Proceedings of the Commuter Parking Symposium
Click HERE for graphic. - PROCEEDINGS - COMMUTER PARKING SYMPOSIUM December 6-7, 1990 Battelle Conference Center Seattle, Washington Sponsored by The Association for Commuter Transportation & the Municipality of Metropolitan Seattle Supported by the Urban Mass Transportation Administration and Federal Highway Administration ACKNOWLEDGEMENTS On behalf of the Association for Commuter Transportation (ACT) and the Municipality of Metropolitan Seattle (Metro), I am pleased to submit this manual as a record of the proceedings of the National Commuter Parking Symposium. This symposium was held at the Battelle Conference Center in Seattle, Washington on December 6-7, 1990. The symposium was made possible by the receipt of a $40,000 grant from the Urban Mass Transportation Administration (UMTA) and a $9,500 grant from the Federal Highway Administration (FHWA). I would like to extend special thanks to Rob Martin and Doug Birnie of UMTA and Wayne Berman of FHWA for assisting us in obtaining these grants. Laurie Elder and Eileen Kadesh of Metro's Market Development section were the primary persons responsible for organizing the symposium. They were involved in planning the agenda and small group process, working with white paper authors and reviewers, dealing with requests for travel assistance, developing the conference packets and ensuring that everything went smoothly. I would also like to express my appreciation to the following individuals: White Paper Authors Kiran Bhatt, Don Pickrell, Dick Pratt, Donald Shoup and Rick Willson, Peter Valk and Cy Ulberg Participants in the Panel Discussion Bruce Freeland, Judd Kirk and Peter Valk Evening Speakers John Bencich, Al Huerby, Robert McGarry and Jim Sims Also, I would like to recognize the efforts of those participants who reviewed and critiqued the white papers, although there were too many individuals to list here. Finally, I would like to thank all of the participants who brought energy and diverse perspectives to make the symposium informative, thought provoking and, I hope, useful. It is my hope that the efforts of all those who made this symposium possible will draw attention to parking policy as the one demand management hat supersedes all others in its potential to change travel behavior. William T. Roach, Chair ACT Public Policy Council TABLE OF CONTENTS PROCEEDINGS: COMMUTER PARKING SYMPOSIUM Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . i Astounding Facts . . . . . . . . . . . . . . . . . . . . . . . . . v Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . .vi I PANEL DISCUSSION Panel Discussion Participants . . . . . . . . . . . . . . . I-1 Case Study for Panel Discussion . . . . . . . . . . . . . . I-2 Questions for Panel . . . . . . . . . . . . . . . . . . . . I-4 Highlights of Panel Discussion. . . . . . . . . . . . . . . I-5 II PRESENTATIONS ON INNOVATIVE PARKING PROGRAMS Swedish Transportation Plan . . . . . . . . . . . . . . . .II-1 Proposed Parking Tax for Montgomery County, Maryland. . . .II-4 Proposal to Levy Parking Charges in the San Francisco Bay Area . . . . . . . . . . . . . . . .II-6 Effect of Regulation XV on Private Sector Attitudes Regarding Parking Management . . . . . . . . . . . . . . . . . .II-8 III WHITE PAPERS AND SMALL GROUP SUMMARIES Federal Policy Federal Policy Group Summary Attachment 1 -White Paper: Federal Tax Policy and Employer-Subsidized Parking Elasticity Elasticity Group Summary Attachment 2 - White Paper: Employer-Paid Parking: The Influence of Parking Prices on Travel Demand Local Tax Local Tax Group Summary Attachment 3 - White Paper: Parking Tax Discussion Paper Leasing Group Leasing Group Summary Attachment 4 -White Paper: Leasing Practices & Parking 1 of 2 Zoning Group Zoning Group Summary Attachment 5 - White Paper: Local Zoning Codes & Parking Supply Employer Incentives Employer Incentives Group Summary Attachment 6 - White Paper: Employer Parking Pricing & Incentive Programs that Change Modal Split IV APPENDIX 1. Registration List. . . . . . . . . . . . . . . . . . . . 1 2. Agenda . . . . . . . . . . . . . . . . . . . . . . . . . 9 3. Small Group Break-Out Plan . . . . . . . . . . . . . . .10 4. Parking Program Examples Submitted by Symposium Participants: Example 1: Parking Permit Program (Portland, Ore..). . .11 Example 2: Parking Freeze (Boston, Mass.). . . . . . . .15 Example 3: Park and Play (Orlando, Fl.). . . . . . . . .17 Example 4: CH2M Hill Employee Rideshare Program (Bellevue, Wash) . . . . . . . . . . .18 Example 5: City of Bellevue Rideshare Parking Management Program (Bellevue, Wash.) . . . . .20 5. Other Information Submitted by Participants. . . . . . .22 2 of 2 EXECUTIVE SUMMARY Introduction Parking policy is a critical element in transportation demand management. Since parking is essential at some point for virtually all automobile trips, the price and availability of parking have a strong influence on whether people choose to make their trips by automobile. During the past few years, numerous conferences have been held on issues relating to traffic congestion, ridesharing, and demand management. For the first time, on December 6-7, 1990, a group of experts was assembled in Seattle, Washington to focus on the topic of parking policy reform. Professionals in a variety of disciplines--consultants, employers, developers, public sector managers, service providers, and academics--were invited to identify actions which could affect employer-provided parking. The primary theme of the Commuter Parking Symposium, co-sponsored by the Association for Commuter Transportation and the Municipality of Metropolitan Seattle, was how to "level the playing field " to equalize the subsidy historically offered drivers of single occupant vehicles. The Commuter Parking Symposium had four goals: 1) To look at the issues of parking supply, demand, and pricing in a new way from a new perspective 2) To understand the development process and its relationship to parking from a developer, employer, and local jurisdiction point of view 3) To develop new proposals and ideas for further research, demonstration projects, and policy initiatives, and 4) To create a network of advocates and professionals committed to sharing information and ideas in the future. Perhaps the most significant accomplishment of the symposium was that it represented a first attempt to document and exchange "state-of-the-art" information on parking policy on a nationwide basis among a wide range of disciplines. White Papers To stimulate discussion and generation of ideas at the symposium, white papers were prepared on the following six aspects of parking policy: 1) implications of federal policies for the provision of employee parking. 2) Potential of local parking taxes to raise the cost of parking, generate revenue for transportation purposes, and discourage the provision of subsidized parking. 3) Analysis of parking supply and demand relationships and the influence of price on demand. 4) Developer leasing practices regarding parking. 5) Local jurisdiction zoning practices that influence parking supply. 6) Employer parking pricing and incentive programs that change mode split. A number of surprising facts about parking were drawn from these papers as well as challenges facing those working in the area of parking policy reform . These facts and challenges are listed on the following pages. One of the points discussed at the symposium is that many of the parking policy decisions being made are driven by misguided perceptions and are based more on myth than fact. For example, during an opening panel, a developer noted that the role of lenders is much less significant than commonly perceived. Lenders generally question developers about supply ratios only when there is a proposal to vary widely from normal standards. There is also a need for national organizations, such as ULI or ITE, to conduct new research on supply/demand ratios in a variety of settings (urban, suburban, etc.) Parking standards are currently based on outdated research, inadequate sample sizes, and "folk wisdom." Recommendations from the white papers dealt with seven general issue areas: 1) The need to amend the federal tax code and reclassify employer-provided parking as a fringe benefit. 2) Reducing parking requirements and supply (through establishment of maximums, lower minimums, and overall caps). 3) Travel allowances. 4) The need for research on supply/demand ratios. 5) Parking charges. 6) Local parking taxes. 7) Identifying separate costs for parking and building space in leases. Product Symposium participants were divided into small groups by area of interest to examine the preliminary recommendations generated by the white papers, refine them, and produce new ideas. Each small group's recommendations were then critiqued by groups consisting of individuals from the same sector, e.g. all the participants at the symposium who were developers. This critique enabled the small groups to obtain a "real-world" check on their ideas and identify the most workable recommendations to pursue. Finally, all attendees voted on the top ideas for policy initiatives, demonstration projects, and research needs. The following ideas received the highest rating by symposium participants. These ratings were based on potential for implementation or effectiveness in changing travel behavior. Policy initiatives 1) Amend the federal tax code so that the value of any commute benefit(including parking) that exceeds $60 is taxed (and any commute benefit under $60 is tax free.) 2) Amend the federal tax code to require that employers who offer an employee a parking subsidy must also offer that employee the option to take the market value of the parking subsidy as a taxable cash travel allowance in lieu of the parking subsidy. 3) Amend the tax code to reclassify employer-provided parking as a taxable fringe benefit. 4) Mandate a state level congestion relief program with TDM and parking elements. Demonstration Projects 1) Develop an assessment program which introduces a parking fee at individual sites based on the number of employees. The employer would be responsible for collecting the fee and investing it in transportation demand management programs. 2) The federal government should take the lead by adopting policies for federal employee parking that are a model for all employers. 3) Offer a reduced property tax for developments that take land out of active parking (parking bank) and convert that land to new services for employees. 4) Reduce parking requirements at redeveloping projects in suburban areas and place a lid on peripheral parking at adjacent sites. 5) Collect updated information on parking supply/demand ratios over a representative cross-section of metropolitan areas in a variety of settings (urban, suburban etc.). Research Needs 1) Evaluate/research the corporate decision-making process to determine what data is needed to convince CEOs to charge for parking and support HOV modes. 2) Research and document successful, benchmark employer TDM programs. 3) Document case studies of innovative parking programs, both proposed projects and those already underway. Evaluations of these programs, including collection of "before" and "after" mode-split data, should be prime candidates for funding. Next Steps The work started at the Commuter Parking Symposium will be carried on at several levels. ACT will be the primary organization lobbying congressional representatives for tax policy changes. The Ridesharing Committee of TRB will be asked to sponsor other national parking policy research and data collection. - iii - A national network of individuals interested in working toward parking policy reform is also being formed, consisting initially of symposium attendees who responded to a follow-up questionnaire. This group may try to sponsor commuter parking symposiums in other key areas of the country, such as southern California. Roundtable discussions among employers and developers will be explored, with the hope of identifying demonstration projects that are needed, obtaining organizational and funding support, and documenting results. Other actions initiated as a result of the symposium will be reported in forthcoming ACT newsletters. ASTOUNDING FACTS 1) Nine out of 10 American commuters who drive to work park free. 2) More than half of the office workers who drive to downtown Los Angeles receive subsidized parking (half of those park free). 3) Employer-paid parking increased the number of cars driven to work by 37% at five sites studied in California. 4) Employer-subsidized parking has a value of at least $ 1,000 per year tax-free. 5) The number of drive alone employees has been shown to decline by at least 20% when employers charge a market rate for parking. 6) Seven out of 11 best performing TDM programs evaluated by FHWA Included employee parking charges. 7) imposing an $8 per day parking charge can reduce demand from 2.45 spaces per 1,600 gross square feet of office space to 1.74. 8) A 1986 Urban Land Institute study found that parking spaces at most business parks were only 47% occupied even when the parks were well leased. 9) The federal tax policy considers parking a tax-free benefit, while any bus subsidy over $15 per month is taxable. 10) If the value of parking were included as a taxable employee benefit, it is estimated it would generate $5 billion in tax revenue. - v - CHALLENGES 1) Existing code parking requirements typically result in parking supply far in excess of demand. 2) The demands of lenders result in a supply of parking more generous than that dictated by local municipalities. 3) The practice of commingling parking and office space revenues is an impediment to building owners and tenants to negotiate a reduction in the amount of parking they lease. 4) Building managers have little incentive to reduce the number of parking spaces leased to employers once a development is built. 5) Parking operators have little incentive to reduce demand for parking. 6) Tenants and employees expect an immense supply of no- or low-cost parking in most work centers. 7) Employees consider parking a benefit. 8) The impact of a parking tax on mode shift will depend on the extent to which the tax is passed on to individual parkers. 9) No amount of government subsidy for high-occupancy vehicle modes will ever offset the inducement of employer-provided parking. 10) "Natural" market forces will not constrain parking supply in the suburbs for a long time. 11) The federal government is a direct provider of free parking on a large scale. 12) Market forces have begun to reshape the manner in which tenants perceive and need parking. - vi - PANEL DISCUSSION PANEL DISCUSSION OF CASE STUDY: REQUIRED PARKING CHARGES AT SUBURBAN DEVELOPMENTS Participants: Bruce Freeland, Planning Director,city of Bellevue, WA Judd Kirk, Attorney, currently Vice-President of Blackhawk/Pt. Blakely, Seattle, WA Peter Valk, President, Transportation Management Services, Pasadena, CA Moderator: William T. Roach, Supervisor, Market Development, Municipality of metropolitan Seattle I-1 CASE STUDY FOR PANEL DISCUSSION Required Parking Charges at Suburban Developments The following example of a transportation demand management (TDM)- based parking negotiation is based on a development currently proposed for a suburban community in King County. Requiring parking charges as a condition of approval for this development would set a precedent for the local jurisdiction and for non- urbanized King County. The Proposed Project Universal Development Corporation has proposed the following project: - 500,000 square foot speculative office development; three low-rise buildings, two parking structures, situate on a 10-acre wooded lot. - Construction will occur in three phases over approximately 36 months. Phasing will permit a rough, though variable balancing of on-site parking supply and demand. - Total of 1800 parking spaces in two parking garages proposed (3.87 stalls/1000 sq.ft.); additional surface parking for 40 vehicles proposed for visitor/convenience parking. - Parking ratios of 3.5-4.5 stalls/1000 sq. ft. normally are allowed by local code for developments of this type. However, because this development is proposed within a designated critical congestion area (see area description below), the local jurisdiction has indicated it will reduce the maximum parking ratio to 2.0/1000. The Project Area Universal Development's proposal is located in an area long noted for its congestion problems. The area is dominated by a major freeway corridor. A major transportation study was recently completed for the area. Over $80 million of roadway projects were recommended for construction over the next 15 years, as well as a variety of demand management actions. The area where Universal's proposal is located contains a substantial complex of shopping centers and retail stores. Over the past ten years many high-technology industries and office parks have been built along the freeway corridor here. One of the most significant off ice/business parks, located just over one mile from Universal's site, is currently undergoing additional development. This will add several thousand employees to the area. Other firms are also developing or expanding nearby, and it appears very likely that a transportation management association may soon form in the area. The area is relatively well served by transit. Although only one bus route serves roads adjacent to the site, a transit center is located nearby (about a quarter of a mile). This transit center offers direct service to several major activity centers and connections to many others. I-2 TDM Requirements and Negotiations The local Jurisdiction intends to require a transportation management plan (TMP) of Universal's proposed development, much as it would for similar developments. This TMP will include: - Information elements (High occupancy vehicle (HOV)information at the worksite, an employee transportation coordinator, and so on) - Incentive elements (HOV pass subsidies, guaranteed ride home program, and others) In addition, the TMP will establish a 40% non-drive alone rate for the development, to be attained within three years. This is higher than the normal performance goal required for a development of this type (which would be 30% over two years) due to the area's designation as a critical congestion area. The development will be permitted up to a 25% credit for flextime for commuters arriving/departing at the site outside of peak commuting times. Universal would very much like to construct parking at its originally proposed rate (3.@17/1000). The local Jurisdiction has indicated that it will be inclined to honor this request if Universal will institute parking charges at the garages. Additional elements of the parking negotiations include: - The local jurisdiction has proposed setting the monthly parking charge based on the average cost of a transit pass (currently $34/month). - Parking discounts would be established for carpools, vanpools, flextime commuters. I-3 QUESTIONS FOR PANEL 1) Do each of you recognize/accept a role/responsibility in addressing the problem of congestion (or maintaining mobility)? What is the city's obligation? the developer's obligation? the employer's obligation? 2) Under what circumstances in a suburban environment would instituting parking charges succeed as a TDM measure? 3) Assuming that aggressive TDM objectives are warranted in a given area, can you suggest improvements over the charge for parking approach? 4) From each of your perspectives, what role does parking play in making this a successful project? 5) Assuming limited opportunities to increase publicly financed transportation services in an area, does the fact that parking revenues may be generated by a project offer opportunities to increase the level of transportation services in the area? I-4 HIGHLIGHTS OF PANEL DISCUSSION 1) Need to establish motivation for developer/tenants to decrease parking supply by means of education and availability of alternatives before establishing parking restrictions. 2) Conditioning developments through the permit process impacts new development only. Need to find methods to reach existing development. 3) Stricter parking standards need to be region-wide to be effective. 4) City of Bellevue charges for city hall employee parking and provides bus passes and rideshare subsidies. Has maintained a 50 percent mode split for several years. 5) Many businesses don't want to locate in Bellevue CBD because of parking restrictions. No new buildings in 1-1/2 years. Losing market share to suburbs. 6) Sizing parking is the same as sizing the rest of the project. Based on experience and market patterns. 7) Need meaningful incentives for developers: - There must be a mix of TDM programs to be attractive over time - Transit availability - Access to services, need for mixed use - Mix of financial incentives 8) Lenders don't establish parking levels. Lenders only question supply if the proposed amount is way off base from the "norm." Developers want to build as little parking as possible. Oversupply is a killer economically unless future need may be there. 9) The issue may be historical parking supply patterns cast in stone. if there is adequate information to change the pattern, new developments would reflect that. 10) There is less parking required for mixed use (the standard of 3/1,000 used instead of 4/1,000). 11) Potential parking space land can be left in landscaping and converted to additional spaces if TDM measures do not reduce demand. 12) Need to view parking as an asset, not a fixture. I - 5 PRESENTATIONS ON INNOVATIVE PARKING PROGRAMS SWEDISH TRANSPORTATION PLAN John Bencich Associate Executive Director, Swedish Hospital, Seattle As a part of an agreement reached with the City of Seattle regarding a twenty year development plan, Swedish Hospital Medical Center committed to reducing the number of vehicle trips in the campus area. The focus of the Transportation Management Plan was to reduce employee parking during the day shift, thereby reducing Swedish' contribution to surface street congestion in the First Hill area (of Seattle). These methods required a program focusing on financial disincentives for SOV usage coupled with attractive incentives for HOV users. Marketing and reporting requirements are also central to this transportation section, with prescribed goals of lowering the SOV percentage. The City of Seattle mandates that a major employer have no more than 50% of employees SOV during the day. In 1983, Swedish stood at 59%, with a stated five year goal of reducing this number to the mandated 50%. Many factors were considered in the planning effort to reduce employee dependence on their vehicles. Marketing and pricing of available options were the preferred courses and were embarked upon. In addition to the external constraints mandated by the City, Swedish was (and is) under an internal constraint in providing sufficient parking for patients and visitors to the entire Medical Center. Priorities were re-aligned to state that the patient was number one, followed by physicians, and then employees. Tight code requirements and the costs of constructing additional parking have necessitated the limiting of parking designated exclusively for employees. Parking costs are an expense that can be fully recovered from neither patient/visitors nor employees. Owing to the rapidly changing nature of health care and the requirements from employees during these past eight years, the efforts to increase carpooling have not enjoyed particular success. The rate, $5/month for a driver and $1/month for each passenger, has grown more favorable as SOV rates have risen, but the need for flex shifts have negated carpooling as a very positive option. Swedish Hospital has 500 employees involved in carpooling, 95% of which are on the day shift; this number has been relatively static over a period of years. As a key part of implementing the Swedish Transportation Plan, a full-time Transportation Coordinator was hired in Spring, 1985. This allowed for all component parts of the Parking/Transportation picture to be managed through one office. All employee transportation benefits are managed separately from the standard employee benefits. January 1986, saw the beginning of annual day shift parking increases to create the desired disincentive to SOV users. This rate, which stood at $22/month, continues to be reviewed annually and will stand at $50/month on January 1st (1991). Also in 1986, Swedish realized that the key to marketing HOV usage to our employees was emphasizing the transit option. The employee transit subsidy, which stood at II - 1 between five and ten dollars/pass, was increased to $15/month. Sales increased 11% as a result of this increase but leveled off. As 1987 drew to a close, Swedish knew that the existing programs were stagnating and that both our external and internal parking needs were not being met. Existing at this time was a group of Seattle Hospital Transportation Coordinators that met on a monthly basis. These meetings were held to seek to jointly answer the common problems facing all of these institutions. A meeting in early 1988 yielded the idea of Metro coaches transporting Hospital employees directly to First Hill, bypassing the downtown corridor which surveys had shown was the major reason employees cited for not considering transit as a viable commuting option. Through the middle part of that year, the First Hill Express concept was studied and the idea discussed between First Hill medical employers on two levels: Administrative and Transportation Coordinators. The Administrative group met once per month to discuss contracts and the attendant financial considerations, while the Coordinators worked on marketing this new service. It was agreed that direct service from the North End, South End, and Eastside would provide the greatest options to maximize the expected costs. This Express system differed from standard transit in that participating institutions would be required to subsidize 80% of the cost of the service through guaranteed transit pass allocations. Swedish, and the other participating institutions, committed to supporting this direct transit alternative in mid- summer, and followed it by substantially increasing the transit pass subsidy, to cover 100% of the pass cost. This laid a strong framework for the marketing effort that was undertaken to inform Swedish employees about the Express service. As an integral marketing tool to employees, a guaranteed ride service was offered to those who would need transport back to their vehicle during hours that the Express was not running. This was secured by establishing a contract with a taxi company that would augment the direct transit service offered by the Express coaches. All of these program components provided optimistic assessments on Swedish employee acceptance of this needed part of transportation planning. First Hill Express service began on November 4, 1988, with 68 Swedish employees participating. The initial allocation was 117 passes, with which Swedish expected to incur a net loss during the first eight to twelve months of Express service. Employee usage had risen to 124 passes (exceeding the required allocation) in seven months. Service was extended to accommodate employees (primarily in Medical Office Buildings), which resulted in the allocation being raised. Swedish employees responded and exceeded this additional allocation amount the first month. Additional service was added in February, 1990, that extended two of the routes (south and east). This entailed a substantial addition (50 passes) to the Swedish allocation; as there was substantial demand for these areas, this amount was met the first month and has continued to rise to the present level of 280 First Hill Express passes distributed. Express service is now the capstone of the Swedish Transportation picture. We are currently in the last stages of planning express service utilizing Metro Vanpools to areas where there exists demand but not the numbers to justify a full coach. Employees have been generally receptive to the Express and other measures taken to increase HOV usage. Day Shift parking has been unavailable for three years and is expected to remain so for a minimum of two additional years. Upon initially II-2 freezing the parking, there was a great deal of anger owing to the perception of promises unfulfilled. Within months the transit subsidy was increased to the 100% level and the First Hill Express service begun. Over the past year and one half, employees have understood the requirements (both external and internal) and responded to transit most favorably. Mailings to all employees are undertaken twice a year to provide transportation information updates. Any adverse effects on hiring availability have been mitigated by additional transportation services being Studied and implemented, when warranted. The advent of both the First Hill Express concept and 100% transit subsidization pumped vigor into a transportation program that was non-performing in meeting mandated goals. The Day Shift SOV percentage for the Hospital is now 41 %; transit and carpool (HOV) percentage is 59%. Transit pass distributions are up 71% (1157) over the past three years and 21 % in the last year alone. Innovation has been the key to successfully driving down a high SOV rate that had been in place prior to under-taking a development plan. While initially reluctant, employees will work with you as a partner in a mutually beneficial relationship. II-3 PROPOSED PARKING TAX FOR MONTGOMERY COUNTY, MARYLAND Robert S. McGarry Former Director, Department of Transportation In winter of 1988, I became convinced that additional revenue was urgently needed. The County Executive and I had just been forced to reduce the transportation capital program (roads) by $20 million and defer legitimate highway maintenance for two years. These reductions were caused by the increasing needs for more school classrooms (capital) and teachers (operating). I proposed a parking tax for revenue and recommended I develop legislation for his consideration. He rejected this because he felt that: 1 . Voters were opposed to new taxes ("read my lips") 2. We could get by without more revenue. 3. It was politically the wrong time. When the County Council reviewed the Executive's cuts, they also became concerned about revenue. They formed a committee of citizens, developers, and businessmen to look into revenue needs. The committee talked to me (and others) and concluded: 1 . More revenue is needed. 2. A parking tax is a good source, since the greatest need for revenue is for transportation. The Council accepted the recommendation and drafted parking tax legislation. They wished to exempt housing and retail, even though this significantly reduces revenue. Also, exemption of retail and housing meant that the tax could not be a property (ad valorem) tax on a parking space since Maryland's Constitution requires a uniform property tax rate for all classes of property. This left the option of an excise tax or a fee. Maryland's highest court had just struck down the County's transportation impact fees, leaving only an excise tax option. The bill levied a yearly excise tax of $60 per space on any person who made land available for parking by employees of any business. a. It would be administered via a self-reporting tax return similar to federal/state income taxes. b. Persons with fewer than 10 spaces, parking meters with less than 2 hours, park and ride lots, vehicle storage areas, and federal/state facilities are exempt. C. To encourage TDM policies, tax is reduced by 50% of expense to taxpayer to provide alternative transportation, provided (1) they charge for parking and (2) they provide transit discounts. II - 4 d. All county parking, including spaces in the County's public parking districts, are taxed e. Receipts were dedicated to a new transportation trust fund. The business reaction was LOUD and UNIVERSALLY OPPOSED. The cost to large employers, the fact that only businesses were taxed to support community transportation (or indirectly school) needs, and the loss of competitive edge with neighboring jurisdictions were the main objections. The bill passed by a 4-3 vote. The Executive vetoed it--for the same reasons he told me plus the business arguments--and it died, since 5 votes were needed to override the veto. Two years later the revenue situation is much worse - capital budget has been reduced by $150 million and there is a $60 million operating shortfall. My Executive was defeated and the new Executive is planning a PARKING TAX. II-5 PROPOSAL TO LEVY PARKING CHARGES IN THE SAN FRANCISCO BAY AREA Al Huerby Senior Financial Analyst, Metropolitan Transportation Commission The California Clean Air Act requires each "non-attainment" area to develop a Transportation Control Measure Plan. All "reasonably available" Transportation Control Measures (TCM) within existing legal authority of either the Bay Area Air Quality Management District or local governments must be included in the TCM Plan. The Air Quality Management District has the authority under Indirect Source Review to implement parking charges as a Transportation Control Measure, and therefore parking charges are considered to be "reasonably available" TCMS. The Metropolitan Transportation Commission (MTC) is charged with developing this plan. MTC staff therefore included commuter parking charges in its draft TCM plan recognizing that these are the easiest trips to leverage: - there are trip concentrations at the work end; - people generally commute during the peak period facilitating shared ride programs; and - transit capacity in the Bay Area is geared to serving the work trip market. Two broad approaches were examined by staff: - using parking charges as a means of demand management, and using revenues generated to implement commute alternatives programs at the work site and locally by the local government entities; and - Using parking charges as a revenue raising mechanism with proceeds dedicated to traditional regional mobility improvements, i.e., bus/rail capital improvements, transfer and fare subsidies, regional HOV programs. A charge of $2.00 to $3.00 per day was proposed to be levied on employees' parking, based either on single occupant vehicles (SOV), irrespective of where parked, or only on employer-supplied parking. In addition, the Commission added at the request of the Air Quality Management District a general assessment on all other parking space supply, i.e., shopping centers, entertainment facilities, commercial lots, etc. The contribution to improved air quality, not congestion relief, was the objective of this program and, in addition to parking charges, a bridge toll increase of 11.00 on all seven of the region's toll bridges, 149 gas tax and a $10.000 vehicle registration fee were proposed. The contribution to improved air quality from both pricing impacts and a program of mobility improvements to be funded from revenues generated were evaluated. The plan was presented at a series of hearings to receive public comment. II - 6 The comments were generally quite negative on the parking charge component, and, as a result, the Commission in its approval of the plan voted to keep the parking charges (commuter only) as a contingency to be used only if the Commission was unsuccessful in getting the other revenue raising measures approved by the legislature. During the public debate process it became evident that the Commission did not want to implement demand management techniques, and that the Commission was clearly uncomfortable implementing parking charges except as a revenue raising mechanism. Given this position, it became more logical to propose more traditional and thus less controversial sources of revenue to fund a program of mobility improvements to achieve air quality attainment. Had the Commission chosen to view parking charges as an appropriate means of altering commute behavior to improve air quality by dedicating revenues generated to a program at the employment site designed to provide commute alternatives, the outcome of the public hearing process might have been different. As part of their responsibility to implement the TCM Plan, the Air Quality Management District can reinstate the parking charges at their discretion, either as a demand motivator or as a revenue raising mechanism. II - 7 EFFECT OF REGULATION XV ON PRIVATE SECTOR ATTITUDES REGARDING PARKING MANAGEMENT Jim Sims President, Commuter Transportation Services I. BACKGROUND - Southern California has worst air quality in nation. - 50 to 60% from auto emissions. - To meet Federal standards, must reduce emissions by 90%; 15% of targeted emission reductions to come from TDM actions. - South Coast Air Quality Management District has broad authority under state law to adopt stringent mobile source rules. II. REGULATION XV - WHAT IS IT? - Applies to all employers who have 100 or more employees reporting to work between 6:00 and 10:00 a.m. - Each of 8,000 employers affected must submit plan to increase Average Vehicle Ridership (AVR) to 1.5 In most areas, to 1.75 in congested areas. - Plan must be reviewed and approved by AQMD, and updated annually. - Fines of $25,000 per day for non-compliance. III. EMPLOYER RESPONSE - Initial resistance. Employers seek to minimize cost, maximize effect - Tendency to focus on incentives. - Some problems encountered with disincentives: - employee resistance - opposition from organized labor - limitations imposed by labor agreements - Some increased interest in Transportation Management Associations (TMAS) IV. WHAT LESSONS HAVE WE LEARNED? - Incentives alone may increase ridesharing, but don't reach AVR targets. II - 8 - Disincentives alone can't be implemented due to employee resistance. - Successful programs must include a "package" of incentives/disincentives, tailored to the individual work site. - Parking restrictions/charges the most effective disincentive (it takes parking charges of $40-$70 per month to induce significant changes in behavior). - Effective programs are not cheap. Employers now spending up to $200/year/employee on TDM programs. V. WHAT TYPES OF PROGRAMS ARE MOST SUCCESSFUL? - Programs that include a generous incentive package, frequently including a "transportation allowance" AND charging employees for parking at/near market rate. - County of Los Angeles Example: - replace free parking with pay-for-parking program, and a $70 per month transportation allowance - incentive package included guaranteed ride home, Vanpool support, and on-site child care - resulted in 40% reduction in cars in county lots. CTS doing "before and after" study to determine degree of mode shift. - Common Elements of Successful programs: - appeals to "greed" factor; - provides cash incentives, or incentives that are perceived as cash equivalent; - heavy marketing among employees; and - make cost of driving alone visible to employee. VI. OTHER FACTORS AFFECTING EMPLOYEE ATTITUDES - Important to note that factors other than Regulation XV are impacting employer decisions - Local trip reduction ordinances. Cities are increasingly placing requirements on developers and property owners, to reduce trips generated by development. II - 9 - Congestion Management Plans. Under California law, localities must develop plans to hold congestion to "level of Service" E, or better. Will have great impact on employers. - Tax policy. Evolving state, local and Federal tax policy will make alternatives to employer-paid free parking more and more attractive to employers. - In long run, economic factors may prove more powerful in impacting employer attitudes and actions than government regulation. - In congested areas, it is becoming increasingly difficult to attract and retain trained staff. To be competitive, employers will be developing "Commute Benefit Packages" to offer employees incentives to attract and retain employees. CTS's studies show that the "hassle" and inconvenience of the commute are more important in inducing commuters to try alternative modes than marginal increases in cost. - The concept of managing parking as an "asset" -- potentially a revenue producing asset rather than as a cost of doing business will become increasingly important in employer decision making, especially when coupled with public policies aimed at commute trip reduction. VII. WHERE DO WE GO FROM HERE? - As TDM professionals, we should work to strengthen and guide these emerging trends; i.e., "go with the flow". - That means we should support such things as: - changing Federal and state laws to "level the playing field" between employer-provided free parking and other commute alternatives; - working with labor to ease concerns about trip reduction programs by making them "win-win-win" for employees, employers, and public policy objectives; - linking parking fee revenues directly to the provision of employee incentive programs, and commute alternatives, rather than allowing these funds to go for general government support; and - educating and encouraging employers to begin to think of parking facilities in terms of asset management, rather than as an employee benefit. II - 10 VIII. SUMMARY Employer-provided free parking will be practically extinct in highly congested areas -- especially in air quality non-attainment areas in the mid-term future. Our role as professionals is to recognize the trend, and work with it to achieve the broader objectives of congestion, improving air quality, reducing our dependence on oil imports, and maintaining the economic competitiveness of our cities, regions and nation. II - 11 WHITE PAPERS AND SMALL GROUP SUMMARIES Federal Policy FEDERAL POLICY GROUP RECOMMENDATIONS 1) Amend the federal tax code to require that employers who offer an employee a parking subsidy must also offer that employee the option to take the market value of the parking subsidy as a taxable cash travel allowance in lieu of the parking subsidy. The rationale for this recommendation is developed in the white paper "Employer-paid Parking: The Influence of Parking Prices on Travel Demand," prepared by Donald C. Shoup and Richard W. Willson, pp 7-8. In summary, Shoup and Willson suggest: - First, and politically very important, no employee would be faced with the loss of any existing parking subsidy as a result of this policy. - Any employee who does choose the cash alternative rather than the parking must, by definition, be better off as a result of the choice. - Employers are no worse off if an employee chooses the cash alternative because the cash alternative is not more costly than the parking subsidy (assuming the employer is currently paying market value for the parking space.) - The option of taxable cash in lieu of a parking subsidy would most tempt those auto commuters who now receive employer-paid parking in locations where parking prices are highest. - The proposed cash alternative requirement is minimally intrusive in employers' decisions on how to compensate their employees. - Finally, offering commuters the option to choose between cash and a parking space makes it clear that parking is not free. 2) Amend the tax code so that the value of any commute benefit exceeding $60 is taxed and every commute benefit under $60 is tax-free. This is a policy adopted by the ACT Board of Directors in September 1990. The concept is simple and straightforward. Taxing the value of parking that exceeds $60 is believed to bring in more than enough revenue to offset the cost of employer-provided incentives to alternate commute modes, including vanpools and transit passes worth up to $60. This approach would not affect the vast majority of employees and employers across the country whose parking practices and habits are not significant contributors to the problem, unless the employer wished to provide commute benefits under $60. On the other hand, the proposal may be perceived to hurt downtown versus suburban economic interests. 