Proceedings of the Commuter Parking Symposium
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- PROCEEDINGS -
COMMUTER
PARKING SYMPOSIUM
December 6-7, 1990
Battelle Conference Center
Seattle, Washington
Sponsored by The Association for Commuter Transportation
& the Municipality of Metropolitan Seattle
Supported by the Urban Mass Transportation Administration
and Federal Highway Administration
ACKNOWLEDGEMENTS
On behalf of the Association for Commuter Transportation (ACT) and
the Municipality of Metropolitan Seattle (Metro), I am pleased to
submit this manual as a record of the proceedings of the National
Commuter Parking Symposium. This symposium was held at the
Battelle Conference Center in Seattle, Washington on December 6-7,
1990.
The symposium was made possible by the receipt of a $40,000 grant
from the Urban Mass Transportation Administration (UMTA) and a
$9,500 grant from the Federal Highway Administration (FHWA). I
would like to extend special thanks to Rob Martin and Doug Birnie
of UMTA and Wayne Berman of FHWA for assisting us in obtaining
these grants.
Laurie Elder and Eileen Kadesh of Metro's Market Development
section were the primary persons responsible for organizing the
symposium. They were involved in planning the agenda and small
group process, working with white paper authors and reviewers,
dealing with requests for travel assistance, developing the
conference packets and ensuring that everything went smoothly.
I would also like to express my appreciation to the following
individuals:
White Paper Authors
Kiran Bhatt, Don Pickrell, Dick Pratt,
Donald Shoup and Rick Willson,
Peter Valk and Cy Ulberg
Participants in the Panel Discussion
Bruce Freeland, Judd Kirk and Peter Valk
Evening Speakers
John Bencich, Al Huerby, Robert McGarry and Jim Sims
Also, I would like to recognize the efforts of those participants
who reviewed and critiqued the white papers, although there were
too many individuals to list here.
Finally, I would like to thank all of the participants who brought
energy and diverse perspectives to make the symposium informative,
thought provoking and, I hope, useful.
It is my hope that the efforts of all those who made this symposium
possible will draw attention to parking policy as the one demand
management hat supersedes all others in its potential to change
travel behavior.
William T. Roach, Chair
ACT Public Policy Council
TABLE OF CONTENTS
PROCEEDINGS: COMMUTER PARKING SYMPOSIUM
Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . i
Astounding Facts . . . . . . . . . . . . . . . . . . . . . . . . . v
Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . .vi
I PANEL DISCUSSION
Panel Discussion Participants . . . . . . . . . . . . . . . I-1
Case Study for Panel Discussion . . . . . . . . . . . . . . I-2
Questions for Panel . . . . . . . . . . . . . . . . . . . . I-4
Highlights of Panel Discussion. . . . . . . . . . . . . . . I-5
II PRESENTATIONS ON INNOVATIVE PARKING PROGRAMS
Swedish Transportation Plan . . . . . . . . . . . . . . . .II-1
Proposed Parking Tax for Montgomery County, Maryland. . . .II-4
Proposal to Levy Parking Charges in the
San Francisco Bay Area . . . . . . . . . . . . . . . .II-6
Effect of Regulation XV on Private Sector Attitudes Regarding
Parking Management . . . . . . . . . . . . . . . . . .II-8
III WHITE PAPERS AND SMALL GROUP SUMMARIES
Federal Policy
Federal Policy Group Summary
Attachment 1 -White Paper:
Federal Tax Policy and Employer-Subsidized Parking
Elasticity
Elasticity Group Summary
Attachment 2 - White Paper:
Employer-Paid Parking: The Influence of Parking Prices on
Travel Demand
Local Tax
Local Tax Group Summary
Attachment 3 - White Paper:
Parking Tax Discussion Paper
Leasing Group
Leasing Group Summary
Attachment 4 -White Paper:
Leasing Practices & Parking
1 of 2
Zoning Group
Zoning Group Summary
Attachment 5 - White Paper:
Local Zoning Codes & Parking Supply
Employer Incentives
Employer Incentives Group Summary
Attachment 6 - White Paper:
Employer Parking Pricing & Incentive Programs that Change
Modal Split
IV APPENDIX
1. Registration List. . . . . . . . . . . . . . . . . . . . 1
2. Agenda . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Small Group Break-Out Plan . . . . . . . . . . . . . . .10
4. Parking Program Examples Submitted by Symposium
Participants:
Example 1: Parking Permit Program (Portland, Ore..). . .11
Example 2: Parking Freeze (Boston, Mass.). . . . . . . .15
Example 3: Park and Play (Orlando, Fl.). . . . . . . . .17
Example 4: CH2M Hill Employee Rideshare
Program (Bellevue, Wash) . . . . . . . . . . .18
Example 5: City of Bellevue Rideshare Parking
Management Program (Bellevue, Wash.) . . . . .20
5. Other Information Submitted by Participants. . . . . . .22
2 of 2
EXECUTIVE SUMMARY
Introduction
Parking policy is a critical element in transportation demand
management. Since parking is essential at some point for virtually
all automobile trips, the price and availability of parking have a
strong influence on whether people choose to make their trips by
automobile.
During the past few years, numerous conferences have been held on
issues relating to traffic congestion, ridesharing, and demand
management. For the first time, on December 6-7, 1990, a group of
experts was assembled in Seattle, Washington to focus on the topic
of parking policy reform. Professionals in a variety of
disciplines--consultants, employers, developers, public sector
managers, service providers, and academics--were invited to
identify actions which could affect employer-provided parking. The
primary theme of the Commuter Parking Symposium, co-sponsored by
the Association for Commuter Transportation and the Municipality of
Metropolitan Seattle, was how to "level the playing field " to
equalize the subsidy historically offered drivers of single
occupant vehicles.
The Commuter Parking Symposium had four goals:
1) To look at the issues of parking supply, demand, and
pricing in a new way from a new perspective
2) To understand the development process and its
relationship to parking from a developer, employer, and
local jurisdiction point of view
3) To develop new proposals and ideas for further research,
demonstration projects, and policy initiatives, and
4) To create a network of advocates and professionals
committed to sharing information and ideas in the future.
Perhaps the most significant accomplishment of the symposium was
that it represented a first attempt to document and exchange
"state-of-the-art" information on parking policy on a nationwide
basis among a wide range of disciplines.
White Papers
To stimulate discussion and generation of ideas at the symposium,
white papers were prepared on the following six aspects of parking
policy:
1) implications of federal policies for the provision of
employee parking.
2) Potential of local parking taxes to raise the cost of
parking, generate revenue for transportation purposes,
and discourage the provision of subsidized parking.
3) Analysis of parking supply and demand relationships and
the influence of price on demand.
4) Developer leasing practices regarding parking.
5) Local jurisdiction zoning practices that influence
parking supply.
6) Employer parking pricing and incentive programs that
change mode split.
A number of surprising facts about parking were drawn from these
papers as well as challenges facing those working in the area of
parking policy reform . These facts and challenges are listed on
the following pages. One of the points discussed at the symposium
is that many of the parking policy decisions being made are driven
by misguided perceptions and are based more on myth than fact. For
example, during an opening panel, a developer noted that the role
of lenders is much less significant than commonly perceived.
Lenders generally question developers about supply ratios only when
there is a proposal to vary widely from normal standards. There is
also a need for national organizations, such as ULI or ITE, to
conduct new research on supply/demand ratios in a variety of
settings (urban, suburban, etc.) Parking standards are currently
based on outdated research, inadequate sample sizes, and "folk
wisdom."
Recommendations from the white papers dealt with seven general
issue areas:
1) The need to amend the federal tax code and reclassify
employer-provided parking as a fringe benefit.
2) Reducing parking requirements and supply (through
establishment of maximums, lower minimums, and overall
caps).
3) Travel allowances.
4) The need for research on supply/demand ratios.
5) Parking charges.
6) Local parking taxes.
7) Identifying separate costs for parking and building space
in leases.
Product
Symposium participants were divided into small groups by area of
interest to examine the preliminary recommendations generated by
the white papers, refine them, and produce new ideas. Each small
group's recommendations were then critiqued by groups consisting of
individuals from the same sector, e.g. all the participants at the
symposium who were developers. This critique enabled the small
groups to obtain a "real-world" check on their ideas and identify
the most workable recommendations to pursue. Finally, all
attendees voted on the top ideas for policy initiatives,
demonstration projects, and research needs.
The following ideas received the highest rating by symposium
participants. These ratings were based on potential for
implementation or effectiveness in changing travel behavior.
Policy initiatives
1) Amend the federal tax code so that the value of any
commute benefit(including parking) that exceeds $60 is
taxed (and any commute benefit under $60 is tax free.)
2) Amend the federal tax code to require that employers who
offer an employee a parking subsidy must also offer that
employee the option to take the market value of the
parking subsidy as a taxable cash travel allowance in
lieu of the parking subsidy.
3) Amend the tax code to reclassify employer-provided
parking as a taxable fringe benefit.
4) Mandate a state level congestion relief program with TDM
and parking elements.
Demonstration Projects
1) Develop an assessment program which introduces a parking
fee at individual sites based on the number of employees.
The employer would be responsible for collecting the fee
and investing it in transportation demand management
programs.
2) The federal government should take the lead by adopting
policies for federal employee parking that are a model
for all employers.
3) Offer a reduced property tax for developments that take
land out of active parking (parking bank) and convert
that land to new services for employees.
4) Reduce parking requirements at redeveloping projects in
suburban areas and place a lid on peripheral parking at
adjacent sites.
5) Collect updated information on parking supply/demand
ratios over a representative cross-section of
metropolitan areas in a variety of settings (urban,
suburban etc.).
Research Needs
1) Evaluate/research the corporate decision-making process
to determine what data is needed to convince CEOs to
charge for parking and support HOV modes.
2) Research and document successful, benchmark employer TDM
programs.
3) Document case studies of innovative parking programs,
both proposed projects and those already underway.
Evaluations of these programs, including collection of
"before" and "after" mode-split data, should be prime
candidates for funding.
Next Steps
The work started at the Commuter Parking Symposium will be
carried on at several levels. ACT will be the primary
organization lobbying congressional representatives for tax
policy changes. The Ridesharing Committee of TRB will be
asked to sponsor other national parking policy research and
data collection.
- iii -
A national network of individuals interested in working toward
parking policy reform is also being formed, consisting initially of
symposium attendees who responded to a follow-up questionnaire.
This group may try to sponsor commuter parking symposiums in other
key areas of the country, such as southern California. Roundtable
discussions among employers and developers will be explored, with
the hope of identifying demonstration projects that are needed,
obtaining organizational and funding support, and documenting
results. Other actions initiated as a result of the symposium will
be reported in forthcoming ACT newsletters.
ASTOUNDING FACTS
1) Nine out of 10 American commuters who drive to work park
free.
2) More than half of the office workers who drive to
downtown Los Angeles receive subsidized parking (half of
those park free).
3) Employer-paid parking increased the number of cars driven
to work by 37% at five sites studied in California.
4) Employer-subsidized parking has a value of at least $
1,000 per year tax-free.
5) The number of drive alone employees has been shown to
decline by at least 20% when employers charge a market
rate for parking.
6) Seven out of 11 best performing TDM programs evaluated by
FHWA Included employee parking charges.
7) imposing an $8 per day parking charge can reduce demand
from 2.45 spaces per 1,600 gross square feet of office
space to 1.74.
8) A 1986 Urban Land Institute study found that parking
spaces at most business parks were only 47% occupied even
when the parks were well leased.
