Policy Question – Parking Cash-out

What would be the impact on employment location and types, and on employees’ income of a regional parking cash-out program?

Question Purpose

What is the purpose of this question, why is it important, and who is the intended audience?

Employee based pricing or incentive programs create a choice between a free parking space and cash, incentivizing employees not to park at work, and instead use alternative modes such as carpool, transit, walk, or bicycle. Beneficial impacts of these programs have been seen, yet implementation has been limited and employers appear to be resistant to change without incentive. This question can provide information to MTC and other regional agencies, as well as local governments and employers, on the efficacy and impacts of a regional parking cash-out program. In addition, the State of California could be interested in relation to the State Parking Cash-out law.

Overview of Analysis

How is this question being addressed? What approach is best, given limitations?

In the abstract, this question would be studied by taking before and after data of a range of parking cash-out programs, then simulating regional results through the regional land use and travel models. Because no cases of parking cash out implementation are available to study in the Bay Area, this question is addressed primarily through review of parking cash-out programs in other locations, results of programs bearing similarities to parking cash-out, relevant existing papers, new case studies, and expert analysis. In the future, the analysis could be used for modeling changes in incomes based on commuter mode choice.

Given the limited implementation of parking cash-out programs, similar programs such as commuter benefit programs and other trip reduction strategies are also reviewed for useful indications of the potential effectiveness of parking cash out programs.

Background & Research

Literature Review: Parking Cash-out

Each parking space that an employer provides has a cost (typically born by the employer), yet whether an employee parks at work or not, each employee is affected similarly by this cost. This cost is often indirect for employers and they are unaware of it as it is bundled into rent. This cost for employers is usually an indirect cost for employees, yet even the employees who aren’t parking at work are paying equally for this space. Employee based pricing, or incentive programs, create a choice between the free parking space and cash value that incentivizes employees to carpool, take transit, walk, telecommute, or bicycle to work.[1]

A 1990 study compared employees before and after free parking was eliminated. In five locations analyzed, drive-alone mode share fell by 41% when employees had to pay to park.[2] Additionally, a survey of Bay Area commuters conducted in 2000 found that 77% of commuters with free parking drove alone, while only 39% of those who had to pay drove alone. It is not easy to determine the extent to which this effect is directly due to the cost of parking, and how much is due to other correlating factors, notably superior transit service in areas with paid parking.

Willson (1991) used a multinomial logit model to estimate how employees will commute differently in response to being charged for parking. Willson’s model estimates that 25-34% fewer vehicles would be driven to work when employees are charged for parking, rather than receiving free parking. Fewer vehicles driven to work would also encourage a cultural shift towards public transit and alternative modes of transportation. With such a cultural shift, total demand may decrease for parking for non-commuting trips as well.

Policy Application: California’s Parking Cash-out Law

Enacted in 1992, California’s Parking Cash-out Law (AB 2109, KATZ)[3] requires employers with more than 50 employees (and certain additional qualifying characteristics) to offer a parking cash-out program.[4] An analysis of eight employers who complied with the law resulted in a 17% decrease in single-occupancy drivers after the cash-out program (Shoup, 1997). Additionally, these eight employers saw an average carpooling increase of 64%, transit ridership increase of 50%, and walk/bike mode share increase of 33%. While large impacts were seen from the few employers who do participate, the California legislation did not make a sizable impact statewide as the state has not taken steps to enforce the law, leaving it instead to the local municipalities (Sorensen et al., 2008). Additionally, many employers find exemptions due to the specific criteria for those required to participate. For example, parking owned rather than leased by employers is exempt from the law. Hill and Long (2002) estimate that only 3% of all employers are required to participate.[5]

A study by the CA Center for Sustainable Communities (2013) assesses the potential impact if 25%-50% of employers with 50 or more employees were to participate in the parking cash-out program. [6] The study’s analysis estimates a 2.7-7.8% reduction in automobile commutes (which average 13.2 miles per day and consist of about 23% of all driving in California).

Policy Application: Santa Monica’s Parking Cash-Out Policies

While significant impacts were seen from the few employers who do participate in California’s Parking Cash-out Law, the legislation has not made a sizable impact as the state has not taken steps to enforce the law.[7] Since 1996, the City of Santa Monica has taken steps to enforce the state’s parking cash-out law, requiring employees to comply as part of their Emissions Reduction Plan. One-third of all employers with at least 100 employees were participating as of the City’s 1998 survey. This survey found that of all participants, 20% of employees chose to rideshare to work and take the parking cash-out.[8] This increased effort to enforce the state parking cash-out law could be applied on a wider scale, increasing the effectiveness and reach of the program throughout the entire region.

Policy Application: Washington’s Commute Trip Reduction Law

Similar to the Bay Area Commuter Benefits Program detailed in Policy Question 7, in 1991 the state of Washington passed the Commute Trip Reduction law in 1991, requiring large companies to take steps to reduce automobile trips by employees. Washington’s Commute Trip Reduction (CTR) Law focuses on reducing drive-alone mode share by requiring larger employees to participate in programs that encourage employees to take alternative modes. Washington’s law requires employees to create and manage their own programs, based on guidelines by local jurisdictions. With 1,050 worksites and 530,000 employees currently participating, the program has been successful in (1) saving fuel and time costs by reducing traffic delays during rush-hour (2) reducing total driving by a total of 154 million miles from 2007-2013, and (3) preventing 69,000 metric tons of GHG emissions.[9]

In response, SAFECO Insurance Company offered transit passes and ridesharing incentives to all employees in order to reduce demand for parking. With flexible parking requirements, city officials allowed the company to increase development density and reduce the number of required parking spaces in SAFECO’s new building in Redmond, WA. Since the program’s start in 1997, SAFECO has kept drive-alone trips below 60%, while the county’s average rate is 81%. In addition to the environmental benefits of fewer vehicle emissions and reduced runoff from less paved area, the company saves an estimated $491,000 per year from parking construction and maintenance costs.[10]

Policy Application: Boulder Colorado Transit Passes

An alternative to offering employees cash as a substitute for their parking space is offering a transit pass. Boulder, Colorado offers free transit passes (the EcoPass) to full-time employees located within BID boundaries. These free employee Eco Passes are funded by parking fees in the downtown. The City of Boulder was looking to increase their transit ridership as the core benefit, rather than make more parking available for customers.[11] However, this is another benefit to areas with constrained on-street parking resources.

