The High Cost of Hospital Parking?
By Ralph Bond
The recent Ontario provincial election saw the high price of hospital parking for patients and visitors pop up as an issue.
As the population ages and more of us utilize hospital services and the cost of providing parking in rapidly urbanizing areas continues to increase, this hot topic is likely to keep sizzling over the next decade. The issue is more complicated than it first appears.
Historically, the province has funded approximately 75% of hospital capital and operating costs and relied on the local hospital to fund the remainder by generating surplus revenues from services like parking, retail stores, coffee shops and cafeterias. This has lead over time to the standard practice of parking facilities at hospitals being self- financing.
Perhaps the best way to start a conversation about hospital parking is to understand what it costs to provide it. This includes development costs, operating, maintenance and capital repair costs as well as replacement cost over the long term life cycle of the facilities. The cost of construction will vary significantly depending on whether the parking is in surface lot, above ground parking garage or an underground garage or some combination thereof.1 In the Greater Toronto Area (GTA), a surface parking space would likely cost approximately $15,000 per space to build including land costs. An above ground parking garage would likely cost approximately $35,000 per space while underground parking would be about $50,000 per space. The general trend is towards less surface parking and more garage parking as land becomes scarce and hospitals continue to expand into the surface lots. This means the cost of providing parking is likely to increase significantly into the future.
One also has to consider the cost to operate the parking which would include items like hydro for the lighting, parking access and revenue control equipment, security and staffing costs, cleaning, and snow clearing. Annual operating costs would be an average of approximately $250 per space for surface lots, and approximately $500 per space for above and below ground garages. Long term capital repair costs would likely average approximately $200, $525 and $750 per space per year for surface, above ground and below ground parking respectively. Unlike apartment condominiums that use reserve funds, most agencies do not actually set aside funds each year for long term capital repair costs which can often lead to nasty budget surprises as well as large parking
Adding it all together and assuming the cost of developing the facilities is amortized over 25 years at a 4% interest rate, the annual average cost to deliver parking services would be approximately $1,350, $3,275 and $4,450 per space per year for surface, above ground and below ground parking respectively. In order to recover these costs from the people who actually use the parking, monthly rates for employees would need to be approximately $80, $195 and $265 for surface, above ground and below ground parking respectively. Hourly rates for visitor and patient parking would have to be approximately $0.80, $1.85 and $2.50 respectively for surface, above and below ground parking facilities. These rates exclude HST which the Federal government recently eliminated for patient and visitor parking fees.
A brief perusal of parking fees for visitors and patients at Greater Toronto Area hospitals indicates typical hourly rates in the $6.00 to $8.00 per hour range with daily maximum limits of $15.00 to $20.00.2 Virtually all hospitals also provide discounted rates for frequent visitors in the form of multi-visit or monthly passes, some of which effectively reduce the cost of parking by up to 60% of the maximum daily rate or down to $6.00 to $8.00 per visit. Most hospitals have also been working to improve the customer service aspects of providing parking by actively communicating the different pricing options, providing grace periods for enforcement and consideration for extraordinary circumstances.
One way of reducing patient/visitor parking fees would be to ensure that hospital employees are paying the full cost of providing parking. Because employees represent almost twice the demand for parking compared to patients and visitors, any discounts from cost recovery provided for employees will have a magnified impact on patient/visitor parking fees, if they are to be used to make up the difference. For example, if hospital employees are paying only 50% of the real cost of providing the parking, then patient/visitor parking fees would need to be approximately 90% higher than otherwise required in order to make up for the employee subsidized parking. Making this adjustment would be easier said than done given collective agreements and union bargaining considerations, but it would be more equitable in terms of distributing parking costs. A phased approach over a few years would likely
Another way of reducing patient/visitor parking fees would be to increase hospital funding from the Province in order to reduce or eliminate the need to generate surplus parking revenues to fund patient programs and services. This would require a reliable commitment from the Province and tax increases or the additional services would have to be eliminated. However, it might remove the ability of hospitals to fund some programs and services that are customized to reflect local needs.
Another perhaps counterintuitive approach would be to reduce the amount of parking provided at hospitals. It seems that some people think that parking should not only be provided free of cost but should also be provided in abundance to meet the unrestrained demand that providing it free would induce. This sense of entitlement is not considered for most other goods and services in our economy. Given the inevitable evolution to more expensive above or below ground parking in the GTA as it continues to urbanize, the low cost and unrestrained supply approach is not sustainable.
