BSBA, MBA, Certified Public Accountant (CPA), Certified Management Accountant (CMA),
Certified Management Consultant (CMC), Certified Internal Auditor (CIA), Certified
Government Financial Manager (CGFM ), Certified in Financial Management (CFM)
Chief Financial Officer, Alameda-Contra Costa Transit District, Oakland, CA, 1995-1996
Chief Financial Officer, Southern California Rapid Transit District (now Los Angeles
County Metropolitan Transportation Authority), Los Angeles, CA, 1989-1994
Partner, Founder and Director, National Transit Industry Practice, Deloitte Haskins
& Sells (now Deloitte & Touche, LLP), San Francisco and Washington, DC, 1974-1989
Email: "Thomas A. Rubin" <email@example.com>
4. Subsidized parking – This is a most interesting issue, with the major questions
being, is there really a subsidy, and, if so, who is paying it? The answers can
I would generally agree that there is a significant public sector subsidy for curb
parking. From a market standpoint, this is easy to prove because, in many areas,
there is virtually never any unused space; the obvious conclusion is that curb parking
is underpriced, which in market terms, is a subsidy. (Note that I am here using
subsidy – a difference between market value and price charged – with a different
meaning than I had previously – difference between operating costs and revenues covered
by taxpayers. The general concepts are not different, the calculations and values
produced are; it is even possible to, using these different definitions, have a subsidy
by one definition but not by the other, which is what generally occurs with curb
parking. While it may seem that using two different definitions for subsidy is changing
the rules, I believe that the difference is valid for the way I have used them here,
which is to focus of the propriety of government decisions by using a valid quantitative
I agree with Donald Shoup that curb parking should generally be priced to produce
a small but regular vacancy rate (he suggests 15%). This will ensure that parking
is available for those who want to use it and are willing to pay the price and, more
important, will minimize cruising – people will quickly see the opportunity to buy
at a stated price and will either park quickly, drive to a more remote parking structure
(presumably at a lower cost because it is not as close to the destination), or forgo
Now let's shift to other types of "free parking," such as that at shopping malls.
Let's examine a variety of different takes on the questions of, does a subsidy exist
and, if so, who is paying it?
First, in most such situations, I would argue that there is NOT a public sector
subsidy because there is no tax money or other public sector financial support for
the costs of building the parking lot (recognizing that there are exceptions to this
statement where, for example, the public sector does build, and does not charge,
or does not charge sufficiently to pay all the costs of, the parking facilities –
I am generally not in favor of governments getting directly into the parking business
unless there is a valid public purpose, and providing subsidized parking is not one
that I favor).
Next, is there a subsidy by the business and/or landlord (that may or may not be
the same party)? If they are doing it right, and the market is working the way it
should, generally speaking, no. These are costs of doing business and prices of
the good or services in the store, and the rent the store operator pays, reflect
Well, are the customers, collectively, paying a subsidy? No, collectively, they
are paying the costs for the provision of the parking facilities and, in the larger
sense, not paying too much or too little (most certainly, in certain specific situations
at specific stores, they may be over or underpaying; for example, in bad economic
times, the customers collectively may be underpaying because business is off, the
parking lot is never full, and there is no effective way that the costs of the goods
sold can be raised so that the business can "break-even" on the parking costs).
Getting into more detail, are there cross-subsidies between customers? Here, I
agree, there are. Let's say we have two groups of customers, one of customers that
drive to the store and park in the lot and the other that walk to the store and,
therefore, have nothing to park. Unless the store is charging more for goods for
those that park in the lot – something I have never seen actually happen, although
there are some retailers that do charge for parking – then both groups of customers
are paying pretty much the same for parking, if they use it or not. In this situation,
the walk-to-the-store customers are subsidizing the drive-to-the-store customers.
But, this does not mean that the walk-to-the-store customers are harmed. In fact,
they may be significantly advantaged.
The reason is, stores that deal with walk-to-the-store only customers must draw
them from a fairly small area, compared to stores that also have drive-to-store customers
– and generally will be smaller in size and offer fewer choices to their customers.
