United States Air and Radiation EPA 420-S-01-006
Environmental Protection Transportation and Air Duality September 2001
Agency
Implementing Commuter
Benefits Under the
Commuter Choice
Leadership Initiative
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COMMUTER CHOICE LEADERSHIP INITIATIVE
The National Standard of Excellence for Commuter Benefits
Parking Cash Out
Implementing Commuter Benefits under the
Commuter Choice Leadership Initiative
Employers that offer free or subsidized parking to employees can implement parking
cash out. Under a parking cash out program, an employer gives employees a choice to
keep a parking space at work, or to accept a cash payment and give up the parking
space.
Parking cash out programs are one of the most effective means to encourage employees
not to drive alone to work. Cash out programs are a very effective means of allocating
scarce parking if employers face a parking shortage, or a growing demand for parking.
Parking cash out programs benefit employees, because it allows them a choice of
whether or not to continue driving alone. They are perceived as fair to employees,
because nobody is forced to stop driving or give up free parking, but those who do are
rewarded financially.
Although any employer who pays for parking can implement parking cash out, it works
best for employers who lease, rather than own, their parking.
Parking cash out is one of the primary benefits under the Commuter Choice Leadership
Initiative (CCLI). Employers must offer at least one of three primary benefits to their
employees in order to participate in the CCLI (the other two are transit or vanpool bene-
fits and telecommuting). Under this option, the employer agrees to provide at least
$32.50 per month for parking cash out.
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COMMUTER CHOICE LEADERSHIP INITIATIVE
The National Standard of Excellence for Commuter Benefits
This document is one in a series of Commuter Choice Leadership Initiative briefing papers designed to help
employers implement commuter benefits.
The U. S. Environmental Protection Agency (EPA) and the U. S. Department of Transportation (DOT)
have established a voluntary National Standard of Excellence for employer-provided commuter benefits.
Commuter benefits help American workers get to and from work in ways that cut air pollution and global
warming pollution, improve public health, improve employee recruiting and retention, improve employee
job satisfaction, and reduce expenses and taxes for employers and employees. Participants in the
Commuter Choice Leadership Initiative (CCLI) agree to meet the National Standard of Excellence, and
qualify as Commuter ChoiceSM Employers. CCLI participants agree to:
Centralize commute options information so that it is easy for employees to access and use;
Promote the availability of commuter benefits to employees;
Provide access to a guaranteed ride home program;
Provide one or more of the following primary commuter benefits:
/ Vanpool or transit benefits of at least $32.50 per month
/ Parking cash out of at least $32.50 per month
/ Telecommuting program that averages six percent of daily work force
/ Other option proposed by employer and agreed to by EPA
Provide three or more of the following additional commuter benefits:
Ridesharing/carpool matching
Pre-tax transit/vanpool benefits
Shuttles from transit station
Parking at park-and-ride lots
Provision of real-time transit information
Preferred parking for ridesharers
Reduced parking costs for ridesharers
Employer-sponsored vanpool or subscription bus
programs
Employer assisted vanpools
Secured bicycle parking, showers, and lockers
Electric bicycle recharging stations
Employee commuting awards programs
Discounts/coupons for bicycles and walking shoes
Compressed work schedules
Telecommuting
Lunchtime shuttle
Proximate commute (working closer to home)
Incentives to encourage employees to live closer to work
On-site amenities (dry cleaning, etc.)
Concierge services
Active membership in a Transportation Management
Association (TMA) or similar organization
Other options proposed by employer
Exceed a minimum benchmark of either 14 percent of employees who do not drive alone to work or an
average vehicle ridership (the number of vehicles divided by the total number of employees) of 1.12.
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COMMUTER CHOICE LEADERSHIP INITIATIVE
The National Standard of Excellence for Commuter Benefits
Disclaimer
EPA provides this briefing as a service to employers participating in the CCLI. Information about private
service providers is intended for informational purposes and does not imply endorsement by EPA or the
federal government.
The information presented here does not constitute official tax guidance or a ruling by the U.S.
Government. Taxpayers are urged to consult with the Internal Revenue Service of the U.S. Department of
Treasury or a tax professional for specific guidance related to the Federal tax law.
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CCLI: Parking Cash Out
Table of Contents
PARKING CASH OUT: A SUMMARY.
BRIEF HISTORY
EMPLOYER BENEFITS.
REDUCED PARKING COSTS AND BETTER PARKING MAN-
AGEMENT 2
FAIRNESS AND EMPLOYEE SATISFACTION 2
TAX CONSIDERATIONS 3
CASH IS TAXABLE, PARKING REMAINS TAX-FREE 3
INCREASED REVENUES FOR GOVERNMENT 3
EMPLOYEE BENEFITS 4
WHEN PARKING CASH OUT MAKES
SENSE 4
LEASED PARKING 4
SCARCITY OF EMPLOYER-OWNED PARKING 4
DOWNTOWN EMPLOYERS 5
SUBURBAN EMPLOYERS 5
SMALLER EMPLOYERS 6
IMPLEMENTATION ISSUES AND COSTS 6
LOW ADMINISTRATIVE REQUIREMENTS 6
ADDED PAYROLL COSTS AND PAYMENTS TO NON-DRI-
VERS 6
COMBINING PARKING CASH OUT WITH TRANSIT BENE-
FITS 6
PERCENTAGE OF EMPLOYEES LIKELY TO PARTICIPATE?
GUIDE TO IMPLEMENTATION.
EMPLOYER QUESTIONS AND ANSWERS 9
QUESTION: WHAT HAS BEEN THE REACTION OF
EMPLOYERS AND THEIR EMPLOYEES TO PARKING CASH
OUT? 9
QUESTION: HOW DIFFICULT - AND COSTLY - IS IT TO
ADMINISTER THE PROGRAM? 9
QUESTION: IF I OFFER MY EMPLOYEES A CHOICE OF A
FREE PARKING SPACE OR ITS CASH VALUE UNDER
PARKING CASH OUT, DO I PAY PAYROLL TAXES ON THE
CASH? 9
QUESTION: IS THERE A WAY TO AVOID OR REDUCE THE
ADDITIONAL PAYROLL TAXES ON THE CASH OUT? 10
QUESTION: WHAT ARE THE COST IMPLICATIONS OF
IMPLEMENTING PARKING CASH OUT FOR MY COMPA-
NY? 10
QUESTION: IF I IMPLEMENT A PARKING CASH OUT BEN-
EFIT, AM I REQUIRED TO OFFER THE FULL VALUE OF
THE PARKING TO MY EMPLOYEES AS TAXABLE
INCOME? 10
QUESTION: IF I CURRENTLY GIVE MY EMPLOYEES
TRANSIT PASSES TAX FREE, WILL STARTING A PARKING
CASH OUT PROGRAM AFFECT THE TAX FREE STATUS
OF CURRENT TRANSIT PASSES? 11
QUESTION: DOES MY ENTIRE COMPANY (OR ORGANIZA-
TION OR AGENCY) NEED TO PARTICIPATE? WHAT
IF WE HAVE MULTIPLE WORK SITES? 11
QUESTION: IF I OFFER PARKING CASH OUT, WHAT HAP-
PENS IF AN EMPLOYEE TAKES THE CASH INSTEAD OF
THE PARKING, BUT CONTINUES TO DRIVE TO WORK,
PARKING ELSEWHERE? 11
QUESTION: I DON'T CURRENTLY PROVIDE FREE OR
SUBSIDIZED EMPLOYEE PARKING DOES PARKING
CASH OUT HELP ME? 12
QUESTION: DO ANY STATE OR LOCAL GOVERNMENTS
OFFER ANY INCENTIVES FOR DOING THIS? 12
EMPLOYER CASE STUDIES 12
BELLEVUE, WASHINGTON - CH2M HILL 12
LOS ANGELES, CALIFORNIA - SHEPPARD, MULLIN,
RICHTER AND HAMPTON 13
EDEN PRAIRIE, MINNESOTA - SUPERVALU 13
MINNEAPOLIS, MINNESOTA - UNIVERSITY OF ST.
THOMAS 14
PUBLIC SECTOR ORGANIZATIONS 15
SERVICES THAT SUPPORT
IMPLEMENTATION
.15
ASSOCIATIONS AND CONTACTS 16
STATE AND LOCAL GOVERNMENTS
INFORMATION ON TAX CONSIDERATIONS.
