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Donald Shoup

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

2:22 PM PDT on April 16, 2009

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 willhave a hard time finding bidders for a parking meterconcession because so many drivers with disabled placards now park free atmeters.  Section 22511.5 of the CaliforniaVehicle Code states, “A disabled person or disabled veteran is allowed to parkin any metered parking space without being required topay parking meter fees.” If disabled placard (DP) holderscan park free for an unlimited time at meters, I suspect that few investorswill want to bid for the meter revenues.  In a casual walking-aroundsurvey in downtown, it looked like about half of all the metered spaces wereoccupied by cars with disabled placards. 

If a concessionaire tries to increase the meter rates, the results willprobably be disappointing. Increasing the meter rates will increase theincentive to abuse placards and will also reduce the willingness of thosewithout placards to pay for parking at the curb. Theresult may be that DP parkers (many of them fraudulent) will use all the curbspaces, and almost no one will pay for parking. Theincreased incentive to abuse placards may even reduce curb parkingavailability for genuinely disabled drivers. Bad placards will drive outgenuine placards.

It will be interesting to see how muchinvestors will bid for a Los Angelesparking meter concession.  The first thing investorsought to ask is what is the current parking meter revenueas a percentage of potential revenue if the all the metered spaces wereoccupied and the drivers paid the meters.  I suspect that the ratio ofcurrent 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.

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