Financing Public Parking

Finding the funds when you really do need more parking

Effectively managing the existing parking supply and providing other travel options besides the single occupant auto should be the first options for providing access to any commercial area. However, sometimes additional off-street parking is necessary to support an existing business district or planned future growth. There are local options, state programs, and private responsibilities that can be used to pay for construction and operation of a public parking surface lot or garage.

Providing off-street parking can be expensive. Construction costs per space can range from roughly $1,500-2,000 per space for surface parking in suburban areas to over $20,000 for underground parking in urban areas, not counting land costs, which can be substantial, especially in urban areas. Annual operation and maintenance costs can run from $100-500 per space. All told, the annual costs per parking space can run from roughly $400 a year for suburban surface parking, over $1,200 a year for a 2-level suburban structure, to over $2,000 for an urban parking structure. [1] In addition to the direct costs of building and maintaining the spaces, parking takes up space that could otherwise be used for additional commercial space or housing; incurs environmental costs including increased stormwater runoff and pollution and heat island impacts; and costs to the transportation system from its impact on the relative appeal of driving versus alternative modes. These costs should be recognized and balanced against the benefits parking provides in driver convenience and access.

Where to build a surface parking lot or a parking garage depends both on the number of spaces needed and on the value of land where you are building. One study suggests that land must be valued at $1,000,000 per acre or more for a garage to be cost-effective.[1] A parking study can help you determine how many new spaces you need. Several hundred new spaces at a minimum should be needed before you consider a parking garage. While a garage may cost 10 times what a surface lot will cost, the extra land made available by a smaller garage footprint can bring in considerable sales and tax revenues to the community. In some communities the first floor of a garage contains retail uses which can also produce rental revenue for the community. Garages also typically have the additional environmental benefit of a smaller paved area and reduced rainwater runoff.

Using Local Funds

The most common way to pay for public parking lots is by issuing municipal bonds. These can be general obligation bonds, which are backed by a community’s general taxation revenues, or revenue bonds, which are typically paid off through revenues from parking fees. Revenue from parking enforcement might also be used for this purpose, but typically money from parking tickets is deposited directly into a community’s general fund. A double-barreled obligation bond would usually rely on both a revenue pledge plus the full faith and credit of the community (i.e. a general obligation) in case revenues are not sufficient. Under a special assessment bond, those that benefit from the public parking lot, like local businesses, can be charged a special assessment to pay off the bonds. If a tax increment finance bond is issued, some of the additional taxes expected to be generated from the increase in property values due to the new parking can be pledged to pay off the bond.

The revenue collected from on- and off-street meters can also be returned to a Parking Benefit District or Business Improvement District for local transportation improvement projects.

State Funding Sources

The following Commonwealth of Massachusetts programs can be used, sometimes, to pay for new off-street parking facilities. All of these programs are based on competitive grants, and community applications must demonstrate that the planned garage is eligible and will provide the benefits that the program is designed to promote. Check with the appropriate state agency for eligibility requirements and application procedures.

Public Works Economic Development – PWED (Executive Office of Transportation and Public Works)

  • This program assists municipalities in funding transportation infrastructure that will stimulate economic development. The PWED regulations are “designed to provide eligible municipalities with maximum flexibility and discretion as it relates to project development and implementation” (701 CMR 5.01), but vest in the Secretary of Transportation the responsibility for evaluating and selecting eligible projects that will facilitate economic growth consistent with applicable state policies. For more information follow this link to the Executive Office of Transportation and Public Work ’s PWED page.

Transit-Oriented Development – TOD (Executive Office of Transportation and Public Works)

  • This program funds capital grants on a competitive basis to public agencies for planning, design and construction of housing, parking, bicycle and pedestrian infrastructure located near transit stops. In most instances, Transit Oriented Development funding leverages other project funding provided by the Department of Housing and Community Development (DHCD), the Massachusetts Housing Partnership, Mass Housing and private developers. More information about transit-oriented development can be found here.