3) Amend the tax code to re-classify employer-provided parking as a taxable fringe benefit. (it is assumed there would have to be some basic, bare minimum de minimis value, established by IRS.) - This proposal is pure from a tax policy perspective. - It is estimated to bring at least $4.7 billion in new federal tax revenues. - The enforcement complexity is expected to be moderate. - This proposal does not have positive transportation demand management incentives built in. It is only a tax. - Politically, this would be most unpopular. 4) Apply the non-discrimination rule to free/subsidized parking. A study in Los Angeles found that 17% of employees worked for employers who provided no parking subsidies; a slightly higher number worked for employers who provide parking for everyone. This leaves about 65% of employees working for employers who provide parking for some, but not all employees. It is widely believed that most of these employers discriminate in providing parking subsidies to those in higher paid positions. 5) The Federal Government should take the lead/serve as a model employer. The federal government should adopt specific transportation demand management goals for agencies to meet, should abolish free parking, etc. ATTACHMENT 1 White Paper FEDERAL TAX POLICY AND EMPLOYER-SUBSIDIZED PARKING Don H. Pickrell FEDERAL TAX POLICY AND EMPLOYER-SUBSIDIZED PARKING Don H. Pickrell John A. Volpe National Transportation Center Research and Special Programs Administration U.S. Department of Transportation* Prepared for Commuter Parking Symposium Municipality of Metropolitan Seattle December 6-7, 1990 * Dr. Pickrell is participating in this Symposium as a private individual and not as a representative of the U.S. Department of Transportation. The views expressed in this paper are strictly his own. and in no way represent official policies or recommendations of the Department of Transportation. In urban areas throughout the nation, employers commonly offer their employees free or partly-paid parking at their places of work. More than three quarters of those who drive to work in U.S. cities use parking that is provided by their employers, for which 90 percent pay no charge.1 Although some employer-provided parking is located in low-density suburban areas, many commuters who receive free parking of Work downtown or in densely developed suburban centers, where the price parking would provide a powerful inducement to use transit or join a carpool if their employers did not supply it free. For example, 64 percent of auto drivers crossing the Hudson River on route to the Manhattan CBD during the morning rush hours park their cars in spaces that are completely or partly paid for by their employers.2 And in Washington, the federal government and the region's private employers together provide free parking for nearly 100,000 automobiles, or almost half of all those driven to work during peak commuting hours.3 Tilting the Playing Field By offering free parking, employers substantially reduce the cost at which their employees can drive to work. For many employees, the availability of free parking at work represents a stronger incentive to drive than if their employers offered instead to provide them with free use of an automobile and free gasoline for the trip. Trips to work by automobile in U.S. cities average just under twenty miles (for the round trip). over the course,of which an automobile costs less than $5.00 to own and provide gasoline for.4 Yet in the downtown area of almost any major U.S. city, an employer's offer of a free parking space is worth much more than this amount. Even in many of the nation's suburban ___________________________ 1 Federal Highway Administration, Nationwide Personal Transportation Study, 1969, Table 22. More recently, this same figure is reported in Center for Urban Transportation Research, University of South Florida, Factors Related to Transit Use, 1989. 2 Port Authority of New York and New Jersey, 1984 Survey of Trans-Hudson Automobile Commuters, October 1984. 3 Metropolitan Washington Council of Governments, Parking Management Policies and Auto Control Zones, Report DOT-OS-40045-1, June 1976. 4 Automobile trips to work average 9.9 miles (each direction) in U.S. cities; see Federal Highway Administration, Personal Travel in the U.S., Volume I of the 1983-84 Nationwide Personal Transportation Study, August 1986, Table 7-6. p. 7-9. Costs associated with ownership of a typical automobile (depreciation, financing charges, and licensing and registration fees) currently average $0.181 per mile including all costs associated with ownership of the vehicle itself, while gasoline consumption adds another $0.054 per mile; see American Automobile Association, "Your Driving Costs," 1989 edition, p. 5. These costs would thus total $4.65 over the course of a typical round trip to work. (Even at more recent gasoline prices of up to $1.50 per gallon, gasoline costs average approximately $0.068 per mile, bringing daily round- trip commuting costs to slightly more than $4.90.) 1 office centers. where employment is growing most rapidly, daily parking prices of this level and above are increasingly common.5 It should come as no surprise that an incentive this strong overwhelms any inducement for employees to commute by public transit that is currently offered by partial tax exemption of the value of employer-supplied transit passes. At most. a free transit pass can be worth about $270 in annual taxable salary, and is often worth nothing because the tax exemption of its value is limited under the de minimis rule adopted as part of the 1984 Tax Reform Act.6 In contrast, employers offers of free parking are typically equivalent to salary increases four times as large. and can range in value up to ten or more times that amount.7 Even the combination of exempting from taxation part of the value of transit passes with generous federal. state, and local transit subsidies -- which now exceed $10 billion annually -- has proven woefully inadequate to counteract such a powerful incentive for employees to commute by automobile. This should not be surprising either. since under the most optimistic assumptions these subsidies reduce the average fare for a round trip to work using public transit by slightly more than $3.00, while an employer's offer of a free parking space ___________________________ 5 See for example Sheila A. Henry and Roberta Valdez, "Analysis of Parking Charges and Costs per Employee by Travel Analysis Areas in Orange County," Planning Department, Orange County Transit District. July 1989, Appendix. 6 Under the Tax Reform Act of 1984, employer-provided transit passes worth up to $15 per month may be excluded in computing their recipients' federal income taxes. Under the so-called de minimis rule, however, the Act also provides that if the value of the pass exceeds $15 per month, its entire value is treated as taxable income. For an employee in the highest marginal tax bracket (33%), an untaxed benefit with a cash value of $15 per month is equivalent to $268.66 per year in taxable income. In contrast. the best available estimate is that the value of a free parking space averages $58 per month in U.S. cities, nearly four times the $15 maximum value of a transit pass; see Testimony of the American Public Transit Association Before the Committee on Ways and Means of the U.S. House of Representatives on Federal Tax Laws and the Environment, March 14. 1990. p. 12. An employer's offer of a free parking space that would otherwise cost $7 per day -- a comparatively modest charge in many U.S. cities -- is equivalent to an increase in taxable income of more than ten times as large as the maximum value of a free transit pass (to be exact, $2,758, slightly more than ten times the $268.66 figure) to an employee in the highest tax bracket. 7 The best available estimate is that the value of a free parking space averages $58 per month in U.S. cities, nearly four times the $15 maximum value of a transit pass: see Testimony of the American Public Transit Association Before the Committee on Ways and Means of the U.S. House of Representatives on Federal Tax Laws and the Environment, March 14, 1990, p. 12. An employer's offer of a free parking space that would otherwise cost $7 per day -- a comparatively modest charge in many U.S. cities -- is equivalent to an increase in taxable income of more than ten times as large as the maximum value of a free transit pass (to be exact, $2,758, slightly more than ten times the $268.66 figure) to an employee in the highest tax bracket. 2 typically reduces the cost of driving to work by at least this amount. and often by much more.8 Evidence of Free Parking's Effect The most direct evidence of the effect free parking can have comes from commuters' responses to their employers' decisions to begin charging employees for parking they formerly provided free. When the Los Angeles area's ridesharing agency phased in market rates for employee parking, the fraction driving alone to work declined from 42 percent to 8 percent, while the share of carpool participants rose from 17 percent to 58 percent of the agency's employees.9 When charges equal to 50 percent of commercial rates were imposed for parking at selected federal buildings in the Washington, D.C. area for a brief period during 1979 and 1980, the number of employees driving alone declined by as much as 40 percent at some sites.10 Similarly. when parking prices equal to 70 percent of market rates -- then only about $1.00 U.S. per day -- were imposed on Canadian government employees in Ottawa, the number driving alone to work declined by 23 percent, while commuting by transit increased correspondingly.11 A variety of other evidence. which has been summarized in great detail elsewhere, confirms the substantial ___________________________ 8 Total subsidies paid to urban transit operators by federal, state, and local governments amounted to just over $10.5 billion during 1988, while the number of (linked) trips made by transit totaled about 6.5 billion; these data are estimated from Urban Mass Transportation Administration, 1988 Section 15 Annual Report, Tables 2.02.2, 2.04.2, and 2.13. Thus even if none of this assistance were wasted in the form of higher costs or unutilized service, and all of it were available to underwrite lower fares, the resulting fare reduction would be just under $1.63 per one-way transit trip, or about $3.25 for a round trip to work by transit. (It is possible that this figure underestimates the fare subsidy for commuting to work by transit. On one hand, the subsidy transit work trip would be much greater than this average figure, since a disproportionate share of both capital and operating costs for transit are accounted for by peak service, and most work trips are made during peak travel hours; see Thomas E. Parody, Mary E. Lovely, and Poh Ser Hsu, "Net Costs of peak and Off-Peak Transit Trips Taken Nationwide by Mode," paper presented to the Transportation Research Board 69th Annual Meeting, Washington, D.C., January 1990. On the other, there is substantial evidence that as much as three-quarters of all public assistance to transit operators is unavailable to subsidize lower fares, because it is absorbed by higher operating expenses or more extensive service; see Don H. Pickrell, The Causes of Rising Mass Transit Deficits, Report MA-11-0037, Harvard University, July 1983.) 9 Monica Surber, Donald Shoup, and Martin Wachs, "Effects of Ending Employer-Paid Parking for Solo Drivers," Transportation Research Record, Number 957, 1986, pp. 67-71. 10 Gerald K. Miller and Carol T. Everett, "Raising Commuter Parking Prices: An Empirical Study, "Transportation, Volume 11 (1982), pp. 105-129. 11 Transport Canada, The Effects of the Imposition of Parking Charges on Urban Travel in Ottawa:Summary Report, Report TP 291. February 1978. p. 11. 3 effect that employer-paid parking can have on commuting behavior.12 When all of the available evidence is considered together. the best estimate appears to be that at least 20 percent of commuters who now drive alone would instead choose to carpool or use public transit if they were required to pay market rates for parking they now receive free of charge. Peak hour auto commuting is largely responsible for increasingly widespread urban and suburban traffic congestion, and also contributes heavily to both air pollution levels in our cities and the transportation sector's substantial energy demands. Thus employers who encourage their employees to drive to work by providing free parking contribute significantly -- if unwittingly - - to the severe environmental consequences of our nearly exclusive reliance on the automobile for urban travel. Why is Employer-Provided Parking So Widespread? The major reason that so many employers provide free or below- cost parking to their employees is that its value is exempted from reporting and taxation as income. For those who drive to work, the tax-exempt status of free parking makes it worth more in after-tax income than a salary increase equal to the cost of parking. The difference between the value of an employer's offer of a free parking space and an increase in taxable salary sufficient to purchase that same space rises in direct proportion to the marginal federal,income tax bracket in which each employee's taxable income places her or him.13 Thus an employer can make most of its employees better off for a given outlay on employee compensation by spending part of it on parking that is subsequently offered free (or at least at below-market prices) to employees, rather than paying it in the form of higher salaries. The tax-exempt status "enjoyed" by employer-provided parking stems from its classification under the Tax Reform Act of 1984 as a "working condition fringe benefit."14 The rationale for exempting such benefits from income taxation is to encourage employers to provide desirable working conditions, and thus to increase employment and to encourage higher productivity. In so doing, federal tax law ignores the behavioral linkage between the availability of convenient. free parking at the workplace and the decision to drive an automobile to work, as local zoning codes do in requiring minimum amounts of parking space to be provided at employment sites. While it is difficult to judge whether this represents sound employment policy, it clearly amounts to misguided transportation policy. ___________________________ 12 The evidence available at the time was summarized in Don H. Pickrell and Donald C. Shoup, "Employer Subsidized Parking and Work Trip Mode Choice," Transportation Research Record. Number 786 (1980), pp. 30-38. For a more recent review, see the paper by Shoup and Willson prepared for this Symposium. 13 This effect is exacerbated where state and local income tax rates also rise with an employee's taxable income. 14 U.S. Internal Revenue Code, 1984, Section 132. 1.132-5T(p). 4 Although commuting to work is a necessary cost incurred in earning a living, it is difficult to imagine why doing so by automobile warrants continued (if indirect) federal subsidy of such generous degree, particularly when so many other federal policies (as well as those adopted by state and local governments) simultaneously attempt to discourage driving. Unlike the tax exemption of fringe benefits such as health insurance and retirement savings, which encourages behavior that federal policy deems socially responsible, exempting the value of employer- provided parking from income taxation rewards behavior that aggravates transportation problems and their environmental consequences. In addition to providing strong incentives for private employers to provide free parking, the federal government is a direct provider of free parking on a large scale.There are approximately two million civilian federal employees, many of whom receive free parking if they choose to drive to work, although it is difficult to tell how many of them work in areas where parking would otherwise be costly for them to purchase. Whatever their exact number, government has traditionally served as a leader by providing fringe benefit packages that are subsequently emulated by private employers, and which now commonly entitle their recipients to free parking at their places of work. What Should be Done? The ideal solution to the problem of widespread employer subsidization of employer parking is easy to envision. By amending the federal tax code to reclassify employer-provided parking as a taxable fringe benefit, with its cash value required to be estimated and reported by employers in the same way that most other fringe benefits are now treated, the primary motivation for employers to provide parking would be eliminated. In fact, this appears to have been its status prior to the tax 'reforms" adopted in 1984, although the reporting and taxation of its value were rarely if ever enforced. Parking benefits would still be subject to the de minimis rule, so that employers who provided parking with a low market value (and thus did not induce much increased auto travel among their employees) would not be subjected to costly and burdensome accounting and reporting requirements. Although this is likely to be a politically unpopular reform, it would have one desirable effect, at least from the viewpoint of the Federal budget: it would raise federal tax revenues, initially by as much as $5 billion dollars annually.15 ___________________________ 15 The annual increase in federal income tax liability for an employee receiving a free parking space worth the previously-cited average of $58 per month would range from $104 to almost $230, depending on the employee's taxable income level. At the current average value of the marginal federal income tax rate of 24%, the increased annual tax liability for a commuter receiving a free parking space of average market value would reach $167. If three- quarters of the more than 28 million commuters working in the central city areas of the nation's large cities (those over 500,000 population) receive free parking (as the earlier Nationwide Personal Transportation Survey indicated). taxation of its value would yield $4.67 billion annually at the current distribution of taxpayers among marginal tax brackets. (The 1980 Census revealed that 28.2 million employees commuted to central city jobs in U.S. cities with populations over 500,000; see 5 However, the revenue-generating potential of taxing employer- provided parking would decline over time, as eliminating the major inducement for employers to supply it caused progressively more of them to abandon the practice, and instead to encourage commuting by carpools and public transit. A Second-Best Proposal A more palatable variant of this proposal -- although one without its revenue-generating potential -- would be to amend the federal tax code to permit employers to classify some limited amount of each employee's gross earnings as a tax-exempt "travel allowance," subject to the condition that the employer did not also offer free parking. Employees who currently drive to work could use the resulting increase in their after-tax incomes to pay for parking, but those who decided to commute by other means could reserve part of the increase for other purposes.16 The size of such an allowance could be tailored to produce any desired revenue impact on the federal budget, including "revenue neutrality." by balancing the additional revenue from taxation of the value of parking above the allowance against the reduction in revenues from increasing the amount of income that is deductible in determining individuals' tax liability (that is, the size of the allowance). In effect, this proposal amounts to a cleverly disguised increase in the standard deduction from earnings. except that even those who itemized deductions when computing their taxable incomes (and thus did not claim the standard deduction) would be eligible to claim it.. as long as their employers did not also provide them with free parking. Allowing employers to pay a tax-exempt travel allowance would explicitly recognize that commuting to work is a cost necessarily entailed in earning an income, yet would allow employers to compensate workers for this cost without encouraging them to commute by automobile.17 Alternatives to Income Taxation of Free Parking Several alternatives to attacking the problem directly -- that is, to taxing the value of employer-provided free parking as income -- have been proposed by participants in the federal policy-making process. They include eliminating the deductibility of expenses incurred by employers in providing parking for purposes of computing their corporate tax liabilities, imposing on employers a ___________________________ Alan E. Pisarski, Commuting in America, The Eno Foundation for Transportation, Inc., 1987, Table 3-4. p. 40.) In fact, the increase in tax revenues would probably exceed this figure, because recipients of the highest-valued parking spaces tend to be those in the highest marginal federal tax brackets. 16 This proposal was originated by Donald Shoup, and was first discussed in Donald C. Shoup and Don H. Pickrell, Free Parking as a Transportation problem, Report DOT-OS-8001 1, Office of University Research, U.S. Department of Transportation, June 1979. 17 For a more detailed discussion of this proposal, see Donald C. Shoup, "Cashing Out Free Parking, " Transportation Quarterly July 1982 (Volume 36), pp. 35-64. 6 federal excise tax on the value of free parking they provide to their employees, and levying a uniform per-space federal tax on owners or operators of parking facilities. These proposals share the properties that they are likely to be less effective in discouraging automobile commuting than direct taxation of the value of free parking to its recipients, yet similarly complex to administer and enforce, and at least is difficult politically to implement. Most important, each of them appears less likely to result in a change in the price employees face when deciding whether to commute to work by automobile than does taxing employer-provided parking as income, since each would tax the Provision rather than the receipt of parking that is priced below its market value While each would raise the cost to the employer of providing employee parking, none could ensure that employers would respond by raising the price of parking faced by their employees, which would be an inescapable result of taxing the value of free parking to its recipients. Some employers might respond by simply absorbing the increased cost of purchasing parking, since doing so would produce a partially offsetting reduction in an employer's corporate tax liability. Eliminating the deductibility of expenses incurred by employers in providing parking is also objectionable because it would arbitrarily single out one type of expense for different treatment from that accorded all other legal business activities. Whatever its virtues as transportation policy, which even at best are inferior to those of taxing employer-provided parking as individual income, the added complexity that such a measure would introduce into the already overly complicated federal income tax code makes it undesirable as tax policy. In contrast. taxing the value of parking as individual income would bring its treatment under the tax code into conformity with that accorded most other fringe benefits. and could thus justifiably be classified as one small step toward rationalizing federal income tax policy. At the same time, the proposal to end deductibility of employers' expenses for providing parking suffers from all of the same difficulties of valuation and enforcement that would beset taxation of parking as a fringe benefit, since these stem from the variety and complexity of arrangements under which.employers acquire parking for the purpose of distributing it to their employees.18 Levying a federal excise tax on the value of parking provided by employers is subject to exactly this same criticism. as well as to the aforementioned objection as a tax policy of dubious merit. Finally. singling out parking expenses for non-deducti- bility by corporations would penalize those employers who purchase or construct parking to provide to their employees at unsubsidized prices, by raising their corporate tax liabilities, hardly a desirable message for public policy to convey. The proposal to levy a uniform tax per parking space suffers from far worse drawbacks than even these other questionable endeavors. First, it would be assessed on both spaces that are now provided free to commuters and those for which a market price is now paid, thereby failing to differentiate between "offending" parking spaces and more benign ones. More important, there is no ___________________________ 18 An detailed discussion of the various arrangements under which employers acquire and provide parking is contained in "Transit and Parking: Public Policy," Office of Budget and Policy, Urban Mass Transportation Administration, March 1989, pp. 4-7. 7 guarantee that whatever portion of such a tax was shifted forward to employers purchasing or providing parking on behalf of their employees would not simply be absorbed by those employers who already subsidize employee parking. thereby neutralizing its intended effect on commuter behavior. Unless coupled with elimination of the deductibility of parking expenses, in fact, part of employers' increased costs for parking would be offset by savings in corporate income taxes, and thus absorbed by general taxpayers rather than by automobile commuters. A Small Step in the Right Direction While the proposal to increase the current tax exemption of employer provided transit passes and vanpool benefits enjoys considerable currency, it is particularly important to recognize that this is not likely to be an effective substitute for acting to reduce the prevalence of free parking. Increasing the already substantial subsidies to these modes is destined to be ineffective in promoting their more widespread use, because the costs of commuting by alternate modes will remain nearly irrelevant to most employees' decisions to drive to work as long as free parking continues to be available to them. A large body of empirical evidence suggests that commuters' decisions to drive are extremely insensitive to reductions in transit fares, which suggests that it is virtually impossible to lower current transit fares sufficiently to induce significant numbers of auto commuters to switch to transit.19 Nevertheless. at least six separate measures proposing increases in the deductibility of employer-provided subsidies for transit or carpool use were filed in the recently concluded session of Congress. These proposed measures differed only in the ceilings on the value of these benefits that each proposed to exempt from income taxation (one even proposed that such benefits be unlimited in value). and in whether they applied strictly to conventional bus and rail transit service. or to carpool and vanpool subsidies as well. In contrast to the increase in federal revenue from taxing the value of employer-provided parking, each of them would have introduced a "tax expenditure" -- that is, a decline in the value of federal tax revenues to be made up by other tax increases -- ranging from $120 million to nearly $500 million. according to estimates developed by the Joint Committee on Taxation of the Congress. The major value of the proposal to increase the value of employer-provided transit and carpool benefits that is exempt from income taxation appears to be as a quid pro quo to be offered in exchange for subjecting at least some part of the value of employer-provided parking to income taxation. Indeed, in terms of useful transportation policy, this appears to be the primary merit of such an initiative. In fact, the most promising proposal would be to couple an increase in the value of transit and carpool benefits exempted from income taxation to some dollar threshold (say, $50 per month) with taxation of any value of employer- provided parking in excess of that amount. While this is admittedly an ___________________________ 19 Both econometric and quasi-experimental estimates of the cross-elasticity of auto mode choice or market share with respect to transit price are almost always extremely low in magnitude (that is. often below -0.10 in magnitude); for a survey see Ecosometrics, Inc., Patronage Impacts of Changes in Transit Fares and Services, September 1980. 8 arbitrary connection. it does represent the sort of superficially appealing packaging of changes that often characterizes "saleable" policy proposals. The policy could again be made "revenue neutral" by adjusting this figure to balance the increase in revenue from taxing the value of free parking above it against the revenue loss from exempting that amount from taxation if provided in the form of transit assistance. The Importance of Taking Action There is no better lesson in the futility of attempting to raise subsidy levels for alternate modes to offset those for automobile travel than the experience of the past decade, during which government outlays to promote expanded transit service and lower fares totaled nearly $100 billion, while the historical decline in transit's relative importance as a means of commuting and the dramatic growth of automobile travel both continued unabated.20 During this same time. outlays to construct new and expanded highway facilities in the nation's cities amounted to nearly three times this figure.21 Yet in the face of these massive investments in both improved transit service and expanded highway capacity, traffic congestion continued to escalate dramatically. while the environmental quality of many of our nation's cities continued to deteriorate. By now. it should thus be clear that no amount of government subsidy-federal or otherwise -- for travel by transit or other "high occupancy" modes will ever suffice to offset the powerful inducement to drive that is now offered by exempting the value of employer-provided parking from income taxation. And it should be equally clear that in the presence of such a strong financial incentive to drive an automobile, even the dramatically expanded program of highway construction now being advocated by various groups cannot avoid the intensification of traffic congestion in the downtown areas of out nation's cities, or forestall its continuing spread to their suburban areas. What the phenomena of declining transit use, spreading congestion levels, and intensifying air pollution share in common is one important root cause: layer upon layer of subsidies to automobile travel, both direct and indirect. by all levels of government. One of the most important of these, the widespread provision by employers of free parking for those who drive to work, is readily amenable to legislative action to eliminate it. Although taking such action will ___________________________ 20 This figure, which is expressed in today's dollars, was tabulated from Urban Mass Transportation Administration, National Urban Mass Transportation Statistics: Section 15 Annual Report (annual), various issues. The fraction of workers commuting by public transportation declined from 7.3 percent during 1969 to 5.7 percent in 1977, and further to 5.3 percent by 1983. At the same time. the fraction of all trips in U.S. urban areas -- including those for purposes other than commuting to work -- made by public transit declined from 2.4 percent during 1977 to 2.2 percent in 1983. These data are reported in Federal Highway Administration, Personal Travel in the U.S.: Volume 1, 1983-84 Nationwide Personal Transportation Study, August 1986, Table 7-6, p.7-9. and Table 6-7, p. 6-6. 21 Again expressed in terms of its equivalent in today's dollars, this estimated was tabulated from Federal Highway Administration, Highway Statistics (annual), various issues. 9 require federal policy-makers to display conviction and leadership rather than bowing to political expediency, the time for doing so has clearly arrived. The alternative is another decade of decline in transit's role in our nation's urban transportation system. spreading urban and suburban traffic congestion, and deteriorating environmental quality, while annual subsidy levels for transit escalate toward the $50 billion mark -- and surpass it, if the advocates of increased federal highway and transit appropriations prevail. By taking this decisive step toward more rational pricing of automobile travel, Congress can act to reverse one of the most important defects of current federal transportation policy, thereby improving both the functioning of our nation's transportation system and the quality of our urban environment. 