The regressive nature of parking violations

Parking tickets are irritating. They are especially irritating in Los Angeles where a failure to properly feed your meter can run you nearly $70—and even more if you forget to pay it on time, as I regrettably learned this summer. 

To be fair, parking violations play a necessary role in deterring scofflaws, easing mobility, and creating equitable opportunities for commerce in commercially vibrant urban centers. There is an economic cost for businesses and consumers if parking spaces are not optimally utilized (consumers may waste fuel searching for parking or forgo shopping altogether) and this must be safeguarded against. As we learned from Seinfeld, the scarcity of parking can be the source of considerable agony: 

Comedy aside, there must be a point where the cost of a parking ticket transcends from a socially just deterrent to a punitive and regressive gouge—regressively taxing low income residents who lack access to off-street parking and can least afford to pay.

According to the British Office for National Statistics, a charge is a payment related to the use, and cost, of a service. However, if the charge is above cost, or separate from a person's use of the service, then it becomes a tax. The Economist suggests that cities, in an economically-distorting affront to fairness, are increasingly utilizing "pay-as-you-go government" taxes—like costly parking violations—instead of making tough and unpopular structural changes (like raising the property tax or cutting spending). 

I wonder, at more than $70 in Los Angeles for some common parking violations have we moved past deterrence and into taxation? 

Trends in urban policy 

Donald Shoup, a professor of urban planning at UCLA, has argued that in Los Angeles we are well past the violation cost that would account for the externalities of a parking violation. In 2010, Professor Shoup wrote: 

“Los Angeles…is facing a major budget crisis and increased its fines for all parking tickets by $5, regardless of the violation. This across-the-board hike suggests that the higher fines are more about raising money than about enforcing the law.”

In its move to indiscriminately jack-up parking violations, Los Angeles is not alone. To plug budget deficits after the 2008 financial crisis, many US cities have used unorthodox taxation to raise revenue. In a report produced for the city of St. Louis, the consulting firm Desman Associates recommended setting parking violations at approximately 15x the hourly cost to park and suggested that rates should:

"encourage compliance, but not |appear| overly punitive, potentially deterring people from parking at all.”    

 The following chart shows the cost of an expired meter parking violation in 21 US cities: 

San Francisco has the highest expired meter parking violation. Costing an unlucky or careless driver $72.

Even in downtown Los Angeles, where a parking meter can cost $3-$4/hour, penalties are well in excess of the 15-to-1 ratio suggested by Desman Associates. While the cost of an individual ticket is certainly important, especially for low income drivers, it is only one part of the revenue equation. The other is the frequency of enforcement. 

As of 2013, there were 255 million registered cars in America competing for approximately 800 million parking spaces—an area that if consolidated into one giant parking lot would be roughly the size of Connecticut. In the cities where these parking spaces are regulated, fines typically eclipse generic meter revenue by at least a two-to-one ratio. Therefore, checking meters regularly for violators, not just for collection (which is becoming less relevant as more "smart" meters accept credit cards), is critical to generating revenue. And generating more and more revenue is exactly what these cities have been doing:

• From 2012-13 in Denver, $11.3 million was collected from meters compared to the $30.5 million collected in fines—a 23% increase in total revenue from the previous year. 
• From 2011-13 in Portland, Oregon, parking revenue increased by 31%. 
  
• In Seattle, parking violation revenue amounted to $21 million in 2014—46% more than was collected in 2004. 
• In Los Angeles, expired meter violation revenue increased from $36 million in FY2011 to $45.9 million in FY2013.

Parking meter technology is making it easier for cities to target violators. (Image: marinatimes.com)

In the aftermath of the financial crisis, that cities are collecting increasing amounts of their revenue from parking violations shouldn't be surprising. A working paper from the Federal Reserve Bank of St. Louis explored this topic by examining the elasticity of traffic tickets to county revenue in North Carolina. What they found was that for each 1% decrease in general revenue there was a corresponding 0.38% increase in traffic tickets. It seems that when faced with declining budgets, local governments lean on the revenue streams they can most easily control—and which, unlike traditional taxes, don't have well organized opposition (although I did happen to stumble upon the LA Parking Freedom Initiative which is challenging parking policy in Los Angeles). 

The battering of municipal revenues over the past eight years (which traditionally generate ~38% from governmental transfers, ~23% from charges, ~30% from property tax, ~6% from sales receipts, and ~2% from individual income tax) and the corresponding rise in ticketing across the cities I examined seems to reflect the findings of the Federal Reserve Bank of St. Louis. The chart below shows the amount of parking violation revenue collected per resident in 21 US cities:

NOTE: Cities, generally, do a very poor job of putting parking revenue statistics on the web. For most cities, I was able to use FY13 data. However, even for those cities that admirably disclose this information, they may not break it down in a uniform manner. Therefore, take exact figures with a grain of salt.

