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How to Tax Parking (And How Not To)

I want to thank Brent Runyon of the Providence Preservation Society for bringing this study by VTPI to my attention. I've been thinking a lot on my own about how to tax parking in Providence, and this study gives a lot of insight into what to do--and what not to do.

The long and short of it is that it's politically easiest to tax parking on dedicated lots, rather than to do a "per space" tax on all parking, but this way of taxing parking has problems. We might be tempted, for instance, to tax the lots in downtown Providence but not tax the lot attached to, say, the Whole Foods, because our instinctive thought would be that though we don't like a surface lot next to a grocery store, it's much better than a bare lot serving nothing but parking alone. 

The problem comes with the fact that the lot parking attached to businesses is free to customers and employees. Of course, it's not actually free. It costs money which is passed into lost wages or higher prices. But to the worker or consumer, it appears free. When the price of commercial parking, i.e., the lots downtown that charge per hour, becomes more expensive without putting an equal burden on these other parking lots, it gives a stronger incentive for businesses to include free parking into their design as a benefit to customers or workers. This is not what we want.

What's more, this problem already rears its head in other ways already. As I pointed out in a piece in Eco RI News and The Urbanophile, Providence's smallest (by area) businesses produce the most revenue for the city per acre, while those that appear to be the anchor businesses often produce much lower revenue per acre. Fertile Underground, whose building (with apartments above it) is valued at $750,000 is worth much more per acre than the Waterman Whole Foods, valued over $2 Million, because FUG only takes up  0.2 acres, while the Waterman Whole Foods is much larger (Note: We couldn't even get reliable data from the city on the taxable value of the N. Main Whole Foods, which has even more parking, but my guess is that in absolute terms the building is worth more, and that in per acre terms it's probably worth a great deal less). Even the African Market we chose off of Cranston Street, which was in a dodgy neighborhood and perhaps wouldn't even appear on the radar of city officials, was worth more per acre than the Whole Foods (I'm not trying to pick on Whole Foods here as a "corporate" or "non-local" business, either. This is about building design--the Chipotle on Thayer Street is worth about the same as the Fertile Underground building, but takes up half as much space, making it worth over $7 Million per acre. The Fertile Underground, actually, only has about four parking spots in the back of it for apartment dwellers, but it often occurs to me as I'm taking out the trash there that a whole other building of the same size could fit in that space.)

So, when we set a parking tax, it should be per parking spot. This is a fair tax, because businesses are free to choose whether the cost of parking is worth it to them in a market, or if they'd like to trade some of that cost away for greater infill development. As this study shows, it's hard to make this argument politically, because on the face of things most people assume that they've already paid their fair share for parking, and that a tax on it is some kind of special arm-twisting by a big government conspiracy. But in reality, what's happening is that large frontage businesses with lots of parking are taking up a great deal more in resources from the public--everything from extensions of plumbing, road wear and infrastructure, lost tax revenue from potential development, and so on. In the extreme cases, mostly outside of Providence, we have instances of bus lines like the 54 or 66 being required to go off-route to take people into parking lots and to the door at a Walmart or Stop-and-Shop, and this also is a public drain, taking valuable fuel, vehicle wear, and paid driver time away from running a more efficient route.

Providence has very high property taxes, and is fourth in the country for commercial taxes. It also has a considerable gap between rental property taxes and homeowner taxes, making apartments less affordable. So taxing parking to produce a dividend to lower property taxes is one of the smartest things we can do. A parking tax is fair in a market sense because it puts a value on things that are actually consumed by drivers. It's fair in a lefty-socialist sense because it allows funds that are currently being used to prop up car ownership to be repurposed--either through an expanded market for housing, lower prices on rents; or even in expanded services, such as better spending on schools. It makes sense in an environmental sense because it helps us to achieve green goals. And at its center is the notion that we should build more cool stuff in our city to make it a more attractive place to live.

Let's make sure it's a per-space tax, though. This study shows the importance of that.



  1. The tax should be double or more on parking spaces that are "reserved for customers only while shopping here." Better yet, outlaw this practice because it is toxic to urban fabric. It prevents one's customers from exploring the vicinity on foot, to the detriment of neighboring businesses, most of which are not in direct competition anyway.

    1. Parking should be banned within a certain number of yards of a bus stop, in my humble opinion. But we don't have to ban it entirely. But the R-Line would be much more effective with some strong parking limits, instead of the wimpy ones being proposed.

      I think decoupling the price of parking from rent should be required, just the way we require a landlord to have working electricity meters.

      Tax parking! :-) Lower property and commercial taxes!

  2. I wonder if it would be easier to make the tax on parking lots be per a square foot. That's the way other properties are taxed and it would still mean lots with more spaces pay more in taxes. At the very least it might make parking lot owners try and maximize the number of spaces in their lots.