In January a meeting was held in the office of the mayor of Oakmont to discuss a proposed municipal parking facility. The participants included the mayor, the traffic commissioner, the administrator of Oakmont's Downtown Parking Authority, the city planner, and the finance director. The purpose of the meeting was to consider a report by Richard Stockton, executive assistant to the Parking Authority's administrator, concerning estimated costs and revenues for the proposed facility.

Mr. Stockton's opening statement was as follows:

As you know, the mayor proposed two months ago that we construct a multilevel parking garage on the Elm Street site. At that time, he asked the Parking Authority to assemble all pertinent information for consideration at our meeting today. I would like to summarize our findings briefly for you.

The Elm Street site is owned by the city. All that stands on it now are the remains of the old Embassy Cinema, which we estimate would cost approximately $400,000 to demolish. A building contractor has estimated that a multilevel structure, with space for 800 cars, could be built on the site at a cost of about $12 million. The useful life of the garage would probably be around 40 years.

The city could finance construction of the garage through the sale of bonds. The finance director has informed me that we could probably float an issue of 20-year tax-exempts at 5 percent interest. Redemption would commence after three years, with one seventeenth of the original number of bonds being recalled in each succeeding year.

A parking management firm has already contacted us with a proposal to operate the garage for the city. They estimate that their costs, exclusive of the fee, would amount to $600,000 per year. Of this amount, $400,000 would be personnel costs; the remainder would include utilities, mechanical maintenance, insurance, and so forth. In addition, they would require a management fee of $150,000 per year. Any gross revenues in excess of $750,000 per year would be shared 90 percent by the city and 10 percent by the management firm. If total annual revenues are less than $750,000, city would have to pay the difference.

We conducted a survey at a private parking garage only three blocks from the Elm Street site to help estimate revenues from the prospective garage.

The garage, which is open every day from 7:00 A.M., until midnight, charges $6 for the first hour; $2 for the second hour; and $12 to park all day. Their capacity is 400 spaces. Our survey indicated that during business hours, virtually 100 percent of their spaces were occupied by "all-day parkers" -- cars whose drivers and passengers work downtown. About 50 percent of their spaces are occupied weekday evenings. We did not take a survey on Saturday or Sunday, but the proprietor indicated that the garage averages about 1500 short-term parkers on Saturdays before 6:00 P.M., when most stores close. There's a lull until about 7:00 P.M., when the moviegoers start coming in; he says the garage is almost full from 8:00 P.M. until closing time at midnight -- another 400 parkers. Sundays are usually very quiet until the evening, when he estimates that his garage is 60 percent utilized from 6:00 P.M. until midnight. The garage charges a flat charge of $6 for evenings and weekends.

The city would derive additional income of around $250,000 per year by renting the ground floor of the structure as retail space.

In addition, we studied a report issued by the City College Economics Department last year, which estimated that we now have approximately 50,000 cars entering the central business district (CBD) every working day (8 AM to 5 PM). Based on correlations with other cities of comparable size, the economists calculated that we need 30,000 parking spaces in the CBD to eliminate commuter congestion and to maximize downtown shopping. This agrees quite well with a block-by-block estimate made by the traffic commissioner's office last year, which indicated a total parking need in the CBD of 29,000 spaces. Right now we have 22,000 spaces in the CBD. Of these, 5 percent are curb spaces (all of which are metered, with a two-hour maximum limit for $4); all the rest are in privately owned garages and open lots.

Another study indicated that about sixty percent or, perhaps, a bit more of all auto passengers entering the CBD on a weekday are on their way to work and most of the rest are shoppers. The average number of people per car is 1.75.

Unfortunately, we have not yet had time to use the data mentioned thus far to work up estimates of the revenues to be expected from the proposed garage.

The Elm Street site is strategically located in the heart of the CBD, near the major stores and office buildings. It is five blocks from one of the access ramps to the new cross-town freeway, which we expect will be open to traffic next year, and only three blocks from the Music Center, which the mayor dedicated last week.

As we all know, the parking situation in that section of town has steadily worsened over the last few years, with no immediate prospect of improvement. The demand for parking is clearly there, and the Parking Authority therefore recommends that we build the garage.

The mayor thanked Mr. Stockton for his report and asked for comments.

