The pilot program called ExpressPark, which is set to start in the spring of 2012, will set parking prices according to demand. Parking sensors on the ground will detect when spaces are at a premium and officials could adjust prices.
City officials say higher rates would encourage people to do their business and move along quickly, opening the spots for others. Parking rates during peak hours that are currently as high as $4 per could rise as high as $6 per hour.
"Right now when all the prices are the same, there's no incentive to park further away or closer to the destination so people drive around and around waiting for that spot to open up," said Daniel Mitchell of the Los Angeles City Department of Transportation.
The affected area will be bound by the 10 Freeway to the south, the 110 Freeway to the west, Alameda Street to the East and the streets near Los Angeles Historic State Park to the north.
Some business owners worry it could dissuade consumers.
"It could hurt business, bad," said Chris Frizzell, owner of the Redwood Bar & Grill on 2nd Street.
"It's definitely a balance, so our goal is to support the businesses and provide available parking for the customers, but if the price is too low then there's no parking that can be found and people are circling around and around adding to congestion and pollution and wasting their own time," Mitchell said.