Recently, the Federal Reserve Bank of Minneapolis proposed the building of an 800-stall parking ramp on land that it bought in April of 2018. The land is currently a 300-stall parking lot that is adjacent to the Fed campus. As my colleague Alex Schieferdecker discussed in his article on Tuesday, the proposed “Heritage Landing Parking Ramp” would very likely increase driving, increased driving increases greenhouse gas emissions, reversing progress on Minneapolis’ climate action goals.
There is a lot to be said on how this proposed parking ramp could set the city and planet back. But what about the people who are being subsidized to drive? What are the direct costs to Fed employees who are incentivized to drive?
A back-of-the-napkin cost-benefit analysis
What is the current cost of driving and parking at the Fed compared to riding on Metro Transit?
For a typical employee who may currently drive, let’s start with a home in Wayzata and a destination of the Fed campus in the North Loop. It happens that Wayzata has a transit center where the 674 express bus stops. From the transit center to the front door of the campus by 8:00 AM is 36 minutes of riding and walking from the bus stop. Driving would take up to 35 minutes, not including time to park and walk.
So from a time standpoint, both options are pretty even, depending on traffic conditions. The opportunity cost of punching the clock earlier one way or another is hard to tell.
Other costs for this employee for driving would include gas, parking fees, insurance, and vehicle registration. For a small sedan like a 2018 Ford Focus, gas would cost $1.63 for 25.2 total miles at $2.00 a gallon, the cheapest parking is $5.00 per day, $4.83 per work day for auto insurance, and $0.88 per work day for vehicle registration. That’s a total cost of $12.34 for choosing to use a car to get to work.
What’s the direct cost to ride Metro Transit? There is a great option for everyday commuters: the unlimited rides monthly pass. For $120 per 31-day period, riders can go on unlimited rides up to the rush hour fare of $3.25, but not higher like with Northstar. The cost per work day of using this unlimited pass is $5.42, less than half the cost of using a car. Making things even better, the Fed subsidizes more than 60% of the cost of a Metro Transit cards for employees.
So why is the Fed building parking?
As Alex talked about in his article, it is likely that Fed leadership have a ”windshield mentality“, that they literally see the world through a vehicle’s windshield and don’t experience what employees who ride on Metro Transit experience every day.
The Fed is not building this ramp because there are no other options to accommodate the travel demand of their employees. They are almost certainly building the ramp because the organization’s leadership (who, are demographically more likely to drive) have a “windshield mentality.” They drive and park, and they hear complaints from their immediate staff about the costs of driving and parking. They don’t hear as many complaints about transit (and don’t consider why that makes sense—they don’t run the transit system!) But demand for parking is not a constant that must be met, it is a highly elastic variable that can be manipulated. Providing a lot more convenient parking is a choice, not an obligation, and the research shows unequivocally that it is certain to only increase the incidence of driving, to the detriment of the planet.
But there also is the Fed’s private interest. Like all private banks and government agencies (of which the Fed is is neither), the Fed has a budget and that budget includes revenue from parking. The Fed operates two parking lots right now, a small lot of about 200 stalls on the campus proper, and the 300-stall parking lot acquired in April 2018, which they want to build the ramp on.
The problem facing the Fed’s employees, and neighbors, and the planet is that every time an employee takes the bus, the Fed loses by paying out a subsidy. Every time an employee drives and parks on a Fed parking lot, the Fed makes money in avoiding subsidy and earning rent on the parking stall. Going back to our quick cost-benefit analysis from before, if the Fed is subsidizing 60% of the cost of Metro Transit, and they can charge market rate $5.00 per work day for parking, then for every employee they can convince to switch to drive instead of ride, the Fed marginally makes $8.25 per day per employee who makes the switch.
Unlike private banks, the the Fed mostly holds Treasury bonds, and by law returns the interest it receives on those bonds. For an institution short on ways to increase revenue, building a 800-stall parking ramp looks like a great option. The Fed has a private self-interest in increasing the use of parking on its parking infrastructure.
So what can we do about the Fed’s self interest?
For the answer to this question, I refer you to a quote from the Fed’s own meta-analysis on climate change economics research.
“The message of these analyses is that decentralized mechanisms are likely to lead to poor outcomes in the presence of global externalities. Some form of collective intervention is needed. This collective intervention can be thought of as limiting property rights or as limiting the extent of voluntariness in transactions.”
The Role of Uncertainty and Risk in Climate Change Economics, Page 6
V. V. Chari
University of Minnesota and Federal Reserve Bank of Minneapolis
Staff Report 576 December 2018
In the forums and on Twitter, many have issues with zoning. The case of the Heritage Landing Parking Ramp is a great example of where zoning can make a positive difference for development and combating climate change.
The lot is currently zoned C3A Community Activity Center District with a DH Downtown Height Overlay District. With those two designations, a mixed-use housing development of up to six stories could be built with no variances needed, and if a compelling project were to come forward, we could theoretically have a far denser development with affordable housing.
Now is the time to get involved. There are upcoming meetings of the City Planning Commission and the Park Board where this proposal will be discussed. I am told that it will be February 25 or March 11 for Planning and February 20 for the Park Board, although those dates are subject to change. Email your local representatives on the City Council and Park Board and let them know how you feel about the proposed parking ramp. You can also email City staff to add testimony to the public record.