About a year ago, the government of Washington, D.C., introduced a lottery system to allocate lunch hour parking spots for the city’s booming food truck industry. The one-year retrospectives have been almost uniformly positive, with the government, the media, and the food truck vendors themselves declaring it a rousing success.
I beg to differ.
Simply put, there’s an efficient way to allocate these slots — often located in highly desirable areas — in a way that doesn’t involve allowing for-profit companies to use scarce government property worth millions of dollars while paying only a pittance.
The problem at hand was completely predictable once food trucks started popping up in the city a few years back. In order to get the best spots, food truck operators would mill about for hours in the morning near their preferred locales and–where they could get away with it–pay people to park their cars to hold a spot for them. Besides the trucks tying up traffic as they congregated near the hot spots, the truck owners themselves weren’t fond of having to waste hours a day plus gas money to land a prime spot.
The city put an end to this by awarding spaces via a lottery: Each morning there’s a draw that determines who gets to park on Farragut Square–a prime location near K Street and several government buildings–and who ends up at places with significantly less foot traffic, like McPherson and Franklin Squares.
While it may be true that this is better–from a food truck owner’s perspective, at least–than the first come, first serve method that preceded it, a much better solution would be for the government to simply auction the desired parking slots to the highest bidder. When I say better, I mean not just from the taxpayer’s perspective, but from a broader societal perspective as well.
It doesn’t make sense for the government to randomly give away things that are worth something. Let’s suppose a food truck universe where a handful of trucks were, far and away, the favorite among the office dwellers who regularly dine on such cuisine. In a world where the government auctioned the food truck parking places, the popular truck owners would find it more advantageous to bid the highest for the primo spots along the Connecticut Avenue side of Farragut Square.
Under such an outcome, aggregate food truck sales would be higher than in the random draw we currently have, since the popular trucks would be more convenient to the main locus of customers.
Customers would also benefit from this arrangement, as the walk to their favorite food trucks would become shorter, making it more convenient for them to eat there. They would need to pay more for it to cover the parking fees, but if it’s too much, they could go to another truck farther away or–heaven forfend–a nearby restaurant.
While D.C. is lousy with people holding an irrational animus towards the free market, its undisputed strength is that it tends to allocate scarce resources to those who value it the most. Abandoning the free market in this instance only makes sense if we think there’s some sort of positive or negative externality that the market can’t capture–and there’s no reason to think that such a thing exists here. If we collectively decide to eschew the market and give away this scarce resource, we need to ask why. Is it because food truck owners are poorer than the citizenry at large? No one would seriously believe that. Perhaps we want to give these spots away because fine, affordable cuisine is worth a subsidy? If it is, then why do we limit doing so to food trucks? There are innumerable restaurants in this city run by men and women who pay a monthly rent to a landlord for a fixed space in which to serve customers, and not a week goes by where one does not go out of business. If any restaurateur is worthy of a subsidy it would presumably be some subset of these folks, who face much higher costs and an existence just as tenuous as the food truck operators.
No one is seriously proposing that we subsidize restaurants, of course. Then why are we subsidizing food trucks?
It’s easier to see the folly of this giveaway if we ascribe a dollar figure to the cost of the lottery system. For the twenty spots along Farragut Square, let’s conservatively assume that the market price would average somewhere around 25% of the monthly rent of the storefront restaurants within a block of Farragut Square, a steep discount that accounts for the fewer hours they can serve, as well as the lack of seating for their customers.The rents in the vicinity of Farragut Square for these restaurants range from $10,000 to $15,000 a month, so twenty-five percent of that is, roughly, $3,125. Multiply by twenty and again by twelve months a year and we get $750,000 a year. If we discount this per-spot value by 20% and apply it to the spaces around Franklin and McPherson Squares, along with George Washington University, the Capitol, and various other locales, then the auctions would produce somewhere around $2 million a year. While we’re not going to solve the city’s problems for that amount, it’s not chump change, either.
I like the food trucks–the city is better off having them there. But before we let them use valuable real estate owned by the public at virtually no cost to them, someone needs to ask whether this giveaway makes any economic sense. No one’s yet asked that question, because the answer is a clear no.
Ike Brannon is President of Capital Policy Analytics, a consulting firm in Washington, DC.