9) The federal tax policy considers parking a tax-free
benefit, while any bus subsidy over $15 per month is
taxable.
10) If the value of parking were included as a taxable
employee benefit, it is estimated it would generate $5
billion in tax revenue.
- v -
CHALLENGES
1) Existing code parking requirements typically result in
parking supply far in excess of demand.
2) The demands of lenders result in a supply of parking more
generous than that dictated by local municipalities.
3) The practice of commingling parking and office space
revenues is an impediment to building owners and tenants
to negotiate a reduction in the amount of parking they
lease.
4) Building managers have little incentive to reduce the
number of parking spaces leased to employers once a
development is built.
5) Parking operators have little incentive to reduce demand
for parking.
6) Tenants and employees expect an immense supply of no- or
low-cost parking in most work centers.
7) Employees consider parking a benefit.
8) The impact of a parking tax on mode shift will depend on
the extent to which the tax is passed on to individual
parkers.
9) No amount of government subsidy for high-occupancy
vehicle modes will ever offset the inducement of
employer-provided parking.
10) "Natural" market forces will not constrain parking supply
in the suburbs for a long time.
11) The federal government is a direct provider of free
parking on a large scale.
12) Market forces have begun to reshape the manner in which
tenants perceive and need parking.
- vi -
PANEL DISCUSSION
PANEL DISCUSSION OF CASE STUDY:
REQUIRED PARKING CHARGES AT
SUBURBAN DEVELOPMENTS
Participants:
Bruce Freeland, Planning Director,city of Bellevue, WA
Judd Kirk, Attorney, currently Vice-President of
Blackhawk/Pt. Blakely, Seattle, WA
Peter Valk, President, Transportation Management
Services, Pasadena, CA
Moderator:
William T. Roach, Supervisor, Market Development,
Municipality of metropolitan Seattle
I-1
CASE STUDY FOR PANEL DISCUSSION
Required Parking Charges at Suburban Developments
The following example of a transportation demand management (TDM)-
based parking negotiation is based on a development currently
proposed for a suburban community in King County. Requiring
parking charges as a condition of approval for this development
would set a precedent for the local jurisdiction and for non-
urbanized King County.
The Proposed Project
Universal Development Corporation has proposed the following
project:
- 500,000 square foot speculative office development; three
low-rise buildings, two parking structures, situate on a
10-acre wooded lot.
- Construction will occur in three phases over
approximately 36 months. Phasing will permit a rough,
though variable balancing of on-site parking supply and
demand.
- Total of 1800 parking spaces in two parking garages
proposed (3.87 stalls/1000 sq.ft.); additional surface
parking for 40 vehicles proposed for visitor/convenience
parking.
- Parking ratios of 3.5-4.5 stalls/1000 sq. ft. normally
are allowed by local code for developments of this type.
However, because this development is proposed within a
designated critical congestion area (see area description
below), the local jurisdiction has indicated it will
reduce the maximum parking ratio to 2.0/1000.
The Project Area
Universal Development's proposal is located in an area long noted
for its congestion problems. The area is dominated by a major
freeway corridor. A major transportation study was recently
completed for the area. Over $80 million of roadway projects were
recommended for construction over the next 15 years, as well as a
variety of demand management actions.
The area where Universal's proposal is located contains a
substantial complex of shopping centers and retail stores. Over
the past ten years many high-technology industries and office parks
have been built along the freeway corridor here. One of the most
significant off ice/business parks, located just over one mile from
Universal's site, is currently undergoing additional development.
This will add several thousand employees to the area. Other firms
are also developing or expanding nearby, and it appears very likely
that a transportation management association may soon form in the
area.
The area is relatively well served by transit. Although only one
bus route serves roads adjacent to the site, a transit center is
located nearby (about a quarter of a mile). This transit center
offers direct service to several major activity centers and
connections to many others.
I-2
TDM Requirements and Negotiations
The local Jurisdiction intends to require a transportation
management plan (TMP) of Universal's proposed development, much as
it would for similar developments. This
TMP will include:
- Information elements (High occupancy vehicle
(HOV)information at the worksite, an employee
transportation coordinator, and so on)
- Incentive elements (HOV pass subsidies, guaranteed ride
home program, and others)
In addition, the TMP will establish a 40% non-drive alone rate for
the development, to be attained within three years. This is higher
than the normal performance goal required for a development of this
type (which would be 30% over two years) due to the area's
designation as a critical congestion area. The development will be
permitted up to a 25% credit for flextime for commuters
arriving/departing at the site outside of peak commuting times.
Universal would very much like to construct parking at its
originally proposed rate (3.@17/1000). The local Jurisdiction has
indicated that it will be inclined to honor this request if
Universal will institute parking charges at the garages.
Additional elements of the parking negotiations include:
- The local jurisdiction has proposed setting the monthly
parking charge based on the average cost of a transit
pass (currently $34/month).
- Parking discounts would be established for carpools,
vanpools, flextime commuters.
I-3
QUESTIONS FOR PANEL
1) Do each of you recognize/accept a role/responsibility in
addressing the problem of congestion (or maintaining
mobility)? What is the city's obligation? the developer's
obligation? the employer's obligation?
2) Under what circumstances in a suburban environment would
instituting parking charges succeed as a TDM measure?
3) Assuming that aggressive TDM objectives are warranted in a
given area, can you suggest improvements over the charge for
parking approach?
4) From each of your perspectives, what role does parking play in
making this a successful project?
5) Assuming limited opportunities to increase publicly financed
transportation services in an area, does the fact that parking
revenues may be generated by a project offer opportunities to
increase the level of transportation services in the area?
I-4
HIGHLIGHTS OF PANEL DISCUSSION
1) Need to establish motivation for developer/tenants to decrease
parking supply by means of education and availability of
alternatives before establishing parking restrictions.
2) Conditioning developments through the permit process impacts
new development only. Need to find methods to reach existing
development.
3) Stricter parking standards need to be region-wide to be
effective.
4) City of Bellevue charges for city hall employee parking and
provides bus passes and rideshare subsidies. Has maintained a
50 percent mode split for several years.
5) Many businesses don't want to locate in Bellevue CBD because
of parking restrictions. No new buildings in 1-1/2 years.
Losing market share to suburbs.
6) Sizing parking is the same as sizing the rest of the project.
Based on experience and market patterns.
7) Need meaningful incentives for developers:
- There must be a mix of TDM programs to be attractive over
time
- Transit availability
- Access to services, need for mixed use
- Mix of financial incentives
8) Lenders don't establish parking levels. Lenders only question
supply if the proposed amount is way off base from the "norm."
Developers want to build as little parking as possible.
Oversupply is a killer economically unless future need may be
there.
9) The issue may be historical parking supply patterns cast in
stone. if there is adequate information to change the pattern,
new developments would reflect that.
10) There is less parking required for mixed use (the standard of
3/1,000 used instead of 4/1,000).
11) Potential parking space land can be left in landscaping and
converted to additional spaces if TDM measures do not reduce
demand.
12) Need to view parking as an asset, not a fixture.
I - 5
PRESENTATIONS ON
INNOVATIVE PARKING PROGRAMS
SWEDISH TRANSPORTATION PLAN
John Bencich
Associate Executive Director,
Swedish Hospital, Seattle
As a part of an agreement reached with the City of Seattle
regarding a twenty year development plan, Swedish Hospital Medical
Center committed to reducing the number of vehicle trips in the
campus area. The focus of the Transportation Management Plan was
to reduce employee parking during the day shift, thereby reducing
Swedish' contribution to surface street congestion in the First
Hill area (of Seattle).
These methods required a program focusing on financial
disincentives for SOV usage coupled with attractive incentives for
HOV users. Marketing and reporting requirements are also central
to this transportation section, with prescribed goals of lowering
the SOV percentage.
The City of Seattle mandates that a major employer have no more
than 50% of employees SOV during the day. In 1983, Swedish stood
at 59%, with a stated five year goal of reducing this number to the
mandated 50%. Many factors were considered in the planning effort
to reduce employee dependence on their vehicles. Marketing and
pricing of available options were the preferred courses and were
embarked upon.
In addition to the external constraints mandated by the City,
Swedish was (and is) under an internal constraint in providing
sufficient parking for patients and visitors to the entire Medical
Center. Priorities were re-aligned to state that the patient was
number one, followed by physicians, and then employees. Tight code
requirements and the costs of constructing additional parking have
necessitated the limiting of parking designated exclusively for
employees. Parking costs are an expense that can be fully
recovered from neither patient/visitors nor employees.
Owing to the rapidly changing nature of health care and the
requirements from employees during these past eight years, the
efforts to increase carpooling have not enjoyed particular success.
The rate, $5/month for a driver and $1/month for each passenger,
has grown more favorable as SOV rates have risen, but the need for
flex shifts have negated carpooling as a very positive option.
Swedish Hospital has 500 employees involved in carpooling, 95% of
which are on the day shift; this number has been relatively static
over a period of years.
As a key part of implementing the Swedish Transportation Plan, a
full-time Transportation Coordinator was hired in Spring, 1985.
This allowed for all component parts of the Parking/Transportation
picture to be managed through one office. All employee
transportation benefits are managed separately from the standard
employee benefits.
January 1986, saw the beginning of annual day shift parking
increases to create the desired disincentive to SOV users. This
rate, which stood at $22/month, continues to be reviewed annually
and will stand at $50/month on January 1st (1991). Also in 1986,
Swedish realized that the key to marketing HOV usage to our
employees was emphasizing the transit option. The employee transit
subsidy, which stood at
II - 1
between five and ten dollars/pass, was increased to $15/month.
Sales increased 11% as a result of this increase but leveled off.
As 1987 drew to a close, Swedish knew that the existing programs
were stagnating and that both our external and internal parking
needs were not being met. Existing at this time was a group of
Seattle Hospital Transportation Coordinators that met on a monthly
basis. These meetings were held to seek to jointly answer the
common problems facing all of these institutions. A meeting in
early 1988 yielded the idea of Metro coaches transporting Hospital
employees directly to First Hill, bypassing the downtown corridor
which surveys had shown was the major reason employees cited for
not considering transit as a viable commuting option.
Through the middle part of that year, the First Hill Express
concept was studied and the idea discussed between First Hill
medical employers on two levels:
Administrative and Transportation Coordinators. The Administrative
group met once per month to discuss contracts and the attendant
financial considerations, while the Coordinators worked on
marketing this new service. It was agreed that direct service from
the North End, South End, and Eastside would provide the greatest
options to maximize the expected costs.
This Express system differed from standard transit in that
participating institutions would be required to subsidize 80% of
the cost of the service through guaranteed transit pass
allocations. Swedish, and the other participating institutions,
committed to supporting this direct transit alternative in mid-
summer, and followed it by substantially increasing the transit
pass subsidy, to cover 100% of the pass cost. This laid a strong
framework for the marketing effort that was undertaken to inform
Swedish employees about the Express service. As an integral
marketing tool to employees, a guaranteed ride service was offered
to those who would need transport back to their vehicle during
hours that the Express was not running. This was secured by
establishing a contract with a taxi company that would augment the
direct transit service offered by the Express coaches. All of
these program components provided optimistic assessments on Swedish
employee acceptance of this needed part of transportation planning.
First Hill Express service began on November 4, 1988, with 68
Swedish employees participating. The initial allocation was 117
passes, with which Swedish expected to incur a net loss during the
first eight to twelve months of Express service. Employee usage
had risen to 124 passes (exceeding the required allocation) in
seven months. Service was extended to accommodate employees
(primarily in Medical Office Buildings), which resulted in the
allocation being raised. Swedish employees responded and exceeded
this additional allocation amount the first month.