In analyzing the feasibility of a free employee transit pass program, Boulder acknowledged that the cost of bus fare can be a significant barrier to using transit for car owners. However, the cost of commuting by vehicle is still high and can be a barrier to low-wage earners. The EcoPass improves access to jobs while also reducing an employee’s dependence on their private vehicle.

In February 2014, a study on the feasibility of expanding the Eco Pass program to the wider community was completed, estimating that the program could increase transit ridership between 22 and 64 percent, depending on the amount of resources put into the effort. The existing program has resulted in approximately 7.85 million additional transit boardings per year and 865 million reduced vehicle-miles traveled per year in the City of Boulder.

Policy Application: Genentech’s gRide Rewards program

Genentech’s South San Francisco and Oceanside campuses offer employees $4/day per passenger not to drive alone to work (including carpool, vanpool, transit, and non-motorized modes). This is approximately $80/month or $1,000/year. In 2012, the program reported that it saved more than 100million miles of commuting, taking many vehicles off the road. Each month, more than 3,000 employees participate in gRide Rewards; 41% of the office’s employees take modes other than drive-alone (an increase from 2006 of 22%). To make this program easier, Genentech also offers 38 shuttle buses, or GenenBuses, to provide rides to employees. It should be noted that Genentech is operating under the trip reduction policy goals of the San Mateo City/County Association of Governments (C/CAG), and has a major financial incentive to expand their business while not increase the number of employee commute trips.

Challenges

While there are several studies and examples, a full analysis of the impact of such a program is difficult. There is a lot of potential in the future for simulating regional effects of parking cash-out in UrbanSim, the capabilities and sensitivity of the parking submodel are uncertain and not yet ready for implementing testing. Additionally, the slow or limited implementation of parking cash-out policies may be due to a combination of lack of financial motivation by employers, due to lack of full or direct control of parking resources, and organizational/institutional inertia – both of which are difficult to model.

It should be noted that the environment for effective parking cash–out may be limited by the separation of financial responsibilities between employers and owners of parking, and thus limited opportunities for anyone to directly take advantage of efficiencies in pricing parking. For example, if an employer owns their own parking and there is a market for use of extra parking, or if an employer may choose to lease less parking, then they have an incentive to reduce the amount of parking used by the employees and to lease out the excess parking. Parking cash-out could work well in this situation. Parking cash-out could also work well if an employer/property owner wishes to expand operations and is allowed to build on land that is freed up through parking reduction programs. However, most employers do not own the parking used by their employees, and/or many do not have a choice as to how much parking to lease with an option of savings for the employer. Therefore if such an employer with fixed costs for parking for employees offers financial incentives for employees to not park at work, the employer may incur the cost of the incentive and yet derive no financial benefit from the reduced use of parking.

Potential Policy Actions

One potential policy action is to enforce California’s parking cash out law in the Bay Area. This could be done on a local level or a regional level. Additionally, parking cash-out or other employer-based incentives for employees to give up their parking space could be supported with local policies. These policies could include transit passes, or required parking fees by employers.

A renewed Bay Area Commuter Benefits Ordinance (CBO) could require employers to charge for parking, offer a parking cash out for those who opt out of a parking space, or provide a transit pass option for those who opt out of a parking space.

[1] http://www.smgov.net/Departments/PCD/Transportation/Employers/

[2] Willson and Shoup (1990). Parking Subsidies and Travel Choices: Assessing the Evidence. UCTC No. 34

[3] CA.gov (2011). California’s Parking Cash-Out Law. Available at http://www.arb.ca.gov/planning/tsaq/cashout/cashout.htm

[4] Employers also have to be in an air basin where the area does not meet certain standards.

[5] Legislative Analyst Office, Elizabeth Hill and Rebecca Long (2002). A Commuter’s Dilemma: Extra Cash or Free Parking? http://www.lao.ca.gov/2002/parking/031802_cash_or_parking.pdf

[6] Juan M. Matute, Ha H. Chung, and Stephanie S. Pincetl. (2013) Parking Cash-out programs at Employment Sites. California Center for Sustainable Communities at UCLA.

[7] Sorensen et al., 2008

[8] Legislative Analyst Office, Elizabeth Hill and Rebecca Long (2002). A Commuter’s Dilemma: Extra Cash or Free Parking? http://www.lao.ca.gov/2002/parking/031802_cash_or_parking.pdf

[9] Washington State Department of Transportation, CTR Overview. http://www.wsdot.wa.gov/Transit/CTR/overview.htm#HowItWorks

[10] http://www.epa.gov/dced/pdf/EPAParkingSpaces06.pdf, p 50.

[11] https://www-static.bouldercolorado.gov/docs/communitywide-eco-pass-faqs-1-201402251110.pdf

Additional Resources

How Washington State Convinced Big Companies to Dramatically Reduce Drive-Alone Commutes: The state’s Commute Trip Reduction program is a model for the nation.