Parking Cash Out

PAS Report 532

By Donald Shoup, FAICP

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Free parking is the most common fringe benefit offered to workers in the U.S. Is it any wonder, then, that 91 percent of them drive to work — or that most of them drive solo? The cost of this parking subsidy is about 1 percent of the gross national product and four times the amount of funding for public transit.

This report, a complement to Donald Shoup's book The High Cost of Free Parking, shows how employers who offer their employees the option to cash out their parking subsidies can discourage solo driving and its attendant social, environmental, and infrastructure costs. It also suggests ways planners can bring this option to their communities.

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Page Count
Date Published
March 30, 2005
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Table of Contents

1. An Invitation to Drive to Work Alone
Ubiquitous Free Parking • Effects of Employer-Paid Parking: Seven Case Studies • Effects of Employer-Paid Parking: A Mode-Choice Model • Other Evidence of the Effects of Employer-Paid Parking • Employer-Paid Parking Discourages Carpooling • Commuter Parking in the Context of All Parking • Conclusion: An Invitation to Drive to Work Alone

2. Cashing Out Free Parking
Parking as a Status Symbol • California's Parking Cash-Out Law • Benefits of Parking Cash Out • Daily Cash Out • Partial Cash Out • What Will Happen to All the Empty Parking Spaces? • The Potential for Parking Cash Out • Conclusion: Free to Choose

3. Parking Cash Out: The Tax Angle
Asymmetric Tax Exemption for Employer-Paid Parking • Is Employer-Paid Parking Wage Discrimination? • The Tax Expenditure for Employer-Paid Parking • Parking Cash Out: Two Tax Penalties • Removing the Tax Penalties • A Revenue Windfall for Federal and State Governments • Paying for Parking with Pre-Tax Income • Paying for Transit and Vanpools with Pre-Tax Income • Transportation and Tax Equity • Conclusion: Slow Advances

4. Parking Cash Out: Evaluating the Effects
Eight Case Studies • Case Study Methodology • Summary of Travel Changes after Cash Out • Emission Reductions and Gasoline Savings • Consistency with Previous Research • Cost of Parking Cash Out • Benefit-Cost Analysis of Parking Cash Out • Distribution of Benefits • Employers Praise Parking Cash Out • The Legislative Analyst's Report
Conclusion: Subsidize People, Not Parking

5. Parking Cash Out Compared with Five Alternatives
Alternative 1. Offer Transportation Demand Management Programs • Alternative 2. Require Employee Trip-Reduction Programs • Alternative 3. Remove the Tax Exemption for Employer-Paid Parking • Alternative 4. Increase the Tax Exemption for Transit Subsidies • Alternative 5. Tax Workplace Parking Spaces • The Brightest and the Best • Conclusion: Truth in TDM

6. The Politics of Parking Cash Out
Rationale for a Cash-Out Requirement • Why California Enacted the Parking Cash-Out Law • How California Enacted the Parking Cash-Out Law • Failed Attempt to Repeal the Cash-Out Law • Require Cash as a Condition for Tax Exemption • Allow Employer-Paid Parking in Cafeteria Benefit Plans • Conclusion: Align the Tax Code with Our Objectives

Appendix A. Converting Traffic Congestion into Cash

Appendix B. List of References

1-1. Parking Prices and Mode Choices
4-1. Commuter Mode Shares Before and After Parking Cash Out
4-2. Commuter Mode Shares in Southern California, 1990-1996

1-1. Share of Automobile Commuters Who Park Free at Work
1-2. Employer-Paid Parking Increases Solo Driving: Seven Case Studies
1-3. Employer-Paid Parking Increases Driving to the Los Angeles CBD
1-4. Employer-Paid Parking Reduces the Rewards for Carpooling
2-1. Employer's Cost of Offering Free Parking (For 100 Employees)
2-2. Transfer Cost versus Real Cost (Costs and Benefits Per Employee Per Month)
2-3. Changes in Travel to the City Center after Parking Prices Are Doubled
2-4. Comparing the Cost of Partial versus Full Cash Out
2-5. Employer-Paid Parking Spaces in the United States in 1994
3-2. Paying for Parking from Pre-tax Income: Tax Savings at the University of California
4-1. Commute Subsidies Before and After Cash Out ($ Per Employee Per Month)
4-2. Summary of Travel Changes after Parking Cash Out
4-3. Emissions Reductions after Parking Cash Out (Per Employee Per Year)
4-4. Cash-Out Results Compared with Previous Research (Cars Driven to Work Per 100 Employees)
4-5. Subsidy Per Employee Before and After Cash Out ($ Per Month)
4-6. Benefits and Costs of Parking Cash Out (Per Employee Per Year)
4-7. Demographics of Travel to Work
5-1. Distribution of Subsidies in a TDM Program
6-1. Effects of Offering the Option to Cash Out Six Million Rented Parking Spaces