Photo by Wayan Vota on Flickr.

Parkmobile, the vendor that provides the District’s pay by phone system, just sent out an email to all of its customers, saying that it is raising its fee for each parking transaction by 10¢. However, it is also introducing a system that lets people store up value and then pay a lower fee.

Beginning October 29th, transaction fees in DC will increase from $0.32 to $0.45 due to increased costs triggered by recent federal legislative reform enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act’s Durbin Amendment.

To help offset this increase Parkmobile has developed the Parkmobile Wallet which will provide a more cost-effective parking experience in DC — Wallet transactions will carry a $.30 transaction fee.

The wallet essentially works more like SmarTrip or E-ZPass. Instead of paying by credit card for each transaction, you store some value in a Parkmobile account and then spend that down.

DDOT has an exclusive contract with Parkmobile. The contract does give DDOT authority to approve or reject rate increases, and DDOT spokesperson John Lisle said that the company had been talking with DDOT. DDOT officials were persuaded that the reasons for raising the rates were real, and agreed to a rate increase.

Lisle also pointed out that 45¢ is not out of line with other Parkmobile installations; fees in Rehoboth are 45¢ today, for instance.

The way the email blames regulatory reform seems somewhat suspicious, though. According to Parkmobile spokesperson Laurens Eckelboom, the Durbin Amendment last year capped the “interchange fees” that card issuers could charge. Banks responded by eliminating discounts they had previously given to merchants who process a lot of very small transactions. 

As a result, Parkmobile’s transaction fees tripled. Eckelboom was not willing to say what the fees they pay to banks are, but he said that they were losing money with the current 32¢ fees.

Whether or not this is actually a consequence of the Durbin amendment or just bank behavior is a subject of dispute. Eamon Murphy wrote for AOL last December:

But higher costs due to swipe fees are not direct consequences of the law itself; rather, they result from the card companies’ response to the law. This is not the financial industry’s first attempt to avoid any loss to their own profit margins by raising costs for others: Big banks previously floated plans to charge consumers a monthly fee for debit cards, before a public backlash caused them to back down.

It’s clear this change was out of Parkmobile’s control, but less clear they needed to specifically blame Durbin and not their banks, or just note that this was a result of rising credit and debit card fees without blaming anyone.

DDOT did not choose to share any information with the public as these discussions were going on. Lisle noted that DDOT negotiates other contracts, like streetlights, without public input. However, those contracts involve spending DDOT’s budget, whereas this one authorizes a third party with a government-granted monopoly to charge residents more.

Pepco has to go through more of a public process to raise its rates. Should a more participatory process apply here as well, or is it best to leave it to those whose job is to manage the program?

One long-term solution is to set up a mechanism where multiple companies can compete. Establish an API where any authorized provider can register parking actions with a central DDOT database. Each provider collects payments on its own, however it wants, and then gives DDOT all of the base parking fees at the end of each week or month.

Such a solution would require some software development and take effort, but that would let companies choose their own fees and compete based on them, service, app quality, and more. The same API and maybe the same backend technology could work across many cities, letting cities share the cost of building the system.

David Alpert is Founder and President of Greater Greater Washington and Executive Director of DC Sustainable Transportation (DCST). He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He lives with his wife and two children in Dupont Circle. Unless otherwise noted, opinions in his GGWash posts are his and not the official views of GGWash or DCST.