Parking policies are frequently bizarre. Parking is, after all, a private good – it is both rivalrous (two cars can’t park in the same space at the same time) and excludable (if you don’t want someone parking in your space, you can keep them out). In that respect, it is more like a refrigerator than a public park.

But unlike a refrigerator, there are all sorts of public subsidies and regulations affecting parking. Although refrigerators are arguably more of a necessity of life than parking, councils don’t impose minimum refrigerator requirement for homes and offices. Central government doesn’t provide a tax subsidy for employer-provided refrigerators. And councils don’t invest in (or subsidise) public refrigeration facilities.

And if they did, it would almost certainly result in some perverse outcomes.

A recent NZ Herald story provided an example of how parking subsidies can lead to odd outcomes. (It was also a fine example of meaningless “gotcha” journalism, but never mind that!)

They are the crack team of economic and planning experts charged with sorting Auckland’s future growth.

But a member of the Unitary Plan independent hearings panel has fallen foul of the city – after sneakily parking a jetski in a central city council carpark for almost a month.

The mystery jetski appeared three to four weeks ago, taking up a Queen St park reserved for the panel listening to submissions on the future of the city.

Here’s the jetski in question:

IHP jetski

The article implies that the panel member in question is rorting the system or acting unethically by using their employer-provided carpark to store a jetski. But, if you think about it, it’s actually a good illustration of the poor logic behind many existing parking subsidies.

Let’s back up a step: what subsidies are we talking about, exactly?

In the Auckland city centre, carparks have a market value, which is a good thing. The removal of minimum parking requirements in the 1990s led to an increase in the price of parking – and also to increased development as new buildings weren’t encumbered by the need to provide unnecessary but costly carparks. At present, Auckland Transport is leasing downtown carparks for between $110 to $490 a month – although the cheapest ones are fully sold out. Private operators seem to be supplying them at around $250-$300 per month.

So an employer-provided carpark in the city centre is likely to be worth somewhere in the range of $3000-$6000 per annum. Because fringe benefit tax isn’t levied on carparks, this is worth the equivalent of $4500-$9000 in salary for people paying the top marginal tax rate (33%). (As the panel members probably do.)

That’s a large public subsidy for a small bit of concrete!

In theory, the rationale for the tax subsidy on employer-provided carparks is that it makes it less costly for people to commute to work, and hence encourages people to enter the workforce. But the panel member’s jetski illustrates the absurdity of that approach.

For one thing, people have (or should have) a range of choices about how to commute. Some prefer to drive. Others may take the bus, train, or ferry, or walk or cycle to work. Consequently, a significant share of commuting trips don’t end in a carpark. Based on Census data, around half of the people working in the city centre in 2013 didn’t drive to work. A bit over one in four workers throughout Auckland didn’t drive to work.

Census journey to work Auckland mode share chart

Consequently, trying to subsidise commuting by subsidising parking is likely to be a distortionary and inefficient policy. Some people will change transport modes in response to cheaper parking, resulting in additional road congestion in peak periods. Others will be left with a subsidised parking space that isn’t much use to them.

The panel member who used their parking space to store a jetski probably falls into the latter category. They might walk to work, or take the bus or train. This leaves them with a bit of costly concrete that they don’t need to store a car – so why not use it to store another vehicle instead? I can’t blame them for that.

The jetski has apparently been removed from the parking space, but the policy distortions that led to it being there in the first place remain. So what could we do about that?

The key is to realise that our ultimate aim is to enable mobility, not to simply provide carparks, and make policy accordingly.

For some people, mobility means a monthly public transport pass, or a bicycle and access to a shower at work. But current fringe benefit tax policies discourage employers from offering those solutions to their employees – an employer-provided PT pass would be taxed as regular income, while a carpark is exempt from tax. We need to level the playing field.

The best way of doing so is by removing the fringe benefit tax exemption for carparks, but if that’s not political possible then a good alternative would be to exempt PT passes from FBT, as the Green Party has proposed.

Another alternative would be to offer people the option to “cash out” employer-provided carparks. It’s especially bizarre that employers aren’t required to offer this choice, as the current government changed employment law to allow people to exchange one week of annual holiday for the equivalent in cash. Why not adopt the same approach for carparks, which could easily be worth more than holiday pay for many workers?

