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December 08, 2008

Economics 101 has lessons for Rockville

I live in Rockville, Maryland, which actually has one of the better managed governments I've seen. But everyone makes mistakes.

Until recently, one of the best-kept secrets had to do with parking at the Twinbrook Metro station. In the station parking lots, run by Metro, you would pay $4.75, assuming you've traveled on the subway. Outside the Metro, on the streets, the parking meters cost 25 cents an hour through 6 p.m. If you arrived at 8 a.m. and returned after 6, it would cost you only $2.50. A lot of people didn't know about this at all, and I told only close friends of mine. (Of course, some people knew about it and nevertheless avoided the meters, because they didn't want to keep rolls of quarters in their car or go to City Hall to pick up the electronic meter card.)

Recently, the City decided it needed more revenue from the meters, and effective last week, the price doubled to 25 cents a half hour (50 cents an hour). A 10-hour parking stint now costs $5.00, which makes the Metro parking lot a better deal by a slight margin.

Since the charge went up last week, almost no one has been parking at the meters near the Metro station. It used to be that at 8:00, there were still spaces available on the next block, but the two sides of the street right across from the lot were almost always full. Now, at 8:00, there are maybe four or five cars across from the lot, instead of roughly 30.

I suspect some people will eventually return, once they get over their annoyance at the price increase. But I wonder whether Rockville city council members realized that the City's revenue was going to drop when they raised the meter rates. Economics 101 suggests that there was an intermediate figure by which they could have maximized revenue. A charge of 25 cents for 45 minutes (33.3 cents an hour) or 25 cents for 40 minutes (37.5 cents an hour) might not have driven off all those parking customers.

So basic economics continues to work in Rockville. Increased fees, just like tax increases, can cause people to alter their behavior and reduce revenue in the process.