..16
..17
EMISSIONS AND TRANSPORTATION
BENEFITS 18
BENEFITS AT INDIVIDUAL EMPLOYMENT SITES 18
REFERENCES AND PUBLICATIONS 19
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CCLI: Parking Cash Out
.PARKING CASH Our: A SUMMARY
|sW -/ _ _
Parking cash out is a commuter benefit in which
an employer offers employees the option to
accept taxable cash income instead of a free or
subsidized parking space at work.
The idea behind parking cash out is simple: given
a choice of cash or a parking space, many people
would prefer to receive cash. Most employers in
the U.S. provide free or subsidized parking to
their employees.1 This practice encourages
employees to drive to work alone, increasing traf-
fic congestion and air pollution. Given the option
to take cash instead of the parking space, many
employees will take the cash and choose to car-
pool, take transit, or walk or bike to work. The
benefits are substantial: employees receive broad-
er and more equitable commuter benefits, traffic
and emissions decrease, and the employer may be
able to reduce parking costs.
Also sometimes called a "pay me not to drive"
program or a "cash instead of parking" program,
parking cash out encourages alternatives to driv-
ing alone to work without taking away the exist-
ing parking benefit. It has long been recognized
that free or subsidized employer-provided parking
is a major incentive to drive to work alone, yet
many companies are reluctant to eliminate the
benefit. Under a parking cash out program,
employees may keep their tax-free parking sub-
sidy or accept additional income. Employees who
elect to accept the cash income pay taxes on it,
but can use the money as they choose. Some peo-
ple use the cash for transit fares or vanpooling,
while others save the money by carpooling or
bicycling or walking to work. Employees who
wish to continue driving to work still receive the
original free or subsidized parking and do not pay
any taxes on it.
jjE.*** *. . ; ~ ; j
BRIEF UISTORY
§:» -f"jr ff i _ , j
The idea of parking cash out originated with
Professor Donald Shoup at the University of
California, Los Angeles, and he has done much
of the research on it. In 1992, the state of
California enacted legislation requiring many
employers who subsidize their employee parking
to offer a parking cash out option.2 The law was
unenforced, however, because of conflicts with
federal tax law.
Until 1998, federal tax law prohibited an employer
from providing an option of cash income or a tax-
exempt parking benefit. If an employer chose to
give an employee the option of cash in lieu of a
parking space, then all parking provided by the
employer lost its tax exempt status - both the
employer and employee would be required to pay
taxes on the value of the parking subsidy.
The Taxpayer Relief Act of 1997 amended the
federal tax code to allow employers the option to
offer taxable cash instead of a tax-exempt parking
space. Since the act went into effect in 1998, the
option of parking cash out has been available to
employers nationwide.
ENEFITS
Offering parking cash out can benefit a business
in many ways.
1 It is estimated that nearly three-fourth of all firms in the
U.S. provide free parking for their employees, with
employers providing 85 million free parking spaces for
commuters nationwide. Free parking creates a major
incentive to drive to work. About 95 percent of all com-
muters who drive to work receive free parking, and most
auto commuters park free even in the central business
districts of large cities. (Shoup and Breinholt, 1997).
California Health & Safety Code Section 4385
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CCLI: Parking Cash Out
Reduced Parking Costs and Better Parking
Management
Parking spaces, particularly in urban areas, are
costly. It is estimated that employers provide 85
million free parking spaces for commuters -
spaces with a net worth of nearly 31.5 billion dol-
lars. Employers can save a substantial amount of
money in reducing the number of parking spaces
required; one study estimates that annual per-
space costs vary between $250 and $2,100.
Parking cash out can:
Reduce the need for employee parking and
costs associated with leasing parking space.
Reduce the maintenance costs of parking
areas.
Allow businesses to convert employee park-
ing spaces to customer parking spots.
Allow businesses to convert parking spaces
into revenue-producing activities.
Eliminate the need for new parking construction.
Cashing out parking allows an employer to save on
the extensive cost of supplying parking to employ-
ees. For certain types of businesses, converting
employee parking to customer parking can make
business more accessible to paying customers.
Fairness and Employee Satisfaction
Parking cash out benefits go beyond just monetary
benefits. Expanding employee options not only
increases potential income but also promotes
employee choice and equity throughout the work-
place. Employees praise parking cash out for its
fairness and claim that it better serves everyone's
1 Victoria Transport Policy Institute, Online TDM
Encyclopedia, available at www.vtpi.org/tdm. Costs are
based on land, construction, and operations costs for sub-
urban and urban locations, and for surface, structured,
and underground parking
needs. Employers that have implemented cash out
programs also have been overwhelmingly positive
(Shoup, 1997a), as shown by the comments below:
The employees think it's fair.
[Cashing out] has been really positive.
Since we moved to cash out, we've always
received a good response.
I would definitely recommend [cashing out].
We've always found that cash works. Cash is
always a good incentive.
[Cashing out] has been a really good experi-
ence. People really like it.
People like the idea, they like the cash in
hand, and it does add to their paycheck.
[Employees] love it. The ones that qualify
love it. And the ones who drive alone don't
care because they get free parking.
Compared to the previous policy, I think
[cashing out] is fairer.
If we decided to scratch the program, we would
probably end up with at least fifty or sixty more
employee cars, with no place to park.
Cash works very well for us.
The positive response to cash out may be
ascribed to the fact that it is a simple variation on
a traditional benefit. According to Shoup (1997a):
Parking is a traditional part of most employ-
ers' benefit package, and cashing out can
logically relate to the parking benefit
Cashing out can be a normal operating pro-
cedure for any business because it treats all
employees equally in terms of an important
fringe benefit. Therefore, once established,
cashing out is likely to become a permanent
feature of the employers' benefit package.
Parking cash out offers businesses an attractive
way to increase employee choice and satisfaction
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CCLI: Parking Cash Out
through a simple variation on a benefit the business
already offers. As described above, employers
consistently remark that the cash out option helps
to recruit and retain employees. Further, by
equalizing benefits, companies provide a more
equitable compensation package for all employees.
Together, these features may help to reduce
recruitment and retention costs for the company.
:TAX CONSIDERATIONS
j^?* ^ *
Although the idea of parking cash out is very
simple, and in most cases implementation is
straightforward, employers should review with
their tax advisor possible tax implications for
themselves and their employees.
This section reviews some tax considerations
associated with employer-paid parking and park-
ing cash out, and highlights recent changes in tax
law with respect to parking cash out.
Cash is Taxable, Parking Remains Tax-Free
Under a parking cash out program, cash offered
instead of parking is taxable as regular compensa-
tion. It is treated the same way as the rest of an
employee's pay: the employer incurs payroll taxes
on it, and the employee incurs all regular income
taxes on it. For employees who choose to keep
the free parking (those who do not take the cash),
there is no tax impact. Qualified parking remains
a tax-free transportation fringe benefit.
Until recently, this was not the case. Prior to
1998, the Internal Revenue Code (IRC) prohibit-
ed tax-free parking from being offered in lieu of
taxable cash. The IRC stated that employer-paid
parking would be tax-free only if "provided in
addition to (and not in lieu of) any compensation
otherwise payable to the employee." If an
employer offered cash instead of parking to their
employees, then parking would lose its tax-free
status for all employees. Employees who saw no
change in their benefits (i.e., they continued to
park for free) would see an increase in taxes. The
tax code thus created a major barrier to offering
employees a choice of parking or cash.
Changes in the tax code associated with the
Taxpayer Relief Act of 1997 removed this barrier
to parking cash out.4 Starting in 1998, employers
have been able to offer their employees the
choice of taxable compensation or a tax-exempt
parking benefit.
"Parking cash out" typically means offering cash
in lieu of a parking space, and cash income is
taxable. As a result, firms that cash out generally
will see an increase in their payroll taxes associ-
ated with the cash that is provided to employees
in lieu of parking. (Note that other cost savings
may offset the increase in payroll taxes. See
Employer Benefits above.) In order to minimize
adverse tax impacts, employers can offer tax-
exempt transit passes and vanpool vouchers
(these benefits are currently tax exempt up to $65
per month for each employee; this limit will rise
to $100 in 2002), and may choose to do so in lieu
of a parking space. Employers that want to pro-
vide employees with flexible commuter benefits
often elect to offer tax-free transit or vanpool
benefits, or a combination of cash and transit and
vanpool benefits.