10 Elasticity ELASTICITY GROUP DISCUSSION HIGHLIGHTS - Establish maximum parking spaces per gross square footage. - Mandate permit fee for suburban SOV free parkers for employers with 100 or more employees (through state emissions bill in Oregon). - Charge all SOVs a parking fee, not just commuter SOVS. - Charge a commuter fee to all. - Discourage practice of lowering commute price for SOVs (by subsidizing parking). - Target a pricing strategy to fit the site, i.e. suburban/urban. - Federal legislation: phase in a tax on parking, with a goal of having an equal level of subsidy allowed for HOV subsidies and parking subsidies. - Full cost pricing of all modes, including the internal cost (car maintenance, depreciated bus cost), and externalities of mode (contribution of SOV car to air pollution and congestion, tax treatment). - Charge for parking -- either on a cost basis or market price. - Have developer/employer incentives to reduce trips, I.e. tax credits, density bonuses. - Impact fees. 1) Amend federal IRS tax code to equalize tax treatment of parking and HOV - either make parking taxable or extend deduction of rideshare benefits. - Long Term Goal: Most necessary to achieve -- makes many other programs "do-able" and "effective". - Purpose: Change the attitude that parking is a working condition and bus subsidy a fringe. Parking and HOV modes need to be treated in the tax code equally, either both as working conditions, or as fringe benefits. Consultant group discussed how it would be a great accomplishment if parking was perceived by employers and employees as a benefit, rather than a facility fixture like bathrooms. - Market: The market is three-fold: the political forces needed to pass the change, businesses who have traditionally opposed the tax code change, and the public. The politicians need to hear from businesses in support of the change, and from the public. Public awareness campaigns are needed to make the association between parking and the transportation problems. - Research Needed: Documentation is needed regarding how the cost of parking affects mode choice, and then that information needs to be disseminated to both politicians and employers. - Alternatives for Tax Code Changes: Note: The group ranked these from most "do-able" to most difficult to implement - they felt the difficulty increases as the options get more effective. Tax code changes may have to be phased in over time in order to increase effectiveness or extend effectiveness to suburban areas. a) Offer any employee who receives free parking the option of the cash value of the parking instead. (Easiest to implement -- voluntary, local mandate or federal tax code) - Market: Only effective in areas where the parking market value is greater than 0--not useful for suburban areas - Research: Need to document the effectiveness of this program - has been tested in LA (see Shoup/Willson) b) Require that any employer (with over 100 employees) who offers free or subsidized parking offer the option of cash value of the parking as a travel allowance for alternative modes. (Requires local jurisdiction or federal tax code mandate). This alternative would have to be regulated, and the jurisdiction could determine how to set the value of the parking if there was not market value, e.g., base value on the cost of creating/maintaining parking, give developer incentives for less parking which would create a value for it. - Market: Could be used in the suburban environment if jurisdiction would establish criteria for values. - Research: Same documentation of existing voluntary programs would be useful to ' justify the program - Shoup/Willson have developed a model to forecast the impact of this type of program. c) Require that employers (with over 100 employees) charge for parking and provide equivalent travel allowance. (Most difficult to institute at either the local or federal level). - Market: Urban/suburban markets--mandate would create market value for parking in suburbs. - Research: Same as above, plus the relationship of parking supply and cost on mode choice. 2) Charge all parkers/peak period parkers a permit fee which is waived if parking is already paid for as a part of the non- attainment areas' plan for air quality (one aspect of many in the plan). - Parker pays something like $15 (based on the costs of land, construction and maintenance) to receive a decal for the car purchased on a quarterly basis. - Fee can be waived or reduced based on what amount they pay for parking. a) Goals: Create a charge/value for parking--specifically oriented to suburban parking. Educate public/employers about the relationship of parking to mode choice b) Issues: - Enforcement? -Through employers? - Makes CBD locations more competitive with suburban. - Raises revenue to use to increase service? - $15 may not show a significant mode shift, only an awareness vehicle. Would probably move to $30 once It was accepted to have more of an impact. c) Market: Suburban parkers d) Research: - Program needs to be tested -- before and after evaluation of impact needed. - A mechanism to establish guidelines for employers/ jurisdictions to valuate parking needs to be developed. - Document the costs of congestion to use in developing a public awareness campaign. - Document the effects of density? - Develop mechanisms to help employers establish the value of parking 3) Other Discussion There was some discussion of the effect of full cost pricing of all transportation modes - interesting idea in theory, but very unlikely to happen in reality. ATTACHMENT 2 WHITE PAPER EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL DEMAND Donald C Shoup and Richard W. Willson December 3, 1990 EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL DEMAND Prepared for: Commuter Parking Symposium Association for Commuter Transportation Seattle, Washington December 6-7, 1990 by Donald C. Shoup Graduate School of Architecture and Urban Planning University of California, Los Angeles Richard W. Willson Department of Urban and Regional Planning California State Polytechnic University, Pomona EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL DEMAND ABSTRACT Numerous case studies have shown that employer-paid parking increases solo driving to work. This employer intervention in commuters' travel choices counters public attempts to reduce traffic congestion, gasoline consumption, and air pollution. This paper summarizes previous case studies of the effect of employer parking subsidies on commuters' travel choices, and reports on a new multinomial logit model analysis of employer-paid parking in downtown Los Angeles. Comparing commuters who pay to park versus those who park free, we report on (1) the solo driver mode share, (2) the number of cars driven to work per 100 employees, (3) the price elasticity of demand for parking, and (4) the number of parking spaces demanded per 1,000 square feet of office space. The multinomial logit analysis of downtown Los Angeles commuters estimates a parking price elasticity of demand of -0.18 at the mean market parking price. To illustrate, if a downtown Los Angeles employer eliminated free parking, the model predicts that the solo driving share would decrease from 67 percent to 53 percent. This level of solo driving reduction compares favorably with other much more costly strategies to reduce peak period auto travel. That mode shift reduces the amount of parking "needed" from 2.45 spaces per 1,000 square feet to 2.05 spaces per 1,000 square feet of office space. The income tax exemption of employer-paid parking subsidies strongly encourages employers to subsidize their employees' parking, and thus indirectly encourages commuters to drive to work alone. To combat the harm caused by the tax-exemption for employer-paid parking, we argue the case that an employer who offers any employee a parking subsidy should be required (either by local ordinance or by the internal revenue code) to offer that employee the option to take the fair market value of the parking subsidy as a cash travel allowance instead of as a parking subsidy. No employee would be faced with the loss of any existing parking subsidy as a result of this policy. Instead, employees would receive a new option, the alternative of choosing cash. Employers could continue with any existing parking subsidy arrangement, so long as they broaden the offer to include the option of using the cash value of the parking subsidy for any other purpose the employee prefers. Requiring employers to offer employees the option of the equivalent cash value of any parking subsidy would reduce traffic congestion, air pollution, and gasoline consumption, and would do this by aligning commuters' travel choices more closely with their own preferences. EMPLOYER-PAID PARKING: THE INFLUENCE OF PARKING PRICES ON TRAVEL DEMAND I. INTRODUCTION Although employer-paid parking may appear to be a generous, enlightened, and popular employment policy, it is also a strong incentive to drive to work alone, and it strongly works at cross purposes with public policies designed to reduce traffic congestion, energy consumption, and air pollution. This paper summarizes previous evidence of the effect of employer parking subsidies on mode choice and parking demand, and includes new evidence from a logit analysis of downtown Los Angeles office workers. The paper concludes with a discussion of policies to reduce the level of parking subsidies. II. EMPLOYERS' INFLUENCE ON COMMUTERS' TRANSPORTATION COSTS Nine out of every ten American commuters who drive to work park free at work. Three studies have documented this fact. First, Shoup and Pickrell (1980) used National Personal Transportation Study data to estimate that 93 percent of auto commuters parked free. Second, a 1988 survey found that 91 percent of employees in Los Angeles, Riverside, San Bernardino, and Ventura Counties park free (Commuter Transportation Services, Inc. 1988). Finally, a 1989 survey of large SMSAs found that 90 percent of those who drive to work park free (Center for Urban Transportation Research 1989). Even in downtowns where parking is most expensive, many auto commuters pay nothing for parking. For example, more than half of the 114,000 office workers who drive to downtown Los Angeles rec,.., parking subsidies. Most of those receiving a subsidy pay nothing for parking (47 percent of all driver.), another 7 percent of all drivers receive partial parking subsidies (Willson and Shoup 1990a). The difference between receiving free parking and paying for parking greatly affects overall travel costs. The powerful influence of parking subsidies on travel costs can be illustrated in three ways. First, the offer of free parking is often worth more than the offer of free gasoline. For commuters to downtown Los Angeles in 1986, Willson and Shoup (1990a) found that the average round trip length for those who park free is 36 miles. If their gasoline mileage is 20 miles per gallon, the round trip to work consumes 1.8 gallons of gas, and if gas costs $1 per gallon, the cost of gas for the average round trip commute trip is $1.80 (or $2.70 if gas costs $1.50 per gallon). But the average daily equivalent cost of monthly parking in downtown Los Angeles was $4.32, far more than the cost per trip for gasoline. An employer's offer of free gasoline to employees if they drive to work would seem a reckless incentive to drive alone, yet employer-paid parking is a much stronger incentive. Second, employer-paid parking subsidies dwarf the gasoline tax paid for the average commute trip. A parking subsidy of $4.32 for a trip that consumes 1.8 gallons of gas is equivalent to a subsidy of $2.40 per gallon of gas used. The federal gasoline tax would have to be raised from 14 cents to $2.49 per gallon merely to offset the parking subsidies now given to over 50,000 solo drivers who park free at their employers' expense in downtown Los Angeles. Thus, even very large increases in the gasoline tax would decrease solo driving to work by much less then employer-paid parking already increases it. A third way to illustrate the effect of employer paid parking is to compare it to a congestion toll. If the average round trip drive to work is 36 miles, and the average parking subsidy is $4.32 per day, the parking subsidy is equivalent to 12 cents per mile travelled. Thus, imposing a congestion toll of 12 cents per mile travelled would do no more to discourage commuters from driving to the Los Angeles CBD than employer-paid parking already encourages it. And employers fully subsidize parking for almost half of all the solo drivers to downtown Los Angeles. If you subsidize something you get more of it. Because employer-paid parking so heavily subsidizes solo driving to work, it undoubtedly increases the amount of it. The next two sections present empirical evidence on the extent to which employer-paid parking increases solo driving to work. III. EVIDENCE FROM CASE STUDIES We first review several previous case studies that examine how employer-paid parking affects commuter mode choice. In each case we use three measures to summarize the effect of employer paid parking: 1) the share of commuters who drive to work alone; 2) the number of autos driven to work per 100 employees; and 3) the price elasticity of demand for parking. The first measure is used because many public policies are intended to reduce solo driving to work. The second measure reveals the implications of parking subsidies for trip generation and parking requirements. Finally, the third measure standardizes the parking price changes in the case studies, and can be interpreted as the percent decrease in parking demand that would accompany a one percent increase in parking price. We assembled all the existing well-documented case studies of how employer-paid parking subsidies affect travel behavior. These case studies have either: (1) examined the commuting behavior of employees before and after employer-paid parking was eliminated; or (2) compared the commuting behavior of matched samples of employees with and without employer-paid parking. Willson and Shoup (1990b) summarize these cases, covering a variety of locations, and employer and employee types. Table 1 shows how ending employer-paid parking reduces the solo driver share. The smallest reduction in the number of solo drivers was 18 per cent, and the largest reduction was an impressive 81 per cent (in this case the employer eliminated free parking only for solo drivers).1 ___________________________ 1. It should be noted that in the Warner Center and Ottawa cases, some subsidy for solo drivers remained. Also, in the Warner Center and Mid-Wilshire case studies, parking continued to be free for carpools. Therefore, these studies do not show the effect of a total elimination of parking subsidies. Table 1 HOW EMPLOYER PARKING SUBSIDIES AFFECT SOLO DRIVING Solo Driver Mode Share Case Study and Type Employer Pays Driver Pays Decrease in for Parking for Parking Solo Drivers Mid Wilshire, Los Angeles (before/after) 42% 8% -81% Warner Center, Los Angeles (before/after) 90% 46% -49% Century City, Los Angeles (with/without) 92% 75% -18% Civic Center, Los Angeles (with/without) 72% 40% -44% Downtown Ottawa, Canada (before/after) 35% 28% -20% AVERAGE OF CASE STUDIES 66% 39% -41% Table 2 HOW EMPLOYER PARKING SUBSIDIES AFFECT AUTOMOBILE TRIPS Autos Driven per 100 Employees Case Study and Type Employer Driver Decrease Price Elasticity Pays for Pays for in Auto of Demand Parking Parking Trips for Parking Mid Wilshire, Los Angeles (before/after) 48 30 -38% -0.23 Warner Center, Los Angeles (before/after) 92 64 -30% -0.18 Century City, Los Angeles (with/without) 94 80 -15 -0.08 Civic Center, Los Angeles (with/without) 78 50 -36% -0.22 Downtown Ottawa, Canada (before/after) 39 32 -18% -0.10 AVERAGE OF CASE STUDIES 70 51 -27% -0.16 Table 2 shows two measures of how ending employer-paid parking reduces the number of automobile trips to the site.2 The first is the number of cars driven to work per 100 employees. This measure indicates how trip generation and parking demand would vary under different parking subsidy circumstances. Because some solo drivers shift to carpools when employers eliminated parking subsidies, the number of autos driven to work does not decline by as much as the number of solo drivers, but the decline is still very impressive, ranging from 15 to 38 per cent. The second measure is the parking price elasticity of demand for automobiles driven to work, and hence parking. This elasticity allows one to compare the sensitivity of the number of automobiles driven to work for a given standard change in parking cost. The price elasticity ranges from -0.08 to -0.23, and the average change is -0.16. IV. NEW EVIDENCE FROM A DOWNTOWN LOS ANGELES MODE SURVEY Willson and Shoup (1990c) report on their progress in developing a logit model analysis of downtown Los Angeles commuters. The work uses a 1986 Los Angeles Community Redevelopment Agency mode choice survey of downtown Los Angeles office workers, entitled Los Angeles CBD Employee-Employer Baseline Travel Survey. The survey includes a matched sample of 5,060 employees and 118 employers. The survey collected information on both parking prices and parking subsidies for each employee, so it is possible to determine not only the parking price that drivers paid, but also the parking price that non-drivers would pay if they drove to work. This ability to determine accurately the parking price that non-drivers would pay if they drove is relatively rare in conventional mode choice surveys. The survey also collected information on a number of other factors (such as distance to work, income, gender, travel time by each mode, vehicle availability) that affect travel mode choices, so an analytic technique which can isolate the effect of parking prices was used. The most widely accepted procedure for modeling mode choice is the multinomial logit model. The mode choices were defined as follows: (1) solo driver; (2) carpool/vanpool; and (3) public transit. The multinomial logit model estimates the probability that a commuter will chose each of the three modes for the journey to work. The estimated model is shown in Appendix A, based on a sample size of 713 cases. A negative coefficient is estimated on the parking cost variable, which indicates that as parking costs, increase, the probability of driving decreases. In order to test the model, the full sample data set was used to make predictions with the estimated model. The mode share in the sample is 64 percent solo driver, 17 percent pool vehicle and 19 percent transit. The model estimated mode share to within a percentage point of each mode when used to predict the baseline mode share. ___________________________ 2. The number of cars driven to work per 100 commuters incorporates the effect of employer paid parking subsidies not only on the number of commuters who drive to work solo, but also on the number who carpool, ride public transit, walk, and bike to work. Most of the case studies surveyed do include information on the share of employees who carpool, but not on the average carpool size. In order to estimate the number of cars driven to work by carpoolers, we use the figure of one vehicle per 2.62 carpool/vanpool commuters, which was found in the 1988 Commuter Survey of Southern California commuters conducted by Commuter Transportation Services, Inc. Willson and Shoup use the estimated model to predict mode change under different after subsidy parking prices by changing the parking cost component of the parking cost/income variable for each case from its actual level to the cost being tested. For example, in testing a parking price of $0, we set the parking price for all individuals in the sample to $0. Table 3 shows the predictions of the model under a range of after-subsidy parking prices. The predictions are shown as mode shares, and are converted to the number of cars driven to work per 100 employees.3 Mid-point elasticities for $1 increments in parking price also calculated, based on the number of cars driven to work per 100 employees. These are elasticities of the after-subsidy parking price, expressed as the daily equivalent of monthly permit parking. In situations where high parking prices appear not to discourage solo driving to work, this outcome can occur because commuters actually pay nothing to park, no matter how much it costs. Because the model shown in Appendix A is estimated with accurate data on the after-subsidy price of parking, the influence of parking prices on travel choices is not masked by employer-paid parking subsidies. Table 3 shows that commuters are sensitive to the after- subsidy price of parking. If an employer who gave free parking to all employees eliminated parking subsidies, the solo share of that employer's workers is predicted to fall from 66 percent to 53 percent, at the 1986 average downtown parking price of $4.32. Figure 1 shows the sensitivity of mode choice to after-subsidy parking price in a graphic form. Table 3 also shows the model's prediction that 72 cars per 100 employees would be driven to work by those who park free, while 60 cars per 100 employees would be driven to work by those who pay the 1986 market price of $4.32. Thus, in this case employer-paid parking leads to a 20 percent increase in the number of cars driven to work. The elasticities shown on Table 3 rise with the price of parking, since a one percent increase on a base of $8 per day parking is more onerous than a one percent increase on a base of $1 per day parking. The elasticity calculated at the $4.32 market parking cost is -.18, indicating that automobile trip generation and parking demand significantly decline as the after-subsidy price of parking increases. Figure 2 converts the number of cars driven to work per 100 employees to the number of parking spaces per 1,000 square feet of office space, and plots the new measure as a demand curve for parking.4 When parking is free, 2.45 spaces per 1,000 square feet are demanded; when parking costs ___________________________ 3. The mean carpool/vanpool size of 2.92 for commuters to downtown Los Angeles found in the Baseline Survey is used to convert mode share into the number of cars per 100 employees. 4. Cars per 100 employees is translated to parking spaces per 1,000 square feet assuming an office occupancy density of 4.2 employees per 1,000 square feet, an employee absenteeism rate of 14 percent, and a peak parking occupancy factor of 94 percent (all derived from the Baseline Survey and a Wilbur Smith and Associates 1981 study of downtown Los Angeles parking). For example, if there are 4.2 employees per 1,000 square feet, and 0.72 cars driven to work per employee (the figure estimated when parking is free), there are 3.0 cars driven to work per 1,000 square feet. Not all these drivers require parking spaces at the peak accumulation period on a given day. So the 3.0 Table 3 SENSITIVITY OF MODE CHOICE TO PARKING PRICE After- Mode Share Subsidy ____________________________ Cars Mid-Point Parking per 100 Elasticity Price Solo Carpool Transit Employees of Demand $0 67% 16% 18% 72 $1 64% 17% 19% 69 -0.02 $2 60% 18% 21% 67 -0.06 $3 57% 19% 23% 64 -0.10 $4 54% 20% 25% 61 -0.15 $5 51% 21% 27% 59 -0.20 $6 48% 22% 29% 56 -0.25 $7 46% 22% 31% 54 -0.30 $8 43% 23% 34% 51 -0.35 $9 41% 24% 36% 49 -0.40 Click HERE for graphic. Click HERE for graphic. $8, only 1.74 spaces per 1,000 square feet are demanded. This finding clearly refutes the notion that the demand for parking can be established (by ordinance or otherwise) without reference to the price charged for parking. V. DISTORTIONS CAUSED BY THE TAX EXEMPTION OF EMPLOYER-PAID PARKING A. Private Waste and Public Harm Employer-paid parking is often a take-it-or-leave-it offer. That is, employees are usually not offered any alternative benefit of equivalent value if they do not take the parking. Therefore, some employees who value the parking at less than the cost to the employer of providing it will nevertheless take the parking subsidy rather than nothing. For example, suppose the market price of parking at your work site is $50 per month. Suppose also that at any parking price less than $30 per month you would choose to drive to work alone, but if you had to pay anything more than $30 per month to park at work, you would instead choose to commute by bus or bicycle. Thus, if your employer offers you free parking at work (by paying the $50 a month parking charge for you), you would drive to work alone. If, however, your employer offered you the choice between either the free parking space or the $50 it costs your employer to provide it, you would take the $50 in cash, and then ride the bus or bike to work. In the situation just described, the offer of employee-paid parking (without the option to choose its cash value instead) has two undesirable consequences. First, it is privately wasteful, because you take a parking space that you do not think is worth what it costs. Your employer is paying $50 a month to provide you with something that is worth only $30 a month to you. That represents a net loss of $20 per month in income to you, compared to the alternative of taking the $50 parking subsidy in cash instead. Of course, if you would choose to drive to work even when parking costs you more than $50 a month, the offer of employer-paid parking does not alter your commute decision, and is therefore not privately wasteful in the sense just argued. The subsidy is worth as much to you as it costs your employer. But all the studies cited earlier clearly demonstrate that many employees do not think their parking spaces at work are worth what it costs their employers to provide them, because when commuters have to pay for their own parking, many of them do stop driving to work alone. As one specific example, consider the results found in a Los Angeles case study cited earlier, where an employer ceased offering to pay for parking at work for solo drivers (Surber, Shoup, and Wachs, 1984). Of the 42 solo drivers who had previously been offered free parking, only one solo driver chose to pay the market price of $57.50 a month to continue parking in the previously free spaces. That is, 98 percent of all employees who drove to work alone when their employer paid for their parking felt that the parking spaces were not worth the $57.50 per month that their employer had been paying for them. This suggests the potential for a considerable amount of private waste involved in offering parking subsidies that are worth less than they cost. ___________________________ spaces per 1,000 square feet is multiplied by .86 (to account for employee absenteeism) and .94 (to account for the fact that not all employees who drive park during the peak parking occupancy period), yielding a demand of 2.45 spaces per 1,000 square feet. In addition to the private waste it entails, employer-paid parking is publicly harmful, because it needlessly increases the number of cars driven to work, with all the added external costs that implies. On average, the case studies summarized in Table 2 suggest that ending employer-paid parking decreases the number of cars driven to work by 27 percent. Said the other way around, offering employer-paid parking increases the number of cars driven to work by 37 percent. In addition, analysis of the 1986 survey data for commuters to the Los Angeles CBD showed that employer-paid parking increased the number of cars driven to work by 20 percent. Thus, employer paid parking subsidies clearly aggravate the already serious urban problems of traffic congestion and air pollution. Subsidies are usually justified on the grounds that they encourage desired behavior. When private market prices are, for some reason, believed to deviate from social values, subsidies can be used to correct for this deviation of market prices from social values. But employer-paid parking is an altogether anomalous subsidy, because it strongly encourages the very behavior - solo driving to work - that other subsidies and public policies are trying to discourage. Market parking prices, based on real costs, send a direct signal to commuters to rideshare, but employer-paid parking shields commuters from these market signals and skews commuters' choices toward driving to work alone. Given the ample and growing body of evidence that employer- paid parking is both privately wasteful and publicly harmful, what explains its ubiquity? Why don't employers instead offer their employees a cash commute allowance that employees could use as they choose? The cash commute allowance would not be privately wasteful, because it would not tempt employees to park in spaces they don't think are worth the cost, and it would not be publicly harmful, because it would not induce commuters to drive to work alone. B. Effects of Federal and State Income Tax Policy The strongest explanation for the prevalence of employer-paid parking is that federal and state income tax laws exclude the value of parking subsidies from taxable income. The favored income tax treatment of employer-paid parking subsidies makes it tax-efficient for employers to convert some of their employee compensation from cash into a parking subsidy. Table 4 shows, for each taxable income bracket, how much an employer in California would have to pay an employee in taxable cash income to equal the value of $1 of tax-exempt parking subsidy. For example, for an employee whose taxable income is $45,000 per year, an employer would have to pay the employee $1.51 in taxable cash income to yield, after federal and state income and social security taxes, the after-tax equivalent of a $1 tax-exempt parking subsidy. Thus, the offer of employer-paid parking as a tax-exempt fringe benefit is worth 51% more than a taxable cash commute allowance equal to the cost of a parking space at work. The "tax efficiency" of employer-paid parking is thus a strong incentive to include it as part of an employee's compensation package. Ridesharing and mass transit advocates have for many years argued that the tax treatment of parking and other transportation benefits should be revised to eliminate the bias in favor of employer paid parking. But it is very difficult to eliminate a tax exemption that benefits so many workers, at all income levels. Although the tax exemption provides the greatest benefits to those in higher income tax brackets, eliminating it would affect many low-wage employees as well. Thus, no matter how strongly one believes that it is a food idea. it seems unrealistic, even quixotic, to recommend ending the income tax exemption of employer- paid parking. Quite aside from the money involved, Table 4 TAXABLE CASH EQUIVALENT OF A TAX-EXEMPT PARKING SUBSIDY Taxable Income Marginal Cash Equivalent of Tax Rate $1 Parking Subsidy $19,056 - $30,070 18% * $1.23 $30,071 - $32,450 20% * $1.25 $32,451 - $41,746 32% * $1.48 $41,747 - $52,760 34% * $1.51 $52,761 - $78,400 35% $1.53 $78,401 - $185,730 39% $1.65 over $185,731 35% $1.53 The marginal tax rate is the combined federal and California marginal income tax rate for a married couple filing jointly, based on 1990 federal and 1989 state tax brackets and personal exemptions. * Includes 7.65% Social Security tax rate on incomes up to $51,300 per year. parking privileges are intimately related to one's status within an organization, so any proposal to reform parking subsidies must be approached gingerly. VI. LOCAL ACTION TO REMOVE DISTORTIONS CAUSED BY THE TAX-EXEMPTION OF EMPLOYER-PAID PARKING Given the extreme sensitivity of the issue, is there any possible public policy that can -achieve the benefits of ending employer-paid parking, without encountering the inevitable strong opposition to taking away the substantial subsidies now given to so many commuters? We believe that there is, and that a good example of it exists in the City of Los Angeles' year-old employee transit subsidy ordinance. This ordinance requires that: Each employer in the City that offers free or subsidized parking to any employee ... shall offer a $15 (fifteen) per month transit subsidy to each of its employees for their use in commuting to and from the employer's work-site .... (Section 85.05 of the Los Angeles Municipal Code.5) This ordinance has aroused no significant opposition, but it has had a limited effect in counteracting the effect of parking subsidies. Because the required transit subsidy is only $15 per month, and because parking subsidies are often far higher than that, the offer of a $15 transit subsidy in lieu of a parking subsidy may have only a slight effect of mode choice.6 Nevertheless, the required transit subsidy is a sensible, sensitive, and minimally intrusive public policy that is intended to counteract the harmful effects of parking subsidies by expanding the commuter's options beyond the usual choice between a parking subsidy or nothing. The precedent already successfully set by Los Angeles' transit subsidy requirement suggests the following policy that we recommend as a logical next step to further expand the commuter's options. Building on what the City of Los Angeles has already done, and using the language of its ordinance, any city could require that: Each employer in the City that offers free or subsidized parking to any employee shall offer that employee the choice of taking the market value of the parking subsidy as a cash travel allowance if the employee does not take the parking subsidy. This proposed policy of requiring employers who offer parking subsidies also to offer the cash equivalent to employees has, we believe, several important advantages that deserve serious consideration by employers, by employees, and by public policy makers. ___________________________ 5. The Los Angeles ordinance restricts the transit subsidy requirement to employers who are subject to the South Coast Air Quality Management District's Regulation X-V (that is, employers with 100 or more employees at a single work site), but this does not seem to be a necessary feature of the policy. The full text of the ordinance is provided in the Appendix. 6. The figure of $15 per month was chosen for the Los Angeles ordinance because it is the maximum transit subsidy that is exempt from federal income tax. Any transit subsidy greater that $15 per month is taxable, including the first $15 of the subsidy),. 1. First, and politically very important, no employee would be faced with the loss of any existing parking subsidy as a result of this policy. Instead, employees would receive a new option, the cash alternative. Employers could continue with any existing parking subsidy arrangement, so long as they broaden the offer to include the option of using the cash value of the parking subsidy for any other purpose the employee prefers. 2. Any employee who does choose the cash alternative rather than the parking must, by definition, be better off as a result of the choice. If employees do not consider themselves better off as a result of choosing the cash alternative, they won't choose it because they can, if they wish, continue to take the parking subsidy. Rather than restricting any employee's options, the proposed requirement adds a new option (the cash alternative) for many employees who now face a take-it-or- leave-it choice between a parking subsidy or nothing. 3. Employers are no worse off if an employee chooses the cash alternative rather than a parking subsidy because the cash alternative is no more costly than the parking subsidy. Further, employers might be much more willing to offer the cash alternative if they know that all similarly situated employers are required to make the same offer, so that there can be no question of anyone being put at any competitive disadvantage. Employers should find it difficult to argue publicly that they ought to be allowed to offer parking subsidies alone, without the alternative of taxable cash for an employee who would prefer not to drive to work. Given the serious environmental and traffic problems facing most cities, what valid, persuasive purpose would an employer publicly submit to justify subsidizing only employees who drive to work, without offering an equivalent subsidy to those same employees who would voluntarily elect to quit driving to work? 4. The option of taxable cash in lieu of a parking subsidy would most tempt those auto commuters who now receive employer-paid parking in locations where parking prices are highest. Because parking is usually most expensive in the most congested areas, the incentive to stop driving to work alone would automatically be targeted where it is most needed. 5. The proposed cash alternative requirement is minimally intrusive in employers' decisions on how to compensate their employees. The Los Angeles transit subsidy ordinance quoted above requires that the employer offer transit subsidies to all employees if a parking subsidy is offered to any employee. Our proposed cash alternative policy would require only that an employer who offers an employee a parking subsidy must also offer that same employee the equivalent cash alternative, without imposing any further requirement regarding other employees. An employer could also offer any ridesharing incentives, such as free bus passes or vanpool subsidies. 