Additional service was added in February, 1990, that extended two
of the routes (south and east). This entailed a substantial
addition (50 passes) to the Swedish allocation; as there was
substantial demand for these areas, this amount was met the first
month and has continued to rise to the present level of 280 First
Hill Express passes distributed.
Express service is now the capstone of the Swedish Transportation
picture. We are currently in the last stages of planning express
service utilizing Metro Vanpools to areas where there exists demand
but not the numbers to justify a full coach.
Employees have been generally receptive to the Express and other
measures taken to increase HOV usage. Day Shift parking has been
unavailable for three years and is expected to remain so for a
minimum of two additional years. Upon initially
II-2
freezing the parking, there was a great deal of anger owing to the
perception of promises unfulfilled. Within months the transit
subsidy was increased to the 100% level and the First Hill Express
service begun. Over the past year and one half, employees have
understood the requirements (both external and internal) and
responded to transit most favorably. Mailings to all employees are
undertaken twice a year to provide transportation information
updates. Any adverse effects on hiring availability have been
mitigated by additional transportation services being Studied and
implemented, when warranted.
The advent of both the First Hill Express concept and 100% transit
subsidization pumped vigor into a transportation program that was
non-performing in meeting mandated goals. The Day Shift SOV
percentage for the Hospital is now 41 %; transit and carpool (HOV)
percentage is 59%. Transit pass distributions are up 71% (1157)
over the past three years and 21 % in the last year alone.
Innovation has been the key to successfully driving down a high SOV
rate that had been in place prior to under-taking a development
plan. While initially reluctant, employees will work with you as a
partner in a mutually beneficial relationship.
II-3
PROPOSED PARKING TAX FOR MONTGOMERY COUNTY, MARYLAND
Robert S. McGarry
Former Director, Department of Transportation
In winter of 1988, I became convinced that additional revenue was
urgently needed. The County Executive and I had just been forced
to reduce the transportation capital program (roads) by $20 million
and defer legitimate highway maintenance for two years. These
reductions were caused by the increasing needs for more school
classrooms (capital) and teachers (operating). I proposed a
parking tax for revenue and recommended I develop legislation for
his consideration. He rejected this because he felt that:
1 . Voters were opposed to new taxes ("read my lips")
2. We could get by without more revenue.
3. It was politically the wrong time.
When the County Council reviewed the Executive's cuts, they also
became concerned about revenue. They formed a committee of
citizens, developers, and businessmen to look into revenue needs.
The committee talked to me (and others) and concluded:
1 . More revenue is needed.
2. A parking tax is a good source, since the greatest need
for revenue is for transportation.
The Council accepted the recommendation and drafted parking tax
legislation. They wished to exempt housing and retail, even though
this significantly reduces revenue. Also, exemption of retail and
housing meant that the tax could not be a property (ad valorem) tax
on a parking space since Maryland's Constitution requires a uniform
property tax rate for all classes of property. This left the
option of an excise tax or a fee. Maryland's highest court had
just struck down the County's transportation impact fees, leaving
only an excise tax option.
The bill levied a yearly excise tax of $60 per space on any person
who made land available for parking by employees of any business.
a. It would be administered via a self-reporting tax return
similar to federal/state income taxes.
b. Persons with fewer than 10 spaces, parking meters with
less than 2 hours, park and ride lots, vehicle storage
areas, and federal/state facilities are exempt.
C. To encourage TDM policies, tax is reduced by 50% of
expense to taxpayer to provide alternative
transportation, provided (1) they charge for parking and
(2) they provide transit discounts.
II - 4
d. All county parking, including spaces in the County's
public parking districts, are taxed
e. Receipts were dedicated to a new transportation trust
fund.
The business reaction was LOUD and UNIVERSALLY OPPOSED. The cost
to large employers, the fact that only businesses were taxed to
support community transportation (or indirectly school) needs, and
the loss of competitive edge with neighboring jurisdictions were
the main objections.
The bill passed by a 4-3 vote. The Executive vetoed it--for the
same reasons he told me plus the business arguments--and it died,
since 5 votes were needed to override the veto.
Two years later the revenue situation is much worse - capital
budget has been reduced by $150 million and there is a $60 million
operating shortfall. My Executive was defeated and the new
Executive is planning a PARKING TAX.
II-5
PROPOSAL TO LEVY PARKING CHARGES IN THE SAN FRANCISCO BAY AREA
Al Huerby
Senior Financial Analyst, Metropolitan Transportation Commission
The California Clean Air Act requires each "non-attainment" area to
develop a Transportation Control Measure Plan. All "reasonably
available" Transportation Control Measures (TCM) within existing
legal authority of either the Bay Area Air Quality Management
District or local governments must be included in the TCM Plan.
The Air Quality Management District has the authority under
Indirect Source Review to implement parking charges as a
Transportation Control Measure, and therefore parking charges are
considered to be "reasonably available" TCMS. The Metropolitan
Transportation Commission (MTC) is charged with developing this
plan.
MTC staff therefore included commuter parking charges in its draft
TCM plan recognizing that these are the easiest trips to leverage:
- there are trip concentrations at the work end;
- people generally commute during the peak period
facilitating shared ride programs; and
- transit capacity in the Bay Area is geared to serving the
work trip market.
Two broad approaches were examined by staff:
- using parking charges as a means of demand management,
and using revenues generated to implement commute
alternatives programs at the work site and locally by the
local government entities; and
- Using parking charges as a revenue raising mechanism with
proceeds dedicated to traditional regional mobility
improvements, i.e., bus/rail capital improvements,
transfer and fare subsidies, regional HOV programs.
A charge of $2.00 to $3.00 per day was proposed to be levied on
employees' parking, based either on single occupant vehicles (SOV),
irrespective of where parked, or only on employer-supplied parking.
In addition, the Commission added at the request of the Air Quality
Management District a general assessment on all other parking space
supply, i.e., shopping centers, entertainment facilities,
commercial lots, etc.
The contribution to improved air quality, not congestion relief,
was the objective of this program and, in addition to parking
charges, a bridge toll increase of 11.00 on all seven of the
region's toll bridges, 149 gas tax and a $10.000 vehicle
registration fee were proposed.
The contribution to improved air quality from both pricing impacts
and a program of mobility improvements to be funded from revenues
generated were evaluated.
The plan was presented at a series of hearings to receive public
comment.
II - 6
The comments were generally quite negative on the parking charge
component, and, as a result, the Commission in its approval of the
plan voted to keep the parking charges (commuter only) as a
contingency to be used only if the Commission was unsuccessful in
getting the other revenue raising measures approved by the
legislature.
During the public debate process it became evident that the
Commission did not want to implement demand management techniques,
and that the Commission was clearly uncomfortable implementing
parking charges except as a revenue raising mechanism. Given this
position, it became more logical to propose more traditional and
thus less controversial sources of revenue to fund a program of
mobility improvements to achieve air quality attainment.
Had the Commission chosen to view parking charges as an appropriate
means of altering commute behavior to improve air quality by
dedicating revenues generated to a program at the employment site
designed to provide commute alternatives, the outcome of the public
hearing process might have been different.
As part of their responsibility to implement the TCM Plan, the Air
Quality Management District can reinstate the parking charges at
their discretion, either as a demand motivator or as a revenue
raising mechanism.
II - 7
EFFECT OF REGULATION XV ON
PRIVATE SECTOR ATTITUDES REGARDING PARKING MANAGEMENT
Jim Sims
President, Commuter Transportation Services
I. BACKGROUND
- Southern California has worst air quality in nation.
- 50 to 60% from auto emissions.
- To meet Federal standards, must reduce emissions by 90%;
15% of targeted emission reductions to come from TDM
actions.
- South Coast Air Quality Management District has broad
authority under state law to adopt stringent mobile
source rules.
II. REGULATION XV - WHAT IS IT?
- Applies to all employers who have 100 or more employees
reporting to work between 6:00 and 10:00 a.m.
- Each of 8,000 employers affected must submit plan to
increase Average Vehicle Ridership (AVR) to 1.5 In most
areas, to 1.75 in congested areas.
- Plan must be reviewed and approved by AQMD, and updated
annually.
- Fines of $25,000 per day for non-compliance.
III. EMPLOYER RESPONSE
- Initial resistance. Employers seek to minimize cost,
maximize effect
- Tendency to focus on incentives.
- Some problems encountered with disincentives:
- employee resistance
- opposition from organized labor
- limitations imposed by labor agreements
- Some increased interest in Transportation Management
Associations (TMAS)
IV. WHAT LESSONS HAVE WE LEARNED?
- Incentives alone may increase ridesharing, but don't
reach AVR targets.
II - 8
- Disincentives alone can't be implemented due to employee
resistance.
- Successful programs must include a "package" of
incentives/disincentives, tailored to the individual work
site.
- Parking restrictions/charges the most effective
disincentive (it takes parking charges of $40-$70 per
month to induce significant changes in behavior).
- Effective programs are not cheap. Employers now spending
up to $200/year/employee on TDM programs.
V. WHAT TYPES OF PROGRAMS ARE MOST SUCCESSFUL?
- Programs that include a generous incentive package,
frequently including a "transportation allowance" AND
charging employees for parking at/near market rate.
- County of Los Angeles Example:
- replace free parking with pay-for-parking program,
and a $70 per month transportation allowance
- incentive package included guaranteed ride home,
Vanpool support, and on-site child care
- resulted in 40% reduction in cars in county lots.
CTS doing "before and after" study to determine
degree of mode shift.
- Common Elements of Successful programs:
- appeals to "greed" factor;
- provides cash incentives, or incentives that are
perceived as cash equivalent;
- heavy marketing among employees; and
- make cost of driving alone visible to employee.
VI. OTHER FACTORS AFFECTING EMPLOYEE ATTITUDES
- Important to note that factors other than Regulation XV
are impacting employer decisions
- Local trip reduction ordinances. Cities are
increasingly placing requirements on developers and
property owners, to reduce trips generated by
development.
II - 9
- Congestion Management Plans. Under California law,
localities must develop plans to hold congestion to
"level of Service" E, or better. Will have great
impact on employers.
- Tax policy. Evolving state, local and Federal tax
policy will make alternatives to employer-paid free
parking more and more attractive to employers.
- In long run, economic factors may prove more powerful in
impacting employer attitudes and actions than government
regulation.
- In congested areas, it is becoming increasingly
difficult to attract and retain trained staff. To
be competitive, employers will be developing
"Commute Benefit Packages" to offer employees
incentives to attract and retain employees. CTS's
studies show that the "hassle" and inconvenience of
the commute are more important in inducing commuters
to try alternative modes than marginal increases in
cost.
- The concept of managing parking as an "asset" --
potentially a revenue producing asset rather than as
a cost of doing business will become increasingly
important in employer decision making, especially
when coupled with public policies aimed at commute
trip reduction.
VII. WHERE DO WE GO FROM HERE?
- As TDM professionals, we should work to strengthen and
guide these emerging trends; i.e., "go with the flow".
- That means we should support such things as:
- changing Federal and state laws to "level the
playing field" between employer-provided free
parking and other commute alternatives;
- working with labor to ease concerns about trip
reduction programs by making them "win-win-win" for
employees, employers, and public policy objectives;
- linking parking fee revenues directly to the
provision of employee incentive programs, and
commute alternatives, rather than allowing these
funds to go for general government support; and
- educating and encouraging employers to begin to
think of parking facilities in terms of asset
management, rather than as an employee benefit.