Increased Revenues for Government
Parking cash out has the potential to increase tax
revenue for the federal government and state and
local governments that impose income taxes.
Shoup and Willson (1992b) calculated the poten-
tial tax revenues associated with parking cash out
nationally using 1990 employee Census data. Of
110 million nonagricultural civilian employees,
90 percent are auto commuters. If the average
cost of providing parking is $30 a month and 20
percent of commuters opted for the taxable cash
back option, taxable income would increase by
4 Pub. L. No. 105-34 (111 Stat. 948)
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CCLI: Parking Cash Out
$6.1 billion per year. At a marginal tax rate of
20 percent, revenues would increase upward of
$1.2 billion per year. This revenue increase
would be the result of voluntary employee
choice, with no change in tax rates. State and
local governments in areas where average park-
ing costs far exceed $30 could see substantial
revenue gains.
PMPLOYEE BENEFITS
Employees benefit from parking cash out because
it gives them the option of receiving extra money
instead of a benefit. If employees are willing to
carpool, use transit, or walk or bicycle to work,
they come out ahead financially with parking
cash out. Because there is no detrimental effect
on employees who continue to drive alone, both
employees who drive alone and those who do not
perceive the program as fair.
HEN PARKING CASH OUT MAKES
tSlNSE
Parking cash out can be offered by any employer
that makes subsidized parking available for
employees in off-street lots and garages. Most
parking arrangements for employers that subsi-
dize parking fall into three categories:
1) employer-owned parking,
2) bundled lease parking (arrangements where
the cost of parking is built into the building
rent), and
3) unbundled lease parking (arrangements where
parking is paid separately from rent).
Leased Parking
Parking cash out works best for employers who
lease their parking separately from their building
and can let go of unused parking without penalty
from the lessor. The employer simply leases
fewer spaces and transfers the money to employees
who do not use the parking subsidy. Thus, park-
ing cash out tends to work particularly well for
companies that lease individual parking spaces
rather than those who own their parking.
Parking cash out is most easily applied by, but is
not limited to, employers with unbundled lease
parking. These employers can adopt a parking
cash out arrangement for their employees at any
time. For every employee that accepts the cash
out offer, the employer can reduce the number of
spaces leased.
Employers with bundled parking and office leases
may adopt parking cash out, but they may be
unable to immediately reduce their parking costs
when fewer employees drive to work. The
employer would likely attempt to renegotiate the
arrangement to separate parking costs from office
space costs so the company can reduce parking
costs as employees sign up for cash instead of
parking.
Scarcity of Employer-Owned Parking
Employers that own their own parking are the
least likely to see immediate parking cost savings
from a cash out program. They also may find it
somewhat more difficult than other employers to
value their parking for the purposes of cash out.
The effectiveness of parking cash out depends on
the type of parking arrangement employers have,
as well as on parking demand. Parking cash out
tends to be most effective in the situations
described below.
5 Note, however, that there is no requirement that an
employer offer employees exactly the value of the
parking space. The employer may offer any amount,
either more or less than the actual value or cost of the
space. At least one firm in the Shoup survey offered
substantially more than the cost of a space, in part to
provide true equity by offsetting the tax bite on the
cash out cash.
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CCLI: Parking Cash Out
On the other hand, if parking lots are full and the
employer is considering building, leasing, or acquir-
ing additional parking, parking cash out can be very
attractive regardless of the current parking lease or
ownership situation. Rather than building and main-
taining or otherwise acquiring additional parking, it
may be much less expensive to offer employees cash
for not parking. Cash out can also be an opportunity
to increase parking spaces for customers, again
regardless of lease or ownership arrangements.
Parking cash out also works for employers that
own parking and can rent that parking to an out-
side party or convert it into revenue producing
space. In that case, the employer takes any revenue
and transfers the money to employees who do not
use the parking subsidy. Whenever parking is tight
- regardless of parking lease or ownership - an
employer may want to offer cash out to avoid hav-
ing to build or acquire additional parking.
Downtown Employers
Parking cash out will generally be most popular
with employees where parking is expensive and
the cash option is especially valuable, such as cen-
tral business districts and other dense urban areas.
Transportation alternatives, like transit and HOV
lanes, offer their best services to downtown work
sites, making it easier to stop driving. In addition,
downtown locations typically provide the option of
paying for daily parking. This is an important con-
sideration since an employee may wish to accept
the cash out offer and take transit, carpool, or bicy-
cle or walk to work most days but still have the
option to drive to work occasionally as needs arise.
Employers in downtown locations are also most
likely to see a direct benefit from reducing the
number of employees parking at work. Downtown
parking garages are expensive, and parking cash
out is most appealing to employers when parking
is in short supply and expensive. Downtown park-
ing is also typically sold or leased space by space,
making it relatively easy for employers to shift
spending between parking, other tax-exempt com-
muter benefits, and salary.
Suburban Employers
Although suburban employers are not usually
thought of as obvious cash out candidates because
they tend to own or lease parking in large blocks
and almost always provide it free of charge to
employees, suburban employers also have many
reasons to consider parking cash out:
To limit the cost of acquiring new parking.
To offer customers more parking spaces.
To reduce maintenance and plowing costs.
To offer employees more compensation
choices.
To address regional congestion or air quality
concerns.
A successful parking cash out program could
"retire" enough parking spaces to allow land to be
put to other uses. Rather than supplying more
parking space, an employer could use their land
for additional office space or rent out space for
another company. Recent successes redeveloping
suburban mall properties into denser retail environ-
ments suggest that there is a market for freed-up
parking lot land. If the employer owns the parking,
the employer will need to have controlled entry
points for parking (e.g., parking gates) to ensure
that employees do not take the cash and continue
to drive to work and park.
Although suburban work sites are often inade-
quately served by transit, that need not be a barrier
to suburban cash out. Studies show that when
offered an array of commuter benefit choices,
three-quarters of those who leave their cars opt for
carpooling and telecommuting. The appeal of
parking cash out is not solely dependent on the
quality of public transit service to the work site. In
fact, the flexibility of providing cash allows
employees to choose whatever way makes the
most sense for them to get to work.
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CCLI: Parking Cash Out
Smaller Employers
Although firms of all sizes can implement park-
ing cash out, small employers are an important
market for cash out. Small firms are much more
likely to lease their parking spaces compared to
large firms (small firms lease 30 percent of the
parking spaces they offer free to employees,
while large firms lease only 12 percent of the
parking spaces they offer free). Since leased
parking spaces are most amenable to being con-
verted into cash, small firms are an important
market for cash out. Moreover, small employers
may also be able to implement changes in park-
ing policies most easily.
IMPLEMENTATION ISSUES AND COSTS
Implementation and administration of parking
cash out can be very simple, and usually require
only ensuring that the payroll system accounts for
the fact that some employees will elect to take
additional taxable cash. Generally any complexi-
ties associated with this change pose a one-time
challenge only.
Low Administrative Requirements
Parking cash out places far fewer administrative
burdens on an employer than many other trans-
portation demand management strategies, and
produces higher response rates. The pure form of
cash out (e.g., choice of free parking or extra
income), for example, imposes no administrative
burden in terms of distributing transit and van-
pool vouchers.
Added Payroll Costs and Payments to Non-
Drivers
There are two potential costs to the employer:
additional payroll taxes, and cash out payments to
employees who have not been driving to work.
Because the parking cash out benefit paid to
employees is considered additional salary, the
employer's payroll taxes will increase. In order to
offset this cost, the employer could lessen the
cash payment by the amount of the increased
payroll tax. For example, if the parking spaces is
valued at $100, if instead of paying the employee
$100, and incurring an additional $10 in payroll
tax, the employer could pay the employee $90
and put the remaining $10 toward tax payment.
The employer may also have additional costs
associated with the cash that is paid to employees
who were already commuting to work by alterna-
tive means. For most employers with free park-
ing, this figure is small. A study of cash out pro-
grams implemented by firms in California found
that the increase in employer costs was roughly
equivalent to the reduction in parking costs.