6. Finally, offering commuters the option to choose between cash and a parking space makes it clear that parking is not free. Therefore, all employees, even those who are offered free parking at work, would begin to consider the cost of parking as an important factor in deciding how to commute to work. Previous research has clearly demonstrated that the cost of parking, previously hidden from many commuters by parking subsidies, profoundly influences commuters' mode choices. T"ne available option of cash in lieu of a parking subsidy would be a strong incentive to rideshare, ride transit, bicycle, or walk to work. By allowing market prices to influence choices, a regulation requiring employers to offer employees the option of the equivalent cash value of any parking subsidy, would not only reduce traffic congestion, air pollution, and gasoline consumption, but would do so by bringing commuters' travel choices more in line with their own preferences about how they wish to spend their income. In making the choice between a parking subsidy or its cash equivalent, employees would, of course, have to consider that the cash is taxable, while the parking subsidy is not. Many employees, however, might still prefer the after-tax value of the cash alternative to an untaxed parking subsidy. For example, an employee who is offered the choice between the free use of a parking space that costs $50 per month, or $50 per month extra in before-tax income, might well prefer to take the taxable cash. For an employee with a taxable income of $45,000 per year and in the 34% marginal tax bracket, the after-tax value of an extra $50 per month in cash income is $33 per month, which might be worth more to the employee than a parking space. The taxability of a cash payment in lieu of a parking subsidy reduces, but by no means eliminates, the effectiveness of offering the cash alternative as an incentive to rideshare. The problem that cash is taxable but a parking subsidy is tax exempt is not an argument against the proposed requirement that employers who offer parking subsidies should also offer the cash alternative. If an employee freely chooses the taxable cash alternative because he or she feels that taxable income is worth more than a tax-exempt parking subsidy, how can anyone else argue that the employee is making the wrong choice? Indeed, if an employee does choose the taxable cash alternative, the choice proves beyond doubt that the parking subsidy is worth considerably less to the employee than it costs the employer, and is thus not only socially harmful but also privately wasteful. Although any employer can, acting independently, offer employees cash alternatives to parking subsidies, our federal and state income tax laws clearly stack the deck in favor of offering parking subsidies. This explicit tax bias in favor of employer- paid parking is entirely inappropriate, especially in central cities where employer-paid parking most underprices car trips to the very places where public transit is most available, traffic is most congested, and the air is most polluted. Naturally, the federal and state tax exemption of parking subsidies is a strong motivation for employers to offer their employees free parking, but a local government cannot change that. A local government can, however, implement our proposed requirement that employers who offer parking subsidies must also offer the cash equivalent as an alternative, with the Los Angeles transit subsidy requirement as a strong legal and practical precedent. VII. FEDERAL ACTION TO REMOVE DISTORTIONS CAUSED BY THE TAX EXEMPTION OF EMPLOYER-PAID PARKING An important aspect of offering employees taxable cash as an optional alternative to employer-paid parking subsidies is that when anyone voluntarily does choose taxable cash rather than a tax- exempt parking subsidy, federal and state income tax revenues increase. This increase in revenue does not result from any increase in tax rates, or from any taxation of previously tax- exempt parking subsidies, but rather it results from voluntary cashing out of inefficient parking subsidies that are worth much less to the employee than they cost the employer. The resulting federal and state income tax revenue bonus thus is funded solely by reducing the private waste initially induced by the parking subsidy tax exemption. Further, the tax revenue bonus is an additional benefit above and beyond any reductions in air pollution, traffic congestion, and energy consumption that result when commuters elect to take taxable cash rather than a tax-exempt parking subsidy. The potential for federal and state tax revenue increases suggests that federal and state governments also have a strong interest in seeing that employers offer their employees the option to take taxable cash in lieu of a parking subsidy. To encourage employers to offer this option, the federal income tax code could be changed in the following way: employer-paid parking subsidies could remain as a tax-exempt fringe benefit, but the parking subsidy would be tax-exempt only if the employer offers the employee the option to take the mark-el value of the parking subsidy as a taxable cash travel allowance in lieu of the parking subsidy. In addition to the advantages listed above for the municipal variant of the cash alternative proposal, the proposed federal income tax change would eliminate the need for thousands of local governments to enact their own individual ordinances. The federal income tax exemption for parking subsidies is the origin of the inappropriate incentive for employers to offer free parking, and it should not be left to all local governments to design and implement individual policies that are all directed solely toward countering this incentive. Also, the argument for requiring employers to offer their employees the option to take taxable cash in lieu of any tax-exempt parking subsidy offered is even stronger at the federal and state level than it is at the local level, because any resulting increase in income tax revenue would accrue to the federal and state governments. To suggest the revenue potential of the taxable cash alternative requirement, there were 110,000,000 employees on civilian nonagricultural payrolls in the United States at the end of 1989 (Economic Report of the President, 1990, p. 342). Eighty- six percent of the American workforce commutes to work by car (Pisarski, 1987), and, as cited earlier, 90 percent of auto commuters park free at work. If the average cost of providing this parking is $30 per month, and if 20 percent of existing auto commuters who get free parking choose the taxable cash alternative, taxable income would increase by $6.1 billion per year. If the effective marginal tax rate on this income is 20 percent, the increase in tax revenue would be $1.2 billion per year. This revenue increase would occur without increasing any tax rates, and without removing the existing tax exemption of employer-paid parking. As argued earlier, this revenue increase would result from the voluntary choices of employees who prefer the taxable cash value of the tax-exempt parking subsidies they now receive. In this calculation, the assumed market parking price of $30 per month is above the price of many commuter parking spaces, but those who now get the biggest parking subsidies would be the ones most tempted to take the cash alternative. Thus, the taxable cash alternative received by those who do choose to cash out their parking subsidies could well be significantly above the average market price of parking for all workers. The assumption that 20 percent of those who now park free would give up a parking subsidy to choose the cash alternative is less than the average 28 percent reduction in auto trips to work found in the case studies comparing auto use between commuters who do and commuters who do not pay for parking at work. Finally, the assumed 20 percent combined federal and state income tax and social security tax rate is a conservative estimate of the marginal tax rate faced by those employees who would choose the taxable cash alternative to a parking subsidy, because most employees pay a marginal tax rate significantly above 20 percent (see Table 4). For all these reasons, the revenue estimate of $1.2 billion per year is quite conservative.7 ___________________________ 7. It might be argued that the additional taxable income paid to employees would be offset by reduced taxable income for the employers who pay the new cash travel allowances. But to the extent that employers fund the cash travel allowances by reducing parking subsidies, the employer's taxable income is unaffected. VIII. PROBLEMS WITH REQUIRING THE OFFER OF A TAXABLE CASH ALTERNATIVE TO PARKING SUBSIDIES Three important, interrelated questions regarding any requirement that employers offer their employees the option of taking a parking subsidy in cash are (1) how is the equivalent cash value of a parking subsidy defined, (2) how will employers find the money to pay the cash equivalent, and (3) how will the cash alternative requirement be enforced? 1. What is the Equivalent Cash Value of a Parking Subsidy? In regard to the first question of how a parking subsidy is defined, consider the situation where there is an active market for off-street parking, as there is in most downtown areas. Then, the cash value of an employer-paid parking subsidy is the difference between (1) the market price of the parking spaces offered to employees, and (2) the price that employees pay for parking in these spaces. For example, suppose the market price of commuter parking is $50 per month in the vicinity of the work site, and the employer offers free parking to employees. Then the equivalent cash value of the parking subsidy is $50 per month. Similarly, if the market price of parking is $70 per month, and the employer offers the spaces to employees for $20 a month, the equivalent cash value of the parking subsidy is also $50 a month. And in each case the offer of $50 a month in taxable cash costs the employer no more than the offered parking subsidy. Suppose, however, the work site is in an area where parking is so abundant that the market price is zero. In that case, the required cash alternative would also be zero because there is no market for any parking spaces that employees do not use. However, an employer who buys or constructs new parking spaces to offer free to employees would presumably have to offer as the cash alternative of those new spaces the monthly equivalent of the cost of constructing, maintaining, and operating those new spaces; otherwise, the cost of the new spaces would constitute a subsidy to drivers for which no equivalent cash alternative is made available to non drivers. Thus, before an employer decides to construct new parking spaces, if enough existing auto commuters elect to take the alternative cash value of the proposed spaces, it could eliminate or at least reduce the demand for new spaces. There is also the problem that, for employees who are subject to Social Security taxes on additional income, the employer would have to pay an extra 7.65 percent Social Security payroll tax, plus any other applicable local payroll tax levied on employers, on any tax-exempt parking subsidy that is converted to a taxable cash allowance. Thus, if an employee opts for the cash equivalent of a parking subsidy, the cost to the employer for the taxable cash allowance would exceed the cost of the parking subsidy. If the burden of payroll taxes levied on employers is considered a serious objection to requiring employers to offer employees the option of a cash allowance in lieu of free parking, the objection can be met by defining the equivalent cash value of a parking subsidy as the cash value that, when the employer's payroll taxes on that cash value are added, equals the fair market value of the parking subsidy. For example, if the employer pays an employee a taxable cash allowance equal to 93 percent of the fair market value of a forgone tax-exempt parking subsidy, the employer's 7.65 percent Social Security tax payment on this taxable cash allowance brings the employer's cost of the allowance up to the cost of the parking subsidy.8 2. How Will Employers Find the Money to Pay the Cash Value of Parking Subsidies? In regard to the second question of how employers will find the money to pay employees the cash equivalent of the parking subsidies not taken, the situation is simplest in the case where the employer rents parking spaces from a building landlord, and makes the parking spaces available to employees for free. Then, if an employee who now drives to work when parking is free elects to take the cash value of the parking space instead, the employer saves on parking exactly what is paid in cash. Even in this simple case, however, the employer faces a problem with employees who are now offered parking subsidies but do not take them. For example, employees who now turn down the offer of a parking subsidy and, say, bicycle to work, cost their employers less than do otherwise similar employees who do take the offer of a parking subsidy. If these employees who now turn down parking subsidies become eligible for the equivalent cash value of the parking subsidies they already don't take, these current non drivers would begin to cost their employers the same as drivers who do take the parking subsidies. This cost increase would be very limited, however, because, as cited earlier, only 14 -,percent of all workers now do not drive to work, and many of these non drivers presumably are not offered a parking subsidy. Naturally, any current driver who now receives an employer-paid parking subsidy and who elects to take the cash value of the subsidy instead would not raise an employer's subsidy cost at all, because the cash offer is entirely funded by the avoided parking subsidies. Employer-paid parking is, in effect, a form of wage discrimination in favor of employees who drive to work. The economic motivation for this wage discrimination is, presumably, that employees who drive to work can choose among a large number of employers within commuting distance, while those who don't drive to work have a more limited commuting area in which to seek employment. If an employer did not offer a parking subsidy to drivers, they would be more likely to work elsewhere, because they can choose among a larger number of potential employers within commuting distance. The employer doesn't have the same incentive to offer non drivers an equivalent subsidy because the nondrivers have fewer choices among alternative employment options.9 This wage discrimination in favor of drivers who have a wider option among employers is a rationale for offering employer-paid parking that is separate from and additional to the tax-efficiency rationale created by the tax exemption of employer-paid parking. But it seems particularly ___________________________ 8. If p is the employer's applicable payroll tax rate, the percentage of the parking subsidy to offer as the cash equivalent is I/(l +p). Since the employer's payroll taxes are not included in Table 4, the figures in Table 4 underestimate the tax incentive for employers to offer parking subsidies rather than cash travel allowances. 9. In labor economics terminology, the supply of employees who drive to work is more elastic to the employer than is the supply of employees who walk, bicycle, or ride transit to work. Thus, the employer gains by discriminating among employees according to their elasticity of supply, paying a lower wage to the employees whose labor supply is more inelastic. inappropriate for federal tax policy to encourage employers to discriminate among their employees in favor of those who are most mobile, by offering employer-paid parking, and against those who arc least mobile, by not offering an equivalent benefit. Thus, the proposed requirement to offer employees the option to take the cash equivalent in lieu of a parking subsidy would make it difficult for employers to continue any existing discrimination against employees who don't drive to work. If the employer wanted to keep its parking subsidies tax-exempt, the price would be the elimination of wage discrimination in favor of drivers. To repeat, however, the cash equivalent of a parking subsidy would have to offered only to those who are also offered a parking subsidy. Of course, making a previously hidden parking subsidy visible (by offering the cash alternative) might create further pressure for equal travel subsidies to all employees, and not just to selected employees. The proposed cash alternative requirement would not, however, interfere with any ridesharing subsidy, such as free bus passes, that the employer may continue to offer.10 3. How Would the Cash Alternative Requirement be Enforced? Parking subsidies are unique among tax-exempt fringe benefits in that both their cost to employers and their value to employees are unreported and largely unknown. The employer's cost of other tax-exempt fringe benefits, such as health insurance premiums, are reported both to the employee and to the IRS. Thus, a simple way to implement and enforce the requirement to offer employees the option of taxable cash in lieu of a tax-exempt parking subsidy - would be to require employers to report the tax-exempt parking subsidies on their employees payroll forms in the same way they already report other tax-exempt fringe benefits, such as health insurance premiums. This proposed parking subsidy reporting requirement would not only provide the basis for measuring each employee's cash alternative option, but would also serve to disclose the extent of total employer-paid parking subsidies, which can now only be estimated very roughly. Further, the reporting requirement would make explicit - to employers, to employees, and to policy makers - what parking subsidies go to whom. To discourage under-reporting of tax-exempt parking subsidies, employers who are found to have underreported their parking subsidies - and who are thus found to have offered their employees an insufficient cash alternative to the parking subsidy - could be held liable to make restitution to those employees whose alternative cash payments were smaller than they should have been. This would give employees an incentive to take an interest in the accuracy of their employers' estimates of any parking subsidies offered. IX. OTHER APPROACHES TO REDUCING DISTORTIONS CAUSED BY THE TAX - EXEMPTION OF EMPLOYER-PAID PARKING ___________________________ 10. For example, if an employer now offers employees either a parking subsidy or a bus pass, the proposed legislation would require the employer to add the option of the parking subsidy's cash equivalent to the menu. And some employees might choose the bus pass in preference to either the parking subsidy or its cash equivalent. There are several other policies that deserve consideration as ways to deal with the problems created by employer-paid parking. Some of these are alternatives to the required cash alternative offer, and others are complementary. 1. Eliminate the Income Tax Exemption for Employer-Paid Parking Subsidies Since the tax-exempt status of parking subsidies makes it tax- efficient for employers to subsidize their employees' parking, the income tax code is clearly at the root of the employer-paid parking problem. It seems totally inappropriate for federal tax policy to stimulate solo driving to work when so many other policies are devoted to dealing with the overuse of cars, and on transportation policy grounds it would clearly be a good idea to end the tax- exemption for employer-paid parking subsidies. If ending the tax exemption of employer-paid parking subsidies did lead to ending the practice of employer-paid parking, commuters would face the full market price of parking in their commute decisions, and this would be an even greater incentive to rideshare than offering commuters the after-tax market value of their current parking subsidies. Although transportation policy analysts have long called for ending the tax-exemption of employer-paid parking subsidies, it is obviously politically difficult to begin taxing a fringe benefit that so many commuters enjoy. As mentioned earlier, 86 percent of the 110,000,000 civilian nonagricultural employees drive to work, and 90 percent of them park free at work, so perhaps as many as 85,000,000 commuters receive some form of parking subsidy. Although small parking subsidies would presumably not be taxed, still it would be hard to deal with the public outcry against taxing a traditional tax-exempt fringe benefit, especially since so many influential decision makers in the highest tax brackets now receive large parking subsidies. In effect, the more pervasive the parking subsidies are, the more damage they do, but the harder they are to end. In this political context, there is a distinct advantage to the alternative policy of requiring employers who offer employees tax-exempt parking subsidies also to offer employees the option of the taxable cash equivalent: it helps some employees, doesn't harm any others, and causes minimal inconvenience to employers. It increases tax revenues without increasing tax rates, and provides commuters an incentive to rideshare even if they are offered a parking subsidy. Also, local governments cannot change federal tax policy, and if the federal government does not act, local governments can on their own require employers to offer employees the taxable cash equivalent of any offered parking subsidy. A final question is whether eliminating the tax-exemption of employer-paid parking would in fact lead to the total elimination of employer-paid parking. As mentioned earlier, in addition to the tax-efficiency motive for offering employer-paid parking, there is the additional motive of wage discrimination in favor of employees who drive to work and are thus able to choose among a wider array of employment options. That is, even if employer-paid parking subsidies were taxable, some employers might well continue to offer free parking in order to attract those employees who would drive to work even if they have to pay for their parking, and who thus have choices among employers in a wide area. 2. Increase the Income Tax Exemption for Ridesharing Benefits To counteract the effect of exempting parking subsidies from income taxation, mass transit and ridesharing advocates have recommended increasing the tax exemption for employer-provided transit passes and vanpool subsidies. Currently, transit subsidies are tax exempt from federal income tax only up to a value of $15 a month, and if the subsidy exceeds $15 a month the entire value is taxable. An increase in this tax exemption would make it tax- efficient for employers to offer larger mass transit and ridesharing subsidies to counteract the harmful effects of the parking subsidies they also offer. There are, however, two disadvantages to this recommendation; it would reduce federal and state income tax revenue, and, based on previous research, it would do little to counteract the influence of parking subsidies. Several of the case studies cited earlier showed that, as long as parking remains free, it is difficult to out-subsidize the automobile. Only when parking subsidies were eliminated did significant numbers of solo drivers shift to other modes. Increasing the tax exemption of transit and vanpool subsidies also continues the bias toward motorized commuting, and retains, even strengthens, the bias against walking or bicycling to work. Finally, as argued just above, local governments cannot change federal tax policy, but can require employers to offer employees the taxable cash alternative to any offered parking subsidy. 3. A Tax-Exempt Commute Allowance in Lieu of Employer-Paid Parking This proposal is to modify the federal tax code to allow any employer to pay all of its employees a uniform tax-exempt cash commute allowance if the employer doesn't subsidize any of its employees' parking at work. This would, if effect, be a uniform income tax deduction for all employees whose employers don't subsidize any employee parking. Employers would qualify their employees for the new tax exemption by certifying to the Internal Revenue Service that they provide no commuter parking or provide it only at the fair market price.11 This proposal would not be as unpopular as taxing the value of parking subsidies because any employer could continue to offer employees tax-exempt free parking and not offer them the tax exempt commute allowance. Nondrivers whose employers continue to offer free parking, however, would be motivated to ask "Why give free parking to drivers and nothing to me when you could pay us all a tax-exempt commute allowance?" Allowing only a small tax-exemption for commute allowances (say $15 per month) would probably induce few employers to convert parking subsidies into cash allowances, so it would mainly reduce tax payments from employees who already work for employers that don't offer parking subsidies. The result is to reduce tax revenues without inducing significant changes in travel choices.12 A larger tax-exemption for commute allowances (say $50 per month) would probably be required to induce most employers to end employer-paid parking, and thus to induce significant changes in travel choices.12 Compared to the idea of requiring employers to offer employees the option to choose the taxable cash value of any offered parking subsidy, two advantages of the commute allowance proposal are that (1) it effectively raises the price of parking to the full market price of parking, and (2) it treats all employees equally by allowing all the same tax exempt commute allowance. Two disadvantages are that it would reduce federal income tax revenue, and that it can be implemented only by the federal government. ___________________________ 11. These certifications could be verified by evidence that: employee parking prices equal nearby market parking prices; parking spaces are available to all employees at the prices charged; and any addition to employer's parking supply is economically justified by the parking prices to be charged. 12. For a more complete discussion of the tax-exemption for commute allowances and its possible revenue consequences, see Shoup (1982) X. CONCLUSION The case studies reported here suggest that, on average, employer-paid parking increases the number of cars driven to work by 37 percent. Further, a new multinomial logit analysis of survey data for commuters to downtown Los Angeles suggests that employer- paid parking increases the number of cars driven to work by 20 percent. The logit analysis is an advance in this area of research because it moves beyond case studies to examine a large sample of employees. The logit model controls for other variables affecting mode choice, permitting an accurate assessment of the mode share effect of employer-paid parking. Finally, the model is estimated with accurate data on the after-subsidy price of parking, so that the influence of parking prices on travel choices is not masked by employer-paid parking subsidies. The income tax exemption of employer-paid parking subsidies strongly encourages employers to subsidize their employees' parking, and thus indirectly encourages commuters to drive to work alone. To combat the harm caused by the tax-exemption for employer-paid parking, we have argued the case for the policy of requiring employers to offer their employees the option to take the taxable cash value of any parking subsidy in lieu of the parking subsidy. This minimally intrusive, incremental change in the tax code would retain the tax exemption for employer-paid parking subsidies only if the employer also offers employees the option to take the market value of the parking subsidy as a taxable cash travel allowance. Even without changes in the federal or state income tax codes, however, local governments can act effectively on their own. Any local government can enact its own ordinance requiring employers to offer their employees the option to take the value of any offered parking subsidy as cash income. Requiring employers to offer employees the option to cash out their parking subsidies if they wish will reduce traffic congestion, improve air quality, cut gasoline consumption, enhance employee welfare, and increase tax revenue without increasing tax rates. All these benefits will derive simply from requiring employers to subsidize people, not just cars. REFERENCES Anil Verma Associates (1986) Downtown Los Angeles Parking Price Survey, Community Redevelopment Agency, Los Angeles. Barton Aschman Associates Inc. (1986)Los Angeles Central Business District Employee Travel Based Survey, Final Report, Community Redevelopment Agency, Los Angeles. Center for Urban Transportation Research (1989) Factors Related to Transit Use, University of South Florida, Tampa. Commuter Transportation Services, Inc. (1988) 1988 Commuter Survey Commuter Transportation Services, Inc., Los Angeles. Francis, W. & Groninga, C. (1969) "The Effects of the Subsidization of Employee Parking on Human Behavior." Unpublished research paper, School of Public Administration, University of Southern California. Gillen, D. (1977) "Estimation and Specification of the Effects of Parking Costs on Urban Transport Mode Choice," Journal of Urban Economics 4: 186-199 Mehranian, M., Wachs, M., Shoup, D. & Platkin, R. (1987) 'Parking Cost and Mode Choices Among Downtown Workers: A Case Study," Transportation Research Record 1130, Transportation Research Board, Washington D.C. 1-5. Pisarski, k E., Commuting in America, Westport, Connecticut: Eno Foundation for Transportation, 1987. Shoup, D. & Pickrell, D. (1980) Free Parking as a Transportation Problem U.S. Department of Transportation, Washington D.C. Shoup, D. (1982) "Cashing Out Free Parking," Transportation Quarterly 36: 351-364. Soper, C. (1989) "Pay Parking for Solo Commuters: The 20th Century Solution." Unpublished Paper, UCLA Extension Transportation Demand Management Program, UP #X492. Surber, M., Shoup, D., & Wachs, M. (1984) "Effects of Ending Employer-Paid Parking for Solo Drivers," Transportation Research Record 957 Transportation Research Board, Washington D.C, 6771. Train, K- (1979) "A Comparison of the Predictive Ability of Mode Choice Models with Various Levels of Complexity," Transportation Research 13A: 11-16. Transport Canada (1978) The Effects of the Imposition of Parking Charges on Urban Travel in Canada, Summary Report T?-291, Transport Canada, Ottawa. Wilbur Smith & Associates (1981) Downtown Los Angeles Parking Study, City of Los Angeles Department of Transportation, Los Angeles. Willson, R. and Shoup, D. (1990a) The Effect of Employer-Paid Parking in Downtown Los Angeles: A Study of Office Workers and Their Employers, Southern California Association of Governments: Los Angeles. Willson, R. and Shoup, D. (1990b) "Parking Subsidies and Travel Choices: Assessing the Evidence," Transportation 16: 53-69. Willson, R. and Shoup, D. (1990c) "A Costly Intervention: How Employer-Paid Parking Affects Commuter Mode Choice," Paper presented at the 32nd Annual Association of Collegiate Schools of Planning Conference, Austin Texas. Appendix A Model: Multinomial logit, Fitted by the Maximum Likelihood Method (Mode 1--Auto (solo driver); Mode 2--Carpool/Vanpool; Mode 3--Transit) Independent Variable Estimated Coefficient t statistic (Applicable mode in parentheses) Parking Cost/Income (1-2) -57.16 -3.33 Running Cost (w/o parking)/Income (1-3) -134.47 -4.52 Auto Travel Time (1-2) -0.0077 -1.56 Transit Travel Time (3) -0.021 -4.04 Occupation Dummy (1) 0.37 1.93 Employer Rideshare Program Dummy (2) 0.74 3.19 Vehicle Available for the Work Trip Dummy (3) -3.18 -11.40 Auto Dummy (1) -2.66 -5.18 Carpool Dummy (2) -5.02 -8.15 Likelihood ratio index .33 Log Likelihood at zero -783.3 Log Likelihood at convergence -520.4 Notes: The occupational dummy variable is a proxy for factors that would increase the likelihood of driving alone. The dummy is set to one if the respondent is in a professional occupation ('executive, administrative and managerial" and "professional specialty") and zero otherwise. This variable is intended to capture the need for a car at work because of business meetings and variable hours, and status-related attitudes that might affect mode choice. The rideshare dummy measures whether the employer offers significant ridesharing incentives (zero if no incentives, one if incentives). Finally, the vehicle availability dummy measures whether a car was available for that work trip (zero if car not available, one if available). Local Tax LOCAL TAX GROUP PHILOSOPHICAL STATEMENTS AND GOALS 1) Transportation demand management will work better if decisions about ,it are primarily made in the private sector. 2) The focus of efforts should be on the commute trip. 3) The role of government should be to establish performance targets rather than be prescriptive. 4) Transportation demand management should be applied in a broad sense. 5) The focus should also be on behavior change or making the commuter shift from reliance on single occupant vehicles. 6) The private sector should take the lead in managing revenues which are derived from an assessment or a tax. 7) Government mandated programs should be the last resort. 8) The private sector should begin to view its parking capacity as an asset and make the parking pay financially by introducing a charge to commuters. 9) Employers should begin to help themselves by addressing the commute problems at their sites. RECOMMENDATIONS Develop an assessment program by introducing parking charges at individual sites. The revenues from the assessment would be targeted to transportation demand management programs. The features of the assessment recommendation included: 1) Assessment: - The assessment would be placed on the employer and based on the number of employees in the firm. - Local governments would establish average vehicle occupancy ratios for employment sites. - The employer would be able to get credit against the assessment under two conditions: a) the parker paid the charge him/herself, and b) the firm hit the government established average vehicle ratio. (This is the occupancy ratio which would be established for firms of a specified size.) The AVR could also vary according to area, i.e., firms in areas with greater employment density might be required to have a higher AVR than those in lower density zones. - The credit could/would be on a sliding scale up to the target. This would allow employers to achieve a partial credit even if the actual AVR were not reached and it may encourage them to continue efforts. - Employers would be allowed.to sell credits to other employers if they overachieved by going beyond the required AVR. Similarly, they would be allowed to purchase credits from other employers if they underachieved. The intent is to attain an overall AVR for an area and to introduce entrepreneurial efforts into promoting congestion reduction. - The local government would act as the collector of the tax and only 90 percent of it would be returned to the private sector. Ten percent would be set aside for direct government use in administering the program including monitoring, auditing and evaluation. Note: In effect, the program would work something like a local improvement district or a parking business improvement association (PBIA). Private sector businesses would introduce a parking charge or a parking charge would be required (by the local jurisdiction) on employees. The revenues from the charges would be directed toward transportation demand management programs for these same employees. These programs could take the form of transit or vanpool subsidies, allowances or purchased services, such as custom bus routes, van programs, etc. Contra Costa County actually has a program similar to this although the revenues are developed on a simple tax based on rented gross square footage. Businesses in certain areas of Contra Costa agree to tax themselves at a specified rate in order to purchase transportation demand management services. 2) Disposition: . Revenues from the assessment would be placed in a Trust Fund. The fund would be governed by a joint public/private committee for distribution and use in the area. The Trust Fund would be used only for transportation demand management and the specified administrative purposes. 3) Goals: As goals, Average Vehicle Ratios (AVRs), which were previously described, would be established. These would be set on a regional basis by a regional agency and would be shaped to areas within the region. - The goals would be recommended by local committees with representatives of the private and public sectors. - The regional agency would approve or disapprove the AVR and the zonal limitations. - The regional agency would also approve the employee threshold on which AVR goals would be applied. For example, it would decide if the goals would apply to all or firms of say 50 or 100 employees. 4) Enforcement And Penalties: Civil penalties would be used as the primary enforcement mechanism. They would be applied against employees or employers for perjury, fraudulent activities or failure to establish the assessment. Penalties would not be applied if an employer failed to achieve the AVR. Employers or employees would be required to submit affidavits of compliance with their performance records. The regional agency would conduct random audits of participating employers. 