Economics of the Curb

As this scenario illustrates, administrators and officials around the world often have conflicting KPI‘s and goals to meet, while ‘value’ is often created for a department or level of government other than the one whose budget is funding the initiative.

Increasingly, cities have sustainability measurements and outcomes connected with reduced vehicle emissions, but curb revenue is still largely dependent upon car parking, either as user-pays fees or infringement fines. Of course, fines and parking fees are important behavioral economic methods for effectively managing a city’s supply and demand of curbside space; they are also an important revenue stream for maintaining assets and investments in new transit technology.

But as trends and strategies to reduce single use private vehicles in cities continue, why can’t we have more diverse curb economics that foster a more collaborative ecosystem of benefits realization?

Factors Limiting Diverse Curb Economics

Multi-Jurisdiction Asset Ownership

The ownership of roads and curbs has long been complicated and thorny. For example, congestion busting plans that a state or federal government develops may involve the removal of paid parking spaces controlled by the city authority.

I recall when I was Deputy Secretary of an (Australian) state government transport agency, an element in the congestion strategy was the removal of 18 parking meters along a key arterial. As the roads and parking meters belonged to the city, and the revenue loss would affect their budgets, this was not an easy, nor inexpensive negotiation.

The question of ‘who pays?’ arises and where the value is created has led to protracted and often thwarted traffic management. While the federal or state government quite rightly doesn’t want liability for local roads, there needs to be increasing recognition that there is a collective value to utilizing curbs in a smarter way. 

The advantages of reduced congestion, reduced emissions and improved customer experience need to be valued and monetized to counter the arguments around parking revenue loss. 

The levers of federal (such as US DOT/FTA) and state grants, tax incentives, and development codes for parking numbers go somewhat to addressing a more multi-jurisdictional approach. The creation of economic vehicles such as Business Improvement Districts and Councils of Government can also incentivize multi-jurisdictional benefits realization.

Lack of Performance-Based Pricing

In his Pricing Curb Parking article Donald Shoup models the effect demand-based pricing for parking has on congestion. As featured in the January 2022 issue of Parking & Mobility, he also debunks “30% of congestion caused by cruising.”

However, I am more interested in the dynamic market driven pricing that, with better occupancy information and variable payment technology, cities could subsidize reallocation of curb use by charging more for premium parking assets. 

Shoup prosecutes, “But if cities charge demand-based prices for curb parking, how will drivers choose where to park, and what will they pay?” He poses that, “Short-term parkers, carpools, slow walkers, and drivers with a high value of saving time will park closer to their destinations.” 

And thus, be more willing to pay a premium.

Too often parking rates are set at a zone level, whereas there may be parts of the city that could command higher prices at certain times. 

The developments in technology, particularly digital inventory and mobile payments, allow the management and communication of a dynamic pricing scheme more achievable.

Monetization Barriers

With the proliferation of urban freight deliveries and shared ride services, a lot has been said about the monetization potential of pick-up and drop-off zones, commercial permit zones, and bookable and payable loading zones.

Companies such as Vade and Grid Smarter Cities are working to monetize commercial use of the curb. Vade hypothesized in a perfect world of 100% compliance there is a latent opportunity of $7 billion across rideshare services, parcel delivery and on-demand food services. But in accessing this revenue source, many cities will need to pass new policies as well as adopt new innovative payment technology and incentive structures. 

And the commercial use of curbs is growing. We now have semi-autonomous delivery robots driving the sidewalk to deliver food, and we will have drone delivery services becoming ubiquitous. What opportunities will there be for cities to monetize the air rights over the curb as well as the landing hubs? What access fees are / will sidewalk robotic deliveries pay to access curb infrastructure?

Benefits Realization and Value Capture

While large transit and road projects can create land value and foster private/public partnerships, these are often greenfield projects and probably don’t help Jerry fill his budget deficit.

Indeed, much of the value created by an effective transport and parking strategy can be seen in intangibles like Civic Dividends. I like coming here. I like living here. I can access services I need easily. I’m not stuck in traffic. These intangibles could/will translate into increased economic activity, improved health outcomes, urban growth, meeting sustainability outcomes. Yet, cities need to recognize the cost of operating an effective parking and transport strategy can no longer just depend on citation or infringement revenue to fund it, it must also come from the benefits reaped elsewhere.

And what value is created by the good reputation of your city? I’ve never forgotten a conversation with an Australian Mayor when I was first looking at digital and mobile parking solutions. I explained how convenient it would be for people to renew parking payment if they were running late to avoid a fine. 

He turned to me and said, “Why would I want to do that?”

“So, people have a good experience,” I said.

He replied, “A lot of the people who pay for parking here are visitors to our beach and they don’t vote for me, so why would I care?”

“Departmentalism” 

In our scenario, Jane’s efforts in transportation and parking may have reduced her revenue but created real benefits for other areas of the city like the office of sustainability, community engagement, and the economic development office. So how is this recognized and compensated?

Obviously, for a city to achieve sustainable goals in their priority areas, a leadership team that understands and incentivizes a holistic benefit realization program is crucial. Often, cities establish a leader to support and build consensus among departments in the development of work plans and associated budgets necessary for citywide implementation of initiatives. This can only work in my experience if this person/team is C-Suite and is given the imprimatur of the CEO/Vice President and the government of the day. And can reallocate budgets.

This can take various forms, including a “Future City” or “Smart City Department” or increasingly a Sustainability or Resilience leader. 

I recently came across a city that is setting up a department  which to paraphrase is, “Focused on interdepartmental coordination, regional alignment and new policies and ordinances…and facilitates innovative efforts across multiple City departments to enhance equitable, economic, social and environmental sustainability,” seems to be addressing “Departmentalism”. It goes on to state, “Changes in land uses…promotion of active transportation, and changes in parking rules and standards will all contribute.”

Jane would be happy there.