied rapidly since the first one was established in downtown Toronto in 1965, and many cities now encourage local businesses and property owners to establish them. These organizations have a good track record, their legality is well established, and their operating principles are familiar to public officials and business owners. BIDs are therefore ready-made, legitimate recipients for curb parking revenue. Suppose a city offers new and existing BIDs the parking meter revenue earned within its boundaries. This arrangement amounts to a matching grant from the city: if businesses tax themselves to pay for public improvements, the city contributes the area's curb parking revenue to help finance the effort. The parking revenue either reduces the taxes that businesses have to pay, or increases what the district can spend. The matching grant encourages local businesses to form BIDs, and the meter revenue the city allocates to a BID can elicit more tax revenue from the benefitted businesses.

Earmarking curb parking revenue to fund BIDS, and giving the BIDs a say in setting the parking prices for their area, will encourage businesslike management of the parking supply. Each district can examine how other districts deal with curb parking, and they can weigh the benefits and costs of alternative policies. The BIDs will have every incentive to choose the best policy for curb parking in their area, because they will be the first to benefit from good decisions and the first to suffer from bad ones. BIDs can increase their revenues by installing more parking meters, extending meter hours, or increasing meter rates. More important, charging market prices for curb parking maintains a few vacancies and encourages turnover, so more curb spaces will be available to short term parking is worth its costs.

If BIDs receive all or a substantial share of the curb parking revenue, drivers who fail to pay for parking will reduce the revenue available to fund local public improvements. Merchants should therefore be more willing to support meter enforcement. If the city receives the revenue from citations for meter violations, the city's general fund will gain from the enhanced enforcement effort. In a survey of large cities' on-street parking policies, Allison de Cerreflo (2002) found that, on average, cities collected $4.60 in parking fines for every $1 of meter revenue, so business support for better enforcement of parking regulations can provide substantial revenue for cities.8

Two cities in California-Pasadena and San Diego — return parking meter revenue to the business districts that generate it. Pasadena returns all the revenue, and San Diego returns 45 percent. An evaluation of these two cities' programs shows that they have helped revitalize older business districts by improving their parking, transportation, public infrastructure, and urban design.


Pasadena's downtown declined between the 1930s and the 1980s, but has since been revived as "Old Pasadena," one of Southern California's most popular shopping and entertainment destinations. Dedicating parking meter revenue to finance public improvements in the area has played a major part in this revival.


Old Pasadena was the original commercial core of the city, and in the early 20th century was an elegant shopping district. In 1929, Pasadena widened its main thoroughfare, Colorado Boulevard, by 28 feet, and this required moving the building facades on each side of the street back 14 feet. Owners removed the front 14 feet of their buildings, and most constructed new facades in the popular Spanish Colonial Revival or Art Deco styles. A few owners, however, put back the original facades in an early example of historic preservation. The result is a handsome, circa-1929 streetscape that is the center of Old Pasadena.

The area sank into decline during the Depression and, after the war, the narrow storefronts and lack of parking led many merchants to seek larger retail spaces in more modern surroundings. Old Pasadena became the city's Skid Row, with wonderful buildings in terrible condition. The area was known mainly for its pawn shops, porn theaters, and tattoo parlors, and by the 1970s much of it was slated for redevelopment. Pasadena's Redevelopment Agency demolished three historic blocks on Colorado Boulevard to make way for Plaza Pasadena, an enclosed mall with ample free parking that the city assisted with $41 million in public subsidies. New buildings clad in thenfashionable black glass also replaced other historic properties (see Figure 16-1). The resulting "Corporate Pasadena" horrified many citizens, so the city reconsidered its plans for the area. In 1978 the city published the Plan for Old Pasadena, which stated, "if the area can be revitalized, building on its special character, it will be unique to the region."9 But the Plan did not minimize the problems, describing the area as unkempt, seedy, and unsafe:

The area is commonly perceived as undesirable and unsafe. Comments heard about West Colorado include the following: "The area's been going downhill for years." "It's a bunch of dirty old buildings." "It's filthy." "It's Pasadena's sick child." "The area is unsafe."10

Although the city succeeded in having what was left of Old Pasadena listed in the National Register of Historic Places in 1983, commercial revival was slow to come, in part because most buildings had no off-street parking.