Lastly, we also need to make some choices beyond how we price and subsidise parking. Getting a great range of transport choices will often require us to use existing road space differently. Sometimes the only way to get a dedicated bus lane or a safe, separated cycle lane is to remove a few on-street carparks. We need to look at those choices in a holistic way – i.e. do they improve overall mobility and access to destinations – rather than simply insisting that all carparks must stay in place.

How do you think we should address parking subsidies?

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45 comments

  1. So $4500 to $9000 Per Annum Government subsidy to each INDIVIDUAL entitled private motor vehicle user! So what exactly is the Per Annum Government subsidy to each INDIVIDUAL public transport user again?

    1. well my bus fare is about 4.50 each way, so 9/day*5days/week*46 working weeks a year = 2070. Assuming 50% farebox recovery, that means a subsidy of $2070

      1. The rationale for the PT farebox subsidy is externalities – i.e. people on the bus or train aren’t on the roads causing congestion. The congestion reduction benefits of urban PT networks seem to be significant in magnitude – see some previous posts here and here.

        By contrast, the rationale for keeping FBT off carparks is ??? It subsidises people to drive to work during peak times, which contributes to congestion and air pollution. And that subsidy is likely to be largest in highly congested areas like city centres. Seems like a bad idea.

    2. No, $1,500 – $3,000 per year in forgone tax. By not charging FBT it simplifies tax matters for employers. Outside of CBD’s many business premises will have more than enough car parks for employees and visitors. If those employers/employees were forced to pay FBT it could have a negative impact on employment.

      1. That’s like saying “when people pay income tax it discourages them from working, therefore we should eliminate income tax”. Maybe that’s true at the margins, but on the whole we think that it’s worthwhile to have income taxes to pay for public goods like universal education and environmental management.

        If we levied an FBT on parking, we could use the revenues to lower income taxes in return, which would have an offsetting positive effect on labour supply.

        Alternatively, as I mentioned, we could eliminate the distortion between parking and other transport modes by removing FBT from PT passes and cycling expenditures. That’s not the optimal solution, but it would improve matters.

      2. FBT gets charged on all sorts of less consequential things than free car spaces, the choice not to is purely political

        1. Many employers outside of main-centre CBDs will have ‘spare’ space for parking on their premises. Not allowing employees to utilise it because of FBT implications would be a negative in employer/employee relationships.

          1. You really don’t get what is being asked for, are you? The argument is to level the playing field – either tax car parks the same as other modes / fringe benefits, or not tax those other options. If you really feel that car parks need to be tax-exempt, you could still have that AND a fair playing field.

  2. There are economic and modelling distortions throughout this whole discussion.
    Why in the census report, motorcycle and scooter riders lumped in with car and truck drivers?
    A scooter or motorcycle is the most traffic and parking efficient single person motorised transport – yet they are lumped in with cars (mostly with single drivers).

    1. If you go to the link, you can see the data broken down between cars and motorcycles. I grouped up a few categories for legibility.

    2. I would argue that bicycles are more efficient at traffic and parking than motorcycles or scooters.
      Edit: I see you mention ‘motorised’ As you were. (although does an e-bike count as motorised?). I’ll get my coat.

  3. Peter, could you please write “Maximum Parking Introduced in the 1980’s” on a post it note and stick it on your monitor. You always say the 1990’s.

  4. So following your logic all taxation of company provided carparks should be removed as the realestate is effectively available for any use ( your jetski reference). We could if we chose to put desks in company car parks. So they then become no-ones business but the company’s. I like your logic. So now we have no issue to fret over. Companies can then do what they like with the property they own.

  5. Is the tax subsidy on parking referred to above simply the ability to claim it as a business expense?
    The company I work for offers cash out for parks. And there are showers. So have the previous companies I worked for. I assume its reasonably common in business.
    I think the difference with the example is the fact its a council organisation.

    1. No I think it is more than that. An employer can make parking available to employees and they dont have to pay Fringe Benefit Tax. In places where parking is required by rules it kind of makes sense. If you have have an office and the resource consent says it has to have 10 parking spaces it would be a bit daft for IRD to then tax the employer just for complying with a consent condition. But if parking is not required but provided as a perk of the job then it is clearly a fringe benefit and they should dump the exemption.

        1. I dont think the policy is mode dependent. Or are you expecting that the IRD to charge employers FBT for providing showers so staff can cycle? Or should they charge FBT for each cycle rack even though the new rules require cycle storage to be provided?