The following discussion took place:

Finance Director: I'm all in favor of relieving parking congestion downtown, but I think we have to consider alternative uses of the Elm Street site. For example, the city could sell that site to a private developer for at least $5 million. The site could support an office building from which the city would derive property taxes of around $1 million per year at present rates. The office building would almost certainly incorporate an underground parking garage for the use of the tenants, and therefore we would not only improve our tax base and increase revenues but also increase the availability of parking at no cost to the city. Besides, an office building on that site would improve the amenity of downtown; a multilevel garage built above ground, on the other hand, would not.

Planning Director: I'm not sure I agree completely with the finance director. Within a certain range we can increase the value of downtown land by judicious provision of parking. Adequate, efficient parking facilities will encourage more intensive use of downtown traffic generators such as shops, offices, and places of entertainment, thus enhancing land values. A garage contained within an office building might, as the finance director suggests, provide more spaces, but I suspect these would be used almost exclusively by workers in the building and thus would not increase the total available supply.

I think long-term parking downtown should be discouraged by the city. We should attempt to encourage short-term parking -- particularly among shoppers -- in an effort to counteract the growth of business in the suburbs and the consequent stagnation of retail outlets downtown. Currently shoppers are forced to rely almost entirely on metered curbside parking, The rate structure in effect at the privately operated garage quoted by Mr. Stockton clearly favors the long-term parker. I believe that if the city constructs a garage on the Elm Street site, we should devise a rate structure that favors the short-term parker. People who work downtown should be encouraged to use our mass transit system.

Finance Director: I'm glad you mentioned mass transit because this raises another issue. As you know, our subways are not now used to capacity and are running at a substantial annual deficit borne by the city. We have just spent millions of dollars on the new subway station under the Music Center. Why build a city garage only three blocks away that will still further increase the subway system's deficit? Each person who drives downtown instead of taking the subway represents a loss of $2 (the average round trip fare) to the subway system. I have read a report stating that nearly all of the commuters entering the CBD by car would still have made the trip by subway if they had not been able to use their cars.

Mayor: On the other hand, I think shoppers prefer to drive rather than take the subway, particularly if they intend to make substantial purchases. No one likes to take the subway burdened down by packages and shopping bags. You know, the Downtown Merchants Association has informed me that they estimate that each new parking space in the CBD for shoppers would generate an additional $60,000 in annual retail sales. That represents substantial extra profit to retailers; I think retailing after-tax profits average about 3 percent of gross sales. Besides, the city treasury benefits directly from our 3 percent sales tax.

Traffic Commissioner: I strongly support the objective of reducing commuter congestion, but at the same time I am woried about some of the costs of increased shopping downtown and therefore, presumably, the total number of cars entering the CBD? I'm thinking of such costs as the increased wear and tear on city streets, impeding of the movement of city vehicles, noise, air pollution, and so on. How do we weigh these costs in coming to a decision?

Parking Administrator: I don't think we can make a decision at this meeting. I suggest that Dick Stockton be asked to prepare an analysis of the proposed garage that will answer the following questions:

1. Using the information presented at this discussion, should the city of Oakmont construct the proposed garage?

2. What rates should be charged? That is, should rates be be inverted so as to encourage shoppers, despite the fact that this would reduce parking revenues (otherwise commercial garages would have done it), or no?

3. What additional information, if any, should be obtained before making a final decision?

Use the following assumption in your analysis: Five percent represents both Oakmont's real and its nominal cost of capital (ignore inflation).

Then think about the following:

1. On average, fifty to sixty thousand commuters make the trip to the CBD each day in 30 thousand passenger vehicles. A one percent increase in the number of parking spaces for commuters would increase the number of commuters and autos by one percent OR decrease average congestion and displacement costs about 10 percent (average congestion and displacement costs might be as high as $8 per commuter-vehicle per day or as low as $5).

2. On average, twenty-five to thirty thousand shoppers visit the CBD by car on a weekday. Increasing the number of short-term parking spaces by 1000 would increase the mean average about 50 percent. It would have little or no effect on the total number of shoppers on weekday evenings, holidays, or on weekends. However, it is reasonable to assume that a new parking garage would be utilized during those periods at approximately the same levels as other garages nearby.

* This case was originally prepared by Graeme Taylor, Management Analysis Center; it has been updated by Fred Thompson.
Note: Several ideas for this case were suggested by a study titled Municipal Garages in Boston: A Cost-Benefit Analysis, by George Berkley, which appeared in the April 1965 issue of Traffic Quarterly. The interested reader may wish to refer to this study, and also to Downtown Parking Report 1966 prepared by the Division of Economic Development, City of Milwaukee.
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