II - 10
VIII. SUMMARY
Employer-provided free parking will be practically extinct in
highly congested areas -- especially in air quality non-attainment
areas in the mid-term future. Our role as professionals is to
recognize the trend, and work with it to achieve the broader
objectives of congestion, improving air quality, reducing our
dependence on oil imports, and maintaining the economic
competitiveness of our cities, regions and nation.
II - 11
WHITE PAPERS AND
SMALL GROUP SUMMARIES
Federal Policy
FEDERAL POLICY GROUP
RECOMMENDATIONS
1) Amend the federal tax code to require that employers who offer
an employee a parking subsidy must also offer that employee
the option to take the market value of the parking subsidy as
a taxable cash travel allowance in lieu of the parking
subsidy.
The rationale for this recommendation is developed in the
white paper "Employer-paid Parking: The Influence of Parking
Prices on Travel Demand," prepared by Donald C. Shoup and
Richard W. Willson, pp 7-8. In summary, Shoup and Willson
suggest:
- First, and politically very important, no employee would
be faced with the loss of any existing parking subsidy as
a result of this policy.
- Any employee who does choose the cash alternative rather
than the parking must, by definition, be better off as a
result of the choice.
- Employers are no worse off if an employee chooses the
cash alternative because the cash alternative is not more
costly than the parking subsidy (assuming the employer is
currently paying market value for the parking space.)
- The option of taxable cash in lieu of a parking subsidy
would most tempt those auto commuters who now receive
employer-paid parking in locations where parking prices
are highest.
- The proposed cash alternative requirement is minimally
intrusive in employers' decisions on how to compensate
their employees.
- Finally, offering commuters the option to choose between
cash and a parking space makes it clear that parking is
not free.
2) Amend the tax code so that the value of any commute benefit
exceeding $60 is taxed and every commute benefit under $60 is
tax-free.
This is a policy adopted by the ACT Board of Directors in
September 1990.
The concept is simple and straightforward. Taxing the value
of parking that exceeds $60 is believed to bring in more than
enough revenue to offset the cost of employer-provided
incentives to alternate commute modes, including vanpools and
transit passes worth up to $60.
This approach would not affect the vast majority of employees
and employers across the country whose parking practices and
habits are not significant contributors to the problem, unless
the employer wished to provide commute benefits under $60.
On the other hand, the proposal may be perceived to hurt
downtown versus suburban economic interests.
3) Amend the tax code to re-classify employer-provided parking as
a taxable fringe benefit. (it is assumed there would have to
be some basic, bare minimum de minimis value, established by
IRS.)
- This proposal is pure from a tax policy perspective.
- It is estimated to bring at least $4.7 billion in new
federal tax revenues.
- The enforcement complexity is expected to be moderate.
- This proposal does not have positive transportation
demand management incentives built in. It is only a tax.
- Politically, this would be most unpopular.
4) Apply the non-discrimination rule to free/subsidized parking.
A study in Los Angeles found that 17% of employees worked for
employers who provided no parking subsidies; a slightly higher
number worked for employers who provide parking for everyone.
This leaves about 65% of employees working for employers who
provide parking for some, but not all employees. It is widely
believed that most of these employers discriminate in
providing parking subsidies to those in higher paid positions.
5) The Federal Government should take the lead/serve as a model
employer.
The federal government should adopt specific transportation
demand management goals for agencies to meet, should abolish
free parking, etc.
ATTACHMENT 1
White Paper
FEDERAL TAX POLICY AND
EMPLOYER-SUBSIDIZED PARKING
Don H. Pickrell
FEDERAL TAX POLICY
AND EMPLOYER-SUBSIDIZED PARKING
Don H. Pickrell
John A. Volpe National Transportation Center
Research and Special Programs Administration
U.S. Department of Transportation*
Prepared for Commuter Parking Symposium
Municipality of Metropolitan Seattle
December 6-7, 1990
* Dr. Pickrell is participating in this Symposium as a private
individual and not as a representative of the U.S. Department of
Transportation. The views expressed in this paper are strictly his
own. and in no way represent official policies or recommendations
of the Department of Transportation.
In urban areas throughout the nation, employers commonly offer
their employees free or partly-paid parking at their places of
work. More than three quarters of those who drive to work in U.S.
cities use parking that is provided by their employers, for which
90 percent pay no charge.1 Although some employer-provided
parking is located in low-density suburban areas, many commuters
who receive free parking of Work downtown or in densely developed
suburban centers, where the price parking would provide a powerful
inducement to use transit or join a carpool if their employers did
not supply it free. For example, 64 percent of auto drivers
crossing the Hudson River on route to the Manhattan CBD during the
morning rush hours park their cars in spaces that are completely or
partly paid for by their employers.2 And in Washington, the
federal government and the region's private employers together
provide free parking for nearly 100,000 automobiles, or almost half
of all those driven to work during peak commuting hours.3
Tilting the Playing Field
By offering free parking, employers substantially reduce the
cost at which their employees can drive to work. For many
employees, the availability of free parking at work represents a
stronger incentive to drive than if their employers offered instead
to provide them with free use of an automobile and free gasoline
for the trip. Trips to work by automobile in U.S. cities average
just under twenty miles (for the round trip). over the course,of
which an automobile costs less than $5.00 to own and provide
gasoline for.4 Yet in the downtown area of almost any major U.S.
city, an employer's offer of a free parking space is worth much
more than this amount. Even in many of the nation's suburban
___________________________
1 Federal Highway Administration, Nationwide Personal
Transportation Study, 1969, Table 22. More recently, this same
figure is reported in Center for Urban Transportation Research,
University of South Florida, Factors Related to Transit Use, 1989.
2 Port Authority of New York and New Jersey, 1984 Survey of
Trans-Hudson Automobile Commuters, October 1984.
3 Metropolitan Washington Council of Governments, Parking
Management Policies and Auto Control Zones, Report DOT-OS-40045-1,
June 1976.
4 Automobile trips to work average 9.9 miles (each direction) in
U.S. cities; see Federal Highway Administration, Personal Travel in
the U.S., Volume I of the 1983-84 Nationwide Personal
Transportation Study, August 1986, Table 7-6. p. 7-9. Costs
associated with ownership of a typical automobile (depreciation,
financing charges, and licensing and registration fees) currently
average $0.181 per mile including all costs associated with
ownership of the vehicle itself, while gasoline consumption adds
another $0.054 per mile; see American Automobile Association, "Your
Driving Costs," 1989 edition, p. 5. These costs would thus total
$4.65 over the course of a typical round trip to work. (Even at
more recent gasoline prices of up to $1.50 per gallon, gasoline
costs average approximately $0.068 per mile, bringing daily round-
trip commuting costs to slightly more than $4.90.)
1
office centers. where employment is growing most rapidly, daily
parking prices of this level and above are increasingly common.5
It should come as no surprise that an incentive this strong
overwhelms any inducement for employees to commute by public
transit that is currently offered by partial tax exemption of the
value of employer-supplied transit passes. At most. a free transit
pass can be worth about $270 in annual taxable salary, and is often
worth nothing because the tax exemption of its value is limited
under the de minimis rule adopted as part of the 1984 Tax Reform
Act.6 In contrast, employers offers of free parking are typically
equivalent to salary increases four times as large. and can range
in value up to ten or more times that amount.7
Even the combination of exempting from taxation part of the
value of transit passes with generous federal. state, and local
transit subsidies -- which now exceed $10 billion annually -- has
proven woefully inadequate to counteract such a powerful incentive
for employees to commute by automobile. This should not be
surprising either. since under the most optimistic assumptions
these subsidies reduce the average fare for a round trip to work
using public transit by slightly more than $3.00, while an
employer's offer of a free parking space
___________________________
5 See for example Sheila A. Henry and Roberta Valdez, "Analysis
of Parking Charges and Costs per Employee by Travel Analysis Areas
in Orange County," Planning Department, Orange County Transit
District. July 1989, Appendix.
6 Under the Tax Reform Act of 1984, employer-provided transit
passes worth up to $15 per month may be excluded in computing their
recipients' federal income taxes. Under the so-called de minimis
rule, however, the Act also provides that if the value of the pass
exceeds $15 per month, its entire value is treated as taxable
income. For an employee in the highest marginal tax bracket (33%),
an untaxed benefit with a cash value of $15 per month is equivalent
to $268.66 per year in taxable income. In contrast. the best
available estimate is that the value of a free parking space
averages $58 per month in U.S. cities, nearly four times the $15
maximum value of a transit pass; see Testimony of the American
Public Transit Association Before the Committee on Ways and Means
of the U.S. House of Representatives on Federal Tax Laws and the
Environment, March 14. 1990. p. 12. An employer's offer of a free
parking space that would otherwise cost $7 per day -- a
comparatively modest charge in many U.S. cities -- is equivalent to
an increase in taxable income of more than ten times as large as
the maximum value of a free transit pass (to be exact, $2,758,
slightly more than ten times the $268.66 figure) to an employee in
the highest tax bracket.
7 The best available estimate is that the value of a free
parking space averages $58 per month in U.S. cities, nearly four
times the $15 maximum value of a transit pass: see Testimony of the
American Public Transit Association Before the Committee on Ways
and Means of the U.S. House of Representatives on Federal Tax Laws
and the Environment, March 14, 1990, p. 12. An employer's offer of
a free parking space that would otherwise cost $7 per day -- a
comparatively modest charge in many U.S. cities -- is equivalent to
an increase in taxable income of more than ten times as large as
the maximum value of a free transit pass (to be exact, $2,758,
slightly more than ten times the $268.66 figure) to an employee in
the highest tax bracket.
2
typically reduces the cost of driving to work by at least this
amount. and often by much more.8
Evidence of Free Parking's Effect
The most direct evidence of the effect free parking can have
comes from commuters' responses to their employers' decisions to
begin charging employees for parking they formerly provided free.
When the Los Angeles area's ridesharing agency phased in market
rates for employee parking, the fraction driving alone to work
declined from 42 percent to 8 percent, while the share of carpool
participants rose from 17 percent to 58 percent of the agency's
employees.9 When charges equal to 50 percent of commercial rates
were imposed for parking at selected federal buildings in the
Washington, D.C. area for a brief period during 1979 and 1980, the
number of employees driving alone declined by as much as 40 percent
at some sites.10
Similarly. when parking prices equal to 70 percent of market
rates -- then only about $1.00 U.S. per day -- were imposed on
Canadian government employees in Ottawa, the number driving alone
to work declined by 23 percent, while commuting by transit
increased correspondingly.11 A variety of other evidence. which
has been summarized in great detail elsewhere, confirms the
substantial
___________________________
8 Total subsidies paid to urban transit operators by federal,
state, and local governments amounted to just over $10.5 billion
during 1988, while the number of (linked) trips made by transit
totaled about 6.5 billion; these data are estimated from Urban Mass
Transportation Administration, 1988 Section 15 Annual Report,
Tables 2.02.2, 2.04.2, and 2.13. Thus even if none of this
assistance were wasted in the form of higher costs or unutilized
service, and all of it were available to underwrite lower fares,
the resulting fare reduction would be just under $1.63 per one-way
transit trip, or about $3.25 for a round trip to work by transit.
(It is possible that this figure underestimates the fare subsidy
for commuting to work by transit. On one hand, the subsidy transit
work trip would be much greater than this average figure, since a
disproportionate share of both capital and operating costs for
transit are accounted for by peak service, and most work trips are
made during peak travel hours; see Thomas E. Parody, Mary E.
