City Council Agenda Report Meeting Date: 10/6/2026
TO: City Council
FROM: Barbara Martin, Administrative Services Director
RE: DOWNTOWN PARK & GO PILOT PROGRAM – STATUS UPDATE AND PARKING FUND
FINANCIAL CONSIDERATIONS
REPORT IN BRIEF:
At its June 2, 2026 meeting, the City Council considered the Internal Affairs Committee's recommendation regarding the Downtown Chico Property-Based Improvement District (PBID) Park & Go proposal. Council directed staff to implement a modified pilot program providing two hours of free parking in City downtown parking lots from July through September 2026 and return to Council with an update. The program was intended to reduce parkingrelated barriers to downtown visitation by encouraging use of the City's downtown parking lots.
Preliminary results for July and August indicate increased utilization of the downtown lots compared with the same period in 2025, while net revenue from those lots decreased by approximately $13,900. The pilot results should also be considered within the broader financial condition of the Parking Revenue Fund (Fund 853). Although parking revenues improved during FY 2025-26, Fund 853 continues to experience expenditures in excess of ongoing revenues. The Fund ended FY 2025-26 with a negative cash balance, resulting in an approximately $70,000 draw from the Parking Reserve Fund. At the same time, the City's historical 15% transfer of parking revenues to the Parking Reserve Fund has not occurred since FY 2019-20, and available funding for parking capital projects has been reduced.
This report provides Council with the preliminary results of the Park & Go program and information regarding the financial condition of the Parking Fund. It also identifies potential parking strategies Council may wish to have staff further evaluate in balancing convenient downtown parking with the long-term financial sustainability of the City's parking system.
RECOMMENDATION:
Staff recommends that the City Council provide direction regarding the following:
1. Receive the Park & Go pilot program update and provide direction regarding the program beyond the pilot period; and
2. Provide direction regarding whether staff should further evaluate parking rate and cost-recovery alternatives, including credit-card transaction cost recovery, modifications to existing parking time limits, tiered or escalating rates for extended parking, and other strategies intended to support the long-term financial sustainability of the Parking Fund.
FISCAL IMPACT: Budgeted: (n/a) Supplemental Required: (No) For FY 2025-26, Parking Revenue Fund (Fund 853) generated approximately $946,000 in total revenues. Parking revenues improved over the prior fiscal year, including increases in both street and parking lot meter revenues.
Despite the improvement in revenue, ongoing operating costs continue to place pressure on the Parking Fund.
The Parking Revenue Fund ended FY 2025-26 with a negative cash balance, requiring an approximately $70,000 draw from the Parking Reserve Fund. Continued operating deficits would require additional use of reserves unless revenues increase, expenditures decrease, or a combination of the two occurs.
Use of reserves to support recurring operations has longer-term implications for the parking system. The City's historical 15% transfer of parking revenues to the Parking Reserve Fund, as required by Budget Policy E.4.g., has not occurred since FY 2019-20. Funding available for parking capital projects has also been reduced over successive budget cycles. As a result, reserves that would otherwise be available for maintenance, rehabilitation, and future capital needs may instead be needed to support current operations.
Staff has taken steps to reduce Parking Fund expenditures. As part of the FY 2026-27 budget, one Parking Meter Collector position’s funding was eliminated. In addition to reducing personnel costs, the position reduction recognizes operational efficiencies associated with the City's transition from individual parking meters to kiosks, which require less routine collection and maintenance than the former meter system.
The Parking Fund is also absorbing credit-card processing costs that were previously substantially recovered through a $0.35 convenience fee. The May 2026 Park & Go staff report estimated that the City's absorption of these transaction costs increased Fund 853 operating costs by approximately $140,000 annually. Preliminary estimates from FY 2025-26 activity shows an increase in cost to over $170,000.
During July and August 2026, net revenue from downtown lots was approximately $13,900 lower than during the same period in 2025. Total net parking revenue across all parking zones was approximately $16,900 lower.
DISCUSSION:
Park & Go Pilot Program
The Park & Go proposal originated from concerns regarding the effect of paid parking on the downtown experience and the desire to reduce parking-related barriers for visitors. At its May 5, 2026 meeting, Council considered a PBID proposal for a summer pilot program providing two hours of free downtown parking. At that time, staff estimated that the proposal then under consideration could reduce Parking Fund revenue by approximately $100,000 over the three-month period. Council referred the proposal to the Internal Affairs Committee for additional discussion. On May 18, 2026, the Committee recommended an amended Park & Go program that included two hours of free parking in City parking lots, additional wayfinding signage directing visitors to the lots, and promotion of the program. On June 2, 2026, Council considered the Committee recommendation and ultimately directed staff to implement the pilot in downtown parking lots from July through September 2026.
Preliminary results for July and August indicate increased use of the six lots. Compared with the same two months in 2025, transactions increased by 4,214, or 23%. The increase in utilization was accompanied by a reduction in revenue. Net revenue from downtown lots decreased approximately $13,900 compared with July and August 2025.
The data demonstrates increased utilization of lots during the pilot period. However, the available information does not establish that the increase resulted solely from Park & Go or whether increased parking utilization resulted in corresponding increases in downtown business activity.