5) Assessment Level: The assessment level would be $1 to $3 per day per employee. ALTERNATIVE RECOMMENDATION At the local jurisdiction level, introduce a simple, low-level parking tax. The tax could be applied either as an assessment on stalls or as a surcharge on the act of parking. The parking tax would have the following features: - It would be applied to everyone, i.e. commercial and retail. - Its revenues would be used for transportation demand management. - The local government would be the agency to establish, collect and administer the tax. - The tax should be applied to the act of parking or parking use. This type of parking tax is currently used by many cities around the country. The taxes generally range between 10 and 20 percent. Some examples include: Washington, D.C., Pittsburgh and San Francisco. The taxes are relatively easy to collect and administer and are considered to be somewhat politically feasible. Their primary feature is as a revenue generating device and not as a transportation demand management tool. In fact, this type of parking tax generates a great deal of revenue but does not usually result in commuter behavior change. ATTACHMENT 3 WHITE PAPER PARKING TAX DISCUSSION PAPER Dr. C Ulberg November 20, 1990 PARKING TAX DISCUSSION PAPER INTRODUCTION A parking tax can be implemented in several ways. It can be imposed on the parking provider or directly on the parker. It can apply broadly to all parkers or narrowly to a specific group of parkers. It can be imposed on a jurisdiction-wide basis or to some narrowly defined geographic area. There is also a choice in how to collect the tax: directly from parkers, through parking lot operators, or through employers. The tax can be charged as a fixed fee or as a proportion of the cost or duration of parking. The alternative ways to audit and enforce a parking tax contribute to the number of possible types of parking tax. Finally, the revenues generated by the parking tax can be directed to a variety of uses. The combination of these choices determines the outcome of the parking tax, including its impact on transportation demand, revenue generation, market responses, ease of administration, and public and political acceptability. Parking taxes have been implemented in several major jurisdictions, including Baltimore, Chicago, Los Angeles, New York, Pittsburgh, San Francisco and Washington, D. C. In all those jurisdictions, the implementation has been similar. Wherever a parking charge has been used, a percentage has been added to the charge and collected by the parking operator directly from the person or entity purchasing the parking. The only exceptions have been Chicago and Baltimore, where a fixed fee has been charged. In all cases, the tax has applied to all parkers. In addition, the fees have all gone to the jurisdiction's general fund. In Montgomery County, Maryland, a proposed parking tax was to be charged on all parking spaces, whether or not a fee was charged for use of the space. It was not implemented. The state of Washington's legislature passed enabling legislation in early-1990 allowing local jurisdictions to impose a commercial parking tax. None have done so to this date. Besides an obvious way of raising revenue, a parking tax can be seen as a transportation demand management tool. By raising the cost of parking, jurisdictions will encourage automobile drivers to switch to other modes of travel, or to travel less where and when a parking tax applies. The degree of change that a parking tax engenders can be debated. However, the transportation demand management impact of a parking tax can be targeted to particular groups whose travel behavior is most critical to change. For instance, a parking tax that applies most intensely to commuters traveling in the peak hour will help alleviate peak hour congestion and pollution. However, targeting a tax to a particular population (e. g., peak hour commuters) may result in higher administrative cost and reduce the net revenue realized from a parking tax. The revenue potential from a parking tax is very high if that tax can be applied broadly. For instance, a recent study estimated that in King County, Washington (with a population of about 1.5 - million people), a tax of 50 cents per day paid for all off-street parking used by peak hour commuters would generate almost $100 million a year. The revenue potential from a parking tax applied only 1 to commercial parking would, of course, be much less. Generating revenue from a parking tax is not necessarily incompatible with a transportation demand management objective. In fact, it could be argued that travel behavior will change significantly only if a fairly sizable tax is applied to a broad range of parkers. An important potential impact of a parking tax results from how it is allocated. In most jurisdictions, revenue from parking taxes have simply gone into the general fund to be used for a variety of needs. However, if the revenue from a parking tax is directed to transportation purposes, it may inadvertently reduce the transportation demand management impacts by providing greater street and highway capacity. If the tax revenues are used to build better roads, the increase in traffic may offset the reduction caused by the cost of parking. If the revenues are allocated to transportation demand management measures, such as transit subsidies or rider programs, the tax can provide consistent impetus for mode shift from single occupant vehicles. TYPES OF PARKING Parking is provided in a number of ways. The type of parking influences the ability to impose a tax and administrative requirements to audit and enforce payment of the tax. In this section, five basic types of parking will be discussed: 1) metered, 2) cashiered, 3) individual lease, 4) business lease, and 5) business owned. The essential aspects of "metered" parking are that the parker purchases some proof that parking was paid for and displays that proof somewhere in or near the vehicle. It may be an actual parking meter, a ticket displayed on the dashboard, or a slot in a drop box filled with money. The important feature of this type of parking is that enforcement of payment of the charge and a parking tax requires on-site inspection. Cashiered parking is a system in which a person intercepts the parker and collects for the privilege -of parking. The system usually involves some sort of receipt that a parking charge has been paid. Receipts can be serially numbered to create a paper audit trail to enforce payment of a parking tax. Individuals often lease parking on a weekly, monthly, or annual basis from a parking operator. The advantage to the operator is predictability of income. For the parker, it usually means paying at a cheaper rate than hourly or daily parking and guarantees a parking space, which makes parking' more convenient.' based parking requires some sort of contract and thus provides a readily auditable record of parking and makes enforcement of a parking tax relatively easy. When an employer or business leases parking, enforcement of a parking tax is fairly straightforward if there is an identifiable charge for the parking. It is no different from taxing an individual lease, with one exception. If-the idea of the system is to make the parker pay the parking tax personally, some additional mechanism must be implemented to prove that payment has been made. Sometimes, an employer or business may include parking as a part of the office or retail space lease, when the parking provided is not specified. For instance, contracts for businesses that lease retail space in a shopping mall generally do not include a separate cost for customer parking space. Employee or customer parking in office parks also is not often specified in -office space leases. Even when specific parking places are provided as part of the office space lease, the cost for that 2 parking is not specified. If this type Of parking is to be taxed, some way of specifying the number of spaces or the value of the parking must be developed. When an employer or merchant owns parking places, the ability to tax the parking can be severely limited. The employer or merchant already pays property tax on the land used for parking, and taxing the spaces themselves may be construed as imposing a property tax twice. Taxing the use of the parking spaces requires some records of that use. In most cases, the property owner will not charge for parking, so determining the value of the parking may be problematic. When a parking tax is devised, it is important to know how much of each kind of parking exists so that administrative costs and procedures can be properly specified. In addition, the parking tax should account for the fact that parking may be converted in response to the imposition of the tax. For example, businesses may find more advantage in purchasing land for parking than in leasing it if the tax doesn't apply to business-owned parking. PARKING TAX OPTIONS Affected Taxpayer The decision concerning which persons or entities should incur a parking tax is a critical issue if transportation demand management is a primary goal of implementing the tax. If individual porkers incur the tax, it -will encourage individual mode shift. If entities such as parking operators, employers or merchants incur the tax, the impact on individual m e sh ft w 11 depend on the extent to which the tax is passed on. Parking operators will most likely pass the bulk of a tax on to individual parkers. However, if a tax is designed to affect particular parkers, the tax may or may not be passed on to those people. Parking operators may have the option of changing parking rate structures to respond to the market. Employers and merchants who are required to pay a parking tax will probably pass most of the cost on, but not necessarily to the people parking. For instance, an employer whose parking is taxed may simply pass the cost on as lower salaries to employees or higher costs to customers. Retailers may pass the tax on in the form of higher costs for goods. The people receiving lower salaries or paying higher costs for goods are not the same group as the parkers. In any case, the connection between parking and receiving lower salaries or paying higher costs is indirect enough to severely limit the transportation demand management potential of such a parking tax. On the other hand, employers or merchants may respond to a parking tax by providing less parking. A restricted parking supply can be a very effective transportation demand management tool. The extent to which this occurs will be determined partially by the tax rates, the competition for use of the land available for parking,.and the amount of parking required by zoning codes. If zoning codes require a minimum number of parking spaces, this response may not occur. A parking tax directed to the parker has the greatest possibility to affect individual behavior. Even if the tax is collected by a parking operator or an employer, mechanisms need to be developed to ensure that the parker pays the cost, or at least is aware of it. In most jurisdictions where the parking operator . collects 3 the parking tax, the cost of the tax is required to be displayed prominently on signs and tickets. Employers may be required to provide proof that employees aid a parking tax by producing personal checks from the employees. The city or Alexandria, Virginia, is experimenting with a provision that employers produce personal checks proving that employees paid parking charges. In most locations, short-term parking is not as serious a transportation problem as long-term parking, since short-term parkers tend not to travel in the peak hours. A parking tax may be directed toward commuters or other people who tend to drive during the peak hour. Some options to do that will be described in a later section. In any case, a commuter parking tax may alleviate objections to a general parking tax from merchants who fear losing business to locations where a parking tax is not charged, such as a shopping mall or nearby jurisdiction where no parking tax exists. Geographic Differentiation In most locations where a parking tax has been implemented, the rate is the same in all zones within the,jurisdiction. For transportation demand management or other policy objectives, charging parking fees at different rates in different places may be most advantageous. When the tax is charged as a percentage of the parking fee, the effect is to charge a greater tax in areas of greatest congestion. This may be appropriate for transportation demand management reasons. On the other hand, places that already have high parking costs will support modal shift to high occupancy modes. However, special congestion problems in some locations might be alleviated with differential parking tax rates. The use of different rates for different zones is especially important in implementing a tax on parking where no specific cost can be ascertained. For instance, if a parking tax were to be applied on all employer-provided parking, even if the parking spaces were owned by the employer, the fee could be specified without having determinate information about the value of the parking. Type of Tax At least three types of parking taxes can be considered: 1) ad valorem, 2) hourly rates, and 3) fixed fee. -The appropriate type of tax depends on who is to be charged and the objectives of the tax. An ad valorem tax is charged as a percentage of the parking fee. This type of charge is best when all types (including short- and long-term) of parking are being taxed and when the value of the parking can be determined. It is also most appropriate in a jurisdiction where the cost of parking is proportional to the traffic congestion. A tax based on the number of hours is closely related to an ad valorem tax. However, this method differs in that when discounts are offered for longer term parking (which is usually the case), it has the effect of increasing the relative tax on long-term versus short-term parking. This increase is consistent with transportation demand management objectives and also does not discourage shopping. A fixed fee is best when only long-term parking. is to be taxed. Charging the same fee for one hour and eight hours would be perceived as unfair. In addition, it would discourage short-term parking more than long-term parking, which would be contrary to transportation demand management objectives and would lead to 4 objections from merchants. A fixed fee works well in situations where parking that has no specified value is to be taxed. Targeting a Tax to Commuters At least four options exist to target a parking tax to commuters: 1) long-term parking tax, 2) peak hour parking tax, 3) short-term rebates, and 4) employer-based parking tax. There is no known experience with any of these options. Taxing long-term parking (over six hours) would confine most of the parking tax to commuters, since very few other users park in commercial parking lots for that length of time. In this option, no tax would be applied to short-term parking. However, the potential drawback to this option is that parking operators may change the rate structure so that short-term parkers end up bearing some of the cost of the parking tax. Taxing parking only during the morning peak would direct the tax to a higher percentage of commuters than a tax that apprised all day. In this option, parkers whose cars were parked during the morning peak (.say, -from 6 to 9 AM), would be required to display stickers showing that they had paid the tax. Individuals who purchased leased parking would purchase the stickers with the lease. Occasional long-term parkers could purchase books of stickers at convenient outlets, or individual -stickers from dispensers. Enforcement would require on-site observation. Another option to target commuters is to charge a parking tax to everybody, but provide rebates to short-term parkers such as shoppers. The-rebates could be in the form of tokens obtained from the jurisdiction collecting the tax and distributed by merchants. They could be used to pay for parking or transit. A fourth option is to collect a parking tax through employers. For instance, employers could be required to pay a parking tax for every employee unless they could prove that the employee used some other mode of transportation. Alternatively, parking operators could be required to provide information about employers who leased parking for their employees. If the employees were not charged for that parking, the employee could be subject to a tax. In this way, a charged parking tax could be used as a tool to influence charging for parking in general. CRITICAL ISSUES In judging different ways that a parking tax could be implemented, a number of critical issues need to be considered. Those identified here are based on experience in the Puget Sound area, where local jurisdictions are considering ways to implement a local option parking tax allowed by the state legislature this year. Taxing Leased Parking Much of the parking available to commuters is leased or owned by employers. Confining a parking tax only to parking for which the parker is charged reduces the breadth of application of the parking tax and can be challenged on the basis of equity. It is fairly clear that, when a business leases particular parking places and pays a specified fee for them, a tax can be applied. However, if parking spaces are provided as a part of an office space lease in which no separate charge is identified, imposing a parking tax is more difficult. It is even more challenging if 5 provision of parking is assumed, but no specific parking spaces are identified, such as in some office parks and shopping malls. At least two solutions to this problem are available. A jurisdiction could simply make an assumption about the value of parking that accompanies a lease of office or retail space on the basis of surrounding market values or some other criterion. Alternatively, the .jurisdiction could require by ordinance that parking provided with leases be separately identified. Retailer Reaction Imposing a parking tax that raises the cost of parking for shoppers will discourage some retail activity. Not all shoppers will continue to drive or switch to some other travel mode. In most jurisdictions, alternative shopping locations where a parking tax doesn't apply will bi available to shoppers. Retailers may have legitimate objections to such a parking tax. Jurisdictions with an interest in maintaining a lively central business district will not want to harm its retail viability. It is important to work with the retail community to resolve these issues. Two classes of solutions are possible. One strategy is to ensure that parking taxes apply uniformly to all surrounding jurisdictions and shopping areas. The relative impact on an i Individual shopping area can be minimized . Another solution involves targeting the parking tax to commuters, as outlined above. This strategy may have the beneficial effect-of making more short- term parking available for shoppers. Employer Reaction Employers may have the same concerns as retailers. Raising the cost of parking makes finding workers more difficult, especially if surrounding jurisdictions and employment areas are not affected by a parking tax. This effect can be minimized by widespread and uniform application of parking taxes. In addition, alternative modes of transportation should be enhanced at the same time that the price of automobile commuting increases. Parking Lot Operator Reaction No parking tax will be welcomed by parking lot operators. Any additional charges will detract from potential profits. In addition, if parking lot operators act as the collection agents of a parking tax, they will incur some additional administrative costs. Any proposed parking tax should account for these administrative impacts. To assess the impact of a parking tax on travel behavior and revenue generation, lawmakers must understand how parking lot owners or operators will respond to the tax. For instance, if a tax reduces the demand for parking, it is important to predict whether owners or operators will respond by selling property or converting it to other uses. Another question is how the parking rate structure will be affected by char in& a parking tax to a targeted group of porkers. If a parking tax is designed to apply primarily to long-term parkers, the shift of parking costs to short-term parkers should be estimated. Building Operator Reaction Building or office park operators respond to the same market forces as parking lot operators. If the cost of parking increases, their potential profit also 6 decreases. They may have more difficulty finding tenants and may have to absorb some of the extra parking cost resulting from a parking tax. If building operators are required to separate the cost of parking from the cost of leasing office space, they lose flexibility in negotiating contracts. The likelihood that building operators will contract with a commercial parking operator to manage parking facilities will change if a parking tax is imposed, This could change the parking rate structure and the relative -availability of short and long- term parking. In designing a parking tax, lawmakers should confer with building operators in order to predict outcomes. Parker Response Whether transportation demand management or revenue generation is the primary goal for a parking tax, lawmakers must be able to predict how parkers will respond. A good estimate of revenue generation depends on understanding the impacts of a parking tax on travel demand. A small parking tax may have little or no impact on travel demand. A large tax may cause large shifts. The elasticity of parking price has been studied in many locations, and the studies have clearly shown that the impact of increased prices on parking use varies greatly from case to case. One of the.complications in studying parker response to changes in price is the variation in price itself within fairly small geographic areas. For instance, when parking cost varies 20 percent from one block-to the next, a 20 percent parking tax may simply move parkers one block further away from their destination. The impact on the transportation system may be negligible. Another complication is that parking supply interacts with parking price in determining the use of parking. If parking supply increases substantially at the same time that a parking tax is imposed, the effect of the parking tax may be overwhelmed by the market forces created by the new supply of parking. 7 Leasing LEASING GROUP DISCUSSION HIGHLIGHTS - The role of the lender is much less significant than many people think. Lenders only come into play if the developer is far off the mark. - Inconsistent land use policies result in parking standards which vary between land uses and.-between jurisdictions. - It's easier to sell easy access than vanpool programs or TDM. Developers abhor ongoing commitments. This aversion Is partly fueled by employers. - The market is "tenant-driven." Tenants are shopping for amenities on behalf of their employees. All of the biases in the system err on the high side. - There is a need to assemble information about what market demand really is. Not many jurisdictions rely on ULI data. They simply rely on "folk wisdom." - Cooperation is needed between Jurisdictions on zoning, land use, and other infrastructure planning. - The tenant's role in leasing issues should be highlighted more. - Local jurisdictions are usually not willing to share the risk at all with developers if parking supply is reduced. - ULI is one of the best organizations to collect data on parking supply and demand. NAIOP would be a good organization to disseminate this information. - A distinction should be made between urban and suburban situations in discussing pricing. Highland cost drives this. - In the past, some employers were required to provide parking at an incredibly high ratio and now local governments cannot just turn around and tax them on all these spaces. - Phasing would not work in an urban area. - Separating the cost of office space and parking in leases would make sense if there are federal tax code revisions. However, such a requirement could also result in Just shuffling numbers around. Where parking is limited, separating costs of parking in leases becomes more of an issue. With parking garage construction, space costs could perhaps be separated out from garage costs more easily, letting the tenant know what percentage of total cost is related to parking. It would be undesirable to have a local jurisdiction require that costs of parking be separated in leases. Enforcing this requirement could be a nightmare. - Release everybody from on-site requirements and let them get their own parking. The nice thing about this method is that parking and building space costs are clearly separated. Bellevue, Washington is close to doing this. Documentation is needed about other places where this is already being done. - Assessors could be required to assess parking separately from buildings and other space. - A distinction should be made between high and low cost parking at new development and high and low cost parking at existing sites. Existing suburban sites with low cost parking represent about 75% of the market, while new sites with high cost parking only account for about 5% of the market. RECOMMENDATIONS Existing Development/Low Cost Redeveloping Sites: - Reduce parking requirements. - Place lid on peripheral parking. - Enact TDM programs. Existing Development/Low Cost - Offer reduced property tax for developments that take land out of active parking (parking bank) - Put mixed uses, new services for employees on land taken out of parking Existing Development/High Cost - Goal: Show cost of parking (separate cost of parking in leases). Make parking a commodity (create market). - Public leadership in parking development. New Development/High Cost - Release from on-site parking requirements; acquire parking from separate provider. - Document examples of existing sites where parking is acquired separately from building space. Research - Need better local data relating to innovative programs/market. - Need incentive for consistency in data collection between different areas. - Have a national group (ULI, ITE, etc.) offer grants to assist this effort. Next Steps - In the Seattle area, Metro should convene a roundtable discussion involving private sector representatives (major employers and developers) as well as local Jurisdictions in their role as employers, e.g., King County. The group's focus would be ideas contained in 2929 (The Growth Management Strategies Act). Microsoft, Boeing, US West, Puget Power, and CH2M Hill are among the companies mentioned as possible invitees. ATTACHMENT 4 WHITE PAPER LEASING PRACTICES AND PARKING Peter Valk LEASING PRACTICES AND PARKING Commuter Parking symposium September 1990 Prepared by: Peter J. Valk Transportation Management Services Pasadena, California This paper reviews how development, leasing, and management of property affects parking management strategies designed to reduce the demand for commuter travel. The Setting The value of non-residential real estate is based on its attractiveness to tenants. One key IL) a property's appeal is its accessibility -- more specifically, its accessibility by automobile. Properties whose parking supply, allocation, and pricing do not meet tenant demands are perceived as less attractive than properties offering a better parking environment. This affects occupancy and revenue. Tenants perceive their work site to be accessible if parking is abundant and inexpensive. Access to an immense supply of no- or low-cost parking has come to be expected by tenants and employees in most work centers, especially those outside central business districts. In fact, parking has become such an important element of leasing property that simply providing a place in which to store automobiles is not enough. In some new "prestige" office buildings, tenants are enticed into leasing space with the offer of enclosed parking stalls whose walls protect valuable vehicles from errant car doors. The traditional practice of providing low-cost, plentiful parking makes it difficult to institute parking management strategies that make travel in carpools or vanpools more attractive than driving alone. Institution of these and other strategies will not come about until changes occur in the development and leasing marketplace, along with demonstrable charges in tenant parking needs. These changes are now beginning to occur. This paper examines how development, leasing and property management practices affect parking management strategies designed to reduce commuters' demand for vehicular tripmaking. The Development Process Conditions at a work site that govern the pricing, supply, and management of parking tire shaped during the process of development as property owners, lenders, and municipalities attempt to provide for long-term accessibility to a site. Terms of development stipulated by local agencies specify the amount of parking to be provided; often these terms set a minimum ratio of spaces to gross square footage. In some instances, the terms even specify that tenants and employees not be charged for parking so that they will not seek parking spots in nearby neighborhoods in order to avoid parking fees. Parking requirements are also spelled out by lending institutions that seek to preserve the attractiveness of property over time. In most cases, the demands of lenders result in a supply of parking space more generous than that dictated by local municipalities. For example, the City of Los Angeles has allowed property owners to reduce the amount of off-street parking required at a new development in return for undertaking measures, such as ride-matching and offering financial incentives, that reduce the demand for commuter travel, This opportunity to reduce the investment in parking has appeal in circumstances where the city's requirements are higher than that required by the lender. Few, if any, developers have taken advantage of this program since its introduction in the early 1980's since lenders 2 are more likely to require higher parking ratios than is mandated by city codes. Oddly enough, few if any studies have been done to determine the adequacy of parking standards except in cases where obvious problems exist. In a 1996 Urban Land Institute study1, Gruen and Gruen examined the parking supply at a variety of east and west coast business parks and found that most were only 47% occupied even when the parks were well ]eased. This study, though not conclusive, indicates that many work sites may be over-parked, causing developers to forego revenue associated with non-parking improvements. Not only do they forego this revenue, they also lose money on the parking supply provided. Revenue from most parking facilities associated with office buildings does not yield the return on investment required to cover the debt service on the facilities. Parking management strategies that reduce the amount of parking may find appeal among lenders trying to make their investments more productive by increasing investments in non- parking aspects of projects that yield higher rates of return. These strategies will appeal only when market demands for parking have changed in such a way that a property will not be any less attractive (or less valuable,) because it has fewer parking spaces. lbs is most likely to occur in projects with multiple phases where traditional amounts of parking arc provided in early phases and at the same time aggressive parking and transportation demand management programs are pursued. Lesser amounts of parking are provided in the later stages. In this scenario the property Owners protect themselves from possible long-term shortages of parking supply. As the project matures, trip reductions can be measured over time to determine whether the reductions can be sustained. If they can, property owners can reduce investment in later-stage ___________________________ 1 Urban Land Institute (Gruen and Gruen) "Employment in Suburban Business Park: A Pilot Study", 1986 3 parking without risking the attractiveness of their projects. Pasadena Towers, a two phase office complex in downtown Pasadena, California, is providing for its parking in just such a manner. Agreements with the City require the property owner to provide a host of services that reduce travel demand and hence, parking needs. The project's first phase will provide an ample amount of parking, however, parking built along with the second phase will be less than the supply required by code thus accounting for fewer cars needing parking. The property owner is required to monitor parking including on-street parking and, if needed, provide remedies, such as leasing parking in nearby off-street parking facilities. Parking management strategies that change traditional parking practices will need to be considered early on in the development process since it is difficult to revamp parking supply and management once a project's financial profile has been established. In fact, little opportunity exists for modifying parking practices once an investment in parking facilities has been made, since lenders and property owners will seek to maximize revenues required in the project's pro forma. Lenders will need to be convinced that they run a good chance of leasing their properties if they provide less parking. Their concerns will have to be addressed. For example, pricing programs that lower revenues by allowing carpools and vanpools to park at reduced rates will need to be justified and incorporated into financial analyses to allow for prudent planning. Actions to alter parking requirements by lenders and municipalities will only occur as tenant market demands change and are manifested through considerations called for in lease and space-use agreements. To induce such changes, several communities (for example, Bellevue, Washington), are experimenting with policies that establish a ceiling on parking amounts and offer commuter assistance services that begin to create a market for alternative transportation. In these circumstances, property owners are not able to 4 provide large supplies of parking to accommodate historical travel patterns but must begin to provide new means of accessibility. This approach works when all properties in a tenant marketplace are forced to embrace common parking policies and compete on equal basis. Leasing and Managing Property Property owners (and lenders) see investment in parking as one that in and of itself does not return enough to even meet the cost of debt service, but is necessary for the marketability of the property. Property owners are willing to charge tenants less than it costs to provide the parking and thus take a loss on the investment, because tenants may otherwise be unwilling to lease the space. For example, the return on parking for a 300,000 square foot Class A office building near Los Angeles International Airport, is approximately 8%, with the cost of money at the same project running at about 30% to 12%. Given this dynamic, pro formas for most properties are structured to assess only one revenue stream that combines receipts from parking and work space rather than assessing the value of each clement on its own. Most leases therefore bury parking-revenue writedowns that may be needed to attract tenants; conversely, writedowns on rents for work space are shown as reductions in parking fees so that property owners can justify revenue profiles to lenders. In either case, property owners grow concerned when tenants wish to have more flexibility in the number of spaces to be leased since meeting a development's pro forma projections depends on generating a revenue that has been fixed since the day the project obtained financing. This concern for assuring revenues from parking is not as critical in circumstances where a secondary or black market exists among other tenants that need more space than they are allocated, demand is strong for short-term parking, or some other use can be found for potentially idle spaces (e.g., 5 leasing spaces out to neighboring buildings that are underparked). The inability to vary the amount of parking to be leased serves as a great impediment to inducing tenants to offer employees incentives to not drive their cars to work since the monthly parking costs *ill be the same regardless of whether the parking is used or not. Tenant interests in leasing work space focus on a variety of factors, not the least of which are the. allocation and cost of parking. Property owners and leasing agents contend that parking practices simply reflect what the market is asking for; that is, as much parking as they can get and at no or minimal cost. In response, leasing agents feature the amount (and abundance) of parking to distinguish their property from that of the competition. Tenants carefully assess whether employees will be able to got to and from work in a. convenient manner, but for the most part have equated this to the availability, allocation and cost of parking. Tenants have traditionally sought as much parking as they can get and have bristled when confronted with a ceiling on the amount of parking to be provided. For "ample, many prospective tenants for office space in downtown Bellevue, Washington query property owners on the allocation of parking and how the landlord proposes to provide for employee parking that will exceed the amount of spaces that can be allocated given the relatively low ratio of spaces to leased office space. Many property owners initially react in a conventional manner by scrambling to find parking in adjacent locations while instituting aggressive parking and transportation management efforts to lower demand to the point where it matches the available supply, The pricing of parking is also a critical element in negotiating leases. Tenants seek to minimize, costs while property owners try to get as much as they can. Tenants have historically absorbed most of the cost of parking; thus their employees are not affected by a major component of the economics associated with 6 driving their cars to work. This phenomenon of providing free or limited cost parking to employees has thrived even in circumstances where employers (and property owners) are subject to trip reduction mandates and "the costs of providing incentives are "considerable compared to instituting fees that dramatically change travel habits. Many employers have contended that they would continue to provide free parking "until the Berlin Wall comes down". The course of events in eastern Europe give cause of hope if the disbelievers can be held to their words. Providing discounts for car/vanpool parking may find greater appeal among tenants that want to lower operating expenses by reducing parking demand among employees but must continue to lease a minimum amount of parking. Finally, even in circumstances where tenants are afforded discounts on car/vanpool parking it is not certain that these savings will be passed onto employees. Some trip reduction ordinances have suggested that leases require this pass-through; however, this technique would unduly burden leases. The practice of commingling parking and office space revenues within one revenue stream works against persuading tenants to reduce the amount of parking they lease. Separating the costs would present employers with the opportunity to see just how much parking costs them and furnish a more rational basis for determining how much is to be spent on parking and on lower-cost incentives to employees to reduce parking demand, thus lowering monthly operating costs. This strategy only works in circumstances where tenants are free to choose the amount of parking they need rather than being required to take a fixed amount as dictated by the terms of their lease. Property Management Property management practices affect parking demand by dictating how a facility is used. Parking 7 facilities are operated with a variety of techniques including valet, tandem, reserved, executive, and car/vanpool parking. The operation of most large parking facilities is typically contracted to parking operators who are compensated with a fixed fee, or more often than not, a percentage of each facility's revenue. Operators are obliged to manage the facility according to terms provided by the property owner; however, they will seek to maximize revenues and minimize costs, especially if they are paid on the basis of a facility's revenues. This arrangement works against offering incentives to reduce the demand for parking. Any efforts to initiate parking reduction measures should be incorporated into operating agreements and considered in the operator's compensation. Terms of how parking will be operated also find their way into the Rules and Regulations section of lease agreements with guidelines on hours of operation, space designation, enforcement and punitive action codified in this lease related document. Parking management actions to reduce parking demand will need to be examined and incorporated into the Rules and Regulations so that tenants are informed of proper conduct. The Changing Marketplace Market forces have begun to reshape the manner in which tenants perceive and need parking, especially in areas where trip reduction mandates have forced tenants to take actions that reduce the, demand for employee parking. Employers have begun to broaden their definition of accessibility from simply providing parking to offering an array of commuter services. These mandates have brought new focus to the cost of providing parking and have motivated many tenants to question traditional parking practices that perpetuate solo driving and prevent them from reaching required levels of performance. This phenomenon has also affected property owners whose projects are conditioned with TDM requirements. 8 The marketplace has changed so dramatically in southern California that many property owners are now being asked if their buildings are "commuter friendly', meaning whether they offer commute assistance, services and flexibility in the use of parking. This departure has come about as a re-suit of a change in market forces (albeit prompted by the region's air quality mandates) and not as a result of forcing property owners to adopt uncompetitive lease terms, Property owners with TDM requirements sought to downplay the significance of the lease terms and perceived burdens prior to this change in interest on the part of tenants. Today, leasing agents are beginning to feature a building's rideshare program as an incentive for relocation to their property, compared to a neighboring property that lacks the transportation features and simply provides abundant and inexpensive parking. Economic forces may also begin to change how Parking is provided as financing becomes more difficult to arrange and lenders require better performance from their investment. This departure from traditional parking economics and practices may be easier to accomplish if tenants are not averse to passing the cost of parking along to employees in the hopes that they will reduce their demand for solo driving. In this scenario, tenants would be more willing to pay a fee approximating the cost of providing parking since it will no longer be part of their operating expense. It is conceivable that new buildings may be constructed with fewer parking spaces in what would be a reversal of fortunes since demand for parking would be reduced. The future may find buildings with too much parking based upon an overall reduction of commute travel that is expected from air quality mandates and traffic congestion. Properties with large amounts of parking could end up with higher operating costs and thus be placed in an uncompetitive posture vis a vis buildings that had considered parking management strategies and were built with fewer spaces. This phenomenon is comparable to the rapid growth in demand for office space built to 9 accommodate telecommunications and high technology equipment. Many properties being designed at the time of this new interest were able to respond by providing the services of a so-called 'smart' building. Owners of older buildings have responded by retrofitting their properties to meet the demand for tenant amenities. This type of marketplace change may occur in the realm of parking and transportation management as employers looking for new space and/or renegotiating lease agreements are faced with the need to meet trip reduction mandates in the most cost effective way possible. Next Steps Changes in development, leasing and property management practices that facilitate parking management actions, which in turn reduce the demand for travel, will be best accomplished in response to demands of the marketplace. Market changes seen in places like southern California will become more commonplace as the recently passed Clean Air Act becomes a feature throughout the nation. Helping the development community, including public agencies, to respond to this marketplace will spur the consideration of parking management as a property feature. Actions that will accelerate consideration of effective parking management strategies by the development community include: - examination of development practices and financing techniques - analysis of economic consequence,.; of parking requirements set forth by lenders and local agencies - review of tenant-landlord relationships, agreements and opportunities to create incentives for modifying parking practices - identification of amendments to standard lease agreements that incorporate parking management 10 - identification of tenant interest in building features including non-auto amenities that improve accessibility - analysis,of the effects of trip reduction regulations on tenant parking needs and interests Bringing attention to the changing parking needs among tenants faced with mandates to reduce trips and/or operating costs increases the chance of getting property owners to modify leasing and property management practices related to parking. Documentation of actual changes in parking demand at projects with parking management programs will help considerably to convince lenders and city traffic engineers that properties will not be underparked if parking requirements are reduced nor will neighborhood be threatened if parking is not provided free of charge to employees as is often required by cities and lenders. This data gathering effort should be conducted under the auspices of the Institute of Transportation Engineer.