2. Subsidizing parking to encourage retail.

A. A city wants to encourage a continuous retail frontage in its downtown; that is, it wants all the first floor space to be used for retail and not things like offices. The parking requirement for offices is 1 space per 300 s.f. gross. The parking requirement for retail is 1 space per 200 s.f. gross. So the conversion from office space to retail space requires additional parking. To help out in these situations, the city says that new retail can pay a fee in lieu of actually providing parking; the in lieu fee is $5000 per space. The city will provide spaces offsite in a new public parking facility. Unfortunately, the actual cost of building a parking space is $20,000a lot more than the $5,000 fee. Thus, the city is subsidizing parking to encourage more retail. Based on current experience, the city finds that meters in a downtown parking facility bring in on average, $12/day, 300 days a year (no Sundays and some holidays). With a discount rate of 4%, how long will it take for the city to get its $30,000 investment back for the conversion of 1200 s.f. of office to retail?

B. If these kinds of retail spaces average about $200 in taxable sales per s.f. gross of space per year, how much will the city get annually in sales tax from the conversion of one 1200 s.f. office to retail space? (Assume total sales tax rate is 8.75 of which local share is 1.5%-- and that sales dont increase or decline.)

C. If parking revenue and sales tax revenue are combined, how long does it take the city to get its $30,000 back if investments return 4% per year?