          1. My understanding is that IRD’s underlying principle is that employers / employees opt to not work at home and so travel to work is a personal expense. So if someone travelling to work consequently needs a shower then that is related to personal activity and arguably could be subject to FBT. Clearly such a move would be roundly criticised and probably unenforceable as people could claim the job made them smelly not the commute and you’d need IRD personal hygiene accessors. Carpark rules are a political minefield and also related to the need to use vehicles for business during the day whether the car is company owned or not. It would be complex to judge whether the carpark is simply there to support the commute and / or other business related use.

      1. In places where MPRs have resulted in an oversupply of parking spaces, then you’d expect the market price of parking to be close to zero. I.E. if on-street parking isn’t priced, then the value of off-street parking is also likely to be pretty negligible. In those cases, I think it would be possible to argue that the FBT on employer-provided parking would also be quite small.

        Of course, the resource costs associated with supplying parking are high regardless of what the market price is. But as you note, that’s an issue to address by changing MPRs and on-street parking management policies rather than changing FBT.

        On your mention of showers – difficult to establish a good market price for them, but I suspect it’s small. For example, we don’t have a shower at work but if I wanted one I could get a basic gym membership for about $10 a week, which adds up to $520 a year. The value of shower access would be lower, as I’m also buying access to a bunch of goofy-looking machines with a gym membership.

        1. I think the point I was making was we don’t have a system where one branch of government requires you to have something then another branch taxes you for having it. Some countries might be like that but not ours. Clearly if parking isn’t required such as in the CBD (since at least the proposed District Scheme 1987) or in centres under the PAUP then when an employer provides it to a staff member it then it can only be a perk. No different to if the employer provides a gym membership. Good policy would see those perks taxed in some manner.

          1. mfwic, I think if you want to draw a distinction between types of car parks for FBT purposes then shouldn’t the demarcation be whether the park is allocated to an individual or not? If only a single employee may use a given park most of the time then clearly that’s a fringe benefit to that individual, which would make a general use park FBT exempt. This approach does have the problem that you could unofficially allocate parking (don’t take the boss’ park if you know what’s good for you) to dodge FBT but that can be addressed either through enforcement or broadening the tax to cover all employee car parks.

          2. The distinction is probably value. If the carpark is required by a rule then once the company has paid for it to comply then it is a sunk cost. Where spaces are not required then the employer doesn’t have to provide it so it is just a perk.

  6. We have the Revenue Minister argue against a GST exemption for tampons because exemptions create distortions and increase compliance costs whereas on the other hand he is unwilling to remove this rediculous FBT exemption despite the distortions it creates. Maybe a few more jet skis, trailers, caravans, BBQ’s and other paraphernalia in car parks would bring this to a head

    1. The Revenue Minister is correct. Eliminating (or at least minimising) exemptions from the normal course of business should be the goal. A business that sells tampons will most likely sell a number of other items and as they all attract the same rate of GST it simplifies and streamlines accounting. A small business that allows employees to park on the premises but does not provide any other ‘perks’ will not have to worry about FBT, simplifying and streamlining their accounting.

  7. ‘Maybe we should make the office shower room a taxable fringe benefit’ – I’ve heard this ironic meme before in anti-transit blogs.

    The starting point for an answer is: similar principle does not necessarily mean the same in practice. Shower attached to the toilet: 2 square metres, used by many people. Parking space in the basement (including circulation space): at least 30 square metres plus significant construction cost, used by one person. Orders of magnitude more significant. At a rule of thumb, let’s think more about more important issues.

  8. Is FBT exemption justified by the fact that the employer was forced to provide the parking space by minimum parking requirements (supposing they were)?

    Interesting idea. On balance I would reply: the employer was forced to build the parking space supposedly for town planning and public amenity reasons, not in order to provide a benefit to their staff. How they allocate it is up to them. They can auction car spaces to their staff if they wish. If they choose to give them away as a fringe benefit, the value should be FBTable.

    If council rates were based on improved property value, would you argue that you deserve a discount on rates because part of the value arises from improvements that you were forced to make by building regulations?

  9. My understanding is that Auckland had Minimum Parking requirements of 1 car per 100m2 of Office space, while Wellington has a Maximum of 1 car per 100m2. Is that correct / still the case ? The built environment of the cities is the resulting outcome – Wgtn has less carparking than Akl, and hence more PT commuters.