Community Development Action Grant Program – CDAG (Department of Housing and Community Development)

  • This program leverages both public and private investment in an effort to stimulate local economies and create jobs that would not occur by private enterprise alone. CDAG provides funding for publicly owned or managed projects that will have a significant impact on the economic condition of a city or town, including activities that will leverage significant private investment and generate or retain long term employment, as well as projects that will significantly improve the conditions of low and moderate income persons through the support of workforce housing production and/or the preservation of public housing. Any city or town in the Commonwealth is eligible to apply to DHCD for CDAG funds. CDAG can be used in a variety of ways, including installation, improvement, construction, repair, rehabilitation or reconstruction of publicly owned or managed buildings or other structures, facades, streets, roadways, thoroughfares, sidewalks, rail spurs, utility distribution systems, water and sewer lines, for site preparation and improvements, demolition of existing structures, and relocation assistance. For more information follow this link to the Department of Housing and Community Development’s CDAG web page.

Community Development Block Grant – CDBG (MA Department of Housing and Community Development, US Department of Housing and Urban Development)

  • Mass CDBG is a federally funded, competitive grant program designed to help small cities and towns meet a broad range of community development needs. Assistance is provided to qualifying cities and towns for housing, community, and economic development projects that assist low and moderate-income residents, or by revitalizing areas of slum or blight. Municipalities with a population of under 50,000 that do not receive CDBG funds directly from the federal Department of Housing and Urban Development (HUD) are eligible for Mass CDBG funding. Eligible Mass CDBG projects include but are not limited to housing rehabilitation or development, micro-enterprise or other business assistance, infrastructure, community/public facilities, public social services, planning, removal of architectural barriers to allow access by persons with disabilities, and downtown or area revitalization. The federal program funded by HUD has the same basic program goals and eligibility requirements, for communities with populations of at least 50,000. The federal requirements can be found here.

Off-street Parking Program (Executive Office of Administration and Finance)

  • Established in 1980, this program provides matching grants to municipalities for the construction of public, off-street parking facilities in Commercial Area Revitalization Districts. A Commercial Area Revitalization District is “a commercial area for which a commercial area revitalization plan has been adopted by the governing body of the municipality and approved by the Secretary of Communities and Development and the project is consistent with the plan. The purpose of the plan shall be to prevent or arrest or reverse the decay of the area covered by the plan. The plan shall describe the area and set forth the development or redevelopment including public improvement proposed to carry out the purposes of the plan.” Communities must pay at least 30% of the project cost. Only communities with populations above 20,000 are eligible. More details can be found here.

Massachusetts Downtown Initiative (Department of Housing and Community Development)

  • DHCD’s Massachusetts Downtown Initiative (MDI) offers a range of services and assistance to communities seeking help on how to revitalize their downtowns. The primary mission of the MDI is to make downtown revitalization an integral part of community development in cities and towns across the Commonwealth. Assistance is provided for planning activities, but construction costs are not provided. Eligibility requirements vary among program components and restrictions may apply, but planning for parking is an eligible activity. The Technical Assistance Site Visit Program is restricted to non-entitlement CDBG communities. More details can be found here.

Requiring the Business Community to Contribute

As mentioned above, some of the taxes or fees from new development can be allocarted directly to a Parking Benefit District or can be used to pay off a tax increment finance bond. Parking regulations can also maintain required minimums but allow developers to pay a fee in lieu of each required space not provided, with the fees to be used for providing public parking. A concern with reduced parking requirements is that if new developments (or redevelopments) are not required to provide parking where previous developments were, the burden of providing parking may be unfairly distributed on the properties that have been there longer. Using the fees to pay for public parking available to all may reduce those concerns. Finally, if the parking required is not needed during part of the day, or on weekends, parking regulations can require or suggest that these spaces be available for public use during certain times.


1. Todd Litman, Victoria Transport Policy Institute, “Parking Evaluation: Evaluating Parking Problems, Solutions, Costs, and Benefits”, Online TDM Encyclopedia.