What Can Los Angeles Expect for the Rights to Its Meters?

4_16_09_Shoup.jpgDonald Shoup doesn't think the city is going to get a lot for its parking. Find out why after the jump.

For the politicians looking to close a loophole in the city’s budget through privatizing street parking, the biggest question is going to be “how much money can the city get” for leasing enforcement and collection of paid street parking.

Reporting from this week’s City Council hearing, Joe Linton writes, “The city is facing a $35M deficit in the current fiscal year.  The deficit projected for next fiscal year was projected at $433M (out of a $7B budget), but that forecast is being revised to about $530M.”  If Chicago got $1.16 billion for leasing control of its 36,000 meters, Los Angeles should be able to get at least that much for it’s 43,000 metered spaces, right?

Not necessarily.  First, given the backlash that the city experienced for just raising the hourly rate for many meters, can we really expect the Council to either let the investor decide the new rates or agree to a series of rate increases that would place L.A.’s parking rates at the top of the country’s?

Even if the City Council does move forward with a plan that would drastically raise the cost of street parking, UCLA Traffic Professor Donald Shoup raises another question about how much money the city can really expect to get in a privatization deal because of a state law that requires.  In an e-mail, the parking guru writes:

I suspect that LA will have a hard time finding bidders for a parking meter concession because so many drivers with disabled placards now park free at meters.  Section 22511.5 of the California Vehicle Code states, “A disabled person or disabled veteran is allowed to park in any metered parking space without being required to pay parking meter fees.” If disabled placard (DP) holders can park free for an unlimited time at meters, I suspect that few investors will want to bid for the meter revenues.  In a casual walking-around survey in downtown, it looked like about half of all the metered spaces were occupied by cars with disabled placards. 

If a concessionaire tries to increase the meter rates, the results will probably be disappointing. Increasing the meter rates will increase the incentive to abuse placards and will also reduce the willingness of those without placards to pay for parking at the curb. The result may be that DP parkers (many of them fraudulent) will use all the curb spaces, and almost no one will pay for parking. The increased incentive to abuse placards may even reduce curb parking availability for genuinely disabled drivers. Bad placards will drive out genuine placards.

It will be interesting to see how much investors will bid for a Los Angeles parking meter concession.  The first thing investors ought to ask is what is the current parking meter revenue as a percentage of potential revenue if the all the metered spaces were occupied and the drivers paid the meters.  I suspect that the ratio of current revenue/potential revenue is probably quite low.

Just to place this discussion into perspective, assuming the city doesn’t reduce the FY 2011 deficit of $530 million, if the we very well could be looking at not even getting three years of a balanced budget off of a sale, and in fact could very well not even make it until July of 2011.