  10. Does AT keep track of the number of vacant car parks at anyone time?
    Can it start to charge for parking on the basis that they have say 15% available at any time and do they have any idea how that would affect the number of cars competing for street space at peak traffic times?

  11. “For some people, mobility means a monthly public transport pass, or a bicycle and access to a shower at work”

    Aside from how offensive and ignorant that statement is mobility in transport has been a standard definition for those who are physically disabled and require not a friggin bus pass but access to even be able to crawl to the door. They don’t need a shower, they need a toilet. Mobility is not a luxury it is essential for living. Mobility scooters require certain widths for moving and mobility passes provide parking access to an area. Accessibility is not saying the area is more open to cyclists but that an area can even be used by those with disabilities. If accessibility is not provided many can not even use an environment or public space and are essentially locked out. The Unitary Plan has imposed many more barriers to providing mobility parking and disabled access. It makes the city more unlivable.

    None of the recommendations by the disability panel were even adequately addressed by the plan and it further enforces Auckland as a place where the disabled and elderly should not be able to live.

    http://infocouncil.aucklandcouncil.govt.nz/Open/2015/03/DIS_20150330_AGN_5810_AT_WEB.HTM

    http://unitaryplan.aucklandcouncil.govt.nz/HTMLSept/Part%202/Chapter%20C/Chapter%20C%20-%201%20Infrastructure.htm

    1. “None of the recommendations by the disability panel were even adequately addressed by the plan ”

      Pretty sure it is illegal for you to share details of the plan before it is released this afternoon?

      1. Sure you can take the Auckland Council and NZ Herald to court over releasing the Plan in full text. Have fun with that.

          1. It is a shame your mind cannot cope with conversations on the internet that can span more than a single day. However funnily enough they do happen and can be a good way to discuss an article in dynamic societies. I do apologise though, next time I am in hospital I will try to access decent free wifi to be able to post a reply sooner.

        1. “We are currently uploading the IHP Recommendations content, and anticipate this will be available to view during the afternoon of Wednesday 27 July 2016.

          We apologise for any inconvenience caused.”

          http://www.aucklandcouncil.govt.nz/EN/planspoliciesprojects/plansstrategies/unitaryplan/Pages/PAUPunavailable.aspx

          Also, your previous comments reek of concern trolling. While the accessibility of the city to people of varying degrees of physical mobility is an admirable cause, the major impediment to accessible design is an excessive provision for motor vehicles rather than a fair level of provision for people on bicycles or on foot/in a mobility device.

          1. Concern trolling… My family live with pain and no access to services everyday. Ambulance trips where the drivers drag you down the road because they could not park close by, so you end up opting out of calling he ambulance many times because you cannot afford it. Nurses and care workers cannot visit you because of no parking. Falls and injuries which occur every week and almost every day. It is deeply depressing and suicide is quite often seen as the only escape from the pain and isolation. You want to remove what little access is provided sure, but you are literally locking out people whereas someone who could cycle always has access; they would have access if they had a car, they would have access if they used the train or bus, they never had an accessibility or mobility concern where they did not have access. Because the implication that they have the freedom of movement to cycle they have the ability to choose how they want to travel. Living without basic medical, and living needs is not fun. We do not get a choice to be disabled, in fact we would do anything, trade anything to not be. Yet everyday the pain and the struggle to live takes away any hope or chance of being independant. In fact in many cases you cannot even kill yourself without needing someone else to help you. Why on earth do you think some people go onto the internet begging for a small shred of accessibility, hoping there is decency and compassion out there.

          2. Pacifica, I empathise with the challenges you’re facing. But I don’t think that it makes sense to oppose the needs of mobility-impaired people with the needs of public transport users or cyclists. Mobility-impaired people face some unique challenges, to be certain. But the best way to address those challenges *isn’t* to destroy people’s ability to walk or cycle in public spaces. There are win-wins.

            To give one concrete example: Dominion Rd. I walk and run up and down it on a regular basis. The pavements are cracked and the crosswalks are dilapidated or nonexistent. Upgrading the footpaths will make life easier for everyone – people shopping on foot; people walking to the bus, and people in mobility scooters.

            To give a second concrete example: separated cycleways. One of the benefits of separated cycleways, as opposed to painted bike lanes on the outside of onstreet carparks, is that they make it safer and easier for people in mobility scooters to move along the road: https://twitter.com/KingCyclesAkl/status/758119871330660352

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