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Is your city budget ready for AVs? It’s time to plan for their arrival

December 17, 2020

By Blair Schlecter

Some experts worry that autonomous vehicles will slash municipal revenues—but what if they save money instead?

Look behind the promise of automated vehicles (AVs) and you’ll find an issue that, while less glamorous, has begun drawing attention: how AVs could affect municipal revenues. Alongside AVs’ projected benefits—improved safety, broader accessibility, better ways to move people and goods—some observers worry that this revolutionary technology could take a big bite out of municipal revenues.

With the technology evolving rapidly, we can’t say that will happen. But we can say that cities shouldn’t wait to find out. They can get ahead of the many AV possibilities by developing plans, thinking creatively, and collaborating with other levels of government.

The advent of AVs may chance the balance of revenue sources, but that could present opportunities for municipalities willing to plan.

How much money do cities make from cars?

Many cities, including some of the largest, lean heavily on parking and traffic revenue. A 2017 survey found that the 25 largest US cities earned nearly $5 billion in car-based revenues for 2016, about 60%of it from parking and enforcement. The survey, by Governing magazine, also found that gas taxes represented the biggest source of revenue for several cities and that heavy reliance on car-related revenues left budgets in many smaller cities especially vulnerable to changes.

The pandemic will likely force most cities to rethink funding generally as new patterns of work, travel, and commerce take shape. Before the pandemic, new mobility choices like ride-hailing and micro-mobility (aka scooters and bikes) had already begun reshaping urban transportation. Those shifts promise more uncertainty for municipal budgets.

Empty lots, empty coffers?

Do AVs pose a serious threat to municipal income? How much should cities worry? 

If AVs take the form of low-cost, ride-hailing services, as some expect, car ownership could begin to fall, taking registration fees with it. AVs might snub parking spaces in commercial districts in favor of circulating continuously (Uber and Lyft drivers already do), heading to cheaper spaces farther out, or returning home. Each outcome would cut municipal revenue from lots and meters. Other revenue streams might take a hit, too. With AVs programmed to obey traffic laws—and “talk” to networked traffic signals and to each other—traffic violations would plummet, meaning lower revenue from fines. Convention centers and airports, which often rely on parking revenues to operate, could suffer.

How AVs reach the market will matter

AVs won’t arrive at once but in phases, starting with niche uses. That would make any impact on revenues gradual and give cities more time to adjust. 

With the technology still evolving, the earliest applications will show up for uses like transit and trucking, where automated vehicles can move largely on fixed, predictable routes. Fully automated and personally owned cars would have a bigger impact on car-based revenues, but their high price tags (at least initially) would push widespread adoption much further out. In other words, over the short term, cities will probably see little change in revenues due to AVs.

And AVs could easily save money. They have the potential to reduce collisions, meaning fewer ambulance runs and less damage to light poles and streets that cities pay to repair. Lower parking use would mean less money spent managing parking. Cities could reassign enforcement and administrative staff to other tasks. AVs could also streamline services like trash collection, making them more economical.

In short, AVs’ impacts on revenue will vary—and some might boost budgets. 

Many cities, including some of the largest, lean heavily on parking and traffic revenue. A 2017 survey found that the 25 largest US cities earned nearly $5 billion in car-based revenues for 2016.

What’s a city to do?

Even with so many uncertainties, planning can start now. Three key moves will help: 

  1. Learn, then plan. City leaders can start by learning about AVs so they can game out impacts as they plan to integrate them into existing transportation. They can draw up action plans for the most likely outcomes and contingency plans for less-probable ones.
  2. Get creative. Planning should cast a wide net. Weigh whether lower parking-management expenses might balance lost income. Examine “curb control” and the balance of demands for space at the curb. Update policies and zoning to encourage conversion of parking lots to income-generating uses (today’s parking lots could become tomorrow’s development sites). Consider how to turn curbside parking into community benefits like parklets and outdoor space for restaurants (a pandemic innovation likely to stick around). Or use it to promote economic development by designating food-truck bays or incubator space for small businesses. Freed-up on-street parking can reemerge as dedicated transit and bike lanes that improve quality of life while stimulating investment. 
  3. Collaborate across governments. Forward-thinking alternatives to fuel taxes, like user fees and congestion pricing, will require collaboration with regional, state, or provincial governments. Some areas have already started testing these tools. Cities that take the lead in proposing new models could stake a stronger claim on future revenues.   

If AVs take the form of low-cost, ride-hailing services, as some expect, car ownership could begin to fall, taking registration fees with it.

The road ahead

All signs suggest that AVs will arrive gradually, with specialized, limited applications coming first. That gives cities the opportunity to stop, assess, and plan. AVs might well change the balance of revenue sources, but planning shouldn’t overlook look the opportunities they bring—rethinking the public realm and new revenue from new development. Savvy city leaders will take the coming years to position their cities for big changes ahead.

How can cities plan for a smooth transition? Keep planning focused on the essentials, seek out fresh ideas, and bring in the right partners early on. You’ll want the best companions you can find on the road ahead. Safe travels.

  • Blair Schlecter

    A senior product developer, Blair identifies and resolves policy and regulatory issues and identifies ways to effectively deploy autonomous vehicles safely and sustainably. He has experience in communications, project management, and advocacy issues.

    Contact Blair
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