Larger stores can also get better prices for what they buy. Therefore, a walk-to-store
customer that shops at a store with parking will be able to choose from a larger
selection of goods, often at better prices – and, therefore, even if the walk-to-store
customer is subsidizing the cost of the parking of drive-to-store customers, the
walk-to-store customers at stores with parking may be paying lower prices for a greater
selection of goods than would be available at a store without parking.
Now, what can be done to eliminate this subsidy? Basically, other than charge
for parking, not a whole lot – and that is something that might not be in the best
interests of anyone, including the walkers. As noted, a store that attracts more
customers generally can offer a greater selection of goods at lower prices than a
store with fewer customers. There is also a significant cost in trying to charge
for parking; SOMEBODY has to either pay the attendant or put in a fancy non-attendant
system to collect the money, which is generally far more trouble than it is worth.
So, even with the walkers subsidizing the drivers, the walkers might still be better
off. This is pretty much why the ma-and-pa grocery store has pretty much disappeared
in much of the nation, even with its, "gee, it is just a short walk" location; its
service area is too small, which limits its customer base, reduces its selection,
and causes it to charge higher prices. (Where such American retail outlets still
exist are mainly the most densely populated urban centers with the worst driving/parking
I've been asked, wouldn't it be better if you didn't have to get in your car and
drive a mile each way just to buy a gallon of milk? Well, maybe – but when I need
a gallon of milk, I generally stop at a supermarket on my way home; I have different
ones for every direction of approach to my home, so it doesn't even take me very
far out of my way.
Well, let's stop screwing around with the details of the question of the existence
or not of subsidized parking, and get to the real reason this is on this list – people
think that subsidized parking increases the amount of driving and, if there were
no subsidized driving, people would drive less – WHICH IS THE CLUB’S REAL OBJECTIVE.
(Anyone saying no?)
First, the proposition that "free" parking increases driving sounds perfectly valid
to me; I know from my own behavior it is true. For example, even when I have worked
"downtown," I would very frequently drive further where I could take advantage of
"free" parking rather than have to drive around to find a place to park and then
pay for it – give me a nice free space in front of the store and I'm happy (most
of the retail firms in the U.S. have figured this out by now and behave accordingly).
The no free parking = less driving hypothesis is generally believed to be most
valid for repetitive trips, with home-job and home-school being at the top of most
lists (but also to have some applicability to less repetitive ones, such as less
than daily trips to buy groceries). Here, I strongly support the proposition of
equal treatment of employees for transportation benefits; for example, if an employer
provides free parking for employees, the employer should also provide – and, if necessary,
be required to provide – transit benefits of equal value if the employee so chooses.
This is becoming more and more valid and has even been recognized in changes to
income tax treatment of transit benefits (although, incredibly, not to the extent
of full equity). Of course, for many employers at many locations and for many employees,
transit for the home-to-work commuter simply does not work for them for a variety
OK, other than equity for employees and other impacted groups, is there a valid
reason for government to get involved in such issues? I really don't see much reason,
not beyond that covered by other laws and regulations (such as, for example, requirements
that parking structures be designed for safe and environmentally supportive use).
5. Air, water and land pollution – see discussion above in intro to this section.
6. Noise and vibration damage to structures – Yes, I agree. However, this is generally
already covered by torts and various existing laws and regulations, which should
be applied equally to transportation modes and vehicles and stationary sources. (By
the way, this should be constructed more broadly, not limited to just noise and vibration.
The first thing I would recommend adding is stray electric current; this used to
be a huge problem in metropolitan areas until about 1920, when it became generally
accepted that improper grounding of urban electric railroad was causing very significant
corrosion damage to everything from underground water pipes to building foundations.
This is still a major concern, but we have advanced the state of the art in corrosion
engineering that almost all new designs are well protected against causing this type
of damage in any significant degree. However, re the recent experience in Houston,
if you don't do things right, you can have major problems that will take a lot of
technical work, time, and money to correct.)
