Crypto Parking Meters – a novel use case for the smart city

Most of us don’t give much thought to parking meters even while we drop an antiquated form of currency known as coins into them. But like most pieces of our modern civilization there lies a complicated industry with many economic and societal forces underneath it. This post is about how cryptocurrencies could be used in the parking industry and the advantages they would bring to cities and their citizens.

Parking Data and Economics

The International Parking Institute says there are approximately 5 million parking meters in the US, and estimates there are more than 105 million commercial parking spaces total. They also put a conservative estimate on the gross revenue for the US parking industry at $25-30 billion. These numbers do appear to be a little outdated but if anything this is a growing industry.

That should be enough to pique the interest of at least a few entrepreneurs.

Revenue generated from parking meters varies greatly but some quick googling can bring up data from smart meter pilot studies. The city of Coronado, CA had average revenues between $53 and $77 per meter per month during their pilot study. A more expensive city to park in, San Francisco, saw average revenues of $133 to $229 per meter per month during their pilot study. Revenue for all Chicago parking meters in 2014 was $131 million (net was $45 million).

If we take a closer look at the numbers provided by the San Francisco Municipal Transportation Agency (SMFTA) in 2012 we find a very lucrative operation. That year generated $47,119,999 in parking meter fees and $87,263,867 in citations for parking violations for a total of $134,383,866. It is very interesting to see that parking citations generated almost twice as much as the parking meter fees themselves, which I’m sure plays much into the incentive structures that shape parking policy, but that is beyond the scope of this post.

How does the gross revenue compare to the operating costs? That’s tough to figure out because so much of the city’s systems overlap, but I think we can get an insightful estimate by looking at some more of the SFMTA data. SFMTA employs 263 parking control officers (meter maids) at an average salary of $51,207 and 23 senior parking control officers who average $63,500. Assuming employee cost at 1.5 times their salary and we get roughly $22.4 million per year. Add in roughly half a million a year for meter maid vehicle maintenance and we have an estimated operating cost of around $23 million per year. This very simple estimate shows just how incredibly huge the profit margin on parking meters can be.

Not only is there plenty of room for companies to generate profit by selling smart meters and monthly service fees to cities, some cities are apparently willing to give away their per meter profits as well. The $131 million revenue for Chicago meters mentioned above didn’t go to the city, but instead to a private company. Chicago sold 75 years of their meter revenue to Chicago Parking Meters LLC for $1.2 billion, and they have generated over half that in the first 5 years of operating. While I wouldn’t expect most cities to be as stupid (or corrupt) enough to offer contracts like Chicago did, I’m sure the next decade will offer plenty of lucrative opportunities for those with the right connections.

From Mechanical Meters to Smart Meters

The first parking meter was installed in 1935, and multispace “pay and display” machines (where you purchase a ticket and display it on your dashboard) were introduced in the 1950s. Technology advanced and in the 1980s digital meters were introduced which made it easier to reprogram the meters for different rates. More recently we have started to see parking meters and pay and display machines that allow payment via credit or debit card, and sometimes even by mobile phone.

Despite the forward march of technology the basic mechanics of paying for parking has gone mostly unchanged. We pay to rent parking space for a given time. But so-called smart meters are being looked at as replacements for the older technology. Smart meters don’t mean much for us as consumers, but they do bring some advantages for the cities or companies using them.

They can be equipped with sensors that detect when a car leaves so the meter can zero itself out. No more getting lucky and finding a meter that still has time on it. Obviously this will increase revenue. Also these meters are linked with backend services and generate and store data to be analyzed. Not only does this mean cities can make data driven decisions on future parking infrastructure, but it also means rates can fluctuate per meter and per hour, scaling appropriately to fit demand. An individual parking meter can “know” that all other meters are in use on it’s block, and if they are all paid up for a long period of time it can temporarily increase it’s rate.

Crypto Meters

Smart meters bring massive advantages to their owners, and some advantages to users (such as the ability to pay with credit cards), but they do have their drawbacks. The biggest drawback being their cost. The meters themselves are significantly more expensive than their predecessors and they come with monthly service fees to cover meter maintenance as well as the backend infrastructure to deal with electronic payments and data storage and analysis. The expertise required to run such a service virtually guarantees a city can’t do it themselves, which provides a lucrative opportunity for the smart meter companies.