Lovely, and Poh Ser Hsu, "Net Costs of peak and Off-Peak Transit
Trips Taken Nationwide by Mode," paper presented to the
Transportation Research Board 69th Annual Meeting, Washington,
D.C., January 1990. On the other, there is substantial evidence
that as much as three-quarters of all public assistance to transit
operators is unavailable to subsidize lower fares, because it is
absorbed by higher operating expenses or more extensive service;
see Don H. Pickrell, The Causes of Rising Mass Transit Deficits,
Report MA-11-0037, Harvard University, July 1983.)
9 Monica Surber, Donald Shoup, and Martin Wachs, "Effects of
Ending Employer-Paid Parking for Solo Drivers," Transportation
Research Record, Number 957, 1986, pp. 67-71.
10 Gerald K. Miller and Carol T. Everett, "Raising Commuter
Parking Prices: An Empirical Study, "Transportation, Volume 11
(1982), pp. 105-129.
11 Transport Canada, The Effects of the Imposition of Parking
Charges on Urban Travel in Ottawa:Summary Report, Report TP 291.
February 1978. p. 11.
3
effect that employer-paid parking can have on commuting
behavior.12 When all of the available evidence is considered
together. the best estimate appears to be that at least 20 percent
of commuters who now drive alone would instead choose to carpool or
use public transit if they were required to pay market rates for
parking they now receive free of charge.
Peak hour auto commuting is largely responsible for
increasingly widespread urban and suburban traffic congestion, and
also contributes heavily to both air pollution levels in our cities
and the transportation sector's substantial energy demands. Thus
employers who encourage their employees to drive to work by
providing free parking contribute significantly -- if unwittingly -
- to the severe environmental consequences of our nearly exclusive
reliance on the automobile for urban travel.
Why is Employer-Provided Parking So Widespread?
The major reason that so many employers provide free or below-
cost parking to their employees is that its value is exempted from
reporting and taxation as income. For those who drive to work, the
tax-exempt status of free parking makes it worth more in after-tax
income than a salary increase equal to the cost of parking. The
difference between the value of an employer's offer of a free
parking space and an increase in taxable salary sufficient to
purchase that same space rises in direct proportion to the marginal
federal,income tax bracket in which each employee's taxable income
places her or him.13 Thus an employer can make most of its
employees better off for a given outlay on employee compensation by
spending part of it on parking that is subsequently offered free
(or at least at below-market prices) to employees, rather than
paying it in the form of higher salaries.
The tax-exempt status "enjoyed" by employer-provided parking
stems from its classification under the Tax Reform Act of 1984 as a
"working condition fringe benefit."14 The rationale for exempting
such benefits from income taxation is to encourage employers to
provide desirable working conditions, and thus to increase
employment and to encourage higher productivity. In so doing,
federal tax law ignores the behavioral linkage between the
availability of convenient. free parking at the workplace and the
decision to drive an automobile to work, as local zoning codes do
in requiring minimum amounts of parking space to be provided at
employment sites. While it is difficult to judge whether this
represents sound employment policy, it clearly amounts to misguided
transportation policy.
___________________________
12 The evidence available at the time was summarized in Don H.
Pickrell and Donald C. Shoup, "Employer Subsidized Parking and Work
Trip Mode Choice," Transportation Research Record. Number 786
(1980), pp. 30-38. For a more recent review, see the paper by
Shoup and Willson prepared for this Symposium.
13 This effect is exacerbated where state and local income tax
rates also rise with an employee's taxable income.
14 U.S. Internal Revenue Code, 1984, Section 132. 1.132-5T(p).
4
Although commuting to work is a necessary cost incurred in
earning a living, it is difficult to imagine why doing so by
automobile warrants continued (if indirect) federal subsidy of such
generous degree, particularly when so many other federal policies
(as well as those adopted by state and local governments)
simultaneously attempt to discourage driving. Unlike the tax
exemption of fringe benefits such as health insurance and
retirement savings, which encourages behavior that federal policy
deems socially responsible, exempting the value of employer-
provided parking from income taxation rewards behavior that
aggravates transportation problems and their environmental
consequences.
In addition to providing strong incentives for private
employers to provide free parking, the federal government is a
direct provider of free parking on a large scale.There are
approximately two million civilian federal employees, many of whom
receive free parking if they choose to drive to work, although it
is difficult to tell how many of them work in areas where parking
would otherwise be costly for them to purchase. Whatever their
exact number, government has traditionally served as a leader by
providing fringe benefit packages that are subsequently emulated by
private employers, and which now commonly entitle their recipients
to free parking at their places of work.
What Should be Done?
The ideal solution to the problem of widespread employer
subsidization of employer parking is easy to envision. By amending
the federal tax code to reclassify employer-provided parking as a
taxable fringe benefit, with its cash value required to be
estimated and reported by employers in the same way that most other
fringe benefits are now treated, the primary motivation for
employers to provide parking would be eliminated. In fact, this
appears to have been its status prior to the tax 'reforms" adopted
in 1984, although the reporting and taxation of its value were
rarely if ever enforced. Parking benefits would still be subject
to the de minimis rule, so that employers who provided parking with
a low market value (and thus did not induce much increased auto
travel among their employees) would not be subjected to costly and
burdensome accounting and reporting requirements.
Although this is likely to be a politically unpopular reform,
it would have one desirable effect, at least from the viewpoint of
the Federal budget: it would raise federal tax revenues, initially
by as much as $5 billion dollars annually.15
___________________________
15 The annual increase in federal income tax liability for an
employee receiving a free parking space worth the previously-cited
average of $58 per month would range from $104 to almost $230,
depending on the employee's taxable income level. At the current
average value of the marginal federal income tax rate of 24%, the
increased annual tax liability for a commuter receiving a free
parking space of average market value would reach $167. If three-
quarters of the more than 28 million commuters working in the
central city areas of the nation's large cities (those over 500,000
population) receive free parking (as the earlier Nationwide
Personal Transportation Survey indicated). taxation of its value
would yield $4.67 billion annually at the current distribution of
taxpayers among marginal tax brackets. (The 1980 Census revealed
that 28.2 million employees commuted to central city jobs in U.S.
cities with populations over 500,000; see
5
However, the revenue-generating potential of taxing employer-
provided parking would decline over time, as eliminating the major
inducement for employers to supply it caused progressively more of
them to abandon the practice, and instead to encourage commuting by
carpools and public transit.
A Second-Best Proposal
A more palatable variant of this proposal -- although one
without its revenue-generating potential -- would be to amend the
federal tax code to permit employers to classify some limited
amount of each employee's gross earnings as a tax-exempt "travel
allowance," subject to the condition that the employer did not also
offer free parking. Employees who currently drive to work could
use the resulting increase in their after-tax incomes to pay for
parking, but those who decided to commute by other means could
reserve part of the increase for other purposes.16 The size of
such an allowance could be tailored to produce any desired revenue
impact on the federal budget, including "revenue neutrality." by
balancing the additional revenue from taxation of the value of
parking above the allowance against the reduction in revenues from
increasing the amount of income that is deductible in determining
individuals' tax liability (that is, the size of the allowance).
In effect, this proposal amounts to a cleverly disguised
increase in the standard deduction from earnings. except that even
those who itemized deductions when computing their taxable incomes
(and thus did not claim the standard deduction) would be eligible
to claim it.. as long as their employers did not also provide them
with free parking. Allowing employers to pay a tax-exempt travel
allowance would explicitly recognize that commuting to work is a
cost necessarily entailed in earning an income, yet would allow
employers to compensate workers for this cost without encouraging
them to commute by automobile.17
Alternatives to Income Taxation of Free Parking
Several alternatives to attacking the problem directly -- that
is, to taxing the value of employer-provided free parking as income
-- have been proposed by participants in the federal policy-making
process. They include eliminating the deductibility of expenses
incurred by employers in providing parking for purposes of
computing their corporate tax liabilities, imposing on employers a
___________________________
Alan E. Pisarski, Commuting in America, The Eno Foundation for
Transportation, Inc., 1987, Table 3-4. p. 40.) In fact, the
increase in tax revenues would probably exceed this figure, because
recipients of the highest-valued parking spaces tend to be those in
the highest marginal federal tax brackets.
16 This proposal was originated by Donald Shoup, and was first
discussed in Donald C. Shoup and Don H. Pickrell, Free Parking as a
Transportation problem, Report DOT-OS-8001 1, Office of University
Research, U.S. Department of Transportation, June 1979.
17 For a more detailed discussion of this proposal, see Donald C.
Shoup, "Cashing Out Free Parking, " Transportation Quarterly July
1982 (Volume 36), pp. 35-64.
6
federal excise tax on the value of free parking they provide to
their employees, and levying a uniform per-space federal tax on
owners or operators of parking facilities. These proposals share
the properties that they are likely to be less effective in
discouraging automobile commuting than direct taxation of the value
of free parking to its recipients, yet similarly complex to
administer and enforce, and at least is difficult politically to
implement.
Most important, each of them appears less likely to result in
a change in the price employees face when deciding whether to
commute to work by automobile than does taxing employer-provided
parking as income, since each would tax the Provision rather than
the receipt of parking that is priced below its market value While
each would raise the cost to the employer of providing employee
parking, none could ensure that employers would respond by raising
the price of parking faced by their employees, which would be an
inescapable result of taxing the value of free parking to its
recipients. Some employers might respond by simply absorbing the
increased cost of purchasing parking, since doing so would produce
a partially offsetting reduction in an employer's corporate tax
liability.
Eliminating the deductibility of expenses incurred by
employers in providing parking is also objectionable because it
would arbitrarily single out one type of expense for different
treatment from that accorded all other legal business activities.
Whatever its virtues as transportation policy, which even at best
are inferior to those of taxing employer-provided parking as
individual income, the added complexity that such a measure would
introduce into the already overly complicated federal income tax
code makes it undesirable as tax policy. In contrast. taxing the
value of parking as individual income would bring its treatment
under the tax code into conformity with that accorded most other
fringe benefits. and could thus justifiably be classified as one
small step toward rationalizing federal income tax policy.
At the same time, the proposal to end deductibility of
employers' expenses for providing parking suffers from all of the
same difficulties of valuation and enforcement that would beset
taxation of parking as a fringe benefit, since these stem from the
variety and complexity of arrangements under which.employers
acquire parking for the purpose of distributing it to their
employees.18 Levying a federal excise tax on the value of parking
provided by employers is subject to exactly this same criticism. as
well as to the aforementioned objection as a tax policy of dubious
merit. Finally. singling out parking expenses for non-deducti-
bility by corporations would penalize those employers who purchase
or construct parking to provide to their employees at unsubsidized
prices, by raising their corporate tax liabilities, hardly a
desirable message for public policy to convey.
The proposal to levy a uniform tax per parking space suffers
from far worse drawbacks than even these other questionable
endeavors. First, it would be assessed on both spaces that are now
provided free to commuters and those for which a market price is
now paid, thereby failing to differentiate between "offending"
parking spaces and more benign ones. More important, there is no
___________________________
18 An detailed discussion of the various arrangements under which
employers acquire and provide parking is contained in "Transit and
Parking: Public Policy," Office of Budget and Policy, Urban Mass
Transportation Administration, March 1989, pp. 4-7.
7
guarantee that whatever portion of such a tax was shifted forward
to employers purchasing or providing parking on behalf of their
employees would not simply be absorbed by those employers who
already subsidize employee parking. thereby neutralizing its
intended effect on commuter behavior. Unless coupled with
elimination of the deductibility of parking expenses, in fact, part
of employers' increased costs for parking would be offset by
savings in corporate income taxes, and thus absorbed by general
taxpayers rather than by automobile commuters.
