Boost The Parking Lot Tax

Seattle should increase taxes on surface parking lots–which sit at 12.5% now–and add a moderate excise tax on vacant lots in order to encourage their owners to sell or develop them as housing, and earn money to fund affordable housing in the meantime. Taxing parking lots will hasten the conversion of housing for cars into housing for humans while making neighborhood more vibrant and pedestrian-friendly. Walking by parking lots isn’t pleasant nor interesting, and it can be dangerous since these gaps in the urban form rarely have people to provide eyes that are on the street. The revenue stream from increasing the parking lot tax and levying a vacant lot tax can be used to fund affordable housing or to boost bus service.

Seattle last raised the commercial parking lot tax in 2010 in order to help fund the Mercer Street project and the Seawall replacement on Elliott Bay. Increasing the tax 2.5% raised $5.4 million that year.

Councilmembers Kshama Sawant and Nick Licata proposed raising it again in 2014 to prevent Metro cuts, but Mayor Ed Murray succeeded in get his plan passed to increase the sales tax and vehicle license fees to close the gap. Those councilmembers contended that increasing the Commercial Parking Tax from 12.5% to 17.5% would raise $13 million that year. We should raise the tax more aggressively to encourage the conversion of surface parking lot properties and encourage housing production even as the housing market cools off a bit.

Seattle is in the midst of a economic and building boom. At The Seattle Times, Mike Rosenberg reported 10,000 new apartments are expected to open in 2017; however, we are already seeing developers talking about throttling down production as Apartment Insights issued “alarming deterioration” reports on the Seattle apartment market both in 2015 and 2016 to much handwringing in the Puget Sound Business Journal. They may have jumped the gun, but they’re going to be right eventually. Booms do not last forever.

Land Value Tax Lite

In effect, a parking lot tax would work like a limited version of a land value tax, which is a property tax levied on the value of the land rather than the improvements. For some market urbanists, a land value tax is the holy grail because of the incentive to redevelop low-value parcels it’d create. Unfortunately, converting to a land value tax is politically fraught and a pure land value tax may fall unfairly on low-income and middle class households. Back in 2014, Sightline Institute did a series on land value taxes (LVT) and their feasibility in Washington state. Their findings suggested a carefully worded LVT could square with the State Constitution’s tax uniformity clause. But constitutionality doesn’t make a land value tax politically likely.

The surface parking lot excise tax could take the place of a LVT and likely extract one of the biggest benefits: converting the lowest value uses for land to higher uses, and it’s hard to get much lower than a surface parking lot in a dense urban environment. Many surface parking lots in Seattle are already controlled by developers who are biding their time for the right moment to build (and some have already pounced). This tax would reduce speculation and nudge them in the right direction so that the wider Downtown area including Lower Queen Anne, Belltown, South Lake Union, and First Hill has would have fewer parking craters.

Vacant Lots May Warrant Action Too

In addition to surface parking lots, vacant lots remain a problem, even in a booming city like Seattle. One prominent example is the City-owned Civic Square site right outside City Hall, which has been vacant 12 years. The site was going to be a 43-story office building before the recession hit and the developer bungled its position and apparently tried to blackmail City Council candidate Jon Grant, and the City entertained the buffoonery far too long. So if the City also taxed vacant lots say within its urban centers, it’d be taxing itself too (as long as the City doesn’t exempt itself). But maybe doing so would light a fire under itself to do something with its underused properties.

A vacant lot tax would keep parking lot owners from avoiding the parking lot tax and continuing to hoard the land by not charging for parking, in effect letting it go vacant. They wouldn’t extract an income so they wouldn’t be happy about it, but they could continue to play the speculation game waiting for higher prices before they sell or build. Policymakers should try to discourage this kind of speculation, too. Landholders can sell whenever they want, but we shouldn’t make it easy and even moderately profitable in the meantime thanks to parking incomes while they hoard empty lots for a big payoff. Thus, to expand the tax to complimentary surface parking lots, we could use a business license tax pegged to surface parking. This business fee would get at companies that choose not to charge for the surface parking they provide to their employees and/or customers.

Parking Ramps

A proposal to tax surface parking lots would likely incite some motorists to sound the alarm and to pen “war on cars” op-eds for The Seattle Times columns or KIRO 7. But let’s remember Seattle has an abundance of parking ramps, many of them City-owned and rarely full, as this online tracker attests. There is an abundance of parking. It’s just not always right where one wants at the price one wants it.

We shouldn’t necessarily let parking ramps off the hook. One option would be to apply the surface parking tax to ramps for the level of parking that is at the street level (possibly via the business license fee). This would discourage the poor urban design of leaving such a boring and noxious use at street level. Presumably, it wouldn’t cut into their profitability so much that ramps had to close so that they could sop up the motorists used to parking in surface lots.

Real World Examples

Portland attempted to implement a steep parking lot tax and has even explored dedicating the proceeds into a fund to spur development on parking lot properties. It doesn’t appear that plan has gone anywhere yet.

Minneapolis also explored a parking lot tax, but ran into the motor lobby or perhaps inertia and couldn’t get it passed. Hence, the city’s 40 blocks worth of surface parking downtown has taken a more leisurely path to develop. One of the major proponents, Councilmember Jacob Frey is now running for mayor so perhaps the issue will garner greater attention.

In 2011 Nottingham, England implemented a “Workforce Parking Levy” which charged employers (with more than 11 spots) $465 per spot and dedicated the funds to transit. The policy raised more than $30 million for transit in its first three years, helping to boost Nottingham’s transit mode share to 40%, which is relatively high for the United Kingdom. As Streetsblog‘s Angie Schmitt reported:

When the idea of a parking tax was introduced, business leaders furiously opposed it and some predicted the city would become a ghost town. Those predictions turned out to be wrong. The number of employers moving into the city is rising faster than before, the Campaign for Better Transport reports.

Seattle should be the American city that clears the political hurdles and clamps down on surface parking within its urban core. Far too much space in the wider Downtown area is dedicated to parking at the expense of urban vitality and the flourishing of humans. Some lot owners would still choose to pay the higher tax, but we’d be pushing the calculus in favor of redevelopment and earn more for affordable housing in the process. It’s a matter of priorities: storing cars in surface lots Downtown is a backwards priority.