(Shoup, 1997a)
Combining Parking Cash Out with Transit
Benefits
To offset the additional payroll taxes, employers
may wish to implement a transit/vanpool benefits
program along with parking cash out. For exam-
ple, suppose an employer values parking spaces
at $75. Under straight parking cash out, the
employer would offer each employee $75 in
return for not driving. The employer would have
to pay payroll taxes on that $75 increment for
every employee that takes the offer, and each of
those employees would have to pay taxes on the
$75.
However, the employer could offer each employ-
ee $65 in transit/vanpool benefits, and the
remaining $10 in cash. In this case, the employer
would pay payroll taxes only on the $10 incre-
ment, since transit/vanpool benefits are not tax-
able up to $65. Likewise, each employee would
pay taxes only on the $10 increment. For more
information, see the separate briefing papers on
Transit/Vanpool Benefits and Commuter Tax
Benefits.
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CCLI: Parking Cash Out
Percentage of Employees Likely to Participate
According to case studies and research, parking
cash out tends to reduce driving to work by 20
percent or more. An employer implementing
parking cash out should probably expect to see a
reduction in solo driving to work of 20 percent,
and likely more over time. Absolute targets
would depend on starting points. Among eight
firms surveyed by Shoup, the solo-driver share
fell from 76 percent to 63 percent after cashing
out. The firms' 76 percent starting point mirrored
the average national mode split for work trips in
1990, but that average hides wide variation; at
many firms the drive-alone rate is either 100 per-
cent or close to it.
IJJUIDE TO IMPLEMENTATION
T|f **
In order to implement a parking cash out pro-
gram, an organization will typically go through
the following steps:
1) Analyze Current Parking Conditions and
Policies
A first step for any employer will be to examine
current parking conditions and parking benefit
policies. Key questions to ask include:
Does the employer currently provide free or
subsidized parking to all of its employees or
only at certain office locations? (For example,
some companies provide free parking to
employees at their suburban offices but not at
downtown locations).
What are current parking ownership/lease
arrangements? Does the organization own all
of its parking? Does it lease parking? Will it
be able to reduce the number of parking
spaces it leases without penalty?
If parking is owned by the company, does it
have controlled entry points? Could it easily
be converted to controlled entry?
How tight is parking? And how expensive is
it? Would it benefit the company to reduce the
amount of parking it provides to employees?
Understanding current parking arrangements
enables the employer to develop the most appro-
priate options for their own circumstances. It
helps in identifying the potential costs and cost
savings of parking cash out and in selecting the
commuter benefit program that is most beneficial
to employees and the organization.
2) Determine How to Structure a Commuter
Benefits Program
Human Resources staff may wish to meet with
employees and management to discuss potential
ways to structure the commuter benefit program.
The program that is selected will usually depend
on the unique circumstances of the company and
its existing parking arrangements. Typical pro-
gram options include:
Provide employees with the option to accept
the choice between taxable cash or a parking
space at work (the arrangement typically asso-
ciated with the term "parking cash out"). This
option may be most amenable to employers in
semi-urban or suburban locations where car-
pooling, transit, walking and bicycling are
viable options and where parking is tight.
Provide employees with the option to accept
tax-free transit or vanpool benefits, taxable
cash, or a combination of both, in lieu of
parking at work. In locations with extensive
transit or vanpooling, the employer may want
to set up a program in which employees are
given the option of a tax-free transit/vanpool
benefit, taxable cash, or free parking. That
way, employees who wish to use transit or
vanpools can receive a tax-free benefit, and
those who wish to carpool, bicycle, or walk to
work can choose to accept taxable income.
For example, the employer might provide the
employee with the option of free parking, a
tax-free $65 transit/vanpool benefit, or $65 in
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CCLI: Parking Cash Out
cash each month. Under such a situation,
parking may still be subsidized more than
other commute options; for example, if park-
ing costs $100 per month, a solo driver
receives a higher subsidy than a transit rider.
Provide employees with a "commute
allowance" that provides an equivalent com-
muter benefit for all employees. Under this
option, the employer might provide all
employees with a $100 commute allowance,
which can be used toward parking, tax-free
transit or vanpool benefits, or taken as taxable
cash income.
In each case, the employer will need to determine
program structure, such as:
How much cash to offer in lieu of the parking
space (e.g., the full value of parking or a
lower amount)? If a commute allowance is
offered, at what level should it be set?
Will employees in all offices receive the same
cash option or should different cash options
be offered in different locations? (e.g., if
parking is more expensive at certain offices,
should the cash out offer reflect the higher
parking costs?)
Who will be eligible for the program: only
employees who currently use parking or all
employees?
At what point will employees be able to
change their elections? Monthly, quarterly, or
on some other basis?
3) Obtain Senior Management Approval
Senior management will need to approve of the
policy change.
4) Work with Payroll to Set up Appropriate
Payroll Codes
The payroll system will need to be set up to
account for the fact that employees will have the
option to elect to accept taxable cash (or a tax-
free transit or vanpool benefit) in lieu of free
parking. The specific actions that need to be
made will depend on the type of cash out pro-
gram implemented, the payroll system used, and
whether payroll is outsourced.
5) Develop Process for Employees to Elect
their Commuter Benefit
The Human Resources Department will need to
set up a procedure for employees to elect their
commuter benefit. Again, this will depend on the
type of commuter benefit program that is imple-
mented, as well as individual organizational con-
siderations, such as the size of the company and
number of offices. An organization might allow
employees to select whether they want to cash
out via a form submitted to the HR Department
or via an election over an intranet system.
Employers may also want to provide written
information about the benefit in an Employee
Manual or Benefits Guide.
6) Publicize and Implement the Parking Cash
Out Program
Once parking cash out procedures are in place,
the program should be marketed to employees.
Some ways to ensure that employees are aware of
parking cash out include the following:
Company orientation for new employees;
Advertisements in places seen frequently by
employees (cafeteria, garage, elevators, etc);
Distribution of program brochures;
Company newsletters;
Voicemail or e-mail broadcast;
Special promotional days;
Awards or prize drawings to recognize
employees using transit or carpools;
Inserts to paychecks; and/or
Company web site or intranet.
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CCLI: Parking Cash Out
Because parking cash out is not a well-known
arrangement, many employees may have ques-
tions about it. Employers should ensure that
employees have access to information to answer
their questions. This could include both written
materials, as well as a benefits coordinator that
employees can go to with questions.
MPLOYERS QUESTIONS AND ANSWERS
These questions might commonly be asked by an
employer (e.g., a human resources administrator
or business manager) considering a parking cash
out program. Several are variations of each other.
Question: What has been the reaction of employ-
ers and their employees to parking cash out?
Very positive. Cash out gives employees choice,
which is seen as a real benefit by employees. In a
study of California employers that have imple-
mented parking cash out, program administrators
characterized the program as "a really good expe-
rience," "recommended," "fairer," and "loved by
employees." Employers consistently remarked
that the cash out option is an added fringe benefit
that helps to recruit and retain employees. One
employer commented, "Employees are grateful
and thankful and more motivated. So that's a plus
for the company." (Shoup, 1997a, b)
Question: How difficult - and costly - is it to
administer the program?
A study of firms that have implemented cash out
programs generally found negligible implementa-
tion costs. The study found that cash out pro-
grams are simple to organize and implement and
that their ongoing administration poses no extra
cost to the firm. Asked whether administering the
payroll taxes on cash subsidies was a problem,
firms uniformly responded that it was not. One
representative estimated that she spent only two
minutes per employee per month administering
the firm's cash out program. (Shoup, 1997a,b)
Question: If I offer my employees a choice of a
free parking space or its cash value under park-
ing cash out, do I pay payroll taxes on the cash?
Yes. If the employee opts for cash instead of
parking, the employer pays payroll taxes and the
employee pays income and payroll taxes on the
cash. For tax purposes, this cash is the same as all
other regular salary. Employers who want a park-
ing cash out offer to be entirely cost neutral
should offer slightly less than the value of the
parking as a cash stipend in order to cover their
additional payroll taxes.
Employees who opt for the parking do not pay
income and payroll taxes on the value of the
parking and employers do not pay payroll taxes
on the value of the parking, even though the
employee has the choice to convert the parking
benefit to regular, taxable salary. This recent
change to the law makes parking cash out a much
more attractive option than it was in the past.
Question: Is there a way to avoid or reduce the
additional payroll taxes on the cash out?