A Small Step in the Right Direction
While the proposal to increase the current tax exemption of
employer provided transit passes and vanpool benefits enjoys
considerable currency, it is particularly important to recognize
that this is not likely to be an effective substitute for acting to
reduce the prevalence of free parking. Increasing the already
substantial subsidies to these modes is destined to be ineffective
in promoting their more widespread use, because the costs of
commuting by alternate modes will remain nearly irrelevant to most
employees' decisions to drive to work as long as free parking
continues to be available to them. A large body of empirical
evidence suggests that commuters' decisions to drive are extremely
insensitive to reductions in transit fares, which suggests that it
is virtually impossible to lower current transit fares sufficiently
to induce significant numbers of auto commuters to switch to
transit.19
Nevertheless. at least six separate measures proposing
increases in the deductibility of employer-provided subsidies for
transit or carpool use were filed in the recently concluded session
of Congress. These proposed measures differed only in the ceilings
on the value of these benefits that each proposed to exempt from
income taxation (one even proposed that such benefits be unlimited
in value). and in whether they applied strictly to conventional bus
and rail transit service. or to carpool and vanpool subsidies as
well. In contrast to the increase in federal revenue from taxing
the value of employer-provided parking, each of them would have
introduced a "tax expenditure" -- that is, a decline in the value
of federal tax revenues to be made up by other tax increases --
ranging from $120 million to nearly $500 million. according to
estimates developed by the Joint Committee on Taxation of the
Congress.
The major value of the proposal to increase the value of
employer-provided transit and carpool benefits that is exempt from
income taxation appears to be as a quid pro quo to be offered in
exchange for subjecting at least some part of the value of
employer-provided parking to income taxation. Indeed, in terms of
useful transportation policy, this appears to be the primary merit
of such an initiative. In fact, the most promising proposal would
be to couple an increase in the value of transit and carpool
benefits exempted from income taxation to some dollar threshold
(say, $50 per month) with taxation of any value of employer-
provided parking in excess of that amount. While this is
admittedly an
___________________________
19 Both econometric and quasi-experimental estimates of the
cross-elasticity of auto mode choice or market share with respect
to transit price are almost always extremely low in magnitude (that
is. often below -0.10 in magnitude); for a survey see Ecosometrics,
Inc., Patronage Impacts of Changes in Transit Fares and Services,
September 1980.
8
arbitrary connection. it does represent the sort of superficially
appealing packaging of changes that often characterizes "saleable"
policy proposals. The policy could again be made "revenue neutral"
by adjusting this figure to balance the increase in revenue from
taxing the value of free parking above it against the revenue loss
from exempting that amount from taxation if provided in the form of
transit assistance.
The Importance of Taking Action
There is no better lesson in the futility of attempting to
raise subsidy levels for alternate modes to offset those for
automobile travel than the experience of the past decade, during
which government outlays to promote expanded transit service and
lower fares totaled nearly $100 billion, while the historical
decline in transit's relative importance as a means of commuting
and the dramatic growth of automobile travel both continued
unabated.20 During this same time. outlays to construct new and
expanded highway facilities in the nation's cities amounted to
nearly three times this figure.21 Yet in the face of these
massive investments in both improved transit service and expanded
highway capacity, traffic congestion continued to escalate
dramatically. while the environmental quality of many of our
nation's cities continued to deteriorate.
By now. it should thus be clear that no amount of government
subsidy-federal or otherwise -- for travel by transit or other
"high occupancy" modes will ever suffice to offset the powerful
inducement to drive that is now offered by exempting the value of
employer-provided parking from income taxation. And it should be
equally clear that in the presence of such a strong financial
incentive to drive an automobile, even the dramatically expanded
program of highway construction now being advocated by various
groups cannot avoid the intensification of traffic congestion in
the downtown areas of out nation's cities, or forestall its
continuing spread to their suburban areas.
What the phenomena of declining transit use, spreading
congestion levels, and intensifying air pollution share in common
is one important root cause: layer upon layer of subsidies to
automobile travel, both direct and indirect. by all levels of
government. One of the most important of these, the widespread
provision by employers of free parking for those who drive to work,
is readily amenable to legislative action to eliminate it.
Although taking such action will
___________________________
20 This figure, which is expressed in today's dollars, was
tabulated from Urban Mass Transportation Administration, National
Urban Mass Transportation Statistics: Section 15 Annual Report
(annual), various issues. The fraction of workers commuting by
public transportation declined from 7.3 percent during 1969 to 5.7
percent in 1977, and further to 5.3 percent by 1983. At the same
time. the fraction of all trips in U.S. urban areas -- including
those for purposes other than commuting to work -- made by public
transit declined from 2.4 percent during 1977 to 2.2 percent in
1983. These data are reported in Federal Highway Administration,
Personal Travel in the U.S.: Volume 1, 1983-84 Nationwide Personal
Transportation Study, August 1986, Table 7-6, p.7-9. and Table 6-7,
p. 6-6.
21 Again expressed in terms of its equivalent in today's dollars,
this estimated was tabulated from Federal Highway Administration,
Highway Statistics (annual), various issues.
9
require federal policy-makers to display conviction and leadership
rather than bowing to political expediency, the time for doing so
has clearly arrived.
The alternative is another decade of decline in transit's role
in our nation's urban transportation system. spreading urban and
suburban traffic congestion, and deteriorating environmental
quality, while annual subsidy levels for transit escalate toward
the $50 billion mark -- and surpass it, if the advocates of
increased federal highway and transit appropriations prevail. By
taking this decisive step toward more rational pricing of
automobile travel, Congress can act to reverse one of the most
important defects of current federal transportation policy, thereby
improving both the functioning of our nation's transportation
system and the quality of our urban environment.
10
Elasticity
ELASTICITY GROUP
DISCUSSION HIGHLIGHTS
- Establish maximum parking spaces per gross square
footage.
- Mandate permit fee for suburban SOV free parkers for
employers with 100 or more employees (through state
emissions bill in Oregon).
- Charge all SOVs a parking fee, not just commuter SOVS.
- Charge a commuter fee to all.
- Discourage practice of lowering commute price for SOVs
(by subsidizing parking).
- Target a pricing strategy to fit the site, i.e.
suburban/urban.
- Federal legislation: phase in a tax on parking, with a
goal of having an equal level of subsidy allowed for HOV
subsidies and parking subsidies.
- Full cost pricing of all modes, including the internal
cost (car maintenance, depreciated bus cost), and
externalities of mode (contribution of SOV car to air
pollution and congestion, tax treatment).
- Charge for parking -- either on a cost basis or market
price.
- Have developer/employer incentives to reduce trips, I.e.
tax credits, density bonuses.
- Impact fees.
1) Amend federal IRS tax code to equalize tax treatment of
parking and HOV - either make parking taxable or extend
deduction of rideshare benefits.
- Long Term Goal:
Most necessary to achieve -- makes many other programs
"do-able" and "effective".
- Purpose:
Change the attitude that parking is a working condition
and bus subsidy a fringe. Parking and HOV modes need to
be treated in the tax code equally, either both as
working conditions, or as fringe benefits. Consultant
group discussed how it would be a great accomplishment if
parking was perceived by employers and employees as a
benefit, rather than a facility fixture like bathrooms.
- Market:
The market is three-fold: the political forces needed to
pass the change, businesses who have traditionally
opposed the tax code change, and the public. The
politicians need to hear from businesses in support of
the change, and from the public. Public awareness
campaigns are needed to make the association between
parking and the transportation problems.
- Research Needed:
Documentation is needed regarding how the cost of parking
affects mode choice, and then that information needs to
be disseminated to both politicians and employers.
- Alternatives for Tax Code Changes:
Note: The group ranked these from most "do-able" to
most difficult to implement - they felt the
difficulty increases as the options get more
effective. Tax code changes may have to be
phased in over time in order to increase
effectiveness or extend effectiveness to
suburban areas.
a) Offer any employee who receives free parking the option
of the cash value of the parking instead. (Easiest to
implement -- voluntary, local mandate or federal tax
code)
- Market: Only effective in areas where the parking
market value is greater than 0--not useful for
suburban areas
- Research: Need to document the effectiveness of this
program - has been tested in LA (see Shoup/Willson)
b) Require that any employer (with over 100 employees) who
offers free or subsidized parking offer the option of
cash value of the parking as a travel allowance for
alternative modes. (Requires local jurisdiction or
federal tax code mandate).
This alternative would have to be regulated, and the
jurisdiction could determine how to set the value of the
parking if there was not market value, e.g., base value on the
cost of creating/maintaining parking, give developer
incentives for less parking which would create a value for it.
- Market: Could be used in the suburban environment if
jurisdiction would establish criteria for values.
- Research: Same documentation of existing voluntary
programs would be useful to ' justify the program -
Shoup/Willson have developed a model to forecast the
impact of this type of program.
c) Require that employers (with over 100 employees) charge
for parking and provide equivalent travel allowance.
(Most difficult to institute at either the local or
federal level).
- Market: Urban/suburban markets--mandate would create
market value for parking in suburbs.
- Research: Same as above, plus the relationship of parking
supply and cost on mode choice.
2) Charge all parkers/peak period parkers a permit fee which is
waived if parking is already paid for as a part of the non-
attainment areas' plan for air quality (one aspect of many in
the plan).
- Parker pays something like $15 (based on the costs of
land, construction and maintenance) to receive a decal
for the car purchased on a quarterly basis.
- Fee can be waived or reduced based on what amount they
pay for parking.
a) Goals:
Create a charge/value for parking--specifically oriented
to suburban parking. Educate public/employers about the
relationship of parking to mode choice
b) Issues:
- Enforcement? -Through employers?
- Makes CBD locations more competitive with suburban.
- Raises revenue to use to increase service?
- $15 may not show a significant mode shift, only an
awareness vehicle. Would probably move to $30 once
It was accepted to have more of an impact.
c) Market:
Suburban parkers
d) Research:
- Program needs to be tested -- before and after
evaluation of impact needed.
- A mechanism to establish guidelines for employers/
jurisdictions to valuate parking needs to be
developed.
- Document the costs of congestion to use in
developing a public awareness campaign.
- Document the effects of density?
- Develop mechanisms to help employers establish the
value of parking
3) Other Discussion
There was some discussion of the effect of full cost pricing
of all transportation modes - interesting idea in theory, but
very unlikely to happen in reality.
ATTACHMENT 2
WHITE PAPER
EMPLOYER-PAID PARKING:
THE INFLUENCE OF PARKING PRICES
ON TRAVEL DEMAND
Donald C Shoup and Richard W. Willson
December 3, 1990
EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON
TRAVEL DEMAND
Prepared for:
Commuter Parking Symposium
Association for Commuter Transportation
Seattle, Washington
December 6-7, 1990
by
Donald C. Shoup
Graduate School of Architecture and Urban Planning
University of California, Los Angeles
Richard W. Willson
Department of Urban and Regional Planning
California State Polytechnic University, Pomona
EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL
DEMAND
ABSTRACT
Numerous case studies have shown that employer-paid parking
increases solo driving to work. This employer intervention in
commuters' travel choices counters public attempts to reduce
traffic congestion, gasoline consumption, and air pollution. This
paper summarizes previous case studies of the effect of employer
parking subsidies on commuters' travel choices, and reports on a
new multinomial logit model analysis of employer-paid parking in
downtown Los Angeles. Comparing commuters who pay to park versus
those who park free, we report on (1) the solo driver mode share,
(2) the number of cars driven to work per 100 employees, (3) the
price elasticity of demand for parking, and (4) the number of
parking spaces demanded per 1,000 square feet of office space. The
multinomial logit analysis of downtown Los Angeles commuters
estimates a parking price elasticity of demand of -0.18 at the mean
market parking price. To illustrate, if a downtown Los Angeles
employer eliminated free parking, the model predicts that the solo
driving share would decrease from 67 percent to 53 percent. This
level of solo driving reduction compares favorably with other much
more costly strategies to reduce peak period auto travel. That
mode shift reduces the amount of parking "needed" from 2.45 spaces
per 1,000 square feet to 2.05 spaces per 1,000 square feet of
office space.