Keep in mind that this will NOT always work against roads. For example, Portland
lost what would probably have been a billion-dollar chip manufacturing facility when
it did not disclose to the Japanese firm considering locating the plant there that
there would be a light rail station next door. I was not party to the details of
the negotiations, but from my experience with major Japanese companies, the "trust"
issue – that significant facts were withheld – could have been at least as important,
perhaps more so, than the problems of rail vibrations to a manufacturing facility
dealing with tolerances measured in tiny fractions of the thickness of a human hair.
7. Health damage from noise and pollution – see discussion above in intro to this
8. Global climate change – this is going to make some people a bit upset, I'm sure,
but I am far from convinced that there is much of a problem here, or that CO2 has
much of an impact, if any.
So that said, and most likely putting myself in a category close to that of a holocaust
denier in the eyes of some, I'm going to offer a few comments and see how they play.
Now, here's the thing -- if the people who thought that we were entering a new
ice age back then has decided that the human race needed to act, exactly what is
it that they would have done – and what impact might that have had for us today?
To say the least, I have not been extremely impressed by a lot of the research
and publication on this topic – and find it most interesting that, the same week
it was announced that Al Gore was to be awarded the Nobel Peace Prize for his world,
an England and Wales High Court Judge ruled that "An Inconvenient Truth" could not
be shown to school children without extensive qualifying remarks because of the high
number of significant technical errors – or, what Mr. Gore himself described as,
"it is appropriate to have an over-representation of factual presentations on how
dangerous (global warming) is."
Obviously, global warning (by the way, the generally preferred term is now, "climate
change," which reflects both that there many trend lines that have stopped showing
warming and allows the argument to be made that excess GHG are bringing on a new
ice age) is not one of my major concerns. On the other hand, I believe it would
be proper for me to consider that it is somewhat doubtful if I will be able to convince
the entire membership of the Club to abandon this concept.
OK, I can live with that. In many areas, there can be agreement on the objectives
without agreement on the reasons; for example, I think we can all agree that using
less energy is superior to using more energy, and if I am not terribly interested
in the reduction in CO2, so what, we both agree that using less energy is a good
Now comes the key – how to implement? I suggest that, if the goal is to reduce
GHG, the first requirement is to do some very serious work as to which gases have
which effect, how they are produced, and what are the trade-offs for reduction tactics.
These analyses get very complex and very frustrating in a hurry.
An interim step will be to realize that, even if the objective is to totally eliminate
all human production of GHC (I trust that there will be no objection to such behaviors
as exhaling CO2), this will not always be possible, so it will be a good idea to
focus on the means that will produce the most benefit for the input of resources.
One way to do this is to put a price on it.
In this context, the usual number mentioned is $50/ton of carbon dioxide. Now,
keep in mind, there are two different lines of thought that are using the same value
for different purposes. One is "carbon tax" at that rate. Well, since I don't see
all that much point in reducing CO2 generation through extraordinary means, that
isn't something I favor, so I'm going to let that one go (recognizing that there
are a lot of others who may be very interested in further discussion).
The other context is to put a maximum value on the reduction of CO2 emissions.
CO2 elimination proposals should be evaluated on the basis of which produce the
most benefit for the dollar of investment, but I suggest that there be a value established
where, if it costs more than that, it will just not be considered as a justification
-- and I'm proposing $50/ton as place to start the discussion.
(To leave no doubt in anyone's mind, yes, I HAVE run the numbers on various transportation
means to reduce CO2 and, yep, rail transit doesn't always do real well – in some
cases, there would be problems meeting a $5,000/ton target.)
9. Petroleum supply line policing and security – this is an interesting one. At
an extreme, I have seen half of the U.S. Defense Department budget considered as
a cost of roads, with a justification that protecting oil for driving is at least
half of the reason we need an Army/Navy/Air Force/Marines/Etc.
I don't entirely buy into that – and I think that's about all I'm going to say
about that right now.
10. Petroleum production subsidies -- I'm trying to figure exactly what is being
referred to here.
