Can Philly afford the real cost of free parking lots?

Passyunk Square neighbors fight to keep their free municipal parking lot, but at what cost to the city?

NOT MY LOT: A developer abandoned plans to build an apartment complex on this crowded municipal parking lot in Passyunk Square after neighbors protested.
Mark Stehle

Newcomers to Philadelphia often marvel at the line of cars parked, bumper-to-bumper, right down the middle of South Broad Street.

How, asks many an incredulous visitor, could this be legal? Why would anyone park on a median sandwiched between four lanes of swirling traffic? To locals, the answer is obvious — parking spots are hard to come by on the cramped streets of South Philadelphia.

So it’s easy to understand why Passyunk Square resident Steve Fabiani was upset when he heard that a developer wanted to build a 34-unit apartment complex on a parcel currently used as a municipal-parking lot, just steps away from his tidy row home near 12th and Reed streets. It was a project that would take away some of these 40 precious — and better yet, free  — parking spaces, while bringing lots of new residents and cars into the neighborhood.

“I see these public [parking] lots as a critical piece of the city’s ecosystem, much like parks, firehouses, police stations,” says Fabiani.“Selling these off for a quick buck or to well-connected developers seems a bit shortsighted to me.”

In February, Fabiani and other neighbors rallied in opposition to the plan. Although developer Alterra Property Group promised to maintain some amount of public parking, they eventually dropped the proposal, nominally because the Planning Commission wanted input “prior to any City assets being sold.” But this was just the latest in a series of increasingly fractious battles to keep parking cheap and accessible as some Philadelphia neighborhoods have swiftly grown. While the motive for such opposition is clear, are the benefits of preserving parking lots worth the cost to the city?

Free municipal parking lots, like the Philadelphia Parking Authority (PPA) lot that Fabiani fought to save, are artifacts from an era when the city faced intense pressure from business interests to subsidize the creation of new parking areas. Viewed as a means of competing with the sprawling postwar suburbs, analysts (sometimes funded by the carmakers) said Philadelphia’s declining population and tax revenues were partially caused by a shortage of parking as the city was flooded with new car owners.

“There are other contributing causes, but parking deficiencies are one of the most important reasons for the substantial declines of these [city] tax revenues,” stated a 1953 white paper by the auto industry-sponsored Eno Center for Transportation. The report recommended that local governments pick up the slack by subsidizing the construction of more parking lots.

It was both a costly and controversial proposition. A Philadelphia Evening Bulletin article estimated that, by that time, 38 acres of Center City had already been converted into 178 surface lots, as owners tore down aging structures to cash in on parking fees. As empty lots in Philadelphia are taxed less than buildings, the newspaper warned that the pace of parking conversion was costing the city an additional $400,000 in lost tax revenue a year.

The city pushed forward with the creation of the PPA in the 1950s, and today that agency operates over 50 free, public parking lots — which generate no tax revenue for the city. 

Nearly 70 years later, it’s a topic that’s still controversial — and, apparently, no less costly.

“Most economists will tell you that the worst thing you could have in a downtown area is free parking,” says Kevin Gillen, senior research consultant at the University of Pennsylvania’s Fels Institute of Government. 

Gillen, who has authored a string of reports on land use in Philadelphia, says that free parking can have the opposite of its intended effect, increasing congestion by attracting more drivers to hunt for gratis spots while discouraging use of public transit.

There is, of course, a need for a certain level of parking and free lots can be used as a tool to attract visitors to struggling neighborhoods. But according to Gillen, when an area is already desirable, public parking often means giving up a lot of valuable tax revenue — from property and title transfer taxes to wage and sales taxes from construction workers and, eventually, new residents or employees.

Using values based on existing apartment units nearby, Alterra Property Group’s 27,000-square-foot project would have likely contributed more than $40,000 annually in property taxes alone — a loss of about $1,000 a year in tax revenue per parking space.

But suppose that each of the 34 units were occupied by a single resident earning $50,000 a year. That adds up to over $66,000 annually in wage taxes, along with untold sales-tax earnings from adding city residents, not to mention the business taxes Alterra would pay for leasing the units.

Gillen added that new research he conducted revealed that surface parking also diminished the value of nearby properties — surprisingly, even more so than maintained vacant lots — further diminishing tax collections.

“Land that is used for surface parking sells at a discount relative to vacant lots … and that affects nearby property values,” he says. “Which would you rather live next to, a maintained community garden or a surface parking lot? Which is better for you to look at? Which smells better?”

The economist was blunt about his reaction to the concerns of Fabiani and his neighbors. 

“If you want to have free parking, then move to any neighborhood where land is cheap,” Gillen says. “That may sound cruel, but the real cruelty is that we artificially maintain land at a low use while the city doesn’t have the revenues it needs to fund public services, schools, roads and police in order to give a handful of privileged people free parking.”

Gillen suggested the city provide tax incentives for developers to build extra parking spots that could then be sold to neighboring residents. But those spots would likely be expensive, reflecting the true cost of reserving space for cars in a big city — unsubsidized parking spots in Center City routinely sell for $40,000 apiece.

Fabiani called such a proposal “naïve,” asserting that few people would be able to afford such an expense and parking problems would just get worse. He also rejected the idea that the lot near his house was truly free. He says he and his partner already pay hefty wage and sales taxes, like most South Philly residents, and that they expected something in return.

While Fabiani conceded there was an “opportunity cost” to reserving public parking, he said that was part and parcel to providing public services.

“I guess you could say that same thing about any urban public land use. But if you follow the logic, it’s a slippery slope,” he says. “Fairmount Park must cost a fortune. Should we sell that?”