Oldest park-and-ride debate rises up again: To develop lots or not to develop?

Jarret Walker over at Human Transit just laid out an argument to develop park-and-ride lots. It's a classic value capture scenario because the agency already owns the land and gets to charge the vertical developer for use of the property. There's more to Jarret's arguments than one might read, and even more nuance to interpreting the ideas than Jarret might have intended. Here's some of Jarret's argument:

Let's start with the basic math.

•  - Really great transit generates high land value around stations.  
•  - Free parking presumes low land value around stations.  

It's a contradiction.
When a transit agency provides free or underpriced parking at a station where the land value signals that there is a higher use, it is subsidizing motorists in two ways.  First, it is forcing a low-value land use to prevail over a high value land use, and second it is making a much bigger investment in access by motorists than it makes in access by people who get to the station in other ways.  I am using the word subsidy in exactly the same sense that any other artificial limit on price is a subsidy.

Well, there are some nuances worth discussing if we're thinking about applying this generally across the U.S. context. For example, he uses "really great transit" to qualify what generates high land values. The United States doesn't actually have a lot of really great transit out there. Therefore, I wouldn't expect there to always be a high increments of value generated by transit.

Second, presuming low land value around stations makes some sense. As noted above, there's some pretty bad transit out there (that doesn't add much value) and some pretty low land values in the United States. Sometimes the two shall meet. Therefore, in the U.S. context, presuming low land value around some transit stations is appropriate and assuming high land value around all stations is inaccurate. In many cases, a surface parking lot or a structure parking facility could be determined to be the highest and best use of the land around a transit station.

Additionally, there are some fundamental issues with the relationship between parking prices, land values, and higher/better/optimal land use set forth in the argument. For one, relying on land value to signal when there is a higher use is not a very useful statement because it is so difficult to quantify such things and land value may be an inaccurate measure of higher/better land uses. We generally don't see public or private institutions accurately quantifying land value because it's data intensive, relatively difficult, and highly volatile. In fact, people generally talk about land value in hypothetical or relative terms. So, unless your in the rare county that is required to maintain updated land value assessments, you're relying on instincts and best guesses to determine land values. Also, it's not so easy to use land value to determine when there is a higher use. For one, there are no hard and fast rules on what land values correspond to what land uses. Further, the value of a parking lot to a transit agency or to society may not be fully reflected in the land value and it might be the case that a parking lot is an optimal use from some perspectives (though not Jarret's).

There's certainly an analysis that can be done from the transit agency's standpoint to determine if a "higher use" exists besides free or "underpriced" parking (it's much harder from society's vantage point because of all the variables and the subjectivity of many of the measures). To argue for the reduction in ridership at stations that might occur after replacing park-and-rides with development (see Duncan's work for a grounded scenario or Levinson's back of the envelope argument that refers to Jarret's post), you'd have to argue that the dollars paid by the vertical development more than offset the loss in fares and ridership-based subsidies earned by the transit agency (recall that transit subsidies in the U.S. cover capital costs and operating costs largely based on ridership numbers--arguably a poor practice but our current reality nonetheless). Essentially, the vertical development can pay for access to the land and more. As noted above, there are many stations located in places where land values are low and vertical real estate development is financially infeasible such that real estate subsidies would be required (hence all of the direct TOD subsidies, tax credit programs, etc.).

Finally, saying that free or underpriced parking is making a higher investment in parkers than other riders could also be described as price discrimination, a regular practice (e.g., cable bundle prices) that respects the demand curve to optimize efficiency and revenue yield. Consumers' demand for for goods and services varies. Some are willing to pay more and others less. To serve more, you can lower the price for everyone (e.g., free transit) or you can discriminate by offering different prices to different people. Those people who drive to a park-and-ride facility are exhibiting one willingness/ability to pay while those who take the bus to the station are exhibiting another willingness/ability to pay. With different options, transit agencies are able to cater to different market segments while maximizing ridership and maybe agency revenues (including subsidies). Furthermore, to offer different options for transit station access, including appropriately priced parking (which is sometimes free in the U.S. context), is the same argument that transit advocates often make for offering transit as a travel option more generally.

Please let me know if you find other issues with these arguments, mine or Jarret's.