What a Price
JUNE 01, 1962 by E.W. DYKES
Mr. Dykes is an architect in Canton, Ohio.
The abandonment of individual responsibility for growing government intervention at local, state and federal levels, with corresponding loss of freedom.
Though the following article deals primarily with the parking problem, the principles outlined are equally applicable to various “urban renewal” projects, municipal fund raising to attract private business ventures, and hosts of other local experiments in compulsory socialization.
The federal government has not yet offered a specific solution to the parking problems plaguing residents in many cities throughout the land. But this would seem to be a probable area of concern to such a federal Department of Urban Affairs as has been proposed.
Meanwhile, a number of municipalities already have entered the off-street parking business, while other cities now—or soon may—face the prospect. That government parking is socialistic is too obvious to deserve argument here. Nor do most of the advocates of city parking facilities need further instruction concerning the relative merits of free enterprise over socialism. Our purpose, rather, is to review how city parking developed and to expose inconsistencies in the arguments of those who pretend to stand for free enterprise while advocating such downtown socialism.
"Downtown" is the kind of a shopping center that was once consistent with the private and other means of transportation and communication then available. Retail businesses were located side by side to be readily accessible to one another’s customers. Walking customers appreciated the opportunity to shop around in one locality for quality and price comparisons. The advent of the automobile brought no sudden change, and it was years before most storekeepers sensed the full import of this new mobilization of customers. Even as the problem grew plainly and painfully evident, few retailers were moved to do anything about it. Why should they? People had to shop downtown! Where else? Competition had not yet forced an adjustment. Not until uptown and suburban shopping centers had developed in record numbers did downtown merchants seriously consider the parking problem. And then, the easy temptation was to ask the city government to do the job. Thus, in our time, do so many erstwhile exemplars of free enterprise realign themselves among the "special interests." Not that they would openly admit self-interest; their stated concern is for "all the people" and the need for quick action "to save the city." Their arguments run like this:
1. The taxable values of downtown will decline, depriving the city of needed revenue.
2. Private parking lots are poorly placed and inadequate; since parking is needed in specific locations, only the city through eminent domain can obtain the proper sites.
3. Private lots generally work on short term leases with no assurance that they will last through the years.
4. Cities with street parking meters already are in the parking business.
5. The retailers and other businesses cannot afford to build parking facilities.
Decline of Taxable Values
The argument that downtown values will decline, with tax losses to the city, seems particularly persuasive against City Councilmen and the general public. They seem to forget that it never has been or will be the main function of any business enterprise to provide revenue for the city or any other tax collector. Also overlooked is that the central business district in a typical city usually bears only about 15 per cent of the municipal tax burden. If the values of existing downtown properties were to decline by 20 per cent and if no new values were created either downtown or elsewhere in the city and if the tax assessor were to recognize this decline, then the total tax loss resulting from downtown deterioration would be only 3 per cent of the city’s revenue. Such a loss would pose problems, of course, but such problems are scarcely of the magnitude so widely proclaimed in the absence of figures. It is not the sort of a crisis that demands action without full consideration.
Furthermore, studies conducted by the Urban Land Institute reveal that the cost of servicing downtown areas generally exceeds the taxes collected from those areas—a possible reason why a city might want to do away with downtown instead of renewing it.¹ However, such a decision, if left to the market place rather than City Hall, allows individuals to support downtown’s high costs with their own money if they so desire.
Finally, if the friends of downtown are sincerely concerned about the city’s loss of tax revenue, let them insist that the tax appraiser list the properties at their true market value rather than the ridiculously low figures now used in so many areas.
The Problem of Location
The argument that private parking lots are poorly placed seldom comes from those who have their money in the parking business. Market considerations determine the placement of parking lots by private owners. Such owners undoubtedly try to get the best possible locations, depending on the availability and the cost of the property, and the probable use of the facilities to be provided.
The proponents of eminent domain contend that parking lots should be located in some precise relation to the business pattern. But what they say in effect is: "Our businesses are more important to us (and to the ‘public good’) than their businesses are to the owners we would displace in order to establish parking lots. The fact that they might not want to sell is unimportant; under eminent domain they get paid what the court decides is a fair price and we get the parking lot."
Periods of Peak Demand
The charge that private parking lots are inadequate is based in part on the fact that the lots (poorly placed though they be) sometimes are filled. This makes them just like any other business in which there may be certain peak periods of temporary demand. If it were economically feasible to have facilities enough to serve such peak demand, it would be done. It is no more reasonable for the city to build parking lots to care for peak loads than it would be for the city to build banks to prevent having to stand in line to make a bank deposit.
In this automobile age, any loss of business in downtown areas for lack of parking space is the problem of those who are losing business and who are unhappy about it. If downtown merchants failed to advertise, they also would lose business and downtown properties would lose value. Yet, no one proposes that the city start a newspaper to carry subsidized ads for the failing merchants. Nor has it been suggested that the city offer an advisory service on downtown merchandising and displays in order to attract lost business and uphold taxable values. It is simply proposed that the city provide parking space, on the grounds that cities are doing it and that leading citizens have given months of study to the matter.
That there is no guarantee of the permanency of private parking locations is true enough. No business can guarantee its permanency. A privately operated parking facility will be available only so long as it is economically justified and pays its way. Restaurants, banks, dairies, and other businesses eventually close if they fail to show a profit. So do parking lots.
We Can’t Afford It
To point out the socialistic character of city-operated parking lots often brings the rejoinder that the city already is in the parking business with street meters. But in this kind of a game of words, it may be possible to point out that the city is not yet in the parking lot business. Whether streets should be used as parking places is another question.