Figure 16-1




Demolition of Pasadena's Mather Building on the corner of
Colorado Bouldevard and Marengo Avenue, July 7, 1971



The replacement building


Two Parking Policies

In the 1980s and 1990s, the city devised two creative parking policies that have contributed greatly to Old Pasadena's revival. First, it has used parking meter revenues to finance public improvements. Second, businesses in Old Pasadena can pay the city a modest fee to satisfy the offstreet parking requirements. Owners can rehabilitate an existing building or change its use without providing any new off-street parking spaces, and two public garages in Old Pasadena provide the parking spaces that the individual properties would have had to provide.11

Parking Meters and Revenue Return

Old Pasadena had no parking meters until 1993. All curb parking was free and was restricted only by a two-hour time limit. Because employees parked in the most convenient curb spaces, and moved their cars periodically to avoid citations, customers had difficulty finding places to park.12 The city's staff proposed installing meters to regulate curb parking, but the merchants and property owners opposed the idea. They realized that employees occupied many of the most convenient curb spaces, but they feared that meters, rather than freeing up space for customers, would discourage customers from coming to the area at all. Customers and tenants, they assumed, would simply go to shopping centers (such as the nearby Plaza Pasadena) that offered free parking. Meter proponents countered that anyone who left because they couldn't park free would make room for others who were willing to pay for parking if they could find a space, and who would probably spend more money while they were in Old Pasadena.

Debates about the meters dragged on for two years before the city compromised with the merchants and property owners. To defuse opposition, the city offered to spend all the meter revenue to pay for public investments in Old Pasadena. The business and property owners quickly agreed to the proposal because they saw that they would directly benefit from it, and the desire for public improvements soon outweighed the fear of driving customers away. Businesses and property owners began to see the parking meters in a new light-as a source of revenue. They agreed to an unusually high rate of $1 an hour for curb parking, and to the unusual policy of operating the meters in the evenings and on Sunday. The city also liked the arrangement because it wanted to improve Old Pasadena. By generating the $5 million needed to finance the ambitious plan to invest in Old Pasadena's streetscape and to convert its alleys into walkways with access to shops and restaurants, the meter revenue would pay for the project." In effect, Old Pasadena became a parking benefit district. The business and property owners bought into the proposal for parking meters because they were bought off with the resulting revenue.

Added Public Services and Local Control

The city worked with Old Pasadena's Business Improvement District to establish the boundaries of the Old Pasadena Parking Meter Zone (PMZ) where the parking meters were installed. Only the blocks with parking meters benefit directly from the meter revenue. The city also established the Old Pasadena PMZ-Advisory Board, consisting of business and property owners who recommend parking policies and set spending priorities for the zone's meter revenues." Local control, and using the meter revenues to pay for added public services, are largely responsible for the parking program's success. "The only reason meters went into Old Pasadena in the first place," said Marilyn Buchanan, chair of the Old Pasadena PMZ, "was because the city agreed all the money would stay in Old Pasadena."15

The city installed the parking meters in 1993, and then immediately borrowed $5 million to finance the "Old Pasadena Streetscape and Alleyways Project," with the meter revenue dedicated to repaying the debt. The bond proceeds paid for street furniture, trees, tree grates, and historic lighting fixtures throughout the area. Dilapidated alleys were turned into safe, functional pedestrian spaces with access to shops and restaurants.

Old Pasadena's 690 parking meters yielded $1.3 million ($1,826 per meter) in 2001 (see Table 16-1). The, PMZ earned additional revenue from valet parking services that use meter spaces, and from investment earnings on the meter fund balance, so the total revenue was $1.4 million ($2,096 per meter). The total capital and operating expenses for collecting the revenue amounted to $383 per meter (18 percent of total meter revenue). 16  Old Pasadena therefore received $1.2 million of net parking revenue ($1,712 per meter) to fund additional public services.


TABLE 16-1

               Meter charges


$1,867 per meter for 690 meters

Valet at meters


Valet use of meter spaces

Investment earnings


Interest on fund balance

Total parking revenues


$2,096 per meter

         Operating expenses



Cash handling



City abatements



Materials and supplies



Vandalism replacement






Internal service charges



Total operating expenses


$235 per meter (11 % of revenue)

Capital expenses

Parking meter lease payments



Parking meter replacement



Total capital expenses


$148 per meter (7 % of revenue)

Total parking expenses


$383 per meter (18 % of revenue)



$1,712 per meter (82 % of revenue)

         Operating expenditures in Old Pasadena


City of Pasadena

Lighting services


City of Pasadena

Additional sidewalk and street maintenance


Old Pasadena Management District



Old Pasadena Management District

Total operating expenditures


59% of net parking revenue

Capital expenditures in Old Pasadena
      Debt service for streetscapes and alleyways



38% of net parking revenue


Total expenditures in Old Pasadena


97% of net parking revenue

Net income after all expenditures


3% of net parking revenue

Source: Memorandum from Pasadena City Manager to City Council Finance Committee, May 21, 2001.