Is the meaning that the U.S. government is selling the rights to drill for oil
at too low a price? Well, it is done by bid, which would appear to make it difficult
to do this consistently over a long period of time, but, if there are some particulars,
please present them. (You won't have a particularly difficult time convincing me
that there is a long history of the U.S. government selling off natural resources
for a lot less than they are worth or cost to produce, with water in the Central
Valley and trees in our National Forests being only the first few things that come
We used to have oil depletion allowances on oil production in the U.S., which was
a large tax write-off. These went away decades ago, but they were highly controversial
in some quarters at the time. However economically, what was going on was going
on was, the effective tax rate on oil profits was reduced, thereby lowering the costs
to produce oil and the price that users of oil paid. This, in turn, meant that all
the other taxpayers got larger tax bills. I think that this was a very valid analysis
– but, when you get into who got the benefit and who got the bigger tax bill, it
was, to a large degree, the same people. Yes, no doubt, there were winners and losers,
but not as much as some people might first believe.
Now, in the analysis I just presented, I assumed that the impact of the oil depletion
allowance was to lower the price of oil. After all, the way that markets work, that's
what should happen. However, there are some skeptics out there, such as those who
know about some of the absolutely incredible things done by Texas Oil interests and
Texas representatives in Congress, not to mention the Texas Railroad Commission (which
set the price of oil in the world for decades), and things like the head of a major
oil company, who, as Governor of Texas, actually declared martial law to be able
to shut down production to keep prices high, who might think that, you know, perhaps
not all of that tax reduction found its way to the people who were buying oil, some
of it may have gone to other uses along the way.
Yeah, that could've happened.
The oil depletion allowance was eliminated when Jimmy Carter was President, so
we can probably skip further discussion of it, except as a history lesson.
If someone would provide some additional information as to exactly what was meant
by this reference, I'd be a lot better position to comment further.
11. Trade and infrastructure deficit -- There are not specifics here, but I'm going
to guess that this is primarily directed towards purchases of oil from non-U.S.A.
producers. I am in agreement that is a problem that needs to be addressed. I believe
that there a number of actions that should be pursued, some of which I believe will
be accepted by the Club members that are likely to be reading this, some likely not:
More fuel efficient autos
Different fuels for auto's, driven by what works and what succeeds in the market
-- I'm all in favor of giving everything a try, but WITHOUT subsidies, with the exception
of relatively minor funding for research and demonstrations. Ethanol from corn,
in particular, should not receive subsidies – it actually produces net energy loss
through the high costs, financially and in energy, of production; while importation
of cane-based ethanol should be examined -- specifically including from Cuba. Use
of other American vegetation, including what can be grown on land not suitable for
growth of food and other commercial products, should continue to be researched and
developed as the results support.
Expanded energy sources, again, driven by what works and what succeeds in the market
– this includes oil shale, nuclear power, expanded drilling for oil and natural gas
in the U.S., with protection of the environment very important, but NOT to the extent
of absolute prohibition of production where there are workable alternatives
Higher road use fees, with higher "cents per gallon" charges to start, giving mileage-based
(VMT) fees a good look, but recognizing that there are huge technical, implementation,
and policy issues that will need a lot of work – and such user fees to go to maintain
the existing road structure and to expand it where required
12. Sprawl and loss of transportation options – I actually have a technical presentation
I call, "Sprawl is Our Friend" – which argues for the advantages of decentralization.
