Fester's Place

Sitting on a goldmine

Chris Briem at Nullspace takes a quick look at parking behavior in Pittsburgh over the past couple of years. The data suggests that the city is sitting on a goldmine:

The parking sales tax rate increased from 31% to 50% (a 61% increase) in recent years as a stop gap way to generate revenue for the city. But if you look at the time series of parking tax revenue, the $$ collected went up from 30.9 million in 2003 to 50.3 million in 2005: a nearly idential 62% increase. That pretty much is the definition of inelastic demand. When you factor in the higher gas prices of recent years it really has been much more expensive to commute into work in the city. Yet the revenue numbers indicate there has not been any decrease in parking utilization.

Inelastic goods are goods that people are willing to pay higher prices without significantly decreasing their consumption. If the city wants to significantly increase short term revenue, increasing the parking tax instead of slowly decreasing the parking tax may be a good idea. This has the politically beneficial effect of being a tax that disproportionally falls on non-voting members of the public for the relevant city decision makers, as the tax is disproportionally paid by suburbanites.

The best counterargument would be that in the short term, parking demand is fairly inelastic due to the high cost of relocating jobs from a higher cost downtown location to a lower cost suburban location but firms will slowly relocate as their leases expire, expansion plans take hold or their employees revolt.

But the city, if it does not mind stripmining the suburbs, could make a boatload of politically easy money if it could convince the state legislature to allow the parking tax to be set by the city instead of the state mandated drops.

posted by fester @ 17:12