There is no way to avoid paying payroll taxes on
cash income that is provided to employees in lieu
of a parking space. Employers, however, can
minimize adverse tax implications by offering
tax-free transit or vanpool benefits (currently
capped at $65 per month). Employers can offer
any combination of cash and transit and vanpool
benefits. A cash out offer could consist of a tax-
free transit voucher and the rest in taxable cash.
An employee receiving a $150 cash out offer
could either accept a) the whole cash out in cash,
in which case both employer and employee pay
applicable federal tax on the full amount or b)
accept a transit or vanpool benefit up to $65 tax
free and the rest in taxable cash. The balance of
$150 minus the $65 tax-free benefit would leave
$85 in income subject to employer and employee
taxes.
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CCll: Parking Cash Out
Question; fVIiat are the cost implications of
implementing parking cash out for my company?
The total financial implications of a cash out pro-
gram depend on the specific conditions of a com-
pany, including existing parking arrangements,
needs for additional parking, and current travel
patterns of employees.
Many companies may be able to cover the direct
cost of offering cash to employees by reducing
the amount of parking they lease. For example,
an employer who leases parking stalls for $200
per month and charges employees $50 per month
could pay $150 per month in cash to employees
who vacate spots and then reduce the lease cost
by the number of vacated stalls. Instead of paying
$150 for a spot ($200 for the lease minus the $50
charge to employees), the employer pays the
vacating employee the $150. The only additional
cost is the payroll taxes on the $150 income.
In many instances, employers will incur a cost
due to the cash out offer, particularly if the com-
pany cannot immediately reduce the amount it
pays for parking. Moreover, payroll taxes will
increase with the program, since the employer
pays payroll taxes on cash provided to employ-
ees. If a firm offers all employees a parking sub-
sidy or its cash equivalent, it will also end up
paying commuters who are already ridesharing or
taking transit (i.e., commuters who are not relin-
quishing a parking spot). In most cases, this will
be a small percentage of total employees; 95 per-
cent of employees who receive free parking at
work drive to work. Still, the company should be
aware of these costs.
It is important to note that additional costs may
be more than offset by other significant cost sav-
ings. Employers interviewed for case studies con-
sistently remarked that the cash out helps to
recruit and retain employees: "Employees are
grateful and thankful and more motivated. So
that's a plus for the company." (Shoup, 1997a, b)
By equalizing benefits, companies provide a
more equitable compensation package for all
employees, which may provide them a competi-
tive edge in a tight labor market. In addition, for
employees who personally support environmental
goals, such benefits may make the company more
attractive than one that simply offers free parking
and does not address other commute modes.
Together, these features may help to reduce
recruitment and retention costs for the company.
Question: If I implement a par king cash out
benefit, am I required to offer the full value of
the parking to my employees as taxable income?
An employer may offer to cash out a parking
space in any amount. The tax code says nothing
about the value of a cash out offer. A firm may
"value" a parking space at any amount.
An employer might value the cash out offer
slightly below the cost of paying for a parking
space to cover the cost of payroll taxes. For
example, if the employer pays $150 per month
per employee parking space, then the employer
might offer the employee approximately $135
instead of $150 in taxable income in lieu of the
parking space. The employer's contribution to
Social Security and Medicare would approximate
$11 on the $135 cash, for a total cost of $146. By
reducing the offer to slightly below the cost of
the space, the employer does not incur costs over
the original cost of the space. The employer
reports the $135 expense as salary to the employ-
ee, and both pay their share of federal taxes.
On the other hand, a company might cash out a
space at above market rates, for several reasons:
to increase employee response in order to
increase customer parking, to avoid the need for
expensive or time-consuming new construction,
and/or to level the parking/non-parking playing
field by offsetting the tax bite on the cash out
cash. At least one firm in California implemented
cash out at substantially above market rates.6
6 The firm offered a parking subsidy of $100 per
month or $150 in cash. (Shoup, 1997a).
10
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CCLI: Parking Cash Out
Question; If I currently give my employees tran-
sit passes tax free, will starting a parking cash
out program affect the tax free status of current
transit passes?
No. Changes in tax code resulting from the
Transportation Equity Act for the 21st Century
(TEA-21) allow employers to offer any combina-
tion of parking, transit, or vanpool benefits (up to
the specified limits), either in addition to present
compensation or in lieu of compensation, tax
free. Section 132(f)(4) of the Internal Revenue
Code now says:
No amount shall be included in the gross
income of an employee solely because the
employee may choose between any qualified
transportation fringe and compensation which
would otherwise be includable in gross income
of such employee.
Question: Does my entire company (or organi-
zation or agency) need to participate? What if
we have multiple work sites?
The entire organization does not need to partici-
pate in a parking cash out program. It is up to your
organization to decide what works best for you. A
company may decide to implement a parking cash
out program at only certain work sites, if desired.
Sites with limited parking or expensive parking
might be most interested in the cash out option.
Other organizations may feel that it is important to
implement one benefit package for employees
regardless of where they work. It is up to the indi-
vidual organization to decide what works best
Question: If I offer parking cash out, what hap-
pens if an employee takes the cash Instead of the
parking, but continues to drive to work, parking
elsewhere?
From a tax perspective, this situation creates no
problem. The cash in lieu of parking does not
depend, for tax purposes, on a particular travel
mode. Some employers, however, institute parking
cash out explicitly in order to reduce driving to
work, and may wish to discourage employees from
taking the cash incentive and continuing to drive.
In areas where parking cash out works best at
reducing driving, such as areas where parking is
costly, mere is unlikely to be free parking near the
work site that the employee can use instead of the
employer-provided parking. In other cases, employ-
ers offer parking cash out to increase employee
choice and/or to reduce the need for parking on-
site. An employee who voluntarily begins using
more distant parking may both save money and
help implement the employer's objectives.
Question: I don't currently provide free or sub-
sidized employee parking. Does parking cash
out help me?
The goal of parking cash out is to eliminate the
unfair subsidy for driving to work, and to encour-
age alternatives to driving alone. Since you do
not currently subsidize parking, this is not an
issue for you. Recent changes in tax law regard-
ing commuter benefits may provide you with
other options that may be beneficial for your
employees. If you are not already doing so, you
may consider a program to allow employees to
pay for transit, vanpools, or parking through a
pre-tax payroll deduction. You could also imple-
ment a program to directly provide employees
with transit or vanpool benefits or taxable cash
incentives for earpooling, bicycling, or walking
to work.
Question: Do any state or local governments
offer any incentives for doing this?
Yes. The State of Maryland offers a 50% tax
credit up to a $30 tax credit per employee per
month for costs associated with providing
employees a cash-in-lieu-of-parking program.
Delaware, Connecticut, Oregon, and New Jersey
also provide tax credits to eligible companies that
implement commuter transportation benefit plans,
which could include parking cash out. Each state
tax credit is different, so employers are encour-
aged to inquire about the requirements of tax
credit programs that may apply to them.
11
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CCLf: Parking Cash Out
(EMPLOYER CASI STUDY
Because of the state's parking cash out legisla-
tion, California employers have been at the fore-
front of implementing this benefit. Experience
with parking cash out has been limited, however,
for a number of reasons. Most importantly, tax
laws prohibited employers from offering cash in
lieu of tax-free parking prior to 1998. Even now,
tax law still favors parking since cash income
provided to employees for commuting is taxable
while parking is tax-free (up to $175 per month).
As a result of this aspect of tax law, many organi-
zations have implemented variations on the cash
out concept. For example, since cash income is
taxable, many companies have found that it is
beneficial to provide transit/vanpool benefits,
which are a tax-deductible fringe benefit for the
employer, rather than cash. Other firms have
implemented "commuter allowance" programs or
financial incentives for alternatives to driving that
provide more equal benefits for all commute
options. When considered broadly, parking cash
out has been put into effect in many ways in vari-
ous parts of the country.
The examples listed below show some of the
many ways in which organizations can implement
cash out.