Much of the material focuses on how well the surface transportation system in Los
Angeles works – in contrast to the usual bad press it receives. To many people,
Los Angeles invokes thoughts of endless freeways connecting huge expanses of single-family
detached homes on acre lots. The actuality is, greater Los Angeles is, by far, the
densest urbanized area in the U.S., with about one-third more souls per square mile
than greater NYC, which is the second densest (New York City is denser than the City
of Los Angeles, Manhattan far more so, but the City of LA is, at a minimum, comparable
to the other large cities in the U.S. and the LA suburbs are by far the densest in
the U.S. Of the 69 U.S. UZA's that had populations of 500,000 or more at the 2000
Census, greater LA had the second LOWEST freeway centerline miles and the second
LOWEST total roadway miles per capita -- and VMT per freeway lane mile far above
that of any other UZA. (I win a lot of bar bets with these statistics.) Given these
statistics, what is most interesting is that home-to-work travel times in LA (28.2
minutes) are lower than those in those of NYC (34.1), Chicago (31.0), and Washington
The reason is very interesting – LA really doesn't have much of a downtown; with
the LA CBD having fewer than 5% of UZA jobs, and sinking. Because there is NOT the
common over-concentration of jobs in the CBD, there is not as much overloading of
the highly deficient freeway system. More important, LA has one of the best home-jobs
balances in the U.S. – BECAUSE there are fewer jobs in the CBD, there is more employment
closer to where people live. As a result, while greater LA is the second largest
U.S. UZA in square miles (after NYC), the average home-to-work travel distance is
below average, and VMT per capita is about 10% below the national average for large
Also, fortunately for LA residents, it has by far the least rail transit of any
of the world's mega-cities (those with populations over ten million), which tends
to the lead to the kind of overconcentration of trip generators that is so difficult
for surface transportation to handle. (Unfortunately, LA is now expending more on
rail transit than almost all other U.S., cities, with very little to show for it
in the way of results – people moved.) Instead of a single major CBD, LA instead
has dozens of distributed ones. This is becoming more and more common in the U.S.
and throughout the world, but LA is definitely the prototype for this urban structure
and has developed it further and continues to develop it further – thereby completely
frustrating generations of urban planners, particularly those who believe that urban
areas should be structured to make rail transit work well, rather than looking on
transportation as part of the infrastructure that should work to make cities work
the way the people who live there would like them to work.
13. Uncompensated auto accident costs – I strongly support TRUE no fault insurance,
in large part so that drivers can cease worrying about losses caused by uninsured
motorists. IN the absence of such changes, public liability/property damage legal
minimums should be significantly increased and, in any case, there must be good protections
for those not covered by no fault, such as pedestrians involved in auto safety incidents
and non-vehicle property owners who suffer monetary losses (details of methodologies
for another time). I am interested in technology that could be utilized to identify
drivers and vehicles not properly covered by insurance and either cited and removed
from the road or subjected to "pay as you drive" insurance at the pump at what will,
due to the nature of underwriting of the risks, high rates, but I am also concerned
about preserving privacy. (I do not favor PAYD for those who obtain coverage in
the conventional manner, in large part because annual mileage, while certainly an
underwriting factor, is far from the most important one.)
14. Congestion – As indicated above, this should be addressed in a variety of ways,
including raising user fees for road use to finance expansion of road capacity, expansion
of telecommuting options by taking advantage of technical advancement, using ITS
advances to get maximum utilization of existing road capacity, and moving more trip
generators away from the city centers that are so frequently the most congested areas
in any urbanized area.
These subsidies should be publicly scrutinized and eliminated by appropriate fuel
and carbon taxes, parking and road user charges, annual vehicle fees, and elimination
of tax credits and deductions for motor vehicle use. The capital and operating costs
of airports, air traffic control, pilot training and waterways, including dredging
and navigation costs, should be charged to the users of such systems.
TAR: I have addressed these issues in detail already, so I will forgo additional
comments here. I am, of course, opposed to carbon taxes, but I favor significant
increases in other road use charges, including tolls, as long as these user charges
are invested back into maintenance and expansion of the road system. I also support
appropriate parking charges, paid by users or their surrogates.
As previously discussed, the discussion of subsidies appears based on a very poor
understanding of what the current subsidies for various modes actually are. This
is particularly disturbing that the only transportation modes mentioned in this policy
that are recommended for subsidies are the only ones that actually HAVE significant
subsidies (transit and intercity passenger rail), which are very large – in large
part because the very existence of the subsidies, where these transportation modes,
divorced from the discipline of the marketplace, tend to have out-of-control operating
costs, even more out-of-control capital costs, including for expensive projects that
rarely meet their stated performance standards, and would be questionable even if
they did – while taking resources away from transit services that transit-dependent
residents actually need.