Every weekend we dig into the archives. This post by Peter was originally published in May 2016.

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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  1. Great post Peter.

    Everything should be on the table. Why for example is AT going to spend tens of millions of dollars on park and rides for who knows what uplift in ridership when they weren’t prepared to pay $3.7 million to hold PT fares that will cause a 1 million drop in ridership?

    Similarly why in Takapuna did Auckland Council decide to spend $30 million on a new car park building at what cost to PT ridership?

    If there is a coherent strategy to shift mode share then it is not yet obvious.

  2. i have a carpark that came with my townhouse that remains empty 365 days a year as I dont own a car (and dont want too). Sometimes i ponder getting a van as is where is & to use it as additional storage or a sleepout.

    1. We could have fun coming up with ideas for what else you could do with it. 🙂

      – You could offer it to someone with a caravan. I know someone who does this – a caravan on the front, a sleepout in the back, and she’s trebled the number of families on her small property just like that.
      – You could offer it to CityHop as a carpark.
      – You could grow things all over it either in containers or on structures to take vines (passionfruit!!)
      – You could ask an arborist to dump a truckload of mulch there, and let the community come and take small amounts for their gardening and composting activities. (That’s what I do.)
      – You could put a secure, covered bike storage unit there, and offer it to neighbours.
      – You could put some furniture there to make it into a patio area.
      – You could put a washing line over it. There are rotary clotheslines that can clip into and out of brackets in the ground so it doesn’t have to be a permanent decision. Clothesline by the front gate are brilliant for getting to know the people who walk along the street.

      1. thanks! Knowing me it will probably remain empty as the bodycorp are easily upset. A storage shed for my bike would be ideal tho.

        1. Check the body corp rules mate, a lot of them say ‘vehicle parking only’ but you can get a box trailer very cheaply and use it for bike/equipment storage while still meeting that.

  3. Good post. And we need to move much further than just removing the FBT exception. We need to put a levy on carparks too. Citywide, but most noticeably in the city centre and town centres. These are needed to cover the costs imposed by the people using the carparks on the rest of society through the spreading apart of amenities and the traffic induced.

    The only argument people cling to in justifying park and ride subsidies is that drivers will just decide to drive all the way. One subsidy doesn’t justify another. So we need to ensure that the cost of parking is placed on the drivers. Public transport can’t compete if the subsidies to driving are so big.

  4. “These are needed to cover the costs imposed by the people using the carparks on the rest of society”

    This is a very good point Heidi. Increasingly young people are choosing not to own cars and it is inequitable that they and other non car owners should pay the costs of those who do, often the more well off. As the number of non car owners grows this will become increasingly unfair; particularly when using other forms of transport than cars is more environmentally friendly.

    I agree with your proposition that there should be a levy on car parks; but as a start the fbt exception should be wiped. I struggle to see how there can be any rational argument for the retention of this policy, other than it suits the people who currently have car parks. On the reverse side of the coin it doesn’t suit the great majority who don’t have car parks provided, who are subsidising the tax bill of the employer and providing a greater amenity for the employee than they might otherwise have.

    This sort of aberration is likely to continue when you have a political party that effectively says; we have the taxation framework exactly right, and there won’t be any new taxes.

  5. “The only argument people cling to in justifying park and ride subsidies is that drivers will just decide to drive all the way.”

    Heidi, well put. The first thing that park and rides do is, that as long as there is enough space, they encourage people to drive from anywhere to use it.

    As an example, there is a relatively new park and ride on Esmonde Road, Takapuna. It is priced – $1 per day. I have heard of people driving long distances across the Shore to use it because they find it more convenient than feeder services.

    Park and rides are non discriminatory . Live 100m, 1000m or 100 kms away and you can still use it. They provide absolutely no incentive to live close to public transport routes and so the car trip to the park and ride may be more environmentally damaging, congestion causing than if they completed the rest of the trip by car.

    On the Shore park and rides may well offer a transport subsidy to the more off in affluent suburbs like Millwater.

    I note that only 2.4% of all PT trips are greater than 3 zones. Does this suggest that AT would be best placed in expending most of its energy in improving outcomes within these zones first? Holding PT fares at current levels would be a good start.

  6. 1) Parking is the strongest travel demand management tool available except congestion tolls.

    2) Urban planners give away Transport Authority control of parking by requiring parking be provided by developers/building owners who then own and control the parking.

    3) In congested areas like CBDs:

    3a) New buildings should not have parking spaces. If the developer wants them, then via good regulation which is price oriented only, the spaces must be leased (this would reflect the rate the building owner would get) to the transport authority which then on-leases them out on i) an hourly charge basis & ii) with a premium for arrivals and departures during congested periods. The transport authority should determine how many spaces there will be (must be less or equal to what the developer wants to build) and have the right to lease them to non building occupants.

    3b) For existing buildings (and off street surface parking) in congested areas 3a) can apply if the building owners wants, and in any case via good regulation which is price oriented, the developer is both levied for the spaces by the transport authority and the building owner is required to lease out the spaces i) an hourly charge basis & ii) with a premium for arrivals and departures during congested periods.

    4) The transport authority should otherwise provide parking in each street block where demand exceeds supply using space efficient vertical parking towers & pricing as per i) & ii) in 3a.

    5) The transport authority should also control all on-street parking.

    6) Parking operating companies would not have the right to renew leases once the current contracts expire. They could then sub-contract only to the transport authority to operate parking.

    i.e this means:

    A. – There is no ability to average out the parking cost or hide it within compensation packages.
    B. – The transport authority would have full control of all parking spaces and be able to price them on a dynamic basis reflecting both parking demand and arrival/departures during congested periods.

  7. I guess the main problem with FBT on parking is the complexity of administering it. It’s simple if the business leases car parks from a private firm, but what if the business owns some land and let’s employees park on it? How do you value that? How much does it cost to value it? What if the car park is sometimes used by employees and otherwise used by customers? What about if the business has no other use for the land? How does providing a car park compare to providing a lunch room or a shower or any other on premise employee perk?

    1. +1, especially in the cases where the building owner was required to put them in as a condition of consent, so the marginal cost of giving the parks to employees is $0. You can get around this by setting a floor price, but it’s needlessly complex. Just allow employees to buy bikes used for commuting pre-tax and buy annual or monthly passes for PT pre tax too.

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