Strategy

The high cost of free parking

Parking lots seem like a licence to print money, but collecting is the hard part.

Few things enrage motorists quite like parking tickets — so much so that some now are accompanied by instructions on performing yoga postures. Beneath the anger lies a common belief that they unfairly enrich those able to issue them. Unjust enrichment happens to be among the allegations in a $55-million class-action lawsuit recently certified by the Ontario Superior Court against Imperial Parking Corp., Canada’s largest parking management company. It was launched by two women who claim Impark’s fees violate the province’s Consumer Protection Act. In court filings, though, Impark reveals parking tickets can be less lucrative than popularly imagined — unless, that is, the meter maids carry big sticks.

Impark levies a “violation fee” of about $70 to motorists who don’t pay, overstay, or fail to display their ticket at its lots across Canada. It claims this fee reflects the costs of patrolling, conducting licence plate searches ($14 in Ontario), mailing statements, hiring collection agencies, paying sales taxes, and so on. Impark issues 12,000 payment notices per month in Ontario, implying potential revenues of more than $10 million a year.

But Impark receives less than a third of that. Partly, that’s because its employees forgive roughly a quarter of those fees using their discretion, and partly because offenders who pay within seven days of the infraction get a much-reduced rate. Then there are the refuseniks, who blow off 25%???30% of Impark’s fees. As a result, Impark collected an average of $20.34 for every payment notice issued last year in Ontario.

Municipalities typically do better. The City of Toronto collects 60% of its fines in the year issued, and another 20% in subsequent years, a rate it says is typical of similar cities. Why the difference? For one thing, its staff are far stingier: they cancel just a tiny fraction of fines using their discretion. But the main difference is Toronto’s greater powers of coercion. Although Impark threatens to sue deadbeats, it rarely does; the costs of bringing actions in small-claims court don’t justify the rewards. Ontarians who don’t pay Toronto’s municipal parking fines can be compelled to cough up when they attempt to renew their provincial licence plate stickers. As for out-of-province vehicles, they flout the city’s parking laws with abandon — 85% of such tickets go unpaid.

Coercion aside, less obvious variables influence fine payment. William Goodling and Samuel Olson, two economics professors at the University of Oregon, published a paper this summer studying parking citations in Eugene, Ore. From this admittedly small sample, they discovered that the nameplate on the offending vehicle matters. Honda, Toyota, Lexus and Mini owners demonstrated among the highest propensities to pay, whereas Ferrari, Hummer and motorhome enthusiasts were most likely to flip the bird. Moreover, larger fines are more likely to be paid. “When very high price citations are issued, individuals expect that the probability of payment enforcement is higher,” the economists surmised.

If yoga postures cannot calm your indignation over the yellow paper under your wiper blade, it may help to know that fines have lessened somewhat from the time of King Sennacherib of Assyria, putative inventor of restricted parking. Beginning around 700 B.C., he punished owners of chariots parked along his new boulevard in Nineveh with death. He then had their bodies impaled in front of their homes. Though no economist has yet to tackle the question, we speculate that compliance was high.