Analysis: City-Owned Parking Lots Are Worth More Than the City Thinks


(The City is forgoing $3,208,000 to subsidize parking on E. Passyunk Avenue)

Philadelphia owns more vacant property than any of our peer cities, and in recent times, politicians have been trying to inventory what we have, and offload some of it. 

Almost everybody agrees it would be a good thing for the City to own less land than it does, but for very different reasons. 

Some people want to see the land returned to the tax rolls and contributing to the City's property tax base; some think the government does a bad job of maintaining the land it owns (it often does); others want the City to give away the land for community gardens and side yards; and some want the City to leverage the land it owns in growing neighborhoods to provide affordable housing through various methods.

In places where land is really cheap, there's no real harm in gifting people side yards or creating community gardens. A lot of the land that the city owns is in places where prices are extremely cheap. But there is also a decent amount of land close to areas that have been appreciating, which developers would want to buy.

In appreciating neighborhoods, or the neighborhoods just beyond them, there's an important trade-off between getting the most money we can for the city budget (i.e. all your favorite public programs) vs. trying to accomplish other social goals by leveraging land sales. The Land Bank has been giving away free land to developers in some places if they agree to build homes that sell for under $230,000.

The drawback of the latter approach is that the full value of the development subsidy is pretty open-ended and hard to measure. The social impact is not as clear-cut as it would be if the property were returned to the tax rolls, and the proceeds divided up along with the rest of the City budget. The Land Bank has also only given away free land for single-family homes so far, giving taxpayers less bang for our buck than if we required triplexes or apartments. 

Another open-ended subsidy that's rarely second-guessed is the city's practice of maintaining (mostly) free surface parking lots in neighborhoods throughout the city. 

The city owns about 45 city-owned parking lots out there, according to this PPA document, and there's another, partly overlapping list of municipal parking lots on the Visit Philly website. All in all, there are nearly 3,000 spaces across the city.

We weren't able to find all of them on the Office of Property Assessment website, as some of the addresses were too inexact on the PPA document, and we weren't able to find them on Google Streetview.

But we were able to find OPA records for 28 of the lots (detailed in the embedded spreadsheet), and the values are pretty significant. They're also way too low.

We asked economist Kevin Gillen of Drexel University, who along with Guy Thigpen at the City developed the land valuation model used by the Land Bank, to find comps of land prices from nearby parcels, in order to see whether OPA's 2017 land assessments were in the right ballpark. For the most part, they weren't. 

Friend of the blog Jake Liefer also used the Google Maps area calculator tool to measure the square footage of the parcels, and found several cases where OPA's square footage numbers were off, sometimes way off.

The results are inaccurate enough in some cases that they really should invite an official analysis from the City Planning Commission. And the sums of money at stake are significant enough that they should really invite some more official scrutiny of the opportunity cost involved in privileging land for money-losing free parking, rather than tax-producing housing or commercial spaces.

Politicians who think these lots are a freebie with negligible impact on the budget are mistaken. They could be getting a lot of money for them, first as cash, and later as real estate tax ratables.*

For instance, the huge municipal lot at 1628 E. Passyunk Avenue, in the middle of one of the city's marquee commercial corridors, is measured at 4,145 square feet, and assessed at $78,100. But the lot is actually closer to 14,320 square feet (three and a half times as large!) and likely worth closer to $3,208,000 based on comps from other land sales in the neighborhood. 

The parking lot at 4716-23 Baltimore Avenue is listed at 1,829 square feet on the OPA website, and assessed at $21,200. But the lot is really closer to 17,557 square feet (nearly 10 times as big!) and valued closer to $1,681,000. 

The lot at 982 N. 6th Street, just on the edge of Northern Liberties, where land prices are some of the highest in the city, is assessed by OPA at just $313,300, and measured at 19,144 feet. It's really closer to 26,161 square feet, and valued closer to $3,225,000.

The point isn't to put these forward as the authoritative numbers--comps are inexact, and there are a few weird cases in here that seem off (the Fern Rock Transportation Center Parking Lot is the value of the entire parcel, not just the parking lot) but for nearly every lot, OPA has lowballed the land value for these 27 parcels by about $24 million. Not counting Fern Rock, the value of the whole portfolio of parking lots is somewhere between $10 million (using OPA's numbers) and $34 million, using the land value comps provided by Gillen.

That's a lot of up-front cash, but it's also an opportunity to bring in more ongoing tax revenue from developing them. Eleven of the lots are zoned for CMX-2 or CMX-2.5 commercial mixed-use with 3-4 stories of residential overhead--one of the real workhorses of the city's property tax base. The next most common categories were RSA-5 (single family), RM-1 (small apartment building), and I-2 (industrial.) Council also has the option of rezoning the parcels for higher density before sale, as Councilmember Allan Domb has suggested. Mixed-use buildings produce more property tax revenue per acre for the city than single family homes.

In a future blog post, we'll examine the "maximum residency" for these parcels, to see how many people they could potentially house by-right under current zoning, and what similar building types in the neighborhood remit to the City budget in real estate taxes each year. From the city budget's view, literally anything is a better use of this land than a tax-exempt free surface parking lot, most of which are used in practice for long-term car storage for very small numbers of residents. It's an extremely cost-ineffective way of trying to make parking easier for residents, and it's time for politicians to start thinking about their next act. 

Here are the revenue ranges that each Councilmember could expect to receive from selling the parking lots in their District. Remember, this is only 27 of the roughly 50 lots that are out there. 

Squilla:  $3,854,500 - $8,419,667

Johnson: $123,500 - $1,327,012

Blackwell: $309,800 - $3,783,024

Jones: $352,000 - $1,566,276

Clarke: $543,200 - $8,307,585

Quinones-Sanchez: $698,400 - $5,660,133

Bass - $1,128,100: $3,453,558

Parker: $3,275,800 - $5,143,496

*The 10-year abatement for property improvements tends to sever the political connection between new real estate investment and new tax revenue in people's minds, but just because the new money comes in on a lag doesn't mean that the land use choices we make today won't have any consequences for our future property tax base. It's also just wrong to say that there aren't any immediate tax base benefits from selling city-owned land. For one thing, the 10-year abatement is only for improvements; the unimproved land portion of the property would begin contributing taxes right away. If a home is built, the city will still collect real estate transfer taxes and various fees in the short term. And if a commercial property is built, the city will get some new wage and business taxes, including Use & Occupancy, in the short term. Council also has the ability to influence the ultimate use by rezoning the properties before selling them. If elected officials think it's important to get more tax dollars now, they should rezone the parking lots to commercial or mixed-use zoning designations.

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