% (ITE), the Transportation Research Board (TRB), and Urban Land Institute (ULI), and the National Association of Office and Industrial Parks (NAOIP) in order to substantiate its findings to professionals working in the field. The results of the study could be the basis for amendments to ITE's Parking Generation and Trip Generation reports that are widely used by the transportation and development communities. The development community could facilitate change by offering its members guidance on specific actions to implement parking management programs such as preparing a series of model lease/space use agreements that offer property owners specific language on parking allocation and pricing. 11 Conclusion Altering the practices of building abundant and low user cost parking will be more difficult to bring about until changes occur in the development and leasing marketplace along with demonstrable changes in tenant parking needs. Changes in market demands may occur as a result of mandates called for through traffic reduction or air quality regulations increasing pressure to reduce business expenses that are not essential to an organization's operations and/or an increase in the value of land such that it becomes too expensive to offer parking in almost limitless quantities. Fundamental shifts in tenant demands will cause changes in how parking j-.; provided and create greater opportunities for using parking management strategies to reduce commuter travel demand. 12 Zoning ZONING GROUP RECOMMENDATIONS Policy Actions States should require congestion relief planning actions at the local level. This requirement should include a TDM element, one part of which should be a parking subelement. 1) To accomplish this would require assessing current experience of similar state actions elsewhere. It might also require "parking primacy" education for legislators and local officials. 2) "Government by example" is very important. The State as an employer should be encouraged to lead the way. 3) A demonstration program on the state level would be useful. A key question would be how TDM/parking policy decreases other budgetary needs. Research/Demonstration 1) A parking/TDM guide to "practitioner's tools" is needed. This would be a continuously updated, growing guide to information on how to accomplish various TDM/parking actions as well as effectiveness outcomes (similar to ITE manuals in this sense). It is needed to help sell various audiences on parking actions: - Two levels of the guide are actually needed: one for more general audiences and one for more technical users. - There is also a need for a "little book of key myths and excuses" for not taking aggressive parking management actions. - ULI, ACT or ITE could be approached to head such an effort. Possible sources of development funds Include UMTA, FHWA, or State DOTS. 2) Develop a generic parking elements "checklist" for a congestion management plan. 'this checklist would help deal with problems of regional consistency associated with parking/TDM ordinances and regulations. Sample elements might include: - Sample goal/problem statements (role of TDM, of parking subelement) - Associated savings (costs and benefits) - Marketing element - Performance standards - Review/assessment element - Enforcement/incentives to insure action - Relationship to land use plans, site plan requirements - Parties to be involved (be sure to include transit agency) - Considerations regarding neighborhood impacts, labor unions Side Note The commuter parking issue should be more fully addressed in the environmental process, under both state and federal environmental guidelines. Other Ideas 1) Demonstration project idea: In an area for which parking costs and limitations have been instigated, address the problem of how to creatively deal with spillover parking, including a community relations element, technical element. 2) Link HOV service provision to parking policy/regulation: Include service incentive agreements, how to base parking standards upon parking indicators (e.g., an "accessibility" index). 3) Research Need: Carefully document the effect of eliminating minimum parking requirements in zoning codes. ATTACHMENT 5 WHITE PAPER LOCAL ZONING CODES AND PARKING SUPPLY Kiran Bhatt LOCAL ZONING CODES AND PARKING SUPPLY A Paper For Presentation at The Commuter Parking Symposium Seattle December 6-7, 1990 Prepared By K. T. Analytics, Inc. LOCAL ZONING CODES AND PARKING SUPPLY I. Background Parking supply has important implications for commuter travel be- havior and traffic. Existing evidence suggests that excessive parking supplies encourage solo driving by commuters and other travelers. Tighter parking supplies will encourage greater use of high occupancy travel (HOV) modes such as transit and ridesharing by making available parking scarcer, and acting as a catalyst to higher parking rates over the long run. Parking supply restric- tions can induce shifts from solo driving to HOV modes and reduce congestion. An effective strategy aimed at this problem consists of the regulation of parking supply through parking requirements in local zoning codes. Localities can restrict and manage the number of parking spaces provided or made available to commuters and other travelers at new developments through supply caps via space requirements in parking codes. They also can encourage traffic reduction strategies through flexible parking codes (which allow reduced parking at developments in return for agreements by developers and employers to implement traffic mitigation policies); through reserving prime parking spaces for exclusive use by HOV modes like transit and ridesharing and short-term parkers; and through capping supplies in an area. Existing code parking requirements typically result in overly ample supply of parking far in excess of the parking demand to serve the expected vehicle trips attracted by the land uses at the sites. For instance, suburban office parks typically show parking supplies between 3.5 and 4.0 spaces per 1,000 square feet of floor space. Against these supplies, usage surveys in California and Texas found office workers only required about 2.0 park- 1 ing spaces per 1,000 square feet of floor space. (Cervero Robert, "America's Suburban Centers, A Study of the Land Use - Transpor- tation Link", University of California at Berkeley, January 19881. The experience of Bellevue and other locations suggests that providing supplies at levels even below those recommended by the estimates of parking demand derived from the expected trip generation rates will be sufficient, in many situations, where traffic mitigation policies are implemented. For example, Seattle, Montgomery County, MD. and others have allowed reductions in requirements in return for trip mitigation measures and still met the demands. While there are concerns regarding adverse impacts of tighter parking supplies on economic development, there is some evidence to suggest that these concerns might be overstated in many situations. Although parking supply is recognized as a contributing factor, it does not appear to be a major determinant of economic development, particularly where the business climate is favorable. In other words, parking supply is not likely to play a central role in development decisions, but can play a significant supporting role. [Meyer Michael and Mary McShane, "Parking Policy and Downtown Development", Journal of Urban Planning and Development, American Society of Civil Engineers, Vol 109, No. 1, May 1983]. The evidence in this regard, however, is sketchy and this issue needs further assessment. 2 II. Promising Parking Supply Policies Localities can: 1. Set tighter maximum and minimum parking requirements at new developments to ensure overly excessive parking supply is not provided (e.g., Seattle, San Francisco, Miami, Portland). 2. Allow reductions in existing minimum requirements, possibly to levels even below the demand derived from standard trip generation rate analyses, in return for traffic mitigation (Bellevue, Los Angeles, Chicago, Hartford). In many situations, it may be worthwhile to consider elimination of the minimum requirement altogether. 3. Set caps on parking supply within certain zones (Portland, Boston, Cambridge). 4. Require reservation of (setting aside of) a certain percentage of spaces in preferred locations for exclusive use by HOV modes (Portland). 5. Require setting aside of certain spaces for short-term parkers (Miami, Portland). 6. Set up incentives for developers to provide a lower amount of parking (e.g., in-lieu fees in Calgary, Davis, Orlando). 7. Allow the local public parking authority to provide substitute parking off-site in return for payments by developers, thus enabling greater administrative, operating and rate setting control by the public authority. In some 3 cases, such management control has led to more rational parking price structures which are conducive to greater HOV use (Montgomery County, MD; Miami). The effectiveness of these strategies will depend on local condi- tions and variables. Localities with the best prospects for realizing reductions in auto use through reduced or flexible parking requirements are those where some or all of the following conditions apply: 1. Developer and lender preferences/requirements or the minimums set by the parking codes result in more parking than is utilized; 2. Mixed uses are available or planned where parking spaces can be shared and used jointly by different travelers (e.g., by commuters during weekdays and shoppers and others at other times); 3. Employer subsidies for parking are not extensive, or will be curtailed or cashed out in the form of travel allowances (as has been done at selected sites in Los Angeles and Seattle area where some employers have eliminated parking subsidies for their employees and replaced them with general travel allowances); 4. Nearby private, commercial and off- and on-street parking supply is well utilized and enforced (thus limiting oppor- tunities for parkers to simply shift parking locations as supplies are tightened); 4 5. The costs of providing parking are high compared to traffic mitigation alternatives; transit capacity is not saturated; uncontrolled parking supplies (e.g. , on-street) are at a minimum or new controls are planned. Where are the best candidate locales for these strategies? Suburban communities may present some of the best opportunities for reduced minimum parking requirements and/or new or lowered maximum requirements. Many of these areas are geared up to receive a lot of new development and parking supplies in these communities tend to exceed demand. (Surveys of suburban office parks show supplies between 3.5 and 4.0 spaces per 1,000 square feet of floor space. In comparison, surveys of space usage in California and Texas found office workers only required about 2.2 spaces per 1,000 square feet; Cervero, op. cit.). These same communities may also be sites for new mixed use developments where parking can be shared across uses. In suburban contexts, it would be important for local jurisdictions to establish parking code requirements in conjunction with HOV goals where the natural market forces would not be expected to constrain parking supply for a long time. Urban communities may provide opportunities for other strategies. Here, the market forces more closely affect supply and price of parking. Employers, through their policies regarding parking rates and subsidies, probably have a significant impact on the level of HOV use in an environment already relatively conducive to certain parking policies. The high cost of parking may encourage developers to seek reduced parking in return for traffic mitigation strategies. Or, if employer parking subsides (provision of free or low cost parking for employees) are to be reduced or matched by transit subsidies (as through recent legislation in Los Angeles), parking requirements can be reduced to be 5 more in line with new anticipated parking demand. Finally, parking requirements may be reduced in proximity to transit stations where employee transit use may well reduce parking demand. III. Key Issues 1. Implementation of new parking code revisions aimed at tighter supply of parking will have costs and financial implications for both public and, particularly, for private sector -- especially if it is required to carry out significant traffic mitigation in return for lower supply requirements. In many situations, however, the developers and employers can save resources by reducing the number of parking spaces built or leased, and use some of these savings to offer HOV incentives. 2. In order to accommodate specific needs of particular sites, it would be desirable to have flexibility in the minimum and the maximum requirements stipulated in revised parking codes. 3. The code revisions will have to determine appropriate maximums and minimums for particular zones depending on the parking needs, HOV goals and other determinants. 4. The code revisions would have to consider the incentives that could be offered to the developers to encourage them to opt for lower supplies within the allowed range. 5. It may become necessary to consider and implement collateral actions such as parking prohibitions for non-resident vehicles in the surrounding neighborhoods to safeguard against possible spillovers. 6 6. Overall caps, although potentially effective, have problems associated with them. They require legislative initiatives and take time to implement. Thus, it is a relatively slow instrument when there is a need to respond to specific sub- area concerns. Within a large area, it might be desirable to implement different caps to account for different levels of congestion and modal usage. It is not clear how such needed flexibility can be legislated via local zoning codes. Any subsequent increase in the existing caps, if needed in the future, also will require legislative actions (e.g., Portland). Thus, the ability and time to respond to unexpected consequences (supply shortfalls) could be quite slow. 7. While some evidence suggests that parking supply may not be a highly critical determinant of economic health of an area (Meyer, op. cit.), additional site specific assessments are needed to ascertain the potential role of parking restrictions in different developmental contexts. More important, often the major roadblock to restrictive parking supply policies come from lenders more than developers. In many cases, this opposition may well be based on long standing conventions rather than on hard evidence. Further synthesis of evidence can be used to make a persuasive case about how lower supplies would be sufficient to accommodate demand and why they would not be detrimental to the success of the proposed development. 8. Any policy aimed at reducing parking supply will have a greater chance of acceptance if it covers a large region rather than one or few jurisdictions. 9. Localities may require some statutory authority under an ex- isting law (e.g., State Environmental Law) to mandate certain types of traffic mitigation if they are tied with flexible code requirements. 7 IV. Recommendations Policy Directions 1. While the relationship between parking supplies and use of al- ternatives to solo driving has not been analyzed carefully, the evidence clearly suggests tight supplies and higher prices are associated with greater use of transit and ridesharing. Consequently, localities should keep parking on the tight side compared to demand in pursuit of the goal of increased transit and ridesharing. In some cases, this may mean allowing the market alone to determine parking requirements, if local developers and lenders left to their own will provide limited parking. However, if the market provides excessive parking (as appears the case in many suburban areas) and if prices are relatively low, then local governments should intervene through parking requirement policies. 2. Localities should use low maximums, reduced or no minimums and flexible parking requirements and other related policies men- tioned earlier in Section II as supporting policies to other more direct traffic mitigation actions. The support of ridesharing and transit for employee trips should be pursued directly (e.g. through ordinances or developer agreements) rather than tied to optional reductions in parking requirements. Likewise, any plans for fringe park and ride should not be tied to in-lieu financing as anticipated funding may not develop. The main role of parking requirements is to insure parking supplies are not overly ample so as to support other direct requirements for traffic mitigation. In this light, minimums and maximums should be set on the low side of estimated demand. Flexible requirements should allow for reductions only where other policies (e.g. demand management 8 ordinances) require traffic mitigation actions. Flexible requirements then become an incentive and support mechanism rather than the main vehicle for encouraging traffic mitigation. 3. Maximum or minimum requirements should be set after careful assessment of the parking market and local HOV goals. The policy also should be cognizant of what developers and lenders perceive as the parking market. Even then, these limits may well miss the mark in some areas, if not immediately then in the future with changes in development, transit, and driving trends. There always will be some developers who will provide much less than the maximum or much more than the minimum. Planners must be prepared to constantly monitor the parking demand and supply market, and adjust requirements over time by zones within urban and suburban areas. 4. Given the spotty experience of cities in regulating supply through code provisions, localities probably should proceed step by step, introduce code revisions gradually in sub-areas and evaluate the impacts of these policies along the way. One approach to consider is to set a low maximum requirement in the immediate vicinity of transit corridors and major terminals. Again, the maximum- must be set after careful market assessment and should be periodically reviewed. Research Needs 1. There is a need to carry out careful synthesis of existing evidence relating to parking supply and travel behavior and modal use. The results would be invaluable to planners, policy makers and developers. 9 2. Additional evidence about the role of parking supply in shap- ing economic development is needed. Developers and lenders would find such information valuable. If the synthesis of existing evidence reaffirms that parking supply is not a major determinant of economic growth, code revisions might become easier to implement. 3. There is paucity of information regarding how the existing programs incorporating revisions in code requirements are working out. In other words, there is a need to synthesize the shifts to HOV modes produced by tighter code parking requirements and to assess whether a rough balance between supply and demand has been achieved at these sites. Relatively more recent programs need revisiting. 4. Planners and policy makers need a better understanding of en- forceability of traffic mitigation measures promised in return for lower parking supplies approved. The track record in this context needs to be reviewed. 5. More information about the authorizing legislative powers needed to enforce the code revisions and accompanying traffic mitigation programs is required. 10 Employer Incentives EMPLOYER INCENTIVES GROUP RECOMMENDATIONS Employer-based parking management programs should embrace the following criteria: 1) Reduce SOV use. 2) Cost must pass through to SOV commuter. 3) Must have commute alternatives in place when parking charge introduced. 4) Employer must be able to remain competitive - recruiting employees - with regard to competition. 5) Program must be easy to administer. 6) Program must be easy to monitor/enforce and be measurable. Research Projects 1) Evaluate the impact of incentives and disincentives on mode split. At the employer level, the current data is inadequate to justify programs and define program elements. - Market: Employers and Local Governments. - Methods: a. mode choice decision process b. before/after surveys c. focus groups. - Who: Those credible to both employers and governments. 2) Evaluate/research the corporate decision-making process. - What data is credible and useful to convince CEOs of need to support HOV/charge parking. - The changing corporate culture - The impact of programs on the cost of doing business. - Markets: Local Governments and employers. - Methods: Study both public sector and private sector employers. - Who: Employer membership-supported organizations e.g., ACT - Comment: This needs credible research to back up program recommendations. 3) Investigate the transportation allowance program. - What is It? - How can it be applied? - Effectiveness? - Relationship to parking demand and mode choice. - Markets: Employers and Service Providers - Methods: a. case studies b. scenarios c. demonstration projects - Who: a. Public/Private Partnerships b. DOTs c. Employer groups/state and local d. ULI, ACT e. Trade associations, chambers - Product: Materials "How-to" Demonstration Projects Video 4) Communicating Success: Highlight successful, benchmark employer TDM programs. - Employer to employer - Employers through business organizations - Communication network - Information clearinghouse. - Markets: Employers and Regulatory Agencies - Methods: - build on existing programs e.g., PPTN - develop new regional or national networks - video and other materials - Who: - ACT - DOT - EPA (funding). 5) Investigate costs and benefits of parking charge for employers. - Determine SOV parking charge. - price that reduces SOV use by goal amount. - revenues generated to support TDM. - what is the opportunity cost of parking: Can the cost of the parking space be used to improve the employer's competitive advantage? - Possible uses of revenue (parking) - HOV parking/subsidy - Transit subsidy - Information/promotion/administration/monitoring /enforcement - Travel allowance. 6) Comment: The use of revenue is a major issue and requires study on how to use it. ATTACHMENT 6 WHITE PAPER EMPLOYER PARKING PRICING AND INCENTIVE PROGRAMS THAT CHANGE MODAL SPLIT Richard H. Pratt EMPLOYER PARKING PRICING AND INCENTIVE PROGRAMS THAT CHANGE MODAL SPLIT A WHITE PAPER INTRODUCTION Parking Management The cost and availability of parking heavily influence both transit use and ridesharing. Employer parking pricing and incentive programs are thus prime strategies for changing employee modal split (choice of travel mode) to reduce vehicle trips. Additional factors that can be modified include location, accessibility and type of parking. Employer parking pricing programs include elimination of subsidies so that employees pay market rates, and institution of parking charges where there are none. Parking supply and location programs include limiting the assured parking supply to carpools and vanpools, and forcing single occupant vehicles to park off-site. Incentive programs include instituting differential parking rates to lower charges as auto occupants increase, devoting the best on- site parking to carpools and vanpools, and provision of compensation to counterbalance the financial impact on employees of eliminating free or subsidized parking. All of these strategies, along with various complementary activities, are encompassed by the term "parking management." Role of The Employer The influence on transit use and ridesharing of parking cost makes itself felt whether or not the cost is imposed by the employer or a parking facility operator. Nevertheless, the role of the employer is crucial, because the employer can influence whether or not, and how much, the employee has to pay. Even in central business districts, posted fee schedules for pay parking do not reflect what the average employee has to pay. In Washington, D.C., for example, half of all employees receive or find free parking. In suburban areas, it is unlikely that there will be any parking charge at all without the proactive involvement of employers and government working together. The employer directly affects the amount and location of parking through site location, design or leasing decisions. These employer decisions are made, of course, within the context of financial, physical and legal constraints, some of which may be the result of public policy. TRIP REDUCTION EFFECTIVENESS Impact on Employee Vehicle Trips One vehicle trip to and from work is saved for every employee who changes his choice of mode from driving alone to transit use, walking, or bicycling. One-half or more of a vehicle trip is saved for every employee who changes from driving alone to carpooling or vanpooling. Employee vehicle trip reductions ranging from a low of 5% to almost 50% have been reported for individual employers instituting parking pricing. The trip reduction range is almost 15% to 50% for programs that include incentives. Data isolating the effects of parking pricing from related incentives and data on the full range of travel modes used by employees before and after parking management is very scarce, but the case studies presented later provide examples. Richard H. Pratt, Consultant, Inc. November 18, 1990 Impact Relative to Other Strategies Travel Demand Management evaluations conducted for several local and state agencies indicate that parking pricing in particular holds substantially more potential for trip reduction than any other TDM strategy, and this finding is borne out by case studies. Packages of strategies that include parking pricing of $3.00 per day are estimated to provide two to three times the trip reduction of packages of strategies without parking pricing. Of 11 top individual TDM programs evaluated by the Federal Highway Administration, 8 out of 11 have some measure of restricted parking, and 7 out of 11 charge for employee parking. Of the top 6 as measured by trip reductions achieved, 4 charge for employee parking; of the 6 with the lowest number of vehicle trips per employee, all charge for parking. Impact on Areawide Trip Reduction Individual employer trip reduction actions only combine to give effective areawide trip reduction if a high enough proportion of employers participate. The proportion of employers participating is known as the employer participation rate, not to be confused with the employee participation rate -within a firm. In calculating the areawide trip reduction impact of employer parking management or any employer based travel demand management program, the employer participation rate -voluntary or mandated through regulation or agreements -- must be factored in. Information on voluntary rates of employer participation in parking management is not available. It can be assumed that they are low. Known voluntary program employer participation rates for firms with over 100 employees are less than 40% for carpooling and variable work hours programs and less than 10% for transit fare subsidies. Corresponding participation rates for firms of less than 100 employees arc all less than 5%. About 65% of all employees work for employers with less than 100 employees. WHY EMPLOYERS PROVIDE FREE PARKING Provision of free parking as an employee benefit is a deeply ingrained practice. In suburban locations, free parking is taken for granted by the workforce. Where pa' parking is prevalent, free parking is a "perk" offered to the most valued employees. Free parking is a subject of labor negotiations for example, U.S. postal employees are guaranteed free parking where "possible" under their labor contract. Free parking is not provided simply out of habit, although that is a significant factor. Free parking is regarded as an employee benefit that may disgruntle employees if taken away, and helps in employee recruitment and retention. Elimination of free parking may incur labor contract renegotiation, with the risk of having to substitute other benefits that may be more costly. Landowners fear that elimination of free parking will lower the desirability of their property and therefore property values. Any program of parking management, to gain acceptance, must address these concerns satisfactorily. POTENTIAL ADVANTAGES OF PARKING PRICING/INCENTIVES Vehicle Trip Reduction Parking management is the most effective single strategy for achieving increased transit and carpool use over which employers have control. Its prime advantage is thus significant vehicle trip reduction, in contrast to the trip shifting produced by alternative work hours programs, which is useful but more constrained in effectiveness. Through trip reduction, parking management addresses a root cause of both congestion and vehicle emissions. It thus offers excellent potential for helping meet the requirements of both traffic mitigation needs and air quality legislation. Parking Space and Cost Reduction The trip reduction potential of parking pricing and incentives has benefits to employers beyond meeting vehicle trip reduction requirements. The parking space released through vehicle trip reduction allows more efficient site utilization. Parking management may allow avoidance of site expansion and even relocation for a growing business. The employer is likewise spared the cost of maintaining the parking eliminated, and perhaps the cost of leasing it or building it. In Montgomery County, Maryland, the estimated savings to the employer per vehicle trip removed is SO to $8 per day, averaging $5; at a TDM program cost of $0 to $4 per day, averaging $ 1. Revenue source for other programs The parking fees charged with parking pricing obviously generate revenue. If the parking belongs to the employer, the fees collected can be used by the employer for any purpose desired. One option available is to use the fees collected as a revenue source for other program elements, such as transit fare subsidies, carpool and vanpool cost sharing, or transportation allowances. In this manner the parking fees imposed on the employees who choose to drive are returned as an employee benefit and incentive for alternatives to driving. INGREDIENTS FOR SUCCESSFUL IMPLEMENTATION Meaningful Options for Employees The trip reduction success of parking management is closely tied to the existence of meaningful options other than driving alone. If employees have or know of no other acceptable means of getting to work, or if employees need an auto during the workday, parking pricing may do little more than generate revenue and displeasure. Actions that employers and public/private organizations can take to generate options for the commute trip include carpool matching services, vanpool programs, transit service improvements, and facilities such as walkways, lockers and showers for those who might walk or bicycle. The occasional real need for an auto should also be recognized. Provision of a guaranteed ride home in case of emergencies or late work can help make employees less "captive" to their auto for the commute. Results of Seattle's First Hill Program suggest that providing backup single-occupant parking for occasional use can make carpool and transit pass programs more palatable. Midday needs for an auto likewise have to be addressed. Employees may make use of their auto not only for company business but also to drop off children at child care, drive to lunch, and run errands at noon or on the way home. Such needs can be reduced by provision of on-site services such as child care and food services, and by working to achieve mixed land use so that the workplace is not isolated from service retail. Incentives and Benefits for Employees The key to countering employee objections to parking pricing is to balance pricing imposition with complementary incentives and benefits. Providing meaningful options as described above is a combined incentive and benefit. Offering incentives such as transit fare subsidies and carpool/vanpool cost sharing is also an employee benefit. The availability of commute options and incentives can help retain and attract employees much as free parking has done in the past, perhaps more effectively. The most comprehensive benefit devised to date for balancing imposition of parking pricing is the transportation allowance. The transportation allowance is a fringe benefit remuneration scaled to the parking cost the employee must now pay. If the employee continues to drive alone, he or she incurs no net financial gain or loss. If the employee uses transit or rideshares, financial gain is obtained. Current tax law, providing that only $15 a month of any such allowance or subsidy is non-taxable, is an undesirable complication, but not a prohibition. The solution under present conditions is to compute the tax cost to the employee and increase the transportation allowance accordingly. Incentives and/or Requirements on Employers An employer-based strategy is only as effective as the proportion of employers participating in the program. Since voluntary employer participation in parking management is likely to be very low, only with incentives and/or legal requirements inducing employer involvement is significant areawide trip reduction from parking management likely to be achieved. Examples of requirements placed on employers include trip reduction ordinances or regulations imposed on new development, or on all employers, for purposes of congestion mitigation or air quality. Parking pricing and incentives do not have to be mandated strategies in order to achieve increased use of such measures by employers. For examPle, South Coast Air Quality Management District Regulation XV specifies a trip reduction goal, and does not require but encourages parking management as an effective means to achieve that trip reduction. Possible incentives for employers to institute parking management include creation of transportation districts financed through an assessment per employee vehicle trip, and imposition of a tax on parking that would be waived if passed down to employees as a parking charge with incentive programs of equal value. CASE STUDY EXPERIENCES CH2M Hill Upon moving to their new downtown site in the Seattle suburb of Bellevue, the architectural and engineering firm of CH2M Hill gave each of their 400 employees a $40 per month compensation increase as a transportation allowance. Although the company's cost for parking was less, they instituted a parking charge of $40 per month, putting the difference into a fund. From this fund transit users are provided with a $15 monthly pass discount, and carpoolers are given a free parking space, while in addition both still qualify for the transportation allowance. Before the 1987 move, 89% of the employees drove alone, 9% carpooled, 1% took transit, and 1% walked or came by other means. After the move -- with parking pricing and incentives -- 54% drove alone, 12% carpooled, 17% took transit and 17% walked or came by other means; a 36% reduction in vehicle trips. Restrictions on the number of spaces CH2M Hill could lease gave the incentive for the firm to institute this successful program. 