Earlier, I posted about downtown parking costs and suggested that the city might have actually been making money off of downtown parking. Here’s what I wrote:
“Bad debt refers to tickets that have been issued but not paid. This is not money the city had and then spent. Instead, it is money the city could have but doesn’t because people aren’t paying their tickets. I would argue that this is an opportunity cost, rather than an actual cost.
So let’s get rid of money that never falls into city hands and talk only about real money. This would be the money that the city spends on downtown parking, and the money that the city makes from downtown parking. People who don’t pay their tickets are not a real cost, but an opportunity cost, and so are not factored in here.
After doing this, the net revenue of downtown parking in 2007 rises from $80,054 to $139,011 ($80,054 + $58,967). But perhaps more significantly, the net revenue of the downtown parking program in 2011 changes from a loss of $81,193 to a profit of $23,232 ([-$81,193] + $104,425). Free parking is still not generating as much money as paid parking, but it’s no longer costing the city money– at least not real money, just money that it could be making that it isn’t otherwise. “
I was wrong. As pointed out in the comments section:
“The “cost” of bad debts (in most accounting procedures) accounts for money that was recorded as revenue, but will never be received. While it may not be *this* year’s revenue that is now a “bad debt”, it was, at some point, recorded as money that had been earned (revenue), but will not be showing up in the bank account.
Therefore, in order for the books to balance, it must be “removed” from the system as an expense.”
Having learned this, I contacted city staff to find out what each of these items actually mean. Here’s what I’ve learned (quotation marks mean I’m quoting precisely what was told to me):
Of course, this doesn’t necessarily mean free downtown parking has to cost money. Without those bad debts, the city would be running a profit. Not that they haven’t thought of this– in my message from city staff explaining these costs, it’s said that there will likely be a review of how debts are collected.
So there’s the costs and revenues of downtown parking as it stands now. It will be interesting to see how these are calculated going forward.
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