The argument that merchants can’t afford to build parking facilities, either as a current outlay or with borrowed funds, raises serious doubt about the advisability of calling on the citizens to do it for them. In a free market, the price of a product either covers all costs for labor, materials, taxes, transportation, advertising, and other overhead, plus a profit for the seller, or else he is eventually out of business. If parking is necessary to the business, the price of the product should be sufficient to cover the cost of the parking space.
The name of a familiar city often creates a mental block: in their mind’s eye, people see the downtown buildings and unconsciously assume that downtown is the city. But downtown is neither the city nor the city government, and merits no more consideration from city government than does any other interest. Downtown is merely a shopping center in which appear retail, wholesale, and service industries in competition with one another and with others in the city and its suburbs. City governments, established primarily to assure to all the equal protection from violence and other illegal practices, tread on thin ice when they start protecting a select group from the rigors of competition. Businessmen who urge the city to do that are turning their backs on the system of competitive private enterprise that they otherwise strive to preserve. How long can they expect their own enterprises to last who continually look to government to bail them out of competitive pressures? How can one respect a self-righteous prohibitionist who always keeps a flask handy in his hip pocket?
Consider the plight of the privately operated parking lots if the city enters that business. If city owned lots are established, any success they show must be in part at the expense of privately operated lots, which are not always full, even in the cities supposed to have the most serious parking problems.
If the city enters the parking lot business, it probably would frighten away any new private facilities, for an owner never would know when the city might decide to "sit down beside him." In that event, the discovery that both ventures are losing propositions would come too late. Then would come the attempt at salvage, the inevitable price-cutting, the private competitor eventually losing out to the tax-supported venture. The more the private operators are thus squeezed, the greater grows the "need" for expanded city facilities—an irreversible process. Once the city enters the parking lot business, it should be prepared to assume responsibility for meeting all parking needs.
Tax-Exempt Municipal Bonds
If new parking lots really were needed, and could compete successfully with present lots, businessmen should have no fear of putting their own capital to that purpose. Instead, many are saying that the costs of providing parking are too high for them, but that someone else should be willing to do the job. Unwilling to invest their own money in taxpaying parking lots for taxable profits, they think others will want to invest in tax-exempt municipal bonds for tax-exempt parking facilities in the same towns with the same problems and chances. This aspect of the problem deserves careful attention.
Tax-exemption of municipal bonds serves to direct investment funds into channels which cannot and will not contribute to the growth of private enterprise or help preserve a free market economy. Moreover, the exemption granted city-operated businesses merely transfers more of the total tax burden onto the taxpaying private enterprises that remain. The heavily taxed individual, attracted by the prospect of tax-free income from municipal bonds, often fails to see that he is paying for it all in the end. If all investment income were taxed equally—or were equally exempt—then each investment opportunity could be judged strictly on its own merit. Meanwhile, it would seem wise to limit municipal bond issues and rely primarily on private enterprise in a free market to guide investments into proper channels—namely, those which most efficiently serve the ever-changing demands of consumers.
Providing Parking Space Is a Cost of Doing Business
One thing consumers demand today is parking space, which makes parking a part of almost every businessman’s problem. If consumers will not support higher prices for the privilege of parking and shopping downtown, then the need for downtown is open to question.
To inject the power of government into so highly competitive a situation is bound to influence the course of enterprise. Suppose, for instance, that in the face of the competition between automobiles and horses early in this century, society had intervened to prohibit autos on highways or to subsidize blacksmiths. Either step could have slowed progress for who knows how long. Was it wrong to leave that worthy citizen, the blacksmith, at the mercy of the advancing auto industry and the consumer?
In the competition between merchants today, with the automobile an important factor, the free market should be relied upon to guide the outcome. This may mean that some merchant downtown will not make the grade, and will go the way of the blacksmith who couldn’t compete. Such weeding out of failures is a vital function of a free market, and the soundness of an economy depends upon it. If downtown is not the proper place for a shopping center, artificial preservation only prolongs an unfortunate situation.
The regional shopping center is proclaimed by many as the wave of the future, but such a prediction is hazardous in our rapidly changing times. For all I know, we soon may be shopping by color television for deliveries by pneumatic tube. Fantastic? Perhaps, but who would have believed 25 years ago that you could sit in your own home and see a Broadway production in full color at the instant of its performance? If society had urged its protective agency, the government, to interfere in the competition between radio and television, it is likely that TV might still be a dream instead of commonplace in the household.
Where Does It End?
The basic question is this: Just what problems of its citizens ought a city government not attempt to solve? If it is proper for government to enter the parking business to preserve taxable values, why shouldn’t it also enter the advertising business, advise merchants on purchasing and sales techniques, furnish attractive new store buildings, and help in a hundred other ways to raise taxable values to gain more revenue to do more things for more people?
The costs of government per person in the United States have advanced from less than $20 in 1900 to about $800 today—the lengthening shadow now covering more than a third of typical family earnings. A local businessman might laugh at the infinitesimal additional tax cost for municipal parking lots in his town. Yet, the total cost for similar facilities in all cities, plus the cost for federal and state and municipal aid for all other projects that could qualify under the parking-lot principles he endorses, surely will lengthen the shadow significantly.
The best control one has over such things is in his own city. If he has principles, there is nowhere else to apply them. How can free people remain free if they persist in forging their own chains? Only as we assume full responsibility for our own selves and our own problems do we count as defenders of a free society—entitled to its blessings.
¹ One of the high costs is for the fantastically expensive freeways through downtown areas, the need for which might soon disappear if the current evolutionary pattern persists.
The First Duty of Citizens
It is proper to take alarm at the first experiment upon our liberties. We hold this prudent jealousy to be the first duty of citizens.
The freemen of America did not wait until usurped power had strengthened itself by exercise and entangled the question in precedents. They saw all the consequences in the principle and they avoided the consequences by denying the principle.