Sellevae, Washington - CH2MHUI
Upon moving into new offices in the Seattle sub-
urb of Bellevue, WA, the 430 employees of the
engineering firm CH2M Hill were offered a new
deal: $40 per month if they walked, bicycled, car-
pooled or took transit to work; or free parking if
they drove alone. The firm's drive-alone rate
promptly fell from 89 percent to 54 percent,
while the percent carpooling increased from 9 to
12 percent. The percent taking transit soared from
1 to 17 percent, and the percentage biking or
walking rose an equal amount from 1 to 17 per-
cent. With single occupant driving down by 39
percent, the firm's parking scarcity evaporated.7
Los Angeles, California - Sheppard, Mullin,
Richter and Hampton
Sheppard, Mullin, Richter and Hampton is a law
firm in downtown Los Angeles. In 1990, the firm
paid $145 per space per month to rent parking
spaces for its employees; it offered free parking to
attorneys, a parking subsidy of $90 per month to
administrative employees with less than three
years of service, and a parking subsidy of $120 per
month to administrative employees with more than
three years of service. The firm also offered
ridesharing benefits, including guaranteed ride
home, in-house carpool/vanpool matchlists, on-site
bus pass sales, and promotional campaigns.
In 1993-94, the firm changed its commute policy
and offered all employees either a parking subsidy
of $100 per month or a cash transportation
allowance of $150 per month (The company paid
$165 a month to rent parking and charged employ-
ees $65 a month). Except for minor changes, other
incentives remained the same. As a result, the firm
went above and beyond the standard for cash out
by actually offering a larger commuter benefit to
employees that chose not to drive to work.
Following the change allowing employees the
option to take cash in lieu of parking subsidies,
the solo drive share fell from 75 to 53 percent,
the carpool share rose from 10 to 23 percent, and
the transit share rose from 15 to 24 percent. The
shift from solo driving to ridesharing and transit
reduced the number of vehicle trips and VMT for
commuting to work by 24 percent.3
1 Example from: Victoria Transport Policy Institute.
TDM Encyclopedia: Employee Financial Incentives.
Available at: http://www.vtpi.org/tdm/tdm8.htm. Also,
conversation with employee benefits administrator,
CH2M Hill, February 2001.
8 Example from: Shoup, Donald C. 1997b. Evaluating
the Effects of Parking Cash Out: Eight Case Studies,
Sacramento: California Environmental Protection
Agency, 1997, 240 pp. and conversation with Donald
Shoup, January 2001.
12
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CCLI: Parking Cash Out
Eden Prairie, Minnesota - SuperValu
SuperValu, a national grocery store chain with
headquarters in the rapidly growing suburb of
Eden Prairie, MN, recently put in place a unique
financial incentive to encourage alternatives to
driving alone. The company offers employees
that forego a parking space a $3/day voucher that
can be used at the building's cafeteria or at the
firm's grocery stores. In addition to the financial
incentive, SuperValu provided ridematching serv-
ices on-site and assisted in designing new van-
pool routes created by the local bus service
provider.
SuperValu, like other suburban employers, pro-
vides free parking for employees, and there is
minimal bus service available. Several market
conditions motivated SuperValu to take leader-
ship on commuting challenges facing suburban
employers. First, a growing workforce created the
need for additional parking spaces. Second, sub-
stantially increased congestion was projected
given several major road construction projects
nearby. Finally the firm hoped to persuade the
city to install a traffic signal at the entry to its
headquarters and a high-occupancy vehicle
(HOV) by-pass at the entrance ramp to 1-494,
a major freeway serving commuters.
A win-win deal was struck in which the city
agreed to install the hoped for road infrastructure
in exchange for SuperValu's commitment to an
aggressive travel demand management (TDM)
plan.
Only 45 of the company's 650 employees used an
alternative to driving alone prior to the incentive.
The commuter incentive led to 40 employees giv-
ing up a parking space and carpooling to work,
an 88% increase in non-SOV mode share.*
Minneapolis, Minnesota - University
of St. Thomas
In the fall of 1999, the University of St. Thomas
introduced a parking cash out option for staff
working at its Minneapolis campus. The school
hoped to save money on parking expenditures, to
communicate to staff the parking costs associated
with downtown employment, and to promote the
use of alternatives to driving alone.
Prior to the 1999/2000 school year, parking was
heavily subsidized: Staff were only required to pay
$12.50 per month out the full cost of $150 per
month it cost the university to lease each parking
space (i.e., the University subsidized $137.50 per
month). The school did not offer any comparable
incentive for other commuting modes.
In 1999, the school began offering staff a $100
financial incentive if they would forego a parking
space. In addition, the school made it possible for
staff to purchase bus passes on a pre-tax basis.
They also allowed staff to park at their St. Paul
campus (not in a downtown location) for a fee of
$12.50 per month and to take a free shuttle to the
Minneapolis campus.
Since a bus pass could be purchased on a pre-tax
basis at a net cost of approximately $46/month,
staff choosing the commuter incentive received a
significant cash reward: $54 in additional taxable
income.
9 Example from: Van Hattum, David, Cami Zimmer, and
Patty Carlson. "Implementation and Analysis of Cashing
out Employer Paid Parking by Employers in the
Minneapolis-St. Paul Metropolitan Area." Submitted to the
MPCA and the U.S. EPA. June 30, 2000.
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CCLI: Parking Cash Out
The "commuter incentive" was structured to meet
three criteria:
To reward those commuters who already used
an alternative mode;
To minimize additional costs to the
University; and
To maximize the incentive for the "drive
alones" to choose an alternative commuting
mode.
To insure fairness, St. Thomas offered the incen-
tive to all employees at the Minneapolis campus,
not just new bus riders. One issue was explaining
the incentive to employees at the St. Paul Campus
who were not eligible for the incentive. St.
Thomas conveyed this in their Parking/ Commuter
Master Plan which is designed to "recognize the
cost of parking in a downtown environment and to
provide an incentive for faculty and staff to make
alternative commuting arrangements."
In November 1999, the University of St. Thomas
received a regional Commuter Choice award for
this innovative program. While many employers
have been unwilling to provide differential trans-
portation benefits between work locations, St.
Thomas approached their parking supply crisis as
an opportunity to educate employees about the
real costs of parking in a downtown environment.
Of the 238 employees eligible for the incentive,
48 (23 percent) elected to give up their parking
space and use an alternative to driving alone to
work. Prior to the incentive only 31 (13 percent)
used an alternative to driving alone. Of these 48
choosing the incentive, 84 percent rode the bus
from home or the park-n-ride (i.e., they parked at
the St. Paul campus and took the shuttle), eight
percent bike or walked, and eight percent car-
pooled.10
Bethesda, Maryland Culvert Group
The Calvert Group, a socially-responsible invest-
ment fund located in suburban Washington, DC,
offers a commuter benefits program to cover
every potential mode, including walking and
bicycling. Calvert subsidizes employees who
drive at a rate of $75/month, but persons who
ride transit are reimbursed the full value of the
transit costs. Bicyclists can receive a one-time
bicycle reimbursement of $350, while walkers
can apply for a $120 subsidy to cover the cost of
shoes.
Although not a true parking cash out program,
Calvert has successfully spread commuting bene-
fits through a wide range of choices, and found
ways to discourage solo driving. Employee
turnover dropped from 25 to 12 percent after
implementation of the program, and Calvert man-
agement sees the plan as integral to its recruit-
ment and morale. The company has gained
national attention for the quality of its employee
programs in national publications such as
Business Week and Working Mothers Magazine."
10 Example from: Van Hattum, David, Cami Zimmer,
and Patty Carlson. "Implementation and Analysis of
Cashing out Employer Paid Parking by Employers in the
Minneapolis-St. Paul Metropolitan Area." Submitted to
the MPCA and the U.S. EPA. June 30,2000.
11 Example from:
http://www.commuterchoice.com/employers/success.hto
14
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CCLL: Parking Cash Out
Public Sector Organizations
A survey of public entities suggests that they, too,
have enjoyed substantial success with parking
cash out.12
Los Angeles County, California. Los Angeles
County's large and effective employee trip reduc-
tion program features a form of parking cash out.
LA County owns its own parking facilities. Prior
to 1990, county employees parked for free.
Parking now costs $120 per month for single-
occupancy vehicles. The county offers $70 per
month cash to employees who commute via car-
pool, vanpool, public transit or by walking or
bicycling. LA County has achieved average vehi-
cle occupancy rates of 1.85 in the Hall of
Administration, surpassing mandated regional
goals and earning them an award from the South
Coast Air Quality Management District.