Allocation of Revenues
Why do the rates charged to hospital patients and visitors seem to be considerably higher than required to cover the average cost of providing the parking? There are several reasons, including:
- 60 to 70% of the parking at full service hospitals is typically related to employees who often pay considerably less than the cost of providing it;
- Discounts or free parking are often provided for hospital volunteers, clergy and other support workers;
- Hospitals reliably obtain surplus funds from parking that are used to fund programs, services and equipment;
- A significant portion of parkers pay the substantially discounted rate for multiple visits;
- Older hospitals can be surprised by unexpected or deferred major capital repair costs for parking garages that have to be funded by parking rate increases;
- In some settings, parking fees have to be comparable to nearby facilities or people from the non- hospital facilities will use the hospital parking.
In order to seriously consider providing less parking, government agencies and private enterprise need to approach the issue of providing access and mobility for specific institutions and buildings much differently than in the past. We need to question whether everyone needs to drive to a location and objectively examine whether providing alternative transportation solutions is more cost effective.3 If the cost of parking is not recoverable in parking user fees, providing improved transit service, carpooling programs and cycling facilities could actually cost less than providing the parking. This would free up land for more productive use and also lead to healthier living outcomes to the extent more people walked, used transit (which requires more walking than driving) or cycled – something that hospitals (as heath care institutions) should be eager to promote rather than discourage by providing subsidized parking.
One important principle of parking pricing in order to encourage people to take transit is to make sure that the monthly cost of a parking space for employees is at least the same as or preferably more than the comparable cost of a monthly transit pass. In the GTA, typical monthly transit pass rates are generally in the $100 to $120 per month range. As mentioned earlier, the recovery cost for above and below ground parking facilities in the GTA is probably in the $195 to $265 per month range and $80 per month for surface parking. Most hospitals have a mix of all parking types. Assuming 50% in surface lots and 50% in above ground garages an average cost recovery price of $140 per month or more would be required. Daily maximum parking fees should be set high enough to discourage employees from undercutting monthly transit supportive or cost recovery rates. For a $140 per month employee parking rate, the daily maximum rate should be approximately $9.00 per day. Similarly, single use transit ridership fares are approximately $2.50 to $3.00 per ride or $5.00 to $6.00 for a return trip. Therefore daily parking fees should exceed this amount if transit use is to be promoted. With this in mind, maximum daily parking rates in the $10.00 to $12.00 range would encourage carpooling or transit use for hospital visitors, assuming most people drive to the hospital with at least one passenger. Therefore appropriate hospital parking fees for all users will encourage alternative travel modes and recover costs more equitably.
It is of course not as easy as simply pricing parking to encourage the use of alternative transportation modes. The alternatives have to be provided effectively. This means that local government, transit agencies, hospitals and the province need to work together to ensure that hospitals are provided with very good levels of transit service as well as cycling and walking facilities. Fortunately, the Provincial government in Ontario has pledged to spend billions on new transit initiatives. In fact, some of the new fast, frequent and reliable transit lines will run very close to some of the major hospitals in the region. Other locations will need more careful attention to ensure that employees, patients and visitors will have attractive alternatives to driving. Another important consideration is the placement of high density residential development within walking distance and along major transit lines leading directly to major hospital facilities. This will provide opportunities for hospital staff to live conveniently close to work, thereby making it easier to walk, cycle or take transit. It will also provide the same opportunities for an aging population of patients/visitors. All of this will help people to reduce their level of automobile ownership, potentially saving them thousands of dollars per year in driving costs, an especially important benefit for people at lower levels of income.
Much of what has been described above already exists in the downtown cores of most major cities, that is constrained parking supply (especially for employees), parking prices that recover costs and encourage alternative travel modes, high density residential living opportunities close by and good public transit access options. The challenge is transplanting this model to the rapidly urbanizing areas of the GTA outside downtown cores in order to achieve sustainable development and healthy living. These are important principles for current and future hospital planning.
People interested in learning more about the sustainable mobility approach to planning should consider attending the Sustainable Mobility & Healthy Communities Summit in Markham, November 30 to December 3, 2014 –
- The costs used in this article are averages in order to simplify the discussion. Actual costs could vary significantly.
- We have excluded parking fees at downtown and inner city Toronto locations which are influenced by much higher development costs and constrained parking market conditions.
- There will always be a significant number of people who have to drive because of their specific circumstances or where they choose to live, however most people do not or would not need to drive given good transit service.