20th Century Insurance At their suburban location in the San Fernando Valley of Los Angeles, 20th Century Insurance formerly provided free parking to their 500 employees. Their May 1988 attempt at trip reduction involved offering a $15 per month subsidy for vanpools and transit users, and preferential parking spaces in the main lot for three- or-more-person carpools. Approximately 3% of all employees responded, and thus average vehicle occupancy was largely unchanged. In January 1989 the company instituted a $30 per month parking charge. Two-or-more-person carpools received free parking, an Employee Transportation Coordinator assisted in carpool formation, and a guaranteed ride home was offered, while the $15 per month vanpool and transit subsidy was continued. Average vehicle occupancy rose from 1.10 to 1.46 persons per vehicle, $200,000 per year previously spent on leasing off-site parking spaces was put toward employee benefits, and a satisfactory response to air quality regulations was achieved. Tennessee Valley Authority In 1973, already required to pay for parking, 35% of the employees of the Tennessee Valley Authority in downtown Knoxville already commuted by means other than driving alone. Starting in Dec. 1973 several measures were taken to provide transportation alternatives, including express bus service, and promotion and facilitation of carpooling and vanpooling. With neither differential parking rates nor other financial incentives involved, the proportion of employees arriving by means other than driving along rose to 58%. In January, 1975, an incentive program was initiated whereby carpoolers received preferred and inexpensive parking, vanpools were subsidized, and commuter bus tickets were discounted by 1/3. Over the next two years the proportion of employees arriving by means other than driving alone rose to 82%. Detailed TVA employee mode split data is as follows: Travel Mode Nov. 1973 Dec. 1974 Jan. 1977 Drive Alone 65% 42% 18% Transit 4% 14% 31% Carpool 30% 40% 41% Vanpool 0% 2% 7% Bicycle, walk, etc. 1% 2% 3% No. of employees 2950 3000 3400 Spaces required 2200 1640 1070 If the modal use patterns of 1973 had pertained in 1977, TVA would have required 1463 additional parking spaces at an annual cost of $628,000, four times the cost of the transportation alternatives and incentives (exclusive of administration). CHALLENGES -- AVOIDING PROBLEMS Challenges, and problems to avoid, in implementing parking pricing and incentives include: - Interaction with off-site parking. If parking pricing is applied in a site adjacent to streets without parking restrictions, parking may move off-site to the streets. This can create a nuisance, particularly in shopping and residential areas, but can be countered with on-street parking time limits combined with residential parking permits. - Peripheral Parking. Locating parking at sites peripheral to central business districts and other major activity centers may reduce traffic in congested areas but will not reduce vehicle trips unless part of a disincentive program. If parking price differentials do not give significant cost savings to peripheral lot patrons, such lots may go unused, and shuttle buses serving peripheral lots tend to be costly and often poorly patronized in any case. Proposals to provide free peripheral parking as part of a program to institute charges for on-site parking offer a promising variation. - Multiple use parking/activity centers. Parking pricing becomes more complex in suburban activity centers and other sites with multiple use parking. Retail uses in particular may legitimately feel the need to provide free customer parking. Shared parking among several uses can be an effective strategy when combined with differential pricing for time of day and duration. - Enforcement and monitoring The effectiveness of parking pricing and incentives will be diminished if there is not appropriate enforcement and monitoring of parking controls and especially priority treatment for poolers. Enforcement and monitoring is a service that can be contracted for or provided by a parking management or transportation management district. - Zoning requirements. Land use zoning regulations often require more parking spaces than needed or desirable when parking management is practiced. Besides discouraging parking management, such regulations can prevent employers from making use of space freed up. Modernized zoning codes with parking maximums instead of minimums will better serve trip reduction programs. - Parking tax pass-through. A parking tax alone is not a suitable trip reduction strategy because individual employers may not pass it down to employees in the form of parking pricing. Waiver of the tax if parking pricing and incentives are instituted may be the appropriate employer incentive. - Labor relations. Employee relations and labor contract implications of parking pricing have been discussed above. Provision of some form of transportation allowance, combined with ensuring that alternative means of commuting are available and attractively priced, is a positive approach. - Taking parking for granted. The national habit of taking free parking for granted can invade even pricing programs with a transportation allowance, if conversion of the transportation allowance into subsidized parking becomes the "default" choice offered employees. Making employees fill out a request every month reinforces the fact that the allowance is a benefit and can be converted to cash if the employee ceases to drive to work. APPROACHES TO TAKE -- NEXT STEPS Individual Problem Solutions Each of the challenges and problems listed above has been paired with an approach to solution that has been tried or otherwise looks promising. Other problem solutions will hopefully evolve from this symposium. Getting the Door Open The deeply ingrained practice of providing free parking needs to be addressed on multiple fronts to open the door to parking management. Employers and landowners who stand to loose if fears about loss of competitiveness in employee hiring and retention and loss of property values are realized need to know if these are possible outcomes and how to avoid them. Landowner, developer and employer representatives such as the Urban Land Institute, the National Association of Industrial and Office Parks, the U.S. Chamber of Commerce, and human resource professional groups can assist by researching the effect of parking management on employee hiring and retention, and property leasability. These same groups, assuming they confirm that parking management properly handled can be beneficial, can further assist by developing an information base, increasing awareness and providing support. Forms of parking management with initial steps that seem less drastic to apprehensive C.E.O.'s and landowners need to be developed and tried. The program applied by State Farm Mutual in the South Coast Air Quality Management District is a successful example. Parking remains free for single occupant drivers, but carpoolers receive direct subsidy daily, in effect a form of negative pricing. Coupons offered to each employee upon arrival are worth $0.50 apiece for 2-person carpoolers, $1.00 for 3-person carpoolers, and $1.50 for 4-person carpoolers, transit users, walkers and bicyclists. This program is one the previously mentioned 11 TDM programs evaluated by the Federal Highway Administration. It is one of the top 6 as measured by trip reductions achieved, joining 4 that charge for employee parking. Inducements for Employers Ordinances and regulations are not the only route to increasing employer participation in strong TDM programs like parking management. Financial incentives are another. One promising mechanism is use of transportation management districts, a form of assessment district. Transportation management districts would engage in travel demand management in cooperation with employers encompassed by the district. If the assessment is based on the number of employee vehicle trips generated by each employer, the incentive to engage in strong measures like parking management should be strong. The same Montgomery County, Maryland study that estimated a $5 average savings to an employer per vehicle trip removed also estimated a $5 average savings to society in lessened road construction, maintenance and related costs. With this potential, the public sector could well afford to provide financial incentives. An approach that would have no negative impact on public budgets would be the previously suggested pass-through parking tax, which would be waived for each employer instituting parking pricing and incentives of equal or greater dollar amount. CONCLUSIONS Parking management is the most effective means employers have to influence employee mode choice and achieve vehicle trip reductions. For it to work properly there must be suitable alternatives to driving alone. Providing employees with a transportation allowance, preferably combined with other ridesharing and transit use incentives, counters employee resistance to pay parking. Broad scale employer implementation of parking management is unlikely without mandatory vehicle trip reduction or strong financial incentives. The promise of vehicle trip reduction offered by parking management should be strong incentive to find solutions to implementation impediments. APPENDIX APPENDIX ITEM #1 COMMUTER PARKING SYMPOSIUM REGISTRATION LIST Mr. John Bencich, Associate Executive Director Swedish Hospital 747 Summit Ave. Seattle, WA 98104 (206) 386-2637 Mr. Wayne Berman, Highway Engineer FHWA HHP-25 400 7th St. SW Washington, D.C. 20590 (202) 366-4069 Mr. Kiran Bhatt, President K.T. Analytics, Inc. 103 Baughman's Lane, Suite 176 Frederick, MD 21701 (301) 695-4714 Ms. Elsa Coleman, Parking Manager City of Portland 1120 SW 5th Ave., Room 730 Portland, OR 97204 (503) 796-5185 Mr. Robert Dunphy, Director of Transportation Research Urban Land Institute 1090 Vermont Ave. NW Washington, D.C. 20005 (202) 624-7104 Mr. Bill Eager, President TDA, Inc. 615 2nd Ave., Suite 200 Seattle, WA 98104 (206) 682-4750 Mr. Terry Ebersole, Regional Manager UMTA, Region 10 901 Second Avenue Seattle, WA 98104 (206) 442-4210 Mr. Gary Edson, Consultant Commuter Network 101 Metro Dr., Suite 248 San Jose, CA 951 10 (408) 453-4030 Ms. Caroline Feiss, Executive Director Sno-Tran 5800 198th SW, #A2 Lynnwood, WA 98036 (206) 672-0674 Mr. Roger Figura, Manager KPMG Peat Marwick 8150 Leesburg Pike, Suite 800 Vienna, VA 22182 (703) 442-0030 Mr.Bruce Freeland, Planning Director City of Bellevue Planning Dept. P.O. Box 90012 Bellevue, WA 98009-9012 (206)455-7857 2 Mr. Andrew Hamilton, Staff Scientist Conservation Law Foundation 3 Joy St. Boston, MA 02108-1497 (617) 742-2540 Mr. Tom Horan, Evaluation Manager GAO PEMD Division 441 G St. NW, Room 5844 Washington, D.C. 20548 (202) 275-7133 Mr. Al Huerby, Senior Financial Analyst Metropolitan Transportation Commission 101 8th Street Oakland, CA 94607 (415) 464-7736 Mr. Jim Jacobson, Manager Service Development Municipality of Metropolitan Seattle 821 2nd Ave., MS/64 Seattle, WA 98104 (206) 684-1618 Mr.Gilbert Jay, Manager Corporate Facilities Projects The Boeing Company P.O. Box 3707 Seattle, WA 98124-2207 (206) 655-6987 Dr. F. Ron Jones, Deputy Director Center for Urban Transportation Research College of Engineering University of S. Florida Tampa, FL 33620-5350 (813) 974-3120 3 Mr. Judd Kirk, Attorney Blackhawk-Pt. Blakely 500 Union St., Suite 830 Seattle, WA 98101 (206) 624-5810 Ms. Martha Lester, Legislative Analyst Legislative Analyst Seattle City Council 1106 Seattle Municipal Bldg. Seattle, WA 98104 (206) 684-8149 Mr. Michael Luis, Manager of Government Relations Greater Seattle Chamber of Commerce 600 University St., Suite 1200 Seattle, WA 98101 (206) 389-7267 Mr. Robert MacMillan, Vice President Cornerstone Columbia 1001 1 Western Avenue, Suite 500 Seattle, WA 98104 (206) 623-9374 Mr. Mark Mazur, Economist United States Congress 1010 Longworth House Office Bldg. Washington, D.C. 20515 (202) 225-6801 Mr. Robert S. McGarry Delon Hampton & Associates 800 K Street NW, Suite 720 Washington, D.C. 20001 (202) 898-1999 4 The Honorable Dick Nelson, State Representative Washington State Legislature 2208 NW Market, #305 Seattle, WA 98107 (206) 789-7938 Mr. Brad Parrish, Director of Marketing Ampco 1325 4th Ave., Suite 910 Seattle, WA 981 01 (206) 624-1870 Mr. Don Pickrell, Economist U.S. Dept. of Transportation TSC DTS-49 Kendall Square Cambridge, MA 02142 (617) 494-2858 Mr. Richard Pratt, Principal Consultant, Inc. 11112 Rokeby Ave. P.O. Box 158 Garrett Park, MD 20896 (301) 933-0400 Mr. Jay Reich, Attorney Preston, Thorgrimson 5400 Columbia Center 701 5th Ave. Seattle, WA 98104 (206) 623-7580 Mr. William T. Roach, Supervisor Market Development Municipality of Metropolitan Seattle 821 2nd Ave., MS 64 Seattle, WA 98104 (206) 684-1620 5 Dr. Scott Rutherford, Director Washington State Transportation Center (TRAC) 4507 University Way NE, Suite 204 Seattle, WA 98105 (206) 655-2481 Mr. Curtis Salazar, Staff Assistant Representative Jim McDermott's Office 1212 Tower Bldg. 1809 Seventh Avenue Seattle, WA 98101 (206) 553-7170 Mr. Eric N. Schreffler, Manager COMSIS 2309 Pacific Cost Hwy., Suite 108 Hermosa Beach, CA 90254 (213) 372-7989 Dr. Donald Shoup, Professor UCLA Graduate School of Urban Planning 1317 Pearloff Hall 405 Hilyard Ave. Los Angeles, CA 90024-1467 (213) 825-5705 Mr. Jim Sims, President Commuter Transportation Services 3550 Wilshire Blvd., Suite 300 Los Angeles, CA 9001 0 (213) 380-7750 Mr. Jerry Skillette, Vice President Central Parking System 11500 Olympic Blvd., Suite 420 Los Angeles, CA 90064 (213) 444-9061 6 Mr. Steve Smith, Associate Vice President JHK & Associates 3600 Lime Street, Suite 127 Riverside, CA 92501 (714) 274-0394 Mr. Arthur Smith, President The Voit Companies 21600 Oxnard St., Suite 300 Woodland Hills, CA 91367 (818) 883-9100 Ms. Sandra Spence, Executive Director ACT 808 17th St. NW, Suite 200 Washington, D.C. 20006 (202) 223-9669 Mr. Richard Steinmann, Program Analyst UMTA Office of Policy 400 - 7th St. SW Washington, D.C. 20590 (202) 366-4060 Mr. Andrew Taber, Vice President Wright Runstad & Company 1201 3rd Ave., Suite 2000 Seattle, WA 981 01 (206) 447-9000 Dr. Cy Ulberg, Associate Professor Washington State Transportation Center (TRAC) 4507 University Way NE, Suite 204 Seattle, WA 98105 (206) 543-0365 7 Mr. Peter Valk, President Transportation Management Services 959 E. Walnut Ave. #200 Pasadena, CA 91106 (818) 796-3384 Mr. William V. Wells, Jr., Manager TRW Operations & Support Group One Space Park Redondo Beach, CA 90278 (213) 813-4412 Mr. Tad Widby Parsons, Brinckerhoff 1510 Arden Way, Suite 301 Sacramento, CA 95815 (916) 925-5535 Mr. Rick Willson, Associate Professor California State Polytechnic University Dept. of Urban Planning 3801 W. Temple Ave. Pomona, CA 91768-4048 (714) 869-2701 Metro Staff Pamela Chin Candace Carlson Laurie Elder Bob Flor Eileen Kadesh Kathy Petrait Ron Posthuma David Stallings Carol Thompson COMMUTER PARKING SYMPOSIUM AGENDA Thursday, December 6 11:30 - 12:30 Lunch Dining Room 12:30 Check-in Cedar Room 12:45 Welcome and Introduction Cedar Room 1:00 - 2:00 Overview / Panel Cedar Room 2:00 - 3:00 Small group I-identify issues * Break 3:15 - 4:45 Small group II-critique issues * 4:45 Large group summary Cedar Room 5:00 - 6:00 Reception Lobby 6:00 - 8:00 Dinner/Innovative Approaches Dining Room Friday, December 7 7:30 - 8:30 Breakfast Dining Room 8:30 - 8:45 Introduction Cedar Room 8:45 - 10:30 Small group 1-develop plans * Break 10:45 -.12:00 Small group I-refine proposals * 12:00 - 1:00 Lunch Dining Room 1:00 - 2:30 Summary and conclusions Cedar Room * see attached list of small group assignments Click HERE for graphic. APPENDIX ITEM #4 DESCRIPTION OF PARKING PROGRAM EXAMPLES SUBMITTED BY PARTICIPANTS Example 1: Parking Permit/Oregon Emission Fee Bill Portland, Oregon Name of Person Submitting: Elsa Coleman Primary Contact Person: Michelle Alexander or Elsa Coleman City of Portland 1120 SW 5th, Room 730 Portland, OR 97204 (503) 796-5185 John Kowalczyk Oregon Department of Environmental Quality Executive Building, 7th Floor 811 SW 6th Portland, OR 97204 (503) 229-6459 The attached description on the motor vehicle section Is part of a comprehensive bill being proposed by the Oregon Department of Environmental Quality in which all emissions of pollutants, both stationary and mobile, will require a fee. The parking permit position will be required only in ozone non-attainment areas. 11 MOTOR VEHICLE PROGRAM Emission Fee: - Collection mechanism for the statewide emission fee on motor vehicles's not identified in the most recent version of the bill. Past versions of the bill applied half the fee to new replacement tires, and half the fee in the vehicle registration fee process. - Statewide high emission surcharge for new vehicles applied at the point of sale for new cars--revenue neutral. - Amendment of tax code to allow mass transit subsidy income to be subtracted from the tax payers adjusted federal income. - Ozone non-attainment only: Monthly parking permit of up to $15 required of employees who work for employers with more than 100 employees. Exemption??? - Estimated average fee statewide = $3.24/car per year. - Estimated revenue potential = $7.8 million per year. - Estimated average fee in ozone non-attainment areas = $15/month. - Estimated revenue potential $27 million per year. Fund Uses: - Ozone non-attainment areas: Transit service improvements funded from parking permit revenues. - Ozone non-attainment areas: Work trip reduction projects sponsored by public and private employers of more than 100 employees funded from parking permit revenues. - Statewide: Rebates for conversion to alternative fueled vehicles. - Statewide: Feasibility studies and pilot demonstration projects to collect tolls on roadways by peak commuter traffic. 12 PARKING MANAGEMENT IN PORTLAND Elsa Coleman September 1990 In 1972, Portland's Downtown Plan was approved. In 1975, the Downtown Parking and Circulation Policy (DPCP) became the transportation element of the Downtown Plan. It also became the City's Downtown Transportation Strategy approved by the Oregon Department of Environmental Quality and the federal Environmental Agency for managing carbon monoxide emissions by managing the major source-automobiles. The policy includes a maximum number of total parking spaces downtown; allowing a maximum number of spaces based on the square footage and type of new development rather than the usual approach of requiring a minimum number; and restrictions on surface lots. It divides the downtown into Sectors and classifies streets for their dominant use, whether transit or automobiles. The DPCP's part of Portland's comprehensive parking management program which includes an on-street and off-street car pool program, residential and parks parking permit programs, managing the rates and operations of City-owned garages and meters to promote customer and client parking and, the essential ingredient, high quality and standards in parking patrol enforcement. Thus far, Portland's approach to transportation and parking management has been effective. In 1975, there were 69,800 employees; in 1989, approximately 90,000. In 1975, there were well over 50 violations of the carbon monoxide standard; in 1989 none. In 1975, there were 79,000 daily one-way transit trips to downtown; in 1989, 128,000 trips. Meanwhile, from 1975 to 1989, the number of parking spaces remained approximately the same--40,000. A developer has only to comply with the DPCP to gain approval of parking for the project. No other environmental impact evaluation is needed. In fifteen years, no development project has been turned down because of the policy - However, the City is proposing some interim modifications of the DPCP. In 1985, participants in the last update of the DPCP identified certain issues which precluded any major changes. Those issues pertained to whether downtown had enough parking available to accommodate future growth, and, if not, whether more could I be added without degrading air quality. Therefore, no substantive changes were made. In 1986, actions were taken to address those issues, beginning with an analysis of transportation measures that would decrease auto emissions downtown which, if implemented at appropriate levels, would allow spaces to be added to the maximum total. These measures are called air quality offsets and are effective in two ways. Either they improve the automobile emissions (e.g. annual emissions inspections and alternative fuels) or the speed and/or method of travel which impacts peak hour traffic (e.g., regional park-and-ride lots, opening parking spaces at 9:30 or 10 a.m. to reserve them for customers and clients, and alternative work schedules). The results of this analysis are now available and will be utilized to continue growth while also assuring improved air quality, traffic flow and transit ridership. Next, the issue of parking availability was addressed through a major parking needs assessment. Based on parker and employer surveys, parking data collection, 13 development projection information and citizen workshops, an analysis of expected needs for trips downtown in the year 2000 was developed. Three different growth scenarios and three different methods of handling trips to downtown were utilized. Briefly, the Regional Transportation Plan, the Central City Plan and a third growth scenario representing 'high-end" growth provided the range of possible trip needs to downtown. To review a range of options for providing access to downtown, the three methods of providing for those trips were 1) holding the number of transit trips expected in the Regional Transportation Plan constant and letting parking float; 2) holding the 1989 parking supply constant and letting the transit trips float; and 3)holding the transit trip percentage and letting the parking float. The growth scenario which allows for growth envisioned in the Central City Plan coupled with transit projected by the Regional Transportation Plan is the approach which best meets all goals because it acknowledges realistic targets for both additional parking (1,300 spaces over the lid) and transit (35% ridership) by the year 2000 and therefore promotes a balanced transportation system. Most important, it provides a goal which can be adapted to meet actual development growth and actual capacity growth in three or five years. The conclusions of the Air Quality Offsets Study and the Parking Study provide the basis for the Downtown Parking Management Plan, approved by Portland City Council in July 1990. The Plan identifies actions for air quality and congestion improvement which when approved by EPA will allow the City to add new parking above the current maximum parking inventory. Of particular interest are those actions which also provide regional equity, congestion relief and support for transit. The Plan also includes strategies unique to each Section of downtown for improving the management of existing parking. The solutions for downtown's future growth are now available and cooperative action by the private and public sectors is being developed. As was stated, after the Downtown Plan was approved, its transportation component was essential for providing access for anticipated growth, and the Downtown Parking and Circulation Policy was developed. The Central City Plan, approved in 1988, is now the blueprint for further growth in downtown as well as for adjacent districts. The recent activities in refining parking and access plans for downtown have highlighted the need for transportation management of the Central City to preserve the very things that make Portland attractive--managed growth, easy access, high quality of urban design, and distinct districts. Further analysis of what parking and access plans would best serve each of these unique areas in the Central City will be pursued in the future. At the same time, impacts of transportation policy on development within districts of the city as well as the surrounding region will be further evaluated along with the implications of the new federal Clean Air Act. The key is to focus on air quality and transit enhancement which promote a balanced transportation system while allowing for managed growth. 14 Example 2: South Boston Parking Freeze Boston, Massachusetts Name of Person Submitting: Andrew Hamilton Primary Contact Person: Sonya Hamel Central Transportation Planning Staff 10 Park Plaza, Suite 2150 Boston, MA 02116 (617) 973-7100 The attached description is a synopsis of a proposed amendment to the Transportation Element of the State Implementation Plan relating to the creation of a South Boston Parking Freeze Area. 15 Synopsis of the Proposed Amendment to the Transportation Element of the State Implementation Plan Relating to the Creation of a South Boston Parking Freeze Area The industrial area of South Boston, adjacent to downtown on one side and a stable, working-class neighborhood on another, is comprised of about 600 acres of largely underutilized land. Over the next 20 years, development will grow from 16.4 million square feet of low trip-generating uses to an anticipated 31.9 million square feet of high trip-generating uses (largely office). This area is not currently served by mass transit, but a bus tunnel is expected to be completed by 1998. A $5 billion highway construction project, the Central Artery/Third Harbor Tunnel project, will add substantial highway access capacity to the area by 1998. The salient features of the freeze proposal, as agreed upon by the Boston Metropolitan Planning Organization, include the following measures: 1) An inventory of existing spaces plus those for all projects already in the environmental review process by August 1, 1990. 2.) A cap on the construction of all parking spaces equivalent to the existing number plus 10%. 3.) If and when the Central Artery Third Harbor Tunnel project Is completed, the cap will be increased by an additional 10%. 4.) At least 10% of off-street spaces will not be open between the hours of 7:30 and 9:30. 5) Three separate parking districts will be created, consisting of the South Boston Piers Area (expected to receive the most office development), the residential neighborhood, and an industrial zone covering existing industrial uses. 6) Procedures and criteria developed for the downtown freeze area, in existence since 1975, will be adopted for this freeze area. These are currently under revision, and will likely include incentives for providing preferential HOV parking, short-term parking, and a limit on the number of spaces allowable per thousand square feet of floor space. (This number will be in the neighborhood of .5 spaces per thousand square feet, with bonuses for HOV and short-term parking.) 16 Example 3: Orlando Park-and-Play Orlando Florida Name of Person Submitting: Dr. F. Ron Jones Primary Contact Person: Danny C. Pleasant Bureau Chief Transportation Planning Bureau City of Orlando 400 South Orange Avenue Orlando, FL 32801 (407) 246-2775 As congestion during Orlando's peak period continues to intensify and a parking shortfall of 2,000 central business district (CBD) spaces is projected by 1990, the city is developing innovative transportation demand management techniques to help alleviate the problem. The Orlando Park-and-Play garage, or "Meter Eater 11", was designed to meet the waiting list of people who have requested parking in the "Meter Eater I" park-and-ride lot located on the northwest fringe of the business district. Since convenience is one of the major factors in encouraging commuters to rideshare or take a bus, this proposed $8.3 million garage will also house a day-care center so that parents do not have to make an extra stop on their way to and from work. CUTR assisted the city in applying for a $6.2 million Section 3 UMTA Grant to build the 1,000 vehicle garage immediately adjacent to "Meter Eater I". Shuttle service between the garages and the downtown area, which currently operate full during peak hours, will be expanded by the Tri-County Transit Authority. 17 Example 4: CH2M Hill Employee Rideshare Program Bellevue, Washington Name of Person Submitting: Eileen Kadesh/David Stallings Primary Contact Person: Karen O'Leary Chair, Employee Parking Committee (206) 453-5300 In 1986, when CH2M Hill moved its offices from Bellefield Business Park to the Rainier Bank Plaza building, it was evident that the company would soon be facing a situation of too many parkers for too few parking spaces. Although the lessor had allocated a sufficient number of spaces for the first couple of years, that allocation was scheduled to decrease while the staff size was projected to increase. To address this future problem, an employee parking committee was formed in 1986 to explore alternative solutions. The committee decided that an employee ridesharing fund be established at the time of the move to encourage employees to use transit, carpools or other modes of commuting, instead of the single-occupant vehicle (SOV). The fund's revenue was derived from the parking fee employees paid to park in the garage. During the initial years of the lease, the cost per parking space was less than the monthly parking allowance CH2M Hill paid to its employees. The committee charged each parker the full allowance amount ($40/month) and deposited the difference into the employee ridesharing fund. The amount CH2M Hill currently pays for parking, $48.69/month, is, in turn, the price charged SOV parkers. There are plans to increase the parking fee to $55/month. In April 1990, CH2M Hill had 430 employees with 290 parking spaces. 250 of those spaces were being used for employee cars. As a disincentive to use a single-occupant vehicle for commuting, all employees at CH2M Hill receive a travel allowance of $40/month in their paychecks. In addition, the company pays $15 for each monthly transit and vanpool pass purchased. The parking fee for carpoolers is also fully subsidized. A carpool must have at least two CH2M Hill employees to qualify for the subsidy. Those who walk, bike or are dropped off by others keep their parking allowance for their personal use. The attached table summarizes the progress made to date. 18 Click HERE for graphic. 19 Example 5: City of Bellevue Rideshare Parking Management Program Bellevue, Washington Name of Person Submitting: Eileen Kadesh/David Stallings Primary Contact Person: Judy Miyoshi City of Bellevue Rideshare Program Coordinator (206) 462-2035 Program Intent The primary objective of the City's Rideshare Parking Management Program is to reduce parking demand at overcrowded city lots and to preserve parking for visitors, library patrons and private businesses in the vicinity of those lots. This was to be accomplished through the active promotion of ridesharing and by a reduction in the number of single-occupancy vehicles (SOVS) occupying those sites. Secondary objectives include providing a working example of a Transportation Management Program to the community and reducing street traffic congestion. Program Goals Reduce the demand for parking (average of 500 + workers at "City Hall campus' during peak hours versus 292 employee parking stalls) as close to supply as possible through employee participation in ridesharing. - February 1988 = 10% participation (54 employees) - February 1989 = 19% participation (195 employees) - July 1989 = 35% participation (175 employees) Background Phase I of the City's parking plan, the Transportation Management Program (TMP) has been in effect since October 1987, with good results. During 1988 the TMP-combined with the temporary absence of the police force from City Hall and the vacancy of the CityFed building--had dramatically eased the crunch at the City Hall campus. However, with the impending occupation of the new Municipal Services Center (MSC), the parking program needed to continue, but with some new elements-All persons employed by the City of Bellevue in the City Hall/Leavitt Building or new MSC areas and not enrolled in a rideshare mode were required to pay $30/month for the opportunity to park their single-occupancy vehicle at those sites between the hours of 8:00 a.m. and 5:00 p.m. Fee payment did not "buy" or guarantee an employee a parking space, but a daily rebate was available if the employee could not find an appropriate space. 20 Revenues derived from this charge go toward offsetting the cost of providing rideshare Incentives and subsidies, toward constructing and maintaining parking areas and to the RPM program operating costs (including enforcement). Rideshare Incentives Alternative Modes 80% Participation 60% Participation (1) Carpool free parking Free parking $15/mo. incentive (2) Priority parking (3) Priority parking (3) Transit Free parking Free parking One-zone reimbursement Vanpool Free parking Free parking $25/mo. subsidy No Subsidy Priority parking (3) Fleetride Free parking N/A $3.00/day income benefit Other (walk, bike, Free parking Free parking drop-off, $15/mo. incentive motorcycle) Non-city Carpool Free parking Free parking $15/mo. incentive Car in priority Car In priority parking parking one day/ two days/week max. week max. (1) No incentives or subsidies paid for 60% participation. (2) Reimbursed quarterly. (3) Priority parking only when ridesharing. Effects of the TDM Program 1987 Pre-"Rideshare Parking Management" Program HOV mode split = 15% June 1988 Rideshare program underway (Financial Incentives, ridematch, etc.) HOV mode split = 25% July 1989 Program continues Pay for parking underway ($30/month) HOV mode split = 35% June 1990 More of above Pressure mounts with more employees HOV mode split = 53% 21 APPENDIX ITEM #5 OTHER INFORMATION SUBMITTED BY PARTICIPANTS 22 MTC JOSEPH P. BORT METROCENTER METROPOLITAN 101 EIGHTH STREET TRANSPORTATION MEMORANDUM OAKLAND, CA 94607 COMMISSION 415/464-7700 FAX 415/464-7848 To: Work Program and Plan Revision Date: 11/21/90 Committee (WPPRC) Fr: Executive Director Re: State Air Quality - TCM Plan On October 31, 1990 we circulated a draft Transportation Control Measure (TCM) Plan intended to meet the mobile source reduction objectives of the California Clean Air Act. The proposal was reviewed by the WPPRC at two meetings this month with considerable public comment. The public comment focused on the parking charges. In general the environmental community supported parking charges and even stronger measures. The public and business community expressed opposition to the parking charges. As a result of these meetings, on November 19 the WPPRC requested development of alternate revenue sources and implementation packages. The attached outline responds to the Committee request. The key to our proposal is to focus on the provision of mobility options to provide alternatives to single occupant auto use. This has been MTC's traditional approach to improving air quality and to achieve other regional objectives such as reducing congestion. The "fees" become a way of financing the mobility package rather than a device to control demand. Even as we emphasize the mobility package, we must determine 1) how it is to be financed and 2) who is to decide on the choice of funding. Our preference would be to finance the mobility package with bridge tolls, registration fees and gas taxes or some combination of these sources. These sources have established administration procedures and they provide a reasonable surrogate for emissions from auto use. The Air District has informed us that its rulemaking process will extend to mid-1993, thus allowing time to seek legislative authority for an alternative to parking fees. During this time it will also be possible to reach consensus on whether or not these fees should be put to a vote. We recommend that the parking charge, at $1 rather than $3, remain an option however, for the following reasons: 1) It is defined by the Air District and Air Resources Board as a reasonably available TCM now. 2) The Air District wishes to pursue this option, and can do so with or without MTC agreement. 