The income tax exemption of employer-paid parking subsidies
strongly encourages employers to subsidize their employees'
parking, and thus indirectly encourages commuters to drive to work
alone. To combat the harm caused by the tax-exemption for
employer-paid parking, we argue the case that an employer who
offers any employee a parking subsidy should be required (either by
local ordinance or by the internal revenue code) to offer that
employee the option to take the fair market value of the parking
subsidy as a cash travel allowance instead of as a parking subsidy.
No employee would be faced with the loss of any existing parking
subsidy as a result of this policy. Instead, employees would
receive a new option, the alternative of choosing cash. Employers
could continue with any existing parking subsidy arrangement, so
long as they broaden the offer to include the option of using the
cash value of the parking subsidy for any other purpose the
employee prefers. Requiring employers to offer employees the
option of the equivalent cash value of any parking subsidy would
reduce traffic congestion, air pollution, and gasoline consumption,
and would do this by aligning commuters' travel choices more
closely with their own preferences.
EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL
DEMAND
I. INTRODUCTION
Although employer-paid parking may appear to be a generous,
enlightened, and popular employment policy, it is also a strong
incentive to drive to work alone, and it strongly works at cross
purposes with public policies designed to reduce traffic
congestion, energy consumption, and air pollution. This paper
summarizes previous evidence of the effect of employer parking
subsidies on mode choice and parking demand, and includes new
evidence from a logit analysis of downtown Los Angeles office
workers. The paper concludes with a discussion of policies to
reduce the level of parking subsidies.
II. EMPLOYERS' INFLUENCE ON COMMUTERS' TRANSPORTATION COSTS
Nine out of every ten American commuters who drive to work
park free at work. Three studies have documented this fact.
First, Shoup and Pickrell (1980) used National Personal
Transportation Study data to estimate that 93 percent of auto
commuters parked free. Second, a 1988 survey found that 91 percent
of employees in Los Angeles, Riverside, San Bernardino, and Ventura
Counties park free (Commuter Transportation Services, Inc. 1988).
Finally, a 1989 survey of large SMSAs found that 90 percent of
those who drive to work park free (Center for Urban Transportation
Research 1989).
Even in downtowns where parking is most expensive, many auto
commuters pay nothing for parking. For example, more than half of
the 114,000 office workers who drive to downtown Los Angeles
rec,.., parking subsidies. Most of those receiving a subsidy pay
nothing for parking (47 percent of all driver.), another 7 percent
of all drivers receive partial parking subsidies (Willson and Shoup
1990a).
The difference between receiving free parking and paying for
parking greatly affects overall travel costs. The powerful
influence of parking subsidies on travel costs can be illustrated
in three ways. First, the offer of free parking is often worth
more than the offer of free gasoline. For commuters to downtown
Los Angeles in 1986, Willson and Shoup (1990a) found that the
average round trip length for those who park free is 36 miles. If
their gasoline mileage is 20 miles per gallon, the round trip to
work consumes 1.8 gallons of gas, and if gas costs $1 per gallon,
the cost of gas for the average round trip commute trip is $1.80
(or $2.70 if gas costs $1.50 per gallon). But the average daily
equivalent cost of monthly parking in downtown Los Angeles was
$4.32, far more than the cost per trip for gasoline. An employer's
offer of free gasoline to employees if they drive to work would
seem a reckless incentive to drive alone, yet employer-paid parking
is a much stronger incentive.
Second, employer-paid parking subsidies dwarf the gasoline tax
paid for the average commute trip. A parking subsidy of $4.32 for
a trip that consumes 1.8 gallons of gas is equivalent to a subsidy
of $2.40 per gallon of gas used. The federal gasoline tax would
have to be raised from 14 cents to $2.49 per gallon merely to
offset the parking subsidies now given to over 50,000 solo drivers
who park free at their employers' expense in downtown Los Angeles.
Thus, even very large increases in the gasoline tax would decrease
solo driving to work by much less then employer-paid parking
already increases it.
A third way to illustrate the effect of employer paid parking
is to compare it to a congestion toll. If the average round trip
drive to work is 36 miles, and the average parking subsidy is $4.32
per day, the parking subsidy is equivalent to 12 cents per mile
travelled. Thus, imposing a congestion toll of 12 cents per mile
travelled would do no more to discourage commuters from driving to
the Los Angeles CBD than employer-paid parking already encourages
it. And employers fully subsidize parking for almost half of all
the solo drivers to downtown Los Angeles.
If you subsidize something you get more of it. Because
employer-paid parking so heavily subsidizes solo driving to work,
it undoubtedly increases the amount of it. The next two sections
present empirical evidence on the extent to which employer-paid
parking increases solo driving to work.
III. EVIDENCE FROM CASE STUDIES
We first review several previous case studies that examine how
employer-paid parking affects commuter mode choice. In each case
we use three measures to summarize the effect of employer paid
parking:
1) the share of commuters who drive to work alone;
2) the number of autos driven to work per 100 employees;
and
3) the price elasticity of demand for parking.
The first measure is used because many public policies are intended
to reduce solo driving to work. The second measure reveals the
implications of parking subsidies for trip generation and parking
requirements. Finally, the third measure standardizes the parking
price changes in the case studies, and can be interpreted as the
percent decrease in parking demand that would accompany a one
percent increase in parking price.
We assembled all the existing well-documented case studies of
how employer-paid parking subsidies affect travel behavior. These
case studies have either: (1) examined the commuting behavior of
employees before and after employer-paid parking was eliminated; or
(2) compared the commuting behavior of matched samples of employees
with and without employer-paid parking. Willson and Shoup (1990b)
summarize these cases, covering a variety of locations, and
employer and employee types.
Table 1 shows how ending employer-paid parking reduces the
solo driver share. The smallest reduction in the number of solo
drivers was 18 per cent, and the largest reduction was an
impressive 81 per cent (in this case the employer eliminated free
parking only for solo drivers).1
___________________________
1. It should be noted that in the Warner Center and Ottawa cases,
some subsidy for solo drivers remained. Also, in the Warner Center
and Mid-Wilshire case studies, parking continued to be free for
carpools. Therefore, these studies do not show the effect of a
total elimination of parking subsidies.
Table 1
HOW EMPLOYER PARKING SUBSIDIES AFFECT SOLO DRIVING
Solo Driver Mode Share
Case Study and Type Employer Pays Driver Pays Decrease in
for Parking for Parking Solo Drivers
Mid Wilshire, Los Angeles
(before/after) 42% 8% -81%
Warner Center, Los Angeles
(before/after) 90% 46% -49%
Century City, Los Angeles
(with/without) 92% 75% -18%
Civic Center, Los Angeles
(with/without) 72% 40% -44%
Downtown Ottawa, Canada
(before/after) 35% 28% -20%
AVERAGE OF CASE STUDIES 66% 39% -41%
Table 2
HOW EMPLOYER PARKING SUBSIDIES AFFECT AUTOMOBILE TRIPS
Autos Driven per 100 Employees
Case Study and Type Employer Driver Decrease Price Elasticity
Pays for Pays for in Auto of Demand
Parking Parking Trips for Parking
Mid Wilshire, Los Angeles
(before/after) 48 30 -38% -0.23
Warner Center, Los Angeles
(before/after) 92 64 -30% -0.18
Century City, Los Angeles
(with/without) 94 80 -15 -0.08
Civic Center, Los Angeles
(with/without) 78 50 -36% -0.22
Downtown Ottawa, Canada
(before/after) 39 32 -18% -0.10
AVERAGE OF CASE
STUDIES 70 51 -27% -0.16
Table 2 shows two measures of how ending employer-paid parking
reduces the number of automobile trips to the site.2 The first is
the number of cars driven to work per 100 employees. This measure
indicates how trip generation and parking demand would vary under
different parking subsidy circumstances. Because some solo drivers
shift to carpools when employers eliminated parking subsidies, the
number of autos driven to work does not decline by as much as the
number of solo drivers, but the decline is still very impressive,
ranging from 15 to 38 per cent. The second measure is the parking
price elasticity of demand for automobiles driven to work, and
hence parking. This elasticity allows one to compare the
sensitivity of the number of automobiles driven to work for a given
standard change in parking cost. The price elasticity ranges
from -0.08 to -0.23, and the average change is -0.16.
IV. NEW EVIDENCE FROM A DOWNTOWN LOS ANGELES MODE SURVEY
Willson and Shoup (1990c) report on their progress in
developing a logit model analysis of downtown Los Angeles
commuters. The work uses a 1986 Los Angeles Community
Redevelopment Agency mode choice survey of downtown Los Angeles
office workers, entitled Los Angeles CBD Employee-Employer Baseline
Travel Survey. The survey includes a matched sample of 5,060
employees and 118 employers. The survey collected information on
both parking prices and parking subsidies for each employee, so it
is possible to determine not only the parking price that drivers
paid, but also the parking price that non-drivers would pay if they
drove to work. This ability to determine accurately the parking
price that non-drivers would pay if they drove is relatively rare
in conventional mode choice surveys.
The survey also collected information on a number of other
factors (such as distance to work, income, gender, travel time by
each mode, vehicle availability) that affect travel mode choices,
so an analytic technique which can isolate the effect of parking
prices was used. The most widely accepted procedure for modeling
mode choice is the multinomial logit model. The mode choices were
defined as follows: (1) solo driver; (2) carpool/vanpool; and (3)
public transit. The multinomial logit model estimates the
probability that a commuter will chose each of the three modes for
the journey to work.
The estimated model is shown in Appendix A, based on a sample
size of 713 cases. A negative coefficient is estimated on the
parking cost variable, which indicates that as parking costs,
increase, the probability of driving decreases. In order to test
the model, the full sample data set was used to make predictions
with the estimated model. The mode share in the sample is 64
percent solo driver, 17 percent pool vehicle and 19 percent
transit. The model estimated mode share to within a percentage
point of each mode when used to predict the baseline mode share.
___________________________
2. The number of cars driven to work per 100 commuters
incorporates the effect of employer paid parking subsidies not only
on the number of commuters who drive to work solo, but also on the
number who carpool, ride public transit, walk, and bike to work.
Most of the case studies surveyed do include information on the
share of employees who carpool, but not on the average carpool
size. In order to estimate the number of cars driven to work by
carpoolers, we use the figure of one vehicle per 2.62
carpool/vanpool commuters, which was found in the 1988 Commuter
Survey of Southern California commuters conducted by Commuter
Transportation Services, Inc.
Willson and Shoup use the estimated model to predict mode
change under different after subsidy parking prices by changing the
parking cost component of the parking cost/income variable for each
case from its actual level to the cost being tested. For example,
in testing a parking price of $0, we set the parking price for all
individuals in the sample to $0. Table 3 shows the predictions of
the model under a range of after-subsidy parking prices. The
predictions are shown as mode shares, and are converted to the
number of cars driven to work per 100 employees.3 Mid-point
elasticities for $1 increments in parking price also calculated,
based on the number of cars driven to work per 100 employees.
