July 9, 2014

Dear Reader:
If you incorporate BART in your daily or often-enough travels and are a park-and-ride customer, you have likely noticed that parking prices have been incrementally increasing every six months.  They most recently are scheduled to increase this month to $2.50 at most locations.  Some customers have associated this as price gauging and/or an attempt to find new revenue to pay for BART expenses, including the costly wage and benefits package afforded to BART employees.

It is true that increasing the price of services is often sought for the purpose of revenue generation by different government entities.  That is, when revenues are less than projected, expenses are higher than projected, or there is an interest in making new investments, governmental boards will often approve increasing the price of services to make up for the revenue shortage or cost overruns.

There is also the social engineering approach to pricing.  Some members of different governing boards will support increasing or decreasing prices in the interest of influencing consumer behavior.  In this example of parking prices, there certainly are some who support increasing parking fees based on an interest in influencing customers to use alternative travel modes to access BART.  They figure that if you make driving costly enough, then a sufficient amount of people will stop driving to BART and will instead access BART a different way.  Some even would like to influence drivers to reduce or put an end to their driving, period, so are supportive of anything that makes driving nothing short of cost prohibitive.

I can’t speak for my colleagues on the BART Board of Directors.  But speaking for myself, none of these are the reasons why I supported, and remain supportive of, the increase in parking fees at BART stations.

The reason I support(ed) increased parking prices can generally be associated with my support for what you may call efficiency pricing – which, in this case, is demand-based pricing.

Have you ever arrived at a BART station around 10:00AM or 11:00AM and found that there’s no parking?  One way to fix that problem is through pricing.  Generally speaking, demand pricing relies on the economic principles of supply and demand.  When a commodity, such as the number of parking spaces, is fixed and less than the demand for the commodity, you achieve demand pricing through increasing the price of the commodity until the volume of people willing to pay the given price (as price increases, fewer people are willing to pay) is equal to the volume of the commodity.  The below graph illustrates this with a simplified example of fifteen parkers, all of whom place a different monetary value on getting a parking space, vetting for ten parking spaces.  The art/science is in identifying the price point where demand is equal to supply.

The line on this graph is the efficient price for parking; it’s the price where no fewer and no more parkers demand a space than the volume available (10).  In this example, those parkers who value the parking space equal or higher than the efficiency price of $2.47 will pay for the parking; the rest will not.  What those who will not pay for the parking will do instead depends.  They may stop driving ten blocks to park at the station and start walking to the station instead (this is in fact what we witnessed occur when we first introduced parking fees).  They may take transit to BART instead.  Or they may abandon incorporating BART into their travel altogether.  Either which way, the parking lot still fills while the competition for the limited number of spaces ceases to exist.

However, all this approach does is allow us to fill our parking lots to exactly match predictive daily demand.  And that’s not helpful if we want to afford someone coming to park at 11:00AM the confidence of being able to find a space.  To achieve that, what is actually preferred is to price the parking based on a quantity slightly less than the full quantity of spaces we have.  So, in the above example, we may want to change the quantity we base the price on to seven spaces instead of ten, which would bring the price up ever so much higher, but would ensure parking availability throughout the day for the irregular rider or late commuter.

Achieving this long-term efficiency pricing outcome is why I supported and remain supportive of the demand-based pricing model that the BART Board of Directors approved last year.

To underscore my opposition of revenue- and social engineering-based pricing, I gave a long statement in opposition of the original revenue-generation language of the resolution that came before the Board last year and successfully amended the language of the resolution so that it was more economic-efficiency focused.  Economic-based pricing has market-driven limits; revenue generation efforts have no limits.  I do not believe in turning to customers to make up for poor financial planning, bad labor contracts, and such.  Customers are only responsible for paying for the services they receive at an economically efficient price.  That being said, it is my commitment to not base current or future fare and parking prices on anything other than economic efficient pricing principles.

In accordance with Board-established policy, any and all revenue generated from the demand-based parking program that exceeds the operating costs of providing parking will "only be utilized for station access, rehabilitation, and modernization needs."

At some point, reserved parking will become obsolete if demand-based pricing is fully adopted.  The benefit and intent of reserved parking is to allow park-and-ride customers greater confidence in finding a parking space in exchange for paying for the parking in advance and with an added premium.  However, if parking is to be efficiently priced so that a space is able to be found throughout the day, all that our reserved parking lots do is artificially reduce our supply of daily parking, which artificially increases the demand-based price we would set for daily parking.  And that's not efficiency pricing; it's overpricing.

When we achieve an efficient price for parking, there will no longer be a need to purchase a month's worth of parking in bulk with a premium.  Rather, today's reserved parking customers will be able to confidently find a daily parking space and not need to pay for more days of parking than they may actually use (i.e., as of now, they pay for a full month's worth of parking and don't necessarily park every weekday of the month).

Sincerely yours,

Zakhary Mallett, MCP
Director, District 7
San Francisco Bay Area Rapid Transit District (BART)