3) Its consideration during rulemaking serves to keep pressure on the business community to assist MTC in pursuing authority from the Legislature to enact more desirable options. Memo to WPPRC 11/21/90 Page Two The pricing strategy remains as a contingency. Here the objective is to increase bridge tolls, parking fees, registration fees, gas taxes or new smog congestion fees significantly in order to affect mode choice. However, the revenues are still invested in mobility options. If political feasibility is set aside, it is theoretically possible to set the fees high enough to achieve any required reduction in auto emissions with this mechanism. We recommend that the WPPRC recommend that the Commission adopt a State Air Quality - TCM Plan that: - Has the provision of mobility options as the centerpiece. - States MTC preference for bridge tolls, registration fees gasoline taxes over parking fees. - Retains parking charges as an option. - Resorts to significantly higher pricing package and further mobility options as the contingency element. The draft TCM plan submitted to the Commission for review last month will have to be modified to reflect the decisions the Commission makes today. Lawrence D. Dahms LDD:WFH:dg:0150Q6 STATE CLEAN AIR ACT TRANSPORTATION CONTROL MEASURES MOBILITY PROGRAM The centerpiece of the proposed MTC response to the State Clean Air Act is development and implementation of a program to improve mobility options to auto travel. The plan would provide for transit and carpooling alternatives and a legislative strategy for funding. The basic elements of the mobility package are outlined below: Mobility Package Components Annual Total (in millions - Transit Improvements --Rail Capital and Facility Rehabilitation 82 --Transit Fare Subsidy and Service Increase 291 --Transit Coordination and Information 24 397 - Commute Alternatives --Ridesharing (RIDES, local agencies) 6 --Bicycle and Pedestrian Projects 4 --Demonstration and Public Education 4 --Planning and Monitoring 3 17 - Traffic Operations and HOV Package 41 - Youth Transportation 107 - Earthquake Retrofit of Bridges 20 582 Revenue Alternatives to Provide $500-600 Million Annually. Our November TCM draft proposed a revenue strategy to fund the mobility program which consisted of a bridge toll increase for mobility in bridge corridors, an increase in registration fees shared regionally and locally, and regional parking charges. Commissioners have expressed the desire to review other options to raise revenue needed to fund the mobility program. Turning to the draft TCM plan presented in June, two revenue options are proposed for consideration. One option would be imposition of a much larger registration fee. Another option would impose a regional gas tax. Restrictions on the use of gas taxes for operations and for transit need examination. It may also have a more challenging implementation path. Mobility Package Revenue Options ($ in millions) OPTION #1 OPTION #2 OPTION #3 Level Total Level Total Level Total Bridge Toll $2 $94 $2 $94 $2 $94 Registration Fee $4 $24 $125(2) $500 $10 $60 Parking Charge $1(1) $461 NA NA Regional Gas Tax NA NA 14› $420 per gal. Mobility Program $579 $594 $574 ($500-600 million) (1) Includes 30% set aside for administration and local programs (2) Based on a flat fee, consideration must be given to either pollution based fee or value based fees 8099p/1 San Francisco Chronicle Examiner 11/30/90 Smog war off to a shaky start Agency believes drivers should pay for clean air, but it hasn't asked them to pay enough HE Metropolitan Transportation Commission is off to a faltering start in its mission to help the state cut smog and promote public transportation. The agency has passed , modest plan to reduce auto emissions by making driving somewhat costlier, but some members of its staff say the proposal will not meet the state's goal of cutting auto emissions 35 percent by 1997. Moreover, the agency sidestepped a controversial proposal that would go a long way toward eliminating free parking in the Bay Area. The commission is sensibly committed to combatting air pollution by making the use of private automobiles more expensive. But the new plan calls for only mild increases in bridge tolls, auto registration fees and the gasoline sales tax, boosting annual costs for the average driver by about $300 a year. Driving is not terribly price sensitive. To make a difference, the added cost has to be very large. How many drivers are going to abandon their cars to save $300? Environmentalists are keenly disappointed by the proposal. The agency also appears to have succumbed to outcries from the public and business over the imposition of parking fees at shopping centers and at the workplace - though the commission did leave a loophole. The final version of the plan kills the shopping center fee entirely, but would allow the imposition of a $1 a day parking charge at work sites if the legislature fails to impose the fee, tax and toll hikes. The commission's proposal is a draft that now goes to the Bay Area Air Quality . Management District, which is charged 'with carrying out a smog-cutting plan and must have one in place by June. The air quality district could overrule the transportation commission and impose the workplace parking fee, and that is precisely what some observers expect to happen. The district has already indicated general support for the agency's plan. The commission should have offered a more stringent draft, one that included the sweeping parking fees. That would have indicated a strong commitment to meeting California's tough air quality standards, the best in the nation. Still, the agency is to be commended for supporting the philosophical position that drivers should pay to clean up the air they pollute. San Francisco Chronicle 12/1/90 EDITORIALS Punishing Parkers Is No Answer THE TRAFFIC EXPERT cleared the air -- but not in the way he originally intended. He agreed that the plan to freshen the atmo- sphere by imposing stiff parking fees in order to cut down on Bay Area traffic will have to be postponed well beyond the foreseeable future. "We didn't find a lot of support," conceded William Hein, deputy executive director of the Metropolitan Transportation Commission. Only four weeks ago the commission considered banning free parking almost "everywhere it exists" in the Bay Area as part of an air freshening campaign. It will still be necessary to finance an expanded transit program to cut auto travel and, in the process, reduce the region's emission of hydrocarbons. But heavy reliance on parking fees won't do. Any plan that Is adopted must have at least the reluctant consent of those who will pay for it through taxes, registration fees or tolls. Officials of the Bay Area Air Quality Management District, who still talk about imposing punitive charges on parking, would do well to follow the transit commission's lead. San Jose Mercury News LARRY JINKS President and Publisher ROBERT D. INGLE, Senior Vice President and Executive Editor JEROME M. CEPPOS, Managing Editor ROB ELDER, Vice President and Editor KATHY YATES, Senior Vice President/General Manager DEAN R. BARTEE Senior Vice President JOHN & HAMMM, Senior Vice President GERALD H. POLK, Vice President/Operations BRUCE A CUNNINGHAM, Vice President/Chief Financial Officer TIMOTHY J. ALLDREDGE, Marketing Director RONALD G. BEACH Classified Advertising Director LOU ALEXANDER, Display Advertising Director Editorials Monday, December 3,1990 6B Air of Uncertainty The state's clean air goals can't be met with hesitant measures on commuting THE Metropolitan Transportation Commission has edged timidly into reducing air pollution from cars in the Bay Area. Timidity won't clean the air or unclog the freeways. Higher bridge tolls, a regional gasoline tax and higher auto registration fees are MTC's first choices. If those don't work a virtual certainty - the next step is requiring employers to charge employees who commute alone $1 a day to park. Rejected were parking fees of up to $3, both at work and at shopping centers, theater complexes and other places many people drive to. In taking the timid course, MTC didn't do enough for the air and it lost sight of the larger picture. While the immediate problem before it is an antipollution plan to satisfy the state Clean Air Act of 1988, for the commuter sitting on Highway 101, the main irritation is not bad air. It's time lost to traffic jams. Both problems are eased by reducing the number of people who drive themselves. Getting more people into car pools or mass transit will clean the air, reduce congestion and, over time, lead to the more efficient use of land by freeing businesses, malls, arenas and so forth from having to devote as much land to parking as they do to buildings. For now. MTC had to concentrate on changing driving behavior, not automobiles themselves. While a technological Savior might arrive -- electric or, natural gas-powered cars, or even cars made cleaner through increased inspections -- the arrival is uncertain. And electric cars can clog highways just as effectively as gasoline-powered ones. The commission's clean-air goals make sense insofar as they discourage single-occupant autos and consumption of gasoline. They will succeed insofar as the money raised from higher fees is used to provide transportation alternatives that are convenient and inexpensive. We have no objection to higher bridge tolls - pretty much a freebie for the South Bay - or high gasoline taxes. Higher car registration fees hit the target only if they're structured properly. The fees, as some at MTC have suggested, ought to be adjusted for the mileage driven and the emissions or fuel- efficiency of the car. Otherwise they punish every car owner. We agree with MTC that parking charges at shopping malls are not the place to start. Convenient alternatives to taking the car there don't exist. Where MTC was too timid was on the parking fee at workplaces. At work, the same people are driving to the same place at roughly the same time every day. Organizing car pools to work is far easier than to the grocery store. We understand the complaints from business about parking fees. They are yet another administrative burden. We just don't see a better alternative. As well as establishing a parking fee, MTC and other agencies need to establish now that starting in 1993, the Clean Air Act deadline, commuting alone is going to get progressively more expensive. Driving habits can be changed with less friction if people have time to plan ahead. January 31, 1990 MEMORANDUM TO: Councilmember Adams Received Nov. 15, 1990 FROM: Michael Faden, Senior Legislative AttOrneY SUBJECT: Authority of Council to "act excise tax on parking spaces You asked whether the Council base the legal authority to enact a tax on parking spaces used by employees Of private businesses and parking SPAces In private fee-paid parking lots and garages. The tax would be intended primarily to raise revenue and secondarily to reduce traffic congestion by discouraging excessive automobile use. I conclude that the Council has the authority to enact an excise tax on parking spaces, and that this tax would probably survive a constitutional challenge. Legal Background The basic statutory author-icy for the County to levy taxes, other than property taxes, is found in Montgomery County Code 52- 17 (attached). 52-17 is a local public law enacted by the General Assembly in 1963. 52-17(a) gives the County, with certain exceptions specified in 52-17(b)l *the power to tax to the same extent an the state has or could exercise such power within the limits of the County as part of its general taxing power;... Under 52-17(b), the county cannot adopt any tax that political subdivisions are prohibited from enacting under state law. This primarily means a sales tax, which counties generally are prohibited from enacting by Ann. Code Tax-General 11- 102(b)(1). 52-17(b) also blocks the County from enacting an Income tax; tax on gasoline, motor vehicles generally, vehicle registration or titling; or a gross receipts tax, among other more specialized taxes. The County also cannot adopt a narrowly-focused property tax. State law does not authorize local governments to adopt them. The state Constitution (Art. 15 Of the Maryland Declaration of flights) generally requires that all property taxes must be uniform in their application within the particular taxing district and prohibits different taxes or rates for similar kinds of property (although It does allow &me Classification and subclassification of property). However, the uniformity principle does not apply to excise taxes. Weaver v. Prince Georges County, 281 Md. 349, 379 A2d 399 at 402 (1977), and cases cited therein. In Judging the validity of a tax, the Maryland courts focus on the kind of tax it la - Whether the tax is a property tax, an excise tax (a catchall term for &last all taxes that are not based cm the value of property), or a license fee or other regulatory measure* These are not always *any distinctions to make. The Maryland courts will give the "legislative label" put on the tax "considerable" weight, but it is not conclusive; the courts "look mainly to the operation of the tax rather than to any particular descriptive language which may have been applied to it". Herman v. Mayor and City Council of Baltimore, 189 Md 191 at 198, 55 A2d 491 at 495 1947). A review of the leading Maryland cases shows that certain factors differentiate an excise tax from a property tax. The major factors are; 1) What is the tax assessed on? If it is ownership of the property, it is a property tax. If it is on a use of the property or more specifically, if the tax is levied on only one of the "Incidents of ownership", It is generally considered an excise tax. In the leading case, the Court of Appeals In Weaver vs. Prince Georges County distinguished an excise tax involving real property from a property tax per se: ...the modern conception of an excise tax Includes any tax not directly levied on the ownership of property as such. A tax on the use and enjoyment of a privilege appurtenant to property is, under this view, an excise, despite Its close connection with the underlying property. 379 A2d at 406. In Weaver the Court upheld, as an excise tax, a 4% tax on rent paid for occupancy of multifamily residential units. In Herman v. Mayor and City Council the Court of Appeals upheld as an excise tax a Baltimore City tax of 50 cents per gallon on alcoholic beverages In the hands of retail dealers. The Court found the tax to be an excise tax "on the privilege of doing an alcoholic beverage business," rather than a property tax on the beverages. The Court held that it is not, in the legal sense, double taxation to apply an excise tax to property on which a property tax is also paid. Herman, 55 A2d at 496. 2) Who pays the tax? If the owner of the land pays it, It Is more likely to be a property tax. If the operator of business pays it, It Is probably an excise tax. 3) How to the tax measured? If it "is computed upon a valuation of the property and is assessed by assessors, ... it is a property tax". Weaver, 379 A2d at 404, citing Montgomery County V. Maryland Soft Drink Association. If the rate to met in the legislation and is measured by the extent to which a privilege in exercised, It is an excise tax. This is true even If the unit of measurement Is a unit of property. American National Building & Loan Ass'n v. Mayor and City Council of Baltimore, 245 Md 23 at 35, 224 A2d 883 (1965). 4) When is the tax payable? If a tax In payable at a specified date each year, it Is more likely to be a property tax. If it is paid in connection with a transaction, It in probably an excise tax. 5) Hov is the tax enforced? If a lien is automate @ 17 placed an the property when the tax Is not paid, It is probably a property tax. Care must also be taken to distinguish an excise tax from a sales tax, since the County can enact the former but not the latter. The major points of difference are first, that a sales tax is triggered by a taxable event, a sale, rather than (&$ with the County, beverage container tax, Code 152-16B) merely a wholesaler transferring the property to a dealer; second, a sales tax Is measured by the price paid for the property, rather than (as with the beverage container tax) the number of Items and their capacity. Montgomery County v. Maryland Soft Drink Association, 281 Md. 116, 377 A2d 486 at 491-2 (1977). - 2 - Finally, the law separates license fees, which are regulatory exactions based on the police power, from excise taxes, which are primarily intended to raise revenue. If a statute requires compliance with prescribed conditions in addition to the payment of money, It Is a license fee; but if its sole or primary purpose Is to raise revenue, and no other conditions attach to the payment, it is a revenue measure, Maryland Theatrical Corp. v. Brennan, 180 Md. 377 at 381, 24 A2d 911 (1942); see- AmericAn National Building & Loan Ass'n V. Mayor and City Council of Baltimore, 245 Md 13 at 33- 34, 224 A2d 883 1965). This distinction is important because a regulatory measure must have a ratio relationship to the goals It Is Intended to achieve, while revenue-raising laws are not held to this standard even though they may have a secondary regulatory effect. Excise taxes, In Particular are given wide leeway, and the Maryland courts are very reluctant, compared to those of some other states, to second-guess legislative classifications in this area. See Reinhardt v. Anne Arundel County, 31 Md App 355, 356 A2d 917 at 922 (1976). As to the reasonableness of taxes specifically aimed at parking, the U.S. Supreme Court, in upholding a 20% tax on gross receipts from non-residential parking spaces observed: By enacting the tax, the city Insisted that those providing and utilizing nonresidential parking facilities should pay more taxes to compensate the city for the problems incident to off-street parking. The city vas constitutionally entitled to put the automobile parker to the choice of using other transportation or paying the Increased tax. City of Pittsburgh v. Alco Parking Corporation, 417 U.S. 369 at 378-9, 94 S.Ct. 2291 at 2297 (1974). Application to Parking Excise Tax In Montgomery County v. Maryland Soft Drink Association, the Court of Appeals hold that 52-17 authorized the County to enact au excise tax on certain beverage containers. Thus, if the tax proposed is an excise tax and not a property tax, 52-17 authorized the County to enact It. Applying the factors that distinguish excise taxes from property taxes, a reviewing court is very likely to hold that the proposed tax on employee and paid parking spaces is, legally as well as In name, an excise tax that the County has full power to enact. 1) Subject matter of the tax. The tax is not assessed on ownership of Property. It is assessed on the act of using the property for parking. The event that triggers the tax is not, on the face of the laws the ownership of the land - rather, it is the use to which the land is put. The Court of Appeals in Weaver cited with approval cases from New York, Pennsylvania and Florida that sustained excise taxes on the occupancy and rental of commercial property, 379 A2d at 404-5. 2) Who pays the tax. Under this bill, the tax Is paid by the person who operates the parking area. Thus, the tax is on the person who undertakes a business activity. That person is not necessarily the owner of the property. 3) Measurement of the tax. Under this bill, the tax in a set amount for each parking space. It la not measured by either the rent for using the space (as with a sales tax) or the value of the land or structure. - 3 - 4) When payable. This tax Is assessed and payable annually. While this can indicate a property tax, It does not do so conclusively' an excise tax can be payable on an annual basis, and It Is more efficient to &sees$ this particular tax annually rather than each time the property In so used. 5) Enforcement. Under proposed 152-52p the tax is enforceable by criminal penalties, civil penalties and assessment of interest on unpaid taxes. In addition, 51-52(e) applies 52- 18D to this tax. 52-18D Is a lien provision used for a number of County excise taxes. Because this lien applies only to excise taxes, a court would be less likely to treat It as one of "the attributes traditionally associated with a conventional property tax" (Weaver, 379 A2d at 407). Summary and Conclusion Pulling all these factors together and keeping In mind the Maryland courts' relatively broad definition of excise taxes, I conclude that this tax Is authorized by the local public law codified in 52-17 and is likely to be upheld as an excise tax and not struck down as a disguised property, tax. State law and cases Interpreting It tell us that the Council cannot enact a special property tax on parking lots - that Is , a tax measured by the value of the property. Nor can It enact a tax on the gross receipts of any parking enterprise. But the Council can adopt an excise tax on furnishing parking for employees, or for any other commercial (or residential) purpose. This tax must not be measured by the value of the parking area or the income It produces. The Council can levy an excise tax even though the parking space or structure is already the subject of County property taxes. The Council could best structure a parking excise tax by levying a fixed amount, set in the law for each period of time the space is used for parking; apply It to each parking space at the same rates regardless of the land's assessed value or the rate (If any) charged for parking; collect It from the operator of the parking area, not the owner of the land; not tie It directly to any other traffic or land use regulation; and enforce It through the tax collection process, like any other excise or Income tax. Your proposal meets these criteria and should withstand legal attack. - 4 - Bill No.: 5-90 concerning: Excise Tax Certain Parking Spaces Draft NO. & DaTe: 13 5/3/90 Introduced: February 6, 1990 Enacted; May 3, 1990 Executive: Effective: Sunset Date: December 31, 1995 Ch. , Laws of Mont. Co., FY COUNTY COUNCIL FOR MONTGOMERY COUNTY MARYLAND By: Councilmember Adams and Council President Hanna AN ACT to: (1) establish an excise tax cm the use of land for parking of certain motor vehicles in the County; (2) set the rates of the tax, authorize the Director of Finance to increase the rates periodically to reflect changes in the cost of construction, and authorize the County Council to increase or decrease the rate each year by resolution after notice and hearing; (3) define certain terms and authorize the County Executive to issue certain regulations; (4) allow certain exemptions and credits; (5) direct the Director of Finance to require the registration of certain parking spaces by owners of nonresidential property; (6) provide for collection of the tax and payment of interest and penalties, and apply certain provisions of law to this tax; (7) require all proceeds of the tax to be paid to the Transportation Trust Fund; (8) set effective and expiration date& of the tax; and (9) generally amend the laws governing excise taxation of the exercise of occupations and privileged. By adding Montgomery County Code Chapter 52, Taxation Article [[VII]] VIII, Excise Tax on Certain Parking Spaces Sections [[52-47 through 52-52]] 52-60 through 52-65 EXPLANATION: Boldface indicates a heading or a defined term. Underlining indicates text that in added to existing law by the original bill. [Single boldface brackets] indicate text that is deleted from existing law by the original bill. Double Underlining indicates text that is added to the bill by amendment. [[Double boldface brackets]] indicate text that is deleted from existing law or the bill by amendment. * * * indicates existing law unaffected by the bill. The County Council for Montgomery County, Maryland. approves the following act; Sec. 1. Chapter 52 Is amended by adding Article [[VII]] VIII Excise Tax on Certain Parking Spaces. Article [[VII]] VIII Excise Tax on Certain Parking Spaces. [[52-47]] 52-60 Tax levied: rate. (a) Any person who makes available land in the County as a paid parking area or for the parking of motor vehicles by employees of any business, except in connection with a residence, must file a tax return and pay and excise tax each year on the use of the land for parking purposes. The person liable for the tax is: (1) the individual or business that employs the operator of a paid parking area, for all spaces in that parking area: (2) the business that occupies any single-tenant office, commercial or retail, or industrial building, for all spaces used by employees in that building. (b) The base rate of the tax established under subsection (a) is: (1) [[$120]] $60 for each parking space made available for 90 days or more during the [[preceding]] calendar year for the parking of motor vehicles by employees during business hours; and - 2 - (2) [[$120]] $60 for each parking space in a paid parking area. [[A paid parking area is a parking lot or garage in which, at any time during a calendar year, a user must pay to park a motor vehicle.]] (c) (1) The base rate set in subsection (b) is reduced by; (A) 50% for each parking space over the first 1000 spaces on which the taxpayer has paid this tax during the calendar year; and (B) 75% for each parking space over the first 2000 spaces on which the taxpayer has paid this tax during the calendar year. (2) No tax is due if the taxpayer has paid this tax on 5000 parking spaces during the calendar year. (d) On January 1 each year, beginning january 1, 1993, the Director of Finance must increase the base rate set in subsection (b) by the percentage increase, if any, in the index of construction costs published by the United States Department of Commerce, or a similar index selected by the Director that more closely reflects costs in the Washington metropolitan area, since the base rate was previously set. The Director must round any increase to the nearest dollar. [[(c)]] (e) Each year the County Council by resolution, after a public hearing advertised under Section 52-17(c), may increase or decrease the base rates set in subsection (b). [[(d)]] (f) As used in this Article: (1) business includes any for-profit or nonprofit organization, and any subsidiary or parent firm, - 3 - association, corporation, trust, or partnership: (2) [[patron]] client or customer includes any person who buys, rents, or uses, intends to buy, rent or use, or is solicited to buy rent or use any item or service from any business: (3) employee means any individual who regularly provides services to a business for compensation. Employee includes: (A) any owner of a business, and (B) any temporary or part-time employee, contractor or consultant: [[and]] (4) paid parking area means a parking lot or garage in which, for 10 days or more during a calendar year, a user must pay to park a motor vehicle; and [[(4)]] (5) person includes any individual, corporation, association, firm, partnership, group of individuals acting as a unit, trustee, receiver, assignee or personal representative. [[(e)]] (g) By regulations issued under method (2) that are consistent with this Article, the County Executive may further provide for the administration of this tax and define which parking areas are subject to this tax and any term used in this Article. (h) The County government and each parking lot district are separately subject to this tax. [[52-48]] 52-61 Exemptions. The tax levied under Section [[52-47]] 52-60 does not apply to: - 4 - Bill 5-90 (a) any parking area that, together with all other parking areas within a one mile radius owned by the same person or used for the same business and not exempt under this Section, provides parking for fewer than 10 motor vehicles: (b) any paid parking space governed by a parking meter in which a user can pay no more than 2 hours of parking in advance: (c) any parking area that is used only by persons who transfer directly to any form of mass transit, including carpooling or vanpooling; (d) any parking area used only for the storage of motor vehicles used in a business, and not used for parking by employees of any business. (e) any parking area used only for the storage of new or used motor vehicles held for sale, lease, or repair by a licensed motor vehicle dealer, manufacturer, distributor, auctioneer, rental agency, repair shop, or dismantler and recycler; and (f) any parking area operated by any agency or instrumentality of federal, state, or municipal government. [[52-49.]] 52-62. Credits. (a) Any person who must pay the tax levied under Section [[52-47]] 52-60 may reduce the tax due by 50% of the [[amount the person spent]] net expenses during the preceding calendar year to implement, with respect to the land use for which parking is provided, a traffic mitigation agreement approved under Chapter 42A, if the Bill 5-90 agreement: (1) requires all employees to pay commercial parking rates; and (2) gives employees; (A) discounts for mass transit fares, or (B) preferential parking rates or spaces for carpools and vanpools. (b) A taxpayer must not claim this credit if, during the period which the tax is levied, the taxpayer [[did not comply fully with]] was in default under the agreement. (c) The Director may require any person claiming a credit under this section to document any expenses for which the credit is claimed. [[52-50.]] 52-63 Registration. (a) Within 30 days after this Article takes effect, the Director of Finance must mail or deliver to each owner of nonresidential property a parking registration form. The recipient must list the number of parking spaces, paid parking spaces, employee parking spaces, and [[patron]] client or customer parking spaces located on or used in connection with the property, and for each space the business that makes parking available. The Director may require the recipient to list the number of employees at the location and provide other information reasonably needed to administer this tax. Each recipient must return the registration form, accurately completed, to the Director within 30 days after it is mailed or delivered. - 6 - Bill 5-90 (b) Each tenant of nonresidential property must give the owner any information the owner needs to complete the registration form or report any changes. (c) Each owner of nonresidential property [[subject to tax under Section [[52-47]] 52-60]] must report any changes in the information submitted under subsection (a) within 30 days after the change takes affect. (d) Each owner of nonresidential property that is first used for parking of motor vehicles after the registration forms distributed under subsection (a) are due must request and complete a registration form within 30 days after the property is first used for parking. The Director must notify each applicant for a use and occupancy certificate for any nonresidential property that this tax may apply to parking spaces used in connection with the property. [[52-51.]] 52-64. Due date. (a) The tax levied under Section [[52-47]] 52-60 is due and payable for each calendar year on the last day of February of the next year. (b) Alternatively, the Director of Finance by regulation may establish a staggered payment system in which the tax is due for the preceding 12 months and payable on the last day of the second month after the end of the 12-month period. If a staggered payment system is established, the Director must require a pro-rated payment for any taxable period shorter than 12 months that ends before the system takes effect. Bill 5-90 [[52-52.]] 52-65. Collection: interest and penalties: violation: lien. (a) If any person fails to pay the Director of finance the tax due under Section [[52-47.]] 52-60. that person is liable for: (1) interest on the unpaid tax at the rate of one percent per month for each month or part of a month after the tax is due: and (2) a penalty of 5 percent if the amount of the tax per month or part of a month after the tax is due, not to exceed 25 percent of the tax. (b) If any person fails to pay the tax when due, the Director must obtain information in which to calculate the tax due. As soon as the director obtains sufficient information upon which to calculate any tax due, the Director must assess the tax and penalties against the person. The Director must notify the person of the total amount of the tax, interest, and penalties by mail sent to the persons last known address. This notice is prima facie evidence of the tax due entitles the County to judgement for the amount of the tax, penalty, and interest listed in the notice; and gives the taxpayer the burden of proving that the tax has been paid or any other sufficient defense to the action. The total amount must be paid within 10 days after the date of notice. Bill 5-90 (c) Every person liable for any tax under Section [[52-47.]] 52-60. must preserve for three years suitable records necessary to determine the amount of the tax. The Director may inspect and audit the records at any reasonable time. (d) Any failure to pay the tax when due under Section [[52- 51.]] 52-64. and any violation of Section [[52-50]] 52- 63 or this Section is a Class A violation. Each violation is a separate offense. A conviction does not relieve any person from paying the tax. (e) Section 52-18D applies to this tax. (f) All proceeds of this tax, including any interest and penalties collected under this Section, must be paid into the Transportation Trust Fund, after deducting the cost of administering this tax. Sec. 2. Effective date and expiration of tax. (a) The tax levied under Section [[52-47]] 52-60, inserted by Section 1 of this Act, is due and payable for the 1990 calendar year on February 28, 1991. The tax applies to any parking space used on or after September 1, 1990. (b) Article [[VII]] VIII of Chapter 52, inserted by Section 1 of this act, is not effective after December 31. 1995. The tax levied under Section [[52-47]] 52-60 is due and payable for the 1995 calendar year on February 28, 1996. Sec. 3. Phase-in of Rates (a) Section 52-60(b)(1) and (2), as amended by Section 1 of this Act, are amended by deleting $60 and replacing it with $90. This amendment applies to the tax levied for the 1991 Bill 5-90 calendar year. (b) Section 52-60(b)(1) and (2), as amended by Section 3(a) of this Act, are amended by deleting $90 and replacing it with $120. This amendment applies to the tax levied for the 1992 through 1995 calendar years. Sec. [[3]] 4. Evaluation. By October 31, 1995. the Office of Legislative Oversight must evaluate the effect of this Act on the fiscal and transportation needs of the County and its impact on County taxpayers. Approved: William E. Hanna, Jr., President, County Council Date DISAPPROVED: Sidney Kramer, County Executive Date This is a correct copy of Council action. Kathleen A. Freedman, CMC Date Secretary of the Council 10 CLF Conservation Law Foundation of New England, Inc. 3 Joy Street THE AUTOMOBILE INDEX Boston, Massachusetts 02108-1497 (617) 742-2540 Fax: (617) 523-8019 MOTOR VEHICLES IN THE UNITED STATES Number of registered motor vehicles (1988): 183 million Number of vehicles per licensed driver (1987): 1.03 U.S. proportion of world's vehicles (1987): 35% U.S. proportion of world's vehicle mileage: 50% U.S. proportion of world's population: 5% Miles travelled by cars and light trucks (1987): 1.77 trillion Percent of light truck usage solely for passenger transport: 7, Percent of urban person-trips made by automobile, U.S.: 85% Percent of urban person-trips made by automobile, Europe: 50% TRANSPORTATION ENERGY USE Change in U.S. oil consumption, 1973-88: -2.5% Change in U.S. transportation oil consumption, 1973-88: +19% Average fuel economy of new U.S. car, model year 1973: 13.0 mpg Average fuel economy of new U.S. car, model year 1986: 28.1 mpg Average fuel economy of new U.S. car, model year 1991: 28.1 mpg Average fuel economy of new U.S. light truck, model year 1989: 21.0 mpg Proportion of passenger vehicles that are light trucks: 20% Proportion of passenger vehicle transportation fuel used by light trucks: 50% Energy saved commuting by bus or rail instead of driving alone: 70% Energy saved commuting by vanpool instead of driving alone: 88% ENERGY SECURITY Percentage U.S. petroleum consumed for transportation: 63% Domestic crude oil production (1987): 8.35 million barrels/day Transportation oil use (1987): 10.4 million barrels/day Annual cost of pre-1990 reliance on imported oil: $21-125 billion Amount of oil U.S. would need to import if average fuel economy of U.S. cars was 42 miles per gallon: None Reduction in daily driving per passenger vehicle needed to eliminate need for Iraqi and Kuwaiti oil: 3-4 miles/day Improvement in fleet fuel economy needed to eliminate the need for Iraqi and Kuwaiti oil: 2.7 miles per gallon GLOBAL ENVIRONMENT Percent U.S. carbon dioxide emissions from transportation: 30% Carbon dioxide released by burning one gallon of gas: 20 pounds Ozone-depleting chlorofluorocarbons (CFCs) used for automobile air conditioning (1986): 120 million pounds Proportion of U.S. CFCs used for auto air conditioning: 16% Vermont Office: 9 Bailey Avenue, Montpelier, Vermont 05602 (802) 223-5992 AIR POLLUTION Air pollution emitted by new car complying with all federal standards: 106 pounds/year Proportion of air pollution coming from the 10% of cars that need tune-ups: 1/2 Proportion of urban smog caused by automobiles: 40-60% Number of Americans living in urban areas with unhealthy levels of smog: 100 million Proportion of carbon monoxide emitted by automobiles: 80% Proportion of airborne lead emitted by automobiles: 35% Societal cost of air pollution from gasoline and motor vehicles: $11-187 billion annually SOLID AND HAZARDOUS WASTE, Number of automobiles scrapped (1988): 8.75 million Lead discarded in used automobile batteries (1988): 138,000 tons Proportion of lead in municipal solid waste attributable to automobile batteries: 65% Amount of used motor oil changed annually: 700 million gallons Number of tires discarded annually: 200-250 million Number of tires in existing tire piles: 2-3 billion WATER POLLUTION Amount of oil spilled in U.S. waters, 1980-86, 80 million gallons Typical recovery rate for spilled oil: less than 15% Number of underground automotive fuel storage tanks: 1.2 million Estimated proportion of tanks which leak or soon will leak: 25% LAND USE Amount of land in U.S. devoted to automobile infrastructure: 66,000 square miles Proportion of U.S. land used for automobile infrastructure: 2% Proportion of land in typical U.S. city used for automobile infrastructure: 1/3 - 1/2 HIGHWAYS Percent increase in new highway lane miles, 1960-1987: 9% Percent increase in vehicle miles travelled, 1960-1987: 168% Proportion of U.S. highway funding by user fees: 46% Proportion of European highway funding by user fees: over 100% Average savings in commuting time by adding High Occupancy Vehicle (HOV) lane to congested highway: 45-50% Cost of one lane-mile of a new major highway: $100-120 million Cost of one lane-mile of a new HOV lane: $4-12 million Cost of one mile of new light rail: $10-20 million CONGESTION Proportion of urban peak-hour travellers who experience traffic delays: 2/3 Proportion of U.S. gasoline consumption used by vehicles delayed by highway congestion: 2-3% Predicted increase in urban freeway congestion, 1985-2005: 452% Predicted increase in urban freeway congestion with 20% expansion of roadway capacity, 1985-2005: 297% COMMUTING BY MOTOR VEHICLE Proportion of U.S. driving which is work-related: 30% Average vehicle occupancy for commuting: 1.1 persons/car Amount of oil that could be saved by increasing average vehicle occupancy to 2.1 persons/car: 30-40 million gallons/day Proportion of compact pickups used principally for commuting: 74% Amount of oil that could be saved by using automobiles instead of light trucks for commuting: 135 million gallons/day Proportion of commuting trips made by single-occupant cars: 64% Proportion of commuting trips made by public transportation: 6% Number of suburb-to-city commuting trips (1980): 12.7 million Number of suburb-to-suburb commuting trips (1980): 25.3 million PARKING Proportion of U.S. employee parking provided for free: 75% Amount employer can deduct from taxes for providing employee with free parking space: $1,000-$15,000 (full cost) Amount employer can deduct from taxes for providing employee with free transit passes: $15/month TRANSIT Number of U.S. transit riders, 1988: 8.9 billion Number of U.S. transit riders, 1946: 23.4 billion Proportion of U.S. transit trips made in New York City: 25% Capital and operating subsidies for U.S. transit: $10.5 billion Capital and operating subsidies for U.S. highways: $36.0 billion SAFETY Number, of injuries from highway accidents (1988): 4 Million Number of fatalities from highway accidents (1988): 47,000 Projected highway fatalities early next century if present death rates continue: 60,000 Traffic death rate per 100 million miles (1987): 2.0 Commercial air death rate per 100 million miles (1987): 0.1 OUT-OF-POCKET COSTS Cost (1987 $) for one gallon of unleaded gasoline, 1980: $1.72 Cost (1987 $) for one gallon of unleaded gasoline, 1988: $0.91 Per-gallon gasoline taxes, U.S.: $0.25 Per-gallon gasoline taxes, average of United States' five leading trading partners: $1.84 Annual cost of owning and operating a car (1989): $3,820 Per-mile cost of owning and operating a car (1989): $0.38/mile U.S. SOCIETAL COSTS Federally estimated cost of commuter delays due to urban freeway congestion, 1987: $8 billion Federally projected cost of commuter delays due to urban freeway congestion, 2005: $29-43 billion Cost of truck delays on congested highways and urban streets: $24-30 billion Annual expenditures and subsidies for auto infrastructure: $300 billion Per-car expenditures and subsidies for infrastructure: $2,128/car SOURCES American Public Transit Association, Transit Fact Book (Washington, DC, 1989). American Public Transit Association Transit 2000 Task Force, Managing Mobility (Washington, D.C., 1989). S. Davis et al., Transportation Energy Data Book: Edition 10 (Oak Ridge National Laboratory, 1989) (ORNL-6565). "Energy Index," Greenpeace 13(2): 17 (1989). General Accounting Office, Traffic Congestion: Trends, Measures and Effects (1989). Greene, Sperling & McNutt, "Transportation Energy to the Year 2020,11 in A Look Ahead: Year 2020 (Transportation Research Board, 1988). Institute of Transportation Engineers, A Toolbox for Alleviating Traffic Congestion (1989). Motor Vehicle Manufacturers Association, Motor Vehicle Facts & Figures 189 (1989). Natural Resources Defense Council, No Safe Harbor: Tanker Safety in Americas Ports (1990). A. Pisatski, Commuting in America: A National Report on Commuting Patterns and Trends (Eno Foundation for Transportation, 1987). Pucher, "Urban Travel Behavior as the Outcome of Public Policy: The Example of Modal Split in Western Europe and North America," The Journal of American Planners Association (1988). M. Renner, Rethinking the Role of the Automobile (Worldwatch Institute, 1988). Ross, "Energy and Transportation in the United States," Annual Review of Energy, 14:131-71 (1989). United States Department of Transportation, Moving America: New Directions, New Opportunities (1990). United States Department of Transportation, National Transportation Statistics (1989). United States Department of Transportation, Urban Mass Transportation Administration, National Urban Mass Transportation Statistics (1988 Section 15 Annual Report) (1989). * U.S GOVERNMENT PRINTING OFFICE: 1 9 9 1 - 2 8 2 - 6 5 3/5 5 0 8 (9/90) NOTICE This document is disseminated under the sponsorship of the U.S. Department of Transportation in the interest of information exchange. The United States Government assumes no liability for its contents or use thereof. The United States Government does not endorse manufacturers or products. Trade names appear in the document only because they are essential to the content of the report. This report is being distributed through the U.S. Department of Transportation's Technology Sharing Program. DOT-T-91-14 DOT-T-91-14 TECHNOLOGY SHARING A Program of the U.S. Department of Transportation