The first claim on this revenue is the annual debt service of $448,000 to repay the $5 million borrowed for the sidewalk and alley improvements. Of the remaining revenue, $694,000 was spent to increase public services in Old Pasadena, above the level provided in other commercial areas. The city provides some of these services directly; for example, the Police Department provides additional foot patrols, and two horseback officers on weekend evenings, at a cost of $248,000. The parking enforcement officers who monitor the meters until well into the night are official "eyes on the street," and their presence further increases security, at no additional charge. The city also allocated $426,000 of meter revenue to the area's BID (the Old Pasadena Management District, which has the same boundaries as the PMZ) for added sidewalk and street maintenance, and for marketing (maps, brochures, and advertisements in local newspapers). Drivers who park in Old Pasadena finance all these public services, at no cost to the businesses, property owners, and taxpayers.

A Virtuous Cycle

As the area attracted more pedestrian traffic, the sidewalks needed more maintenance. This would have posed a problem back in the days when Old Pasadena relied on the city for regular cleaning and maintenance, but now the BID has meter money to pay for the added services. The BID has arranged for daily sweeping of the streets and sidewalks, trash collection, removal of decals from street fixtures, and steam cleaning of Colorado Boulevard's sidewalks twice a month.17 Returning the meter revenue to Old Pasadena has thus created a "virtuous cycle" of continuing improvements. The meter revenue pays for public improvements, the public improvements make the area more attractive for visitors who pay for curb parking, and more meter revenue is then available to pay for public improvements. Giving the BID the responsibility for spending the meter money has reassured business and property owners that the city does not use it for any other purpose. To remind everyone where the money goes, the meters have stickers that say, "Your meter money makes a difference in Old Pasadena."18



Public Parking Garages with Zoning Parking Credits

A second parking reform-public parking garages instead of private parking spaces-has also spurred Old Pasadena's revival. Under the city's "Parking Credit Program," businesses can pay the city a modest fee in lieu of providing the required off-street parking spaces. The fee per parking credit was $115 a year per space in 2001.19  Because paying $115 a year is far cheaper than providing an off-street parking space, most businesses choose to pay the fee rather than provide the required parking. The low fees for the parking credits remove a barrier to the adaptive reuse of existing buildings, and the freedom from parking requirements is freedom to create new businesses.

Making Adaptive Reuse Profitable

An example can show how the parking credits promote the prosperity of Old Pasadena. Few buildings have off-street parking because they were constructed before the city required it. Any existing business can continue to occupy its site without off-street parking if the use was established before the city required parking (see Chapter 3). Suppose a pawn shop (from the Skid Row days) occupies a 2,000-square-foot space with no off-street parking. Although Pasadena requires 2.5 spaces per 1,000 square feet for pawn shops, the pawn shop may operate without parking because it possesses a grandfathered right. But if the pawn shop closes and a restaurant wants to occupy the space, the change of use would trigger the city's parking requirement of 20 spaces per 1,000 squarefeet of seating area. If the proposed restaurant has 1,000 square feet of seating area and 1,000 square feet of kitchen area, the city normally requires 20 off-street parking spaces. The parking requirements in Old Pasadena are reduced 25 percent because of the area's mixed-use character, so only 15 spaces are required. Still, without the parking credit program, the restaurant cannot open unless it provides 15 off-street parking spaces. If by some engineering and financial miracle the restaurant could construct 15 parking spaces at a cost of $20,000 each, it would pay $300,000 for them ($300 per square foot of seating area!). With the program, the restaurant pays the city $1,725 a year to buy 15 parking credits to satisfy the parking requirement (15 spaces x $115 per space), or only $1.73 a year per square foot of seating area. The option to pay a low annual fee for parking credits rather than a high up-front cost to provide the required parking has allowed dozens of new restaurants to open in Old Pasadena.

In most cities, parking requirements increase the cost of opening new businesses in old buildings, and therefore reduce the returns to investment in historic preservation. Old Pasadena's parking credits reduce the cost of opening a business, and thus make investment in adaptive reuse more profitable (see Figure 16-2). Off-street parking requirements are no longer a barrier to business in Old Pasadena.

Figure 16-2

Before: warehouse

After: department store



To part 2