These are elasticities of the after-subsidy parking price,
expressed as the daily equivalent of monthly permit parking.
In situations where high parking prices appear not to
discourage solo driving to work, this outcome can occur because
commuters actually pay nothing to park, no matter how much it
costs. Because the model shown in Appendix A is estimated with
accurate data on the after-subsidy price of parking, the influence
of parking prices on travel choices is not masked by employer-paid
parking subsidies.
Table 3 shows that commuters are sensitive to the after-
subsidy price of parking. If an employer who gave free parking to
all employees eliminated parking subsidies, the solo share of that
employer's workers is predicted to fall from 66 percent to 53
percent, at the 1986 average downtown parking price of $4.32.
Figure 1 shows the sensitivity of mode choice to after-subsidy
parking price in a graphic form.
Table 3 also shows the model's prediction that 72 cars per 100
employees would be driven to work by those who park free, while 60
cars per 100 employees would be driven to work by those who pay the
1986 market price of $4.32. Thus, in this case employer-paid
parking leads to a 20 percent increase in the number of cars driven
to work.
The elasticities shown on Table 3 rise with the price of
parking, since a one percent increase on a base of $8 per day
parking is more onerous than a one percent increase on a base of $1
per day parking. The elasticity calculated at the $4.32 market
parking cost is -.18, indicating that automobile trip generation
and parking demand significantly decline as the after-subsidy price
of parking increases.
Figure 2 converts the number of cars driven to work per 100
employees to the number of parking spaces per 1,000 square feet of
office space, and plots the new measure as a demand curve for
parking.4 When parking is free, 2.45 spaces per 1,000 square feet
are demanded; when parking costs
___________________________
3. The mean carpool/vanpool size of 2.92 for commuters to
downtown Los Angeles found in the Baseline Survey is used to
convert mode share into the number of cars per 100 employees.
4. Cars per 100 employees is translated to parking spaces per
1,000 square feet assuming an office occupancy density of 4.2
employees per 1,000 square feet, an employee absenteeism rate of 14
percent, and a peak parking occupancy factor of 94 percent (all
derived from the Baseline Survey and a Wilbur Smith and Associates
1981 study of downtown Los Angeles parking). For example, if there
are 4.2 employees per 1,000 square feet, and 0.72 cars driven to
work per employee (the figure estimated when parking is free),
there are 3.0 cars driven to work per 1,000 square feet. Not all
these drivers require parking spaces at the peak accumulation
period on a given day. So the 3.0
Table 3
SENSITIVITY OF MODE CHOICE TO PARKING PRICE
After- Mode Share
Subsidy ____________________________ Cars Mid-Point
Parking per 100 Elasticity
Price Solo Carpool Transit Employees of Demand
$0 67% 16% 18% 72
$1 64% 17% 19% 69 -0.02
$2 60% 18% 21% 67 -0.06
$3 57% 19% 23% 64 -0.10
$4 54% 20% 25% 61 -0.15
$5 51% 21% 27% 59 -0.20
$6 48% 22% 29% 56 -0.25
$7 46% 22% 31% 54 -0.30
$8 43% 23% 34% 51 -0.35
$9 41% 24% 36% 49 -0.40
Click HERE for graphic.
Click HERE for graphic.
$8, only 1.74 spaces per 1,000 square feet are demanded. This
finding clearly refutes the notion that the demand for parking can
be established (by ordinance or otherwise) without reference to the
price charged for parking.
V. DISTORTIONS CAUSED BY THE TAX EXEMPTION OF EMPLOYER-PAID
PARKING
A. Private Waste and Public Harm
Employer-paid parking is often a take-it-or-leave-it offer.
That is, employees are usually not offered any alternative benefit
of equivalent value if they do not take the parking. Therefore,
some employees who value the parking at less than the cost to the
employer of providing it will nevertheless take the parking subsidy
rather than nothing. For example, suppose the market price of
parking at your work site is $50 per month. Suppose also that at
any parking price less than $30 per month you would choose to drive
to work alone, but if you had to pay anything more than $30 per
month to park at work, you would instead choose to commute by bus
or bicycle. Thus, if your employer offers you free parking at work
(by paying the $50 a month parking charge for you), you would drive
to work alone. If, however, your employer offered you the choice
between either the free parking space or the $50 it costs your
employer to provide it, you would take the $50 in cash, and then
ride the bus or bike to work.
In the situation just described, the offer of employee-paid
parking (without the option to choose its cash value instead) has
two undesirable consequences. First, it is privately wasteful,
because you take a parking space that you do not think is worth
what it costs. Your employer is paying $50 a month to provide you
with something that is worth only $30 a month to you. That
represents a net loss of $20 per month in income to you, compared
to the alternative of taking the $50 parking subsidy in cash
instead.
Of course, if you would choose to drive to work even when
parking costs you more than $50 a month, the offer of employer-paid
parking does not alter your commute decision, and is therefore not
privately wasteful in the sense just argued. The subsidy is worth
as much to you as it costs your employer. But all the studies
cited earlier clearly demonstrate that many employees do not think
their parking spaces at work are worth what it costs their
employers to provide them, because when commuters have to pay for
their own parking, many of them do stop driving to work alone. As
one specific example, consider the results found in a Los Angeles
case study cited earlier, where an employer ceased offering to pay
for parking at work for solo drivers (Surber, Shoup, and Wachs,
1984). Of the 42 solo drivers who had previously been offered free
parking, only one solo driver chose to pay the market price of
$57.50 a month to continue parking in the previously free spaces.
That is, 98 percent of all employees who drove to work alone when
their employer paid for their parking felt that the parking spaces
were not worth the $57.50 per month that their employer had been
paying for them. This suggests the potential for a considerable
amount of private waste involved in offering parking subsidies that
are worth less than they cost.
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spaces per 1,000 square feet is multiplied by .86 (to account for
employee absenteeism) and .94 (to account for the fact that not all
employees who drive park during the peak parking occupancy period),
yielding a demand of 2.45 spaces per 1,000 square feet.
In addition to the private waste it entails, employer-paid
parking is publicly harmful, because it needlessly increases the
number of cars driven to work, with all the added external costs
that implies. On average, the case studies summarized in Table 2
suggest that ending employer-paid parking decreases the number of
cars driven to work by 27 percent. Said the other way around,
offering employer-paid parking increases the number of cars driven
to work by 37 percent. In addition, analysis of the 1986 survey
data for commuters to the Los Angeles CBD showed that employer-paid
parking increased the number of cars driven to work by 20 percent.
Thus, employer paid parking subsidies clearly aggravate the already
serious urban problems of traffic congestion and air pollution.
Subsidies are usually justified on the grounds that they
encourage desired behavior. When private market prices are, for
some reason, believed to deviate from social values, subsidies can
be used to correct for this deviation of market prices from social
values. But employer-paid parking is an altogether anomalous
subsidy, because it strongly encourages the very behavior - solo
driving to work - that other subsidies and public policies are
trying to discourage. Market parking prices, based on real costs,
send a direct signal to commuters to rideshare, but employer-paid
parking shields commuters from these market signals and skews
commuters' choices toward driving to work alone.
Given the ample and growing body of evidence that employer-
paid parking is both privately wasteful and publicly harmful, what
explains its ubiquity? Why don't employers instead offer their
employees a cash commute allowance that employees could use as they
choose? The cash commute allowance would not be privately wasteful,
because it would not tempt employees to park in spaces they don't
think are worth the cost, and it would not be publicly harmful,
because it would not induce commuters to drive to work alone.
B. Effects of Federal and State Income Tax Policy
The strongest explanation for the prevalence of employer-paid
parking is that federal and state income tax laws exclude the value
of parking subsidies from taxable income. The favored income tax
treatment of employer-paid parking subsidies makes it tax-efficient
for employers to convert some of their employee compensation from
cash into a parking subsidy. Table 4 shows, for each taxable
income bracket, how much an employer in California would have to
pay an employee in taxable cash income to equal the value of $1 of
tax-exempt parking subsidy. For example, for an employee whose
taxable income is $45,000 per year, an employer would have to pay
the employee $1.51 in taxable cash income to yield, after federal
and state income and social security taxes, the after-tax
equivalent of a $1 tax-exempt parking subsidy. Thus, the offer of
employer-paid parking as a tax-exempt fringe benefit is worth 51%
more than a taxable cash commute allowance equal to the cost of a
parking space at work. The "tax efficiency" of employer-paid
parking is thus a strong incentive to include it as part of an
employee's compensation package.
Ridesharing and mass transit advocates have for many years
argued that the tax treatment of parking and other transportation
benefits should be revised to eliminate the bias in favor of
employer paid parking. But it is very difficult to eliminate a tax
exemption that benefits so many workers, at all income levels.
Although the tax exemption provides the greatest benefits to those
in higher income tax brackets, eliminating it would affect many
low-wage employees as well. Thus, no matter how strongly one
believes that it is a food idea. it seems unrealistic, even
quixotic, to recommend ending the income tax exemption of employer-
paid parking. Quite aside from the money involved,
Table 4
TAXABLE CASH EQUIVALENT OF A TAX-EXEMPT PARKING SUBSIDY
Taxable Income Marginal Cash Equivalent of
Tax Rate $1 Parking Subsidy
$19,056 - $30,070 18% * $1.23
$30,071 - $32,450 20% * $1.25
$32,451 - $41,746 32% * $1.48
$41,747 - $52,760 34% * $1.51
$52,761 - $78,400 35% $1.53
$78,401 - $185,730 39% $1.65
over $185,731 35% $1.53
The marginal tax rate is the combined federal and California
marginal income tax rate for a married couple filing jointly, based
on 1990 federal and 1989 state tax brackets and personal
exemptions.
* Includes 7.65% Social Security tax rate on incomes up to $51,300
per year.
parking privileges are intimately related to one's status within an
organization, so any proposal to reform parking subsidies must be
approached gingerly.
VI. LOCAL ACTION TO REMOVE DISTORTIONS CAUSED BY THE TAX-EXEMPTION
OF EMPLOYER-PAID PARKING
Given the extreme sensitivity of the issue, is there any
possible public policy that can -achieve the benefits of ending
employer-paid parking, without encountering the inevitable strong
opposition to taking away the substantial subsidies now given to so
many commuters? We believe that there is, and that a good example
of it exists in the City of Los Angeles' year-old employee transit
subsidy ordinance. This ordinance requires that:
Each employer in the City that offers free or subsidized
parking to any employee ... shall offer a $15 (fifteen) per
month transit subsidy to each of its employees for their use
in commuting to and from the employer's work-site ....
(Section 85.05 of the Los Angeles Municipal Code.5)
This ordinance has aroused no significant opposition, but it has
had a limited effect in counteracting the effect of parking
subsidies. Because the required transit subsidy is only $15 per
month, and because parking subsidies are often far higher than
that, the offer of a $15 transit subsidy in lieu of a parking
subsidy may have only a slight effect of mode choice.6
Nevertheless, the required transit subsidy is a sensible,
sensitive, and minimally intrusive public policy that is intended
to counteract the harmful effects of parking subsidies by expanding
the commuter's options beyond the usual choice between a parking
subsidy or nothing.
The precedent already successfully set by Los Angeles' transit
subsidy requirement suggests the following policy that we recommend
as a logical next step to further expand the commuter's options.
Building on what the City of Los Angeles has already done, and
using the language of its ordinance, any city could require that:
Each employer in the City that offers free or subsidized
parking to any employee shall of