Surprisingly, on a per citizen basis, Washington D.C. is above and beyond the most prolific parking revenue generator on the 1.6 million tickets it issues annually (almost $140/resident). Some of this "success" surely derives from their ability to collect on the tickets issued.  To illustrate, New York City issues ~10 million tickets (including moving violations) annually and collects on 89% of them within one year—however, over time the uncollected 11% adds up, with current outstanding debt at more than $746 million. Chicago's collection troubles are starker yet. It issues ~2.4 million tickets annually and has unpaid parking debts in excess of $1.3 billion (Chicago also privatized its meter collection in exchange for a pittance—but that is a story for another time).

What determines a city's parking policy

While many cities have altered their parking policies to generate more revenue (and, in some cases, to decrease congestion and environmental damage), they have done so to differing degrees. What factors explain these variations? 

Could it be political differences? The graph below shows a strong positive correlation between parking violation revenue per resident and the percentage of the city's home county that voted for President Obama in 2012 (which I am using as a proxy for their political variations):

NOTE: my intention is to make this segment (somewhat) accessible to the average reader and is by no means intended to be academic in its verbiage. If you would like my dataset, feel free to email me.

A regression of political variations on revenue per citizen can account for 41% of the variation in revenue and is statistically significant at the 1% level. Why might this be the case? A more liberal city might be increasingly ok with generating revenue regardless of the mechanism and/or a city where the political left dominates may be absent of a strong political opposition and thus able to maximize revenue without fear of recrimination.

Despite a strong correlation, Political variations are likely to be only one part of the puzzle and it may be possible to explain more of the variation in revenue per resident. The correlation matrix below adds the following variables to the mix to explore this possibility: the metropolitan area's median income, the percentage of commuters in the county that take public transportation to work (as measured by the 2010 ACS), the number of parking meters in the city, and the cost of an expired meter violation. 

Interestingly, the actual cost of a "parking time limit violation" (or expired meter) is only correlated with median income and the number of meters. Not public transit or political variations.

From the chart above, you can see that revenue per resident is also correlated (at the 1% level) with the usage of public transit and the median income of the metropolitan area. Why might this be the case? Wealthier cities can afford to pay heavier parking violations and might accept these policies in exchange for more public services and/or where a substantial public transit network exists, a city might increase its parking enforcement to encourage residents to take take the bus or train. 

What happens when you introduce these variables into a multiple regression analysis? 

The usage of public transit--due to its own strong correlation with political variations—loses its statistical significance when it is included in a model with median income and political variations. Excluding the usage of public transit from the model increases its explanatory power from 57.2% of the variation in revenue per resident to 58.3% (with both variables statistically significant at the 1% level). 

Of course, the choice to use revenue per resident as the dependent variable, rather than parking revenue as a percentage of overall revenue (or a similar statistic), may be answering a different question than was intended. That is, it could be asking what leads to higher general revenue rates rather than what leads to higher parking revenue relative to other city specific revenue streams—a quick examination of this does lead to a marginally different ordering of cities, but alas, this will have to be examined more thoroughly elsewhere.  

Why these policies are so bad and what should be done

For every $68 parking ticket in Los Angeles paid for by a resident of the city's poorest neighborhood (Downtown, median income: $15,003) a resident of the city's richest neighborhood (Bel-Air, median income: $207,938) can afford to pay for 14 parking tickets. That wealthier residents are more likely to pay to to put their car in a parking lot or to own off-street parking, only adds to the regressive nature of this municipal revenue stream. 

The owner of this Lamborghini need not worry about collecting a few dozen parking tickets—which would bankrupt that majority of his fellow Dollar Tree shoppers.

This is not to say that cities shouldn't act to reduce overall vehicle traffic. Some cities surely implement their parking policies, at least partially, as a means to influence the behavior of its residents. However, there is a smarter way to do this. 

In some cities, 8% of vehicles account for as much as 29% of all tickets in a given year. It is likely that a substantial number of these drivers are unfazed by their accumulation of fines and are instead calculating the probability cost of being fined versus the cost in dollars and time of finding legal parking. By instituting graduated fines—a system where the cost of the parking ticket would be determined by the number of fines accumulated by the driver—it would be possible to drop the cost of the first ticket while more equitably collecting the same overall parking revenue (if that, rather than identifying another revenue stream, is the city's goal).