Sunday, October 4, 2015

Consider the Penalty of Free Parking as Employer Tax

Cherriots' proposal to fund evening and weekend service has roused, it seems, tremendous attention seemingly out of proportion to the the measure's actual impact qua tax. Its effect as an "employer tax," with the heavy implication that it's "jobs-killing" and "anti-business" is front-and-center.

Instead of arguing against that, let's simply take that claim at face value, and then let's look at a different "employer tax," one whose magnitude I suspect dwarfs that of the proposed payroll tax.

This will be a crappy first-order approximation, do note! I don't know the best way to make this analysis and argument, and I hope that you will be able help. Others must have made similar arguments before in other cities - Shoupistas? - and there must be at least the rudiments of a better analytical procedure out there. So if you know of a better way to run the numbers, please chime in! Maybe we can refine this with another iteration or two.

One important factor that hampers our ability to talk about funding transit is that the system of auto subsidy is invisible.

Here's a lot.

Lots of parking lottage!
You might recognize it. If you do, you'll know why it is the example. If you don't recognize it, that's fine. We are not going to argue here about any particular business owners stance or activities on the Cherriots measure. (So please keep comments on the analytical procedure, not on naming the owner or speculating/commenting on any personal motives. Policy, not people!)

One thing that is striking: About 3/4 of the land is devoted to free car temporary storage. In a different market the stalls might generate hourly revenue, or there might be fewer stalls and more building, with more room for the business or for a different business. The opportunity cost of not using land for something other than parking is non-zero.

Subsidizing free parking is a hidden tax on business.

According to the assessor's office on this parcel:
  • Real Market Value of Land = $476,930
  • RMV of improvements = $694,660
(That's a Land:Improvement ratio of 0.69, by the way.) The most recent taxes on the property were $18,229.71, so that means about $7,221 was on the land. And if you agree that 3/4 of it is parking lot, then the share of taxes on the parking lot itself (distinct from the land under the building) was about $5,566.

The business and property owner must also allocate some annual budget to maintenance and upkeep of  the parking lot. I don't know what a good swag for that is. But it's non-zero. Let's say one hour per week for leaf-blowing and drain-clearing at $10/hour. So that's a little over $500 a year.

So if we round things, that's about $6,000 per year in taxes on a parking lot all by itself.

Now that's an Employer Tax!

If business owners find onerous the prospect of a payroll tax to fund evening and weekend transit service - something that Eugene and Portland do, and they enjoy much better transit than does Salem, so the Salem opposition also bucks local convention - then how much more onerous should they find the current system of parking subsidy?

And if you agree that a parking lot represents an inefficient use of land, we should want to invest more in transit so that parking lots and other wasted land can be put to more valuable use, enterprises that generate private profit and public tax money.

How much does this thing cost to build, operate, and maintain?
How much revenue does it generate directly?
It seems like as a matter of policy, even if the trade-off of better transit and less parking lot is not obvious, at least it merits a much closer look. Customers, after all, can arrive by bus just as well as by car, and if we had a better transportation system that meaningfully offered a full range of choices, we could reduce the amount of wasted space we devote to car storage. Land devoted to free parking is a drag on the local economy.

If funding transit seems anti-business, how much more anti-business is our autoist system of car subsidy?


Anonymous said...

I agree with the basic thrust of your analysis but on this particular issue I think it misses the most important point. This is a moral issue about allowing the least fortunate (the transit dependent) to fully participate in civic life in Salem.

There is no sound business reason (at least in the short term) for Ventis to support expanded transit service. Because of Salem's long term planning failures, this location is a repulsive environment for walking and biking and none of their customers or employees are likely to expose themselves to it by taking transit. Weekend and evening service won't change that. Their business is completely dependent on parking for the rest of their lives. Commercial will never be a walkable place in our lifetime.

In my view, because of the crappiness of the built environment in Salem, transit only serves the least fortunate that are dependent on it. That makes it a moral issue. Are we going to give these folks the chance to participate in civic life or not? Are we going to give them the chance to improve their situation or not? Those are the questions Ventis should be asking.

The only business reason for them to support expanded transit is that it would enable higher density, more walkable development patterns that will lead to increased opportunities to expand their business in the long term. But Salem won't have anything like that in our lifetimes.

I'm more interested in what a business like Straight From NY Pizza might have to say. They have 3 locations in Salem and 2 in Portland. The .07% payroll tax for Trimet did not deter them from expanding there. Or maybe Exit Real World? They had stores in Salem and Portland. They paid .07% on their payroll in Portland and paid 0% on the Salem location but they were able to keep the Portland location open and closed the Salem location. Or Holiday Retirement?

Jeff Schumacher said...

I'm most struck by the business community's (read: Salem Chamber of Commerce) support for the third bridge and their opposition to the payroll tax. To me, it simply exposes them for what they are: a special interest. And as a special interest, everything they say should be taken with a grain of salt. But in Salem, the people in charge seem to take everything they say as the Truth.

Supporting the third bridge means support for a project that would cost somewhere in the neighborhood of $500 million. And that money would come from several taxes, including property taxes. Yet apparently to the Chamber, those taxes will spur growth that will more than make up for the $20 million or more that it will take each year to service the debt on the third bridge. But $5 million a year in payroll tax? It will kill jobs and kill the economy! To me, their mixed messages don't add up. They want us to believe that a giant infrastructure project designed to steer traffic through Salem will somehow benefit us all, yet a modest payroll tax will destroy our small businesses.

I'm all for better understanding the pros and cons to the payroll tax, but I'm wary when the cons are coming from the Chamber especially given their stance on the third bridge. It reminds me a bit of the United States Chamber of Commerce messages during the Obama administration. Every policy introduced by Obama, particularly the Affordable Care Act, is going to kill jobs! And the evidence just hasn't shown up. But their fear mongering about the effect of taxes on the overall economy just continues. And the Salem Chamber seems to use the same playbook.

Anonymous said...

I live in Keizer, and I have taken the bus both times I've been to the S Commercial Ventis . I won't ride my bicycle in that area (mind you, I ride to Fairview Industrial 5 days a week), and would be likely to visit more if I could go on weekends. You are right about the area being unwalkable and unbicyclable, which is what makes Cherriots of particular value...especially to businesses along the #1 route. Perhaps instead of rationalizing, it is time to test: start asking customers IF they use transit, or if they ever would.