I got the idea to think about this by coming across the latest article on San Francisco’s plan to introduce congestion (demand-based) pricing for public parking spots. These spots currently use coin or card-based payment solutions which are being converted into pay stations in many areas. This is the system where you park and then pay at a central box serving 10-15 cars or so. You can even use credit cards at these, not just coins. For now, the rate is fixed for all times of the day, so this just saves money in maintenance and collection from many individual meters.
Wikipedia does a decent job of explaining the economic rationale of this, but in essence, congestion pricing is the idea of using market economics to better balance the negative externality created by a pricing mismatch of a public good where peak demand outstrips supply of a highly supply-constrained resource. Read the Wikipedia article to get on the economics and academic commentary, since that’s not the point here. My goal here instead is to step away from the rationale for it, provide a little anecdotal evidence in support and brainstorm a few of opportunities I think it creates, expanding on some of what the article mentions.
So as it turns out, the area where the parking system is being taken to the next level happens to be right around building we live in, because it has relatively unique parking patterns with highly fluctuating demand. That’s because we’re in a relatively residential area, not a ton of corporations nearby, few stores and not a whole lot of dinner/nightlife. However, we do live 3 blocks from AT&T park and it’s 82 home games. This poses a unique problem that on many summer nights or weekends, there is huge demand for parking with prices as high as $100 during the playoffs to park for the game.
Conversely, a lot of the Embarcadero (for example) has no cars parked on it on weekdays due to a 2-hour time limit. This is inefficient, because there are many lots and structures which provide daily parking (i.e. demand exists). Sure, the private owners of the lots make money, but this is a clear case where a public resource is not being efficiently monetized. And higher revenue by the city would of course be a net benefit to all, not just to a few parking lot owners.
The proposal therefore is to start charging a market rate for parking in an effort to keep 15% of spaces in a defined area free. Higher demand would cause higher rates and there would also be “sales” when plenty of parking is available. The initial plan sounds like it will still be human-controlled and set in advance of anticipated demand, thus not algorithmically determined in a true market fashion. The city has clearly stated that the rate would both go up and down from what they currently are in a given area. The idea of such pricing is of course not new and already running places such as the London inner city congestion charge, SF-Oakland Bay Bridge toll and highway HOV lanes which you can pay to use in many places.
I of course think this is a great idea, as are all market-based pricing mechanisms. After all, I like free markets like butter on toast. Now to be clear, I have zero personal gain and I singularly support this because this is a net win for all. Furthermore, as I mentioned, I actually think there are some great opportunities for the city, techies, entrepreneurs, app competitions, etc. to make this even easier to use, create higher revenue and be net beneficial to all. SF / Silicon Valley / Bay Area, let’s do what we’re best at – solving problems with technology. Here is my non-exhaustive list of ideas presented as solutions to problems/desires, some of which are mentioned in the article already:
- I don’t know where the open spots are: iPod/Android/web app to find a spot. (tech)
- Payment is a pain: PayPal, Bump, the aforementioned mobile app or other NFC payment solution. EZPass-style is likely not feasible since you’re not entering and exiting one area for all spots. (tech)
- I’ve been circling and can’t find a spot: Virtual cell phone parking lot to get onto a waiting list. SMS is sent when spot becomes available. (tech)
- Ok, I just wanna know when will the spots open up? This is harder to check with digital meters since there’s no clock by each car. Instead, publish this on a web site. (tech)
- I’m willing to pay to guarantee an open spot: Premium parking with premiums that reset every 3 months according to demand. (pricing strategy and maybe tech)
- So you’re willing to let people park longer, how will they ever move? Increase the price of each incremental hour. (pricing strategy)
- People still aren’t leaving their spots on time. Higher fines for not moving your car on time. (pricing strategy)
- But #7 is unfair! App / web site where you can refill for a spot, like already in place in Sausalito. (tech)
- I always forget to go back to my car on time: Charge money for an SMS reminder 15 minutes prior to expiration of the meter. (pricing strategy and tech)
- But I need more time: Again, charge money, maybe 25% more than the current rate and let users pay by phone app. (pricing strategy and tech)
On the more esoteric side and ducking the big brother vigilantes who will surely disagree, I believe all meters need to have space open/full detectors built in, preferably with unique identification of the car in the space. This is pretty common in new parking garages, at least the binary yes/no version, and fortunately the city does plan to do this. Once in place, a whole host of new systems could be built like a much more accurate real-time pricing engine, auto payments when you pull into a spot, etc. Tech will solve it all. Let’s do it. 🙂
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