While smart meter companies don’t post prices online (they take the usual B2B individual quotes per contract) we can find some quoted prices from the published pilot studies. San Francisco looked at IPS and Duncan meters. Their pilot lists IPS as $42 per meter per year plus a $0.16 per transaction fee and variable merchant and bank fees and Duncan at $420 per meter per year plus a $0.06 per transaction fee and variable merchant and bank fees. The Coronado pilot study doesn’t list the smart meter manufacturer but the pictures they include are IPS smart meters. They quote a $9.25 per meter per month (so $111 per meter per year) fee, average per transaction fee of $0.32 and what looks to be a one time purchase fee of around $757 per smart meter.

Parking meters that use cryptocurrencies would offer new options for the city and can be implemented cheaper and more reliably than a complicated backend service. They could also offer some new features for consumers that are more difficult to implement with standard electronic payments (and impossible with coin or cash payments). The benefits of smart meters such as sensor resetting and data analysis could still exist with crypto meters, but crypto meters also give the option to go extremely lean, even cheaper than mechanical meters.

The easiest, quickest, and most flexible way to do this is with Ethereum. A contract can be written such that it contains information on each parking meter in the city such as the meter’s unique ID, approximate address, rate, and what block number the meter is reserved up to. Ethereum targets a 15 second block time so it would work fairly well for estimating time, although with some more work block time could be used instead. A simple app or web site run by the city could be the main interaction for reserving meters. Some immediate benefits are that if the timer is about to run out the person can fill it up wherever they are. In fact they could, if they were inclined to, have a friend on the other side of the world top off the meter for them. Administrative access would allow changing rates and reservation limits easily from anywhere in the world, along with adding or removing new meters and inactivating them for particular events or holidays. Cities could even choose to allow people in the city to “rent out” their driveways when popular events are planned. An Ethereum contract could allow the temporary creation of these spaces as well as how the profits are split between the city and the house owners.

Running city parking meters on Ethereum would also enable the development of apps (or Dapps) and services on top of the parking infrastructure that does not exist today even with smart meters. Services could pop up offering discounts (by paying a portion of your parking) by using their app or service. Stores could roll that into part of their sales. Restaurants could pay your parking based on your reservation (much like they often validate parking today) and cities could offer discounts for driving or owning a particular fuel efficient vehicle. Services could pop up that help you find the cheapest parking within a specific distance of a destination or possibly available parking meters with time still on them (assuming the city doesn’t use sensors to zero out the meters). Some of these services would seem to run counter to the revenue generating goal of the city but might be tolerated or even encouraged by the forward thinking city that recognized the growth that healthy app markets create. Creating better or more enticing parking experiences could be beneficial for the city and businesses in it.

For multispace meters and parking garages a different contract could be written where people fill open spaces with their license plate number (or use unique IDs for parking spaces). Most of the rest of the contract could be very similar in structure to the parking meter contract.

As mentioned before this approach allows for a wide range of options for the city. Cities could still use smart meters and sensors and take payments with coins, card, or cryptocurrency. But for cities that are large enough to need parking control but still small enough that a smart meter investment is out of their reach, parking meters could be as cheap as a static sign with a url, app name, and parking ID. Some feedback outside of just an app would be optimal for the user experience but could be done very cheaply with simple digital meters. For those not cryptocurrency savvy an option is to have storefronts assist in the purchase of parking for a small fee.

At least some of these things could be built without running parking meters on Ethereum, but they wouldn’t. The infrastructure for smart meters is completely closed and companies have no motivation to open it. Using Ethereum as the backend also reduces the cost and expertise needed to run the city’s smart meter infrastructure while ensuring greater uptime than even a five nines SLA (meaning a service is up for 99.999% of the time). The city would still need to build an app and possibly host a website and an Ethereum node, but this is orders of magnitude simpler than a full backend service on AWS. By the time this could be rolled out it’s possible an app could work like an SPV client and the city wouldn’t need to even run an Ethereum node after all.

What About Bitcoin?

One could also build crypto parking meters with Bitcoin, and that may be enticing since more people use Bitcoin that any other cryptocurrency. However, to get all the advantages that an Ethereum contract brings with Bitcoin would require a lot of programming and infrastructure outside of the Bitcoin blockchain. This may or may not be worth doing, although a functional starting point could be to associate parking spaces with particular addresses. Rates could be set and queried in the data field of a transaction and apps would have to do a lot of the heavy lifting. While difficult, such an approach could still be quite beneficial.

One last advantage a city would have by using a blockchain backed parking infrastructure is that it would give the city the power and flexibility to use and replace meters and meter companies as they see fit. Smart meter companies would have to integrate with the infrastructure that the city ultimately controls, helping to ensure that cities don’t get trapped in horribly parasitic and exploitative deals. This might sound like bad news to the budding entrepreneur but it is good news for the city and its citizens, if they choose to take advantage of it.