Monday, November 13, 2006

The Cost of Parking

A recent article in the Plain Dealer about the Cleveland Clinic got me thinking: what does parking really cost? The Clinic is prepared to spend $170 million to build a 4000-space garage on its campus. That strikes me as a heck of a lot of money just so people can park their cars.

But is it? What does parking really cost?

Let's start with the Clinic's example. A $170 million garage with 4000 spaces costs $42,500 per space (that's 170,000,000 / 4,000 for everyone out there without a calculator). Furthermore, let's say the Clinic borrows the construction cost over 10 years at 4% interest (not compounded, though). That's $198,875,955 altogether. Furthermore, let's say the Clinic wants to recoup its construction expenses within those same ten years. That means they need to take in $19,885,595 per year. They can distribute that cost through a mixture of monthly and per-hour rates. If half the garage (2000 spaces) has monthly folks, and the other half (2000 spaces) are 100% occupied during 8 business hours 250 days a year, how does that add up? If they charge $100 per month for the monthlies, they'll pull in $2.4 million. They'll have to cover the remaining $17,485,595 with per-hour fees. Given 4,000,000 occupied parking-hours, they can charge $4.31 an hour. Not bad, actually! Of course, I didn't figure in operating expenses (someone has to man the little booths!).

Of course, Steven Litt's article also points out that the Clinic's potential for expansion is limited in the long run. Although they have plans for plenty of new buildings, the Clinic, much like Case Western Reserve University, may eventually find itself out of space. What is the opportunity cost of the new parking garage? For that matter, what happens when the new 4000-spot garage is maxed out? Do we keep expanding automobile infrastructure to meet demand, or do we reconsider passenger vehicles as the preferred method of transportation? While ODOT busily adds lanes to I-77, I wonder if in the long term we are setting ourselves up for more problems...


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