City of Pleasanton, California'. Suburban
Pleasanton initiated a daily form of parking cash
out in January 1994. The City offers $1.50 per
day to employees who use a commute alternative
instead of driving to work alone. All city employ-
ees are eligible to participate with no minimum
days required. The program has resulted in annu-
al savings of 20,625 trips, which translates into
12,375 gallons of fuel and 123 tons of CO2. In
1993, the year before the program was imple-
mented, only 28 employees were commuting to
work using alternative modes. Average participa-
tion in 1994 was 55 employees per month and
grew to 66 participants in 1995.
Sacramento Chamber of Commerce, California:
The Sacramento Chamber of Commerce offered
cash options to all 85 employees with free park-
ing. Within the first year, 22 percent of employ-
ees opted for the cash option.
Louisville and Jefferson County Metropolitan
Sewer District, Kentucky: Upon offering a park-
ing cash out program for district employees, 21
percent of employees switched to non-single
occupancy vehicle commute. The district was
able to eliminate leased parking, decreasing over-
head costs by over $125,000 a year.
EKVJCES,THAT SUPPORT
PLEMENTATION *
Guaranteed Rides Home
One of the barriers that prevents some employees
from taking transit, ridesharing, walking or bicy-
cling to work is the fear that they will not be able
to get home quickly in the event of an personal
emergency, such as picking up a sick child from
school, or working unscheduled overtime.
Guaranteed Ride Home (GRH) programs provide
commuters who regularly carpool, vanpool, bike,
walk or take transit to work with a reliable ride
home when an unexpected emergency arises.
GRH programs are designed to rescue commuters
who are worried about how they will get home
when an emergency arises. Knowing there is a
guaranteed ride home gives many people the
security to take commuting options like transit
and carpools with confidence.
GRH programs may be established by individual
employers; usually the employer will pay for a
taxi home in case an employee who takes transit
or a vanpool needs to go home at a time when
transit services are not available or without the
vanpool. Some MPOs and local governments
have also established regional or county-wide
GRH programs for employees that register for the
program. GRH programs tend to be low-cost
ways to encourage transit use, especially if a
company only "fills in" coverage for areas not
covered under a broader regional program. For
example, a regional transit agency may provide a
guaranteed ride home for monthly passholders, so
a company would have to provide GRH only for
carpoolers. More detailed information about GRH
is available in a separate briefing paper,
Guaranteed Ride Home Programs.
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CCLI: Parking Cash Out
fesOCIATIONS AND CONTACTS ''
This section includes information on experts that
employers might wish to utilize for expertise in
understanding, promoting, or providing technical
information on parking cash out. Individual
employers are directed to contact EPA and their
local MPOs, transit agencies, TMAs/TMOs, or
other groups that may be able to assist in devel-
oping a cash out program.
Regional Organization and Transit Agencies
Many regional and local governments provide
services to help employers implement parking
cash out programs. Metropolitan planning organi-
zations (MPOs), city and county transportation
agencies, transportation management associations
(TMAs), and transportation management organi-
zations (TMOs) throughout the U.S. provide
assistance to employers in starting and maintain-
ing transportation demand management programs
like parking cash out. They often provide infor-
mation to employers about options to reduce driv-
ing to work, implementation issues, and local
programs that support employer initiatives. The
appropriate MPO can be located through the
Association for Metropolitan Planning
Organizations (202-457-0710 x!9); a list of
MPOs with web pages is available at
w\vw.ampo.org/mposnet_old.html
State and Local Governments
A few state and local governments have also
developed programs that either promote or man-
date certain employers implementing parking
cash out. They may provide valuable information
on implementation issues and marketing
approaches. These include:
State of California, Parking Cash Out
Legislation
Contact: Jeff Weir, California Air
Resources Board, 916-445-0098
King County Metro, Commute Trip
Reduction (CTR) law
Contact: Bill Roach, 206-684-1620
City of Santa Monica, Mandatory Parking
Cash Out Program
Contact: Jackie Brooks, 310-458-8956
Downtown Minneapolis TMO
Contact: David Van Hattum, 612-370-3987
Tri-State Transportation Campaign
Contact: Adelma Lilliston, 212-268-7474
Keep Middlesex Moving, Campaign to
promote Parking Cash out
Contact: Roberta Karpinecz, 732-745-4490
Information on Tax Considerations
The Internal Revenue Code that governs employ-
er-provided commuter benefits is found at 26
USC Section 132(f), and is available on the web
at: www.irs.gov or
tmi.cob.fsu.edu/act/f_benefit.htm
For more information relating to qualified trans-
portation fringes in Section 132(f), visit the
Internal Revenue Service (IRS) website at
www.irs.gov. This site contains useful informa-
tion for employers regarding the tax treatment of
fringe benefits. Some publications available from
the IRS that may be useful include:
Publication 15a, Employer's Supplemental Tax
Guide - Section 6. Employee Fringe Benefits
www.ks.gov/prod/formsjubs/pubs/pl5a08.htm
Publication 15b, Employer's Tax Guide to
Fringe Benefits - Transportation (Commuting)
Benefits
www.irs.gov/prod/formsj3ubs/pubs/pl5b0215.htrn
Final Regulation Concerning Qualified
Transportation Fringe Benefits (Issued
January 11, 2001)
frwebgate.access.gpo.gov/cgi-
bin/getdoc.cgi?dbname=2001_register&docid
=01-294-filed.pdf
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CCLI: Parking Cash Out
For more information relating to qualified trans-
portation fringes in Section 132(f), send a written
request to:
Freedom of Information Reading Room
PO Box 795
Ben Franklin Station
Washington DC, 20044
Or contact Patricia Holtzworth at the IRS
at 202-622-6040.
Commuter Choice Leadership Initiative
For more information on the Commuter Choice
Leadership Initiative, contact the Commuter
Choice Hotline at 888-856-3131, or see
www.commuterchoice.gov
MISSIONS AND TRANSPORTATION
JENEFITS
Parking cash out has great potential to reduce
vehicle travel and emissions of air pollutants and
greenhouse gases. Case studies of firms that have
implemented cash out programs show that firms
cashing out take the equivalent of 1 out of 8 of
their employees' commuting cars off the road.
Benefits at Individual Employment Sites
Monitored cash out programs show substantial
reductions in single occupancy commuting. These
reductions, in turn, reduce automobile emissions,
congestion, and parking problems. An analysis of
eight California firms implementing cash out by
Shoup (1997 a, b) provides the best data on the
effects of parking cash out:
Significant decrease in solo driving
As shown in the accompanying chart:
Solo driving dropped 17 percent: from 76 to
63 percent of employees
Carpooling increased by 64 percent: from 14
to 23 percent of employees
Commuter Mode Shares: Before and After Cashing Out
76%
0 Before Cashing Out
After Cashing Out
Solo Driver Carpool Transit Walk
Commuter Mode Choice
Q.8%0.9%
^Sl^n^m,
Bicycle
Transit use rose by 50 percent: from 6 to 9
percent of employees
Combined bicycling and walking rose one-
third: from 3 to 4 percent of employees
Significant decrease in miles driven
An average 2.6 fewer miles per employee per
work day, among all employees offered cash
out (not just employees accepting the offer).
This resulted in an average 12 percent fewer
vehicle miles traveled (VMT) per year per
employee. This reduction is equivalent to
removing one of every eight cars driven to
work.
Emission reductions per employee per year
tracked VMT reductions: a 12 percent reduction
in vehicle emissions from commutes.14
The results from these case studies confirm esti-
mates from previous research based on parking
pricing at workplaces. A summary of seven stud-
ies comparing either: (1) commuting behavior
before
13 VMT determined by multiplying the number of vehi-
cle trips to work by the average round-trip distance.
14 Calculated by multiplying reductions in vehicle trips
and VMT by emissions created per trip.
17
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CCLI: Parking Cash Out
and after employer-paid parking was eliminated;
or (2) the commuting behavior of matched sam-
ples of commuters with and without employer-
paid parking, found that when commuters paid
for parking, they drove an average of 53 cars to
work per 100 employees. When commuters
parked free, they drove an average of 72 cars per
100 employees, suggesting a likely 26 percent
drop when free parking begins to have a price
attached. (Shoup, 1995)
Although parking cash out aims to "level the
playing field" by eliminating the subsidy for solo
drivers, it does not achieve this goal entirely:
"cashing out reduces but does not eliminate the
tax subsidy for solo driving because commuters
must pay income taxes on the in-lieu cash. When
commuters are offered the cash option, income
taxation reduces the after-tax opportunity cost of
taking a free parking space." (Shoup, 1997a)
However, we can expect to see impacts rise over
time. Shoup (1997a) again explains:
Cashing out is a new practice, and few firms
have sufficient years of experience to provide
evidence of longer-term effects. Because
seven of the eight case studies examined
commuters' responses after only one or two
years of cashing out, the longer-term reduc-
tions in vehicle use may be underestimated.
