Portland considering new parking lot tax to spur development

By Bill Holloway

Portland is considering a new tax on surface parking lots to spur development in the Old Town Chinatown neighborhood. John Russell, a Portland developer who owns buildings in the neighborhood and is pushing for the tax, claims that his planned restoration of a nineteenth century building can only succeed if the parking lots that surround it are built up. One possible use for some of the new tax revenue would be to incentivize development in the area. Eventually, Russell would like to see changes to the zoning code to eliminate surface lots in the neighborhood altogether.

However, parking lot owners and operators in the area, as well as the Portland Business Alliance, oppose Russell’s plan. The Business Alliance alleges that if the proposed tax goes forward, some property owners would close the lots they operate and simply hold the vacant lot rather than redevelop because they would be unlikely to be able charge high enough rents to cover construction costs.

Parking taxes are in effect in over 49 cities around the country. According to a 2005 study by the Center for Regional Analysis at George Mason University, these taxes are most commonly assessed as a percentage of daily or monthly parking fees but may also be levied as a flat tax per parking space. Parking tax rates are most commonly in the range of 7–12 percent, although the study found rates as low as 1.9 percent in Phoenix and as high as 50 percent in Pittsburgh.

Pittsburgh’s parking tax, which has now been adjusted downward to a rate of 37.5 percent, may have played a part in helping to reinvigorate the city’s downtown and promote the use of alternative transportation. A comparison between the cities of Detroit and Pittsburgh in a Streetsblog article last year made the case that while Pittsburgh’s parking tax had helped to incentivize downtown development, the property tax structure in Detroit, which applies a lower rate to parking lots and vacant land than to structures, had the opposite effect, creating a disincentive for redevelopment.

Bill Holloway is a Transportation Policy Analyst at SSTI.