Contemporary Approaches to Parking Pricing: - FHWA Operations

Ideally unbundled parking will allow residents and employees to purchase parking on a monthly or even daily basis.
In the case of commercial parking the spaces can be rented through the property management association or a thirdparty
parking manager. In the case of residential parking, spaces can be leased through the homeowners’ or umbrella
owners’ association. Each option allows businesses and residents to purchase only as much parking as they need.
4.3 Parking Taxes and Fees
Parking taxes and fees can affect travel behavior by decreasing the amount of available parking, increasing the cost
of parking, or encouraging employers and developers to pass the cost of parking onto drivers. Fees and taxes do this
by increasing the construction or maintenance cost of parking or by directly increasing parking rates. Drivers are
able to respond to higher parking rates or lower availability by parking in another location, changing their travel
mode, or changing the timing of their activities (Feitelson and Rotem, 2004). Taxes and fees are most appropriate
when applied to parking that is not mandated or required by land use regulations.
The effect of parking taxes and fees is dependent on the type of tax used and the manner in which it is charged.
Taxes can be placed into two primary categories: (1) taxes and fees charged to users and (2) taxes and fees charged to
parking facility owners. User taxes and fees are typically charged on a per-transaction basis. They may be a percentage
of the cost to park or a flat amount and typically only affect facilities where users are charged to park; although,
such a limitation is not necessary. Taxes and fees charged to facility owners can be based on land value, surface area,
or number of available parking spaces. These taxes and fees are extremely flexible: lots that charge parking fees can
be excluded, credits can be issued when preferred spaces are offered to carpoolers or car-share vehicles, and garages
and subterranean lots can be excluded or charged based on land area rather than facility square footage. Owner fees
and taxes can exclude facilities that are charging market rates, which allows facilities that are already engaged in
efficient parking management to avoid the fees and taxes. Funds from parking taxes and fees can be invested in
transit and other transportation improvements that increase the number of travel options available.
User fees and taxes increase the cost of parking and encourage the use of non-auto travel modes and/or the shifting
of travel times. Chicago currently charges a $3.00 per day tax for all vehicles that park in the central business district.
San Francisco has a fee structure that provides a $2.00 discount to vehicles that enter a parking garage before
7:30 a.m. or leave after 7:30 p.m. and stay for at least 3 hours (for a total discount of up to $4.00). The discount is
designed to encourage travel outside of peak congestion periods. Numerous other cities charge taxes that are a
percentage of parking fees paid by drivers, including Cleveland at 8 percent, Santa Monica at 10 percent, San
Francisco at 25 percent, and Pittsburgh at 37.5 percent, the nation’s highest (Alleghany Institute 2011). The taxes
do not affect parking lots where parking is provided for free.
Selecting an appropriate fee or tax rate must be done carefully. Richard Voith developed a model that identifies
parking tax rates that maximize central business district (CBD) size and land values (1998). His model showed that
appropriate parking taxes can increase land values and community size and that failure to charge a tax may result
in excessive congestion, which reduces community size and land value. However, if taxes are set too high the result
will be lower congestion but smaller CBDs and lower land values. Additionally, transaction taxes may encourage
some employers to move from paid parking to free parking in order to avoid the tax.
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