No, Philadelphia Can't Afford the Cost of Free Parking Lots

4Apr
This is why we're broke

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City Paper's Ryan Briggs looks at a recent dust-up over a proposal to build housing on a city-owned surface parking lot in Passyunk Square (referenced here by This Old City), and his calculations are persuasive that, from the perspective of the city budget, this land would be much better off used as housing than as surface parking:

There is, of course, a need for a certain level of parking and free lots can be used as a tool to attract visitors to struggling neighborhoods. But according to Gillen, when an area is already desirable, public parking often means giving up a lot of valuable tax revenue — from property and title transfer taxes to wage and sales taxes from construction workers and, eventually, new residents or employees.

Using values based on existing apartment units nearby, Alterra Property Group’s 27,000-square-foot project would have likely contributed more than $40,000 annually in property taxes alone — a loss of about $1,000 a year in tax revenue per parking space.

But suppose that each of the 34 units were occupied by a single resident earning $50,000 a year. That adds up to over $66,000 annually in wage taxes, along with untold sales-tax earnings from adding city residents, not to mention the business taxes Alterra would pay for leasing the units.

Gillen added that new research he conducted revealed that surface parking also diminished the value of nearby properties — surprisingly, even more so than maintained vacant lots — further diminishing tax collections.

I previously covered this topic at Next City, looking at the property tax yield from four similarly sized parcels at the intersection of Fitzwater and S. 7th Street.  

The northeast and southeast corners of the intersection featured the typical South Philly development pattern of attached rowhouses and storefronts, while the southwest corner featured a municipal parking lot, and the northwest corner has a small building with most of the lot covered by a private surface parking lot.

Here's what the tax yield looks like for each corner:

Instead of collecting ~$30-40,000 a year on the municipal parking lot land, the city collects nothing. And in return, we get more air pollution, more traffic congestion, and diminished nearby property values according to Kevin Gillen. The northwest corner is also a terrible value from the perspective of the city budget, and illustrates the need for a land value tax to discourage low value land uses like surface parking.

Now take what you learned about the opportunity cost of city-owned surface parking lots and extrapolate that for all the city-owned parking lots in District 1, represented by Councilman Mark Squilla. 

Imagine how much more money we would be getting if all these lots were on the tax rolls, with mixed-use buildings on them:

The 1st District only has 461 of the 2971 total city-owned surface parking spaces.

The answer to Ryan's question is a clear No - Philadelphia certainly cannot afford to continue offering free parking. It's long past time to sell these parking lots for development.

Last Updated: Friday, 04 April 2014 @ 13.02
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jongeeting's picture Jon Geeting About the Author:

Jon Geeting is a Philadelphia-based freelance journalist and policy researcher. His writing also appears at Next City, Primary Colors, and Keystone Politics, where he covers politics and elections, land use and transportation, and urban economic policy. He also writes a monthly Political Machine column at Philly City Paper.