Financial Condition of the Parking Fund
Council's consideration of whether to continue the Park & Go program occurs at a time when the Parking Fund continues to experience an imbalance between ongoing revenues and expenditures. Although parking revenues improved during FY 2025-26, the Parking Revenue Fund ended the fiscal year with a negative cash balance.
Approximately $70,000 from the Parking Reserve Fund was required to address the operating fund's year-end cash position. The Parking Revenue Fund has begun relying on reserves while, at the same time, the City has not been able to make its historical 15% annual contribution to the Parking Reserve Fund since FY 2019-20. This creates a compounding financial effect. Reserves can address a short-term funding imbalance but do not provide a sustainable funding source for an ongoing operating deficit. Resources are not being added to the reserve for future parking system needs, while existing reserve resources are being used to support current operations Operating expenses, prior parking policy decisions, maintenance and capital requirements, and other factors also affect the Fund. However, continuation of programs that reduce ongoing parking revenue should be considered within the context of the Fund's existing financial condition.
Staff has taken steps to reduce operating expenditures. The FY 2026-27 budget removed funding for one Parking Meter Collector position. In addition to reducing personnel costs, the reduction recognizes efficiencies resulting from the City's transition from individual parking meters to kiosks. The kiosk system requires less routine cash collection and equipment maintenance than the City's former individual-meter system, reducing the need for the previous staffing level. While additional efficiencies will continue to be evaluated, expenditure reductions must also be balanced against the staffing and resources necessary to operate, enforce, maintain, and rehabilitate the City's parking system.
Credit-Card Transaction Costs
Another factor affecting the Parking Fund is the City's treatment of credit-card transaction costs. Historically, parking customers paid a $0.35 convenience fee intended to recover the merchant costs associated with creditcard parking transactions. When Council considered Budget Policy E.5 on June 6, 2023 regarding credit card processing fees, staff reported that during the first two months of operation of the new parking system, the convenience fee recovered all but approximately $1,000 of the associated merchant fees. At the time, the City was also working to encourage customer acceptance and use of the new parking system, including the Passport Parking mobile application. Feedback from members of the public and downtown businesses indicated that the additional $0.35 charge was viewed by some as a burden and a potential deterrent to use of the City's parking system and visiting Downtown Chico. The City subsequently removed the convenience fee from parking-related credit-card transactions, including transactions made through the Passport Parking application, kiosks, and singlespace smart meters.
While removal of the fee reduced the cost paid directly by the parking customer and supported efforts to improve acceptance of the City's electronic parking payment options, the underlying credit-card processing cost remained an expense of the City. The May 2026 Park & Go staff report estimated that the City's absorption of these transaction costs increased Parking Fund operating costs by approximately $140,000 annually, with preliminary estimates from FY 2025-26 increasing that number to $170,000 for the fiscal year. As Council evaluates the future of Park & Go and the overall financial condition of the Parking Fund, transaction cost recovery represents a separate component of the parking system that could also be reconsidered.
Maintenance, Rehabilitation and Parking Reserves
Parking revenue supports more than the daily administration and enforcement of the parking program. It also provides resources necessary to maintain, repair, rehabilitate, and eventually replace City parking infrastructure.
Budget Policies require a transfer of $150,000 or 15% of parking revenues, whichever is higher, to the Parking Reserve Fund to provide resources for future parking facility capital needs. That transfer has not occurred since FY 2019-20. Available funding for parking capital projects has also been reduced over successive budget cycles and amounts available for rebudgeting from prior years have declined substantially.
Consequently, continued operating deficits have both a current and long-term impact. To the extent reserves are used to support ongoing operations, those resources are no longer available for maintenance and rehabilitation.
Likewise, reductions in ongoing revenue make it more difficult to resume regular contributions to reserves.
Deferring maintenance or rehabilitation does not eliminate the underlying capital need and may shift those costs into future fiscal years. Maintaining a financially sustainable parking system therefore requires consideration of both current operating needs and the long-term cost of maintaining the City's parking assets.
Balancing Park & Go with Parking Fund Sustainability
The preliminary results provide Council with an opportunity to consider Park & Go within the context of the City's broader parking strategy. The program provides a customer benefit by allowing short-term visitors to park in downtown lots for up to two hours without charge. Preliminary data also shows increased utilization of those lots during the pilot. At the same time, providing free parking has a measurable revenue impact on a fund that is already experiencing expenditures in excess of recurring revenues.
The policy discussion does not necessarily need to be limited to a choice between continuing two hours of free parking in its current form or returning to the previous parking structure. If Council wishes to continue some form of Park & Go, other elements of the parking system could be evaluated independently or in combination.
Potential strategies for further analysis could include:
Continuing the current two-hour Park & Go program;
Modifying the duration of the free-parking period;
Reinstating some or all of the credit-card convenience fee to recover transaction costs; Establishing tiered or escalating parking rates, under which an initial parking period could remain comparatively inexpensive while rates increase for longer stays; and Other rate or operational changes intended to improve cost recovery while maintaining convenient access to Downtown Chico.
Staff is requesting Council direction regarding the future of Park & Go and whether additional parking rate and cost-recovery alternatives should be studied for future Council consideration.