For one firm, records are available for three
years after the cash out program began, how-
ever, and the solo-driver share fell in each of
the following three years.
The firms' representatives offered two practi-
cal explanations for this longer-term decline
in solo driving. First, new employees who
have not already made their commuting
choices are more willing to try ridesharing if
they can take cash in lieu of free parking.
Second, when cashing out is available, word
of mouth spreads the idea among fellow
workers. Those who have taken the cash
describe the deal to others, and more begin to
try it.
Substantial Regional and National Potential
Given that most employers provide free parking
to their employees, there is large potential for
parking cash out to produce significant regional
and national reductions in vehicle travel, air pol-
lution, and greenhouse gases. The extent of these
impacts will depend on the number of employers
that actually adopt cash out programs. Nationally,
parking cash out could reduce VMT by between
5 billion miles and 24.9 billion vehicle miles by
2007, depending on adoption rates - a 0.8 to 4.2
percent reduction in commute VMT. Since most
reductions in travel; are expected in urban areas,
the percent reduction in commute VMT in large
metropolitan areas would likely be larger, with
commensurate congestion benefits." Shoup
(1997a) estimates that full national parking cash
out "could reduce the equivalent of all vehicle
travel and vehicle emissions for commuting by
800,000 households."
Studies have shown that increasing the price of
parking is one of the most effective ways to
reduce driving, parking cash out can also be
effective since it creates an "opportunity cost" of
driving to work - the foregone income - without
actually increasing the price of parking.
SFERENCES AND PUBLICATIONS
j
Commuter Transportation Services, Inc. No date.
"Parking Management as a Transportation
Demand Management Tool."
Husick, Tanya. 1992. The Effects of Parking
Pricing and a Transportation Allowance on
Commute Behavior and Employee Attitudes.
Commuter Transportation Services. Los Angeles,
December 15.
15 Memorandum from Grant, Gottsman, and Wheeler-
Smith of Hagler Bailly to Catherine Preston of EPA,
March 9,1999.
18
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CCU: Parking Cash Out
International Council for Local Environmental
Initiatives (ICLEI). Local government guide to
parking ca$h out. Available from:
www.iclei.org/us/cashout/
King County Metro, Municipality of
Metropolitan Seattle, Service Development
Division. 1993. "Managing Employee Parking in
a Changing Market." Available from:
www.bts.gov/smart/cat/sdd.html
King County Metro, "Parking Cash out" fact
sheet. transit.metrokc.gov/programs_info/employ-
er/parkcash.pdf
K.T. Analytics, Inc. 1995. Parking Management
Strategies: A Handbook For Implementation,
Regional Transportation Authority (Chicago).
Kyle Maetani, Michael Kodama, Richard
Willson, William Francis & Associates. 1996.
"Using Demand-Based Parking Strategies to
Meet Community Goals", Local Government
Parking Management Handbook, Mobile Source
Air Pollution Reduction Committee (MSRC).
KPMG Peat Marwick LLP. 1995. Commuter
Choice Initiative, Weighted Survey Results,
Employer-Provided Transportation Benefits.
Prepared for U.S. DOT and U.S. EPA, Commuter
Choice Initiative. November 3.
Shoup, Donald C. 1999. "In Lieu of Required
Parking," Journal of Planning Education and
Research, Vol. 18 (Summer), No. 4, 307-320.
Shoup, Donald C. 1998. "Congress Okays Cash
out," Access, No. 13, pp.2-8.
Shoup, Donald C. 1997a. "Evaluating the Effects
of Cashing Out Employer-Paid Parking: Eight
Case Studies," Transport Policy, Vol. 4, No. 4,
October 1997, pp. 201-216. [An article based on
the report of the same name, below]
Shoup, Donald C. 1997b. Evaluating the Effects
of Parking Cash out: Eight Case Studies,
Sacramento: California Environmental Protection
Agency, 1997, 240 pp.
Shoup, Donald C. 1997c. "The High Cost of Free
Parking," Journal of Planning Education and
Research, Vol. 17 (Fall), No. 1, 3-20.
Shoup, Donald C. 1995. An opportunity to reduce
minimum parking requirements. Journal of the
American Planning Association, Vol. 61, No. 1,
14-28.
Shoup, Donald C. 1994. "Cashing Out Employer-
Paid Parking: A Precedent for Congestion
Pricing?" in Curbing Gridlock, Peak-Period Fees
to Relieve Traffic Congestion, Volume 2,
Washington, D.C.: National Academy Press, pp.
152-200.
Shoup, Donald C. 1993. "Cashing Out Employer-
Paid Parking" Access, No. 2, pp. 3-9. Reprinted
in TDM Review, October 1993, pp. 20-24.
Shoup, Donald C. 1992. Cashing Out Employer-
Paid Parking, Washington, D.C.: U.S.
Department of Transportation, 156pp.
Shoup, Donald C. and Mary Jane Breinholt.
1997. "Employer-Paid Parking: A Nationwide
Survey of Employers' Parking Subsidy Policies."
The Full Costs and Benefits of Transportation:
Contributions to Theory, Method and
Measurement. Eds. David L. Greene, Donald W.
Jones, and Mark A. Delucchi. Berlin: Springer
Press.
Shoup, Donald C. and Richard W. Willson.
1992a. "Solving the Parking Problem,"
Transportation Planning, Vol. XIX, No. 2,
Summer, pp. 9-13.
Shoup, Donald C. and Richard W. Willson.
1992b. "Employer-Paid Parking: the Problem and
Proposed Solutions," Transportation Quarterly,
April, pp. 169-192.
Shoup, Donald C. and Richard W. Willson.
1992c. "Commuting, Congestion and Pollution:
The Employer-Paid Parking Connection," pre-
pared for the Federal Highway Administration
Congestion Pricing Symposium, June.
19
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CCLI: Parking Cash Out
U.S. Department of Transportation, Federal
Transit Administration. No date. "Parking Cash
out." TDM Status. Prepared by K.T. Analytics.
www.fta.dot.gov/library/planning/tdmstatus/FTA-
CASH3.HTM
U.S. Environmental Protection Agency. Employer
Provided Benefits. Available at:
http://www.epa.gov/oms/transp/comchoic/ccmea-
sur.htm
U.S. Environmental Protection Agency. 1998.
"Protocol Development Guidance: Using
Emission Reductions from Commuter Choice
Programs to Meet Clean Air Act Requirements."
June.
Van Hattum, David, Cami Zimmer, and Patty
Carlson. 2000. "Implementation and Analysis of
Cashing out Employer Paid Parking by
Employers in the Minneapolis-St. Paul
Metropolitan Area." Submitted to the MPCA and
the U.S. EPA. June 30.
Victoria Transport Policy Institute. TDM
Encyclopedia: Employee Financial Incentives.
Available at: www.vtpi.org/tdm/tdm8.htm
20
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ORDERING
This publication may be ordered from the National Service Center for Environmental Publications (NSCEP) at: |
U.S. Environmental Protection Agency
NSCEP
P.O. Box42419
Cincinnati, OH 45242-2419
Phone: (800)490-9198, Fax: (513)489-8695
FOR MORE INFORMATION
This guidance document and other information about the Commuter Choice Leadership Initiative are available)
at www.commuterchoice.gov or by calling the Commuter Choice voicemail request line at (888) 856-3131.
ACKNOWLEDGEMENTS
This document was prepared for EPA's Office of Transportation and Air Quality under contract 68-W6-0029, by|
Michael Grant and Liisa Ecola of ICF Consulting, 9300 Lee Highway, Fairfax, VA 22031, (703) 934-3000.
We would like to thank the various reviewers who provided comments and feedback on the document.
Recycled/Recyclable. Printed with Vegetable Oil Based Inks on Recycled Paper (Minimum 50% Postconsumer) Process Chlorine Free
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