The start of a new fiscal year rarely causes a stir in Palo Alto, where a healthy economy has helped the City Council invest in new bike boulevards, fire stations and garages without cutting any services.

But while residents are unlikely to see earth-shattering changes on July 1, when fiscal year 2018 begins, commuters to downtown and California Avenue could be in for an eye-popping shock.

As part of the budget the City Council is set to approve on June 27, annual parking-permit fees for California Avenue lots and garages would go up by 145 percent, from the current level of $149 to $365. The cost for a day-parking permit in the California Avenue district (where the Weekly's office is located) also would rise precipitously: from $8 to $25.

In downtown, things would get even pricier, with the fee for an annual garage permit going up from $466 to $730. The additional fees, according to staff, will be used to support the downtown Palo Alto Transportation Management Association (TMA), the new nonprofit charged with getting people to stop driving to the business district solo.

Employees who buy permits to park on adjacent residential streets won't be spared from the increases. Downtown's Residential Preferential Parking (RPP) employee permit will cost as much as a garage permit. In Evergreen Park and Mayfield, the two neighborhoods near California Avenue, the cost of an employee parking permit would rise to $365, though this increase wouldn't be implemented until the current pilot RPP concludes next March 31.

The new permit prices represent a paradigm shift in the city's approach to paying for transportation improvements, with a greater-than-ever reliance on employees to foot the bill; a new appetite for bringing local rates up to market standards; and a greater emphasis on paying for programs that discourage driving.

By raising prices for garages, the city is also looking to address the phenomenon of workers buying permits and keeping them in their back pockets for occasional use, leaving some garages on downtown's periphery underused even as the area's commercial core gets packed with cars on the weekdays. Making the garage permits more expensive, the thinking goes, will ensure that those who pay for them will actually use them on a regular basis.

To start addressing these problems, city staff brought to the council's Finance Committee on May 18 a proposal to set annual permit fees in the California Avenue district at $280 and in downtown at $560 as part of a "phase-in." Planning Director Hillary Gitelman called the change the first phase of "what will probably be two or three increases over the course of the next several years."

Chris Yi, senior management analyst at the city's Administrative Services Department, told the Finance Committee that a "major overhaul" of fees in the coming year will "better align fees with cost to provide service, as well as for various parking-related initiatives and projects."

Gitelman cited a study that was released earlier this year by the consulting firm Dixon Resources Unlimited, which recommended bringing permit prices closer to market levels.

Dixon surveyed other cities and concluded that the "cost of Palo Alto's annual employee permit is far below neighboring cities' in the region."

"In several cases, the City's current cost is less than half of other cities of similar size and structure," the report stated.

In Berkeley, for example, an annual public permit is $1,800; in San Mateo, annual employee permits cost up to $960; and in Sausalito, the figure is $1,044, according to Dixon.

The Dixon study makes a case for bringing the prices for both on- and off-street parking closer to market levels. The pricing of parking, the study states, "is related closely to the supply and demand of available spaces."

"In many cities, parking on-street is not in significant demand," the study states. "Parking in Palo Alto, on- and off-street is starkly the opposite, however.

"Demand for parking is constant in both arenas," the study states.

During the May 18 budget hearing, city staff acknowledged the magnitude of the proposed change, as well as the anxieties it may stoke. The committee nonetheless decided that the city should go beyond the staff recommendation and raise employee fees even higher (conversely, permits for residents in the two RPP programs would remain at $50 each).

Finance Committee Chair Eric Filseth said that while he understands the issue of "sort of springing a big shock on people," the money would be invested in transportation. He noted that if the city waits a year to adopt a higher fee, it would "leave a few hundred thousand dollars on the table that could be spent on the TMA this year."

Councilman Adrian Fine agreed and called raising fees to fund the Transportation Management Association the "right philosophy." He acknowledged, however, that the TMA will take some time to actually become effective. This means the city will have to find a balance between "ratcheting this up slowly or somewhat fast."

In the end, the committee voted 3-0, with Greg Tanaka absent, to recommend the steeper increases, which will allow the city to contribute about $480,000 toward the transportation nonprofit this year.

In the downtown area, the funding will help the nonprofit expand its commute services, which currently include offerings of Caltrain Go Passes and Valley Transportation Authority (VTA) Eco Passes for eligible employees and subsidies for Lyft and Scoop, a carpooling service. The TMA has a target of changing the commuting behavior of 450 downtown employees in 2017, which according to its estimate constitutes 8 percent of the area's solo driving commuters.

It's less clear, however, how the transportation funding will be used in California Avenue, which does not have a transportation association.

While the city is preparing to build a garage on California Avenue, the new facility is being funded by proceeds from voter-approved increase to the city's hotel tax. As the Finance Committee voted last month to recommend the higher fees in both districts, Keene noted that the city will have to "think about the logic" of raising California Avenue rates and come up with "additional directives" to make sure the funds are used for the same purpose as in downtown.

The proposed hikes are already causing anxieties in the two business districts, with some employees emailing the city to register their concern about the sharp hike and telling the Weekly in recent interviews they don't plan to buy permits but instead re-park their cars every two hours. An employee of a downtown bank likened the city's strategy to price gouging.

"I cannot imaging any reputable business increasing their fees by 57 percent in one year," Robyn Del Fierro, director of City Private Bank, wrote to the city. "If any company did this, there would be utter outrage at the gouging that is happening to their target market."

Any attempt by employees to forestall paying for parking is likely to be, at best, a short-term endeavor. In April, the council signaled its support for eliminating free parking throughout downtown by exploring the installation of parking meters or pay stations, consistent with Dixon's recommendations.

The council didn't go so far as to officially approve paid parking, but members directed staff to return with a "parking management plan" that will almost certainly include paid parking as a central component (staff is tentatively scheduled to present the plan to council's Finance Committee on Aug. 15).

The plan also will likely eliminate (as Dixon recommended) downtown's existing color-zone system, which grants drivers two hours of free parking per given zone. Once that happens, the days of "hopscotching" from zone to zone to avoid parking tickets and permit fees will come to an end.

During the April discussion, Fine called the switch to free parking a "tragedy-of-the-commons problem."

"People don't have an incentive to take transit if they can park downtown for free," Fine said, asserting that paid parking is a vital way to manage parking.

Not everyone, however, is convinced that sharply raising parking rates will solve downtown's parking problems without creating new ones. Mayor Greg Scharff pointed to the retail and restaurant workers who would have a hard time affording the new rates. During the April hearing, he urged staff to create a different rate for low-income workers.

Michael Alcheck, chair of the city's Planning and Transportation Commission, made a similar proposal last week, during the commission's discussion of the Dixon study. Alcheck said he is skeptical about "general restrictions that make it harder for our restaurants and retail establishments to find accommodations for their employees."

"Anyone that's working in downtown and has to hopscotch — we need to help them," Alcheck said. "I don't consider a hopscotcher an offender. I consider them a victim of a poor system."

During the council hearing in April, Keene acknowledged the experimental nature of the city's approach. The city, he said, is "dealing with the fact that there are all these moving pieces and we don't quite know what to do."

"We're running experiments right now, some of which are already telling us clearly that we have to change our ways," Keene told the council. "We should get more comfortable with being able to incrementally move along."

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