$2 Daily Workplace Parking Charge + $4 Cashout

23% Less U.S. Commute VMT/CO2 (51.7M tons CO2/year)

First Version: 10/15/06, major revision June 2008, latest update: 8/8/08

Status:

Scheme Summary:

CO2 from driving will continue to grow in the U.S., even as average mpg slowly rises (assuming a CAFE increase, a cleaner fuel mix, and continued high gas prices). The reason is that "vehicle miles traveled" (VMT) will increase faster than fuel economy increases. 50% of CA CO2 comes from transportation, so we have to cut VMT. Parking charges reduce VMT more than all other policy measures combined. The CA Climate Action Team would love to reduce VMT, but they can only pursue incremental regulations and voluntary action. Without collective action by corporations to reduce commuting, we won't hit 2020 CO2 targets.  

Past efforts to convert free office parking to paid parking (or to apply parking cashout) in the U.S. have not flourished. Past efforts have not spread widely to create a significant shift away from single occupancy vehicle (SOV) commuting. This proposal differs from past efforts:

Compared to past schemes, this proposal relies on four innovations:

Careful effort has been taken to make this scheme palatable to employers. Past objections have been addressed. By adding in real-estate benefits, we believe that the financial outcome for employers will be either positive or neutral. We believe that the majority of employees will favor this scheme and we will take steps to validate this belief to employers.     

We have spoken to MTC (Bay Area's Metropolitan Planning Organization) staffers who are a) in favor of office parking charges, and b) talk about this policy as being very hard to achieve, but being the "holy grail of VMT reduction." California State Environmental Protection Agency Secretary Linda Adams has shown significant interest in commute alternatives as a way to help meet California Climate Protection Law (AB32) carbon reduction objectives. She is enthusiastic about pricing opportunities / trip reduction.

Impact:

  Bay Area CA USA
2007 population 6,000,000 37,000,000 300,000,000
50% of residents work, 50% in offices 1,500,000 9,250,000 75,000,000
23% office worker parking reduction 345,000 2,127,500 17,250,000
CO2 tons/yr saved (3 per commute shifted) 1,035,000 6,382,500 51,750,000
     
VMT reduced/yr @ 6,000 mi/commute 2.0B 12.7B 103.5B
acres of parking freed 2,608 16,080 130,378
new land value created @ $3M/acre $7.8B $48.2B $391.1B

 

Parking Cashout Versus Parking Charges

A "parking cashout" is where an employer pays employees not to park at the work place.  One Bay Area employer (who we will call "Employer X") has a severe parking shortage, so pays employees $4 per day to not park.  Cashout is a "carrot," a benefit used to motivate commuting behavior change.  Employer X's $4 per day cashout program has reduced SOV commute mode share from 78% to 74%.  Before cashout, Employer X had 22% green commutes (walk, bus, train, telecommute, carpool, etc).  To implement cashout, Employer had to pay the existing 22% green commuters $4 per day (out of fairness) before motivating 4% new green commuters.  Hence, the cost per day per new green commute at Employer X is $26 per day (for math, see "Employer X Cashout Calculation" at the bottom of this paper).  Unfortunately, this is a very ineffective way to reduce SOV commuting.  (For the same budget as cashout, Employer X could fund lease payments so that each employee could use two hybrid cars.) Some historical, discontinued cashout programs (from 1995 and before, not in Bay Area) were more effective, but cashout has rarely been tried in modern, auto-centric, suburban office settings. The recent findings of Employer X are not encouraging for Bay Area suburban office cashout.  For more details on cashout, see: http://www.nctr.usf.edu/clearinghouse/parking.htm  

"Parking charges" are where employees have to pay to park at the work place.  Charges are a "stick," not a carrot, changing behavior by penalizing SOV commuting.  High parking charges (combined with good transit and bad auto traffic) in downtown San Francisco dramatically reduce SOV commuting.  SOV commute mode share is less than 50% in San Francisco, but SOV commute mode share at the Bay Area's 17 large suburban-style office parks (more than 594,000 employees) with free parking is greater than 80%. 

"Irritant theory" of behavior change

There is an intuitive psychological theory as to why cashout is not very effective.  High-paid office workers ignore small-benefit programs such as $4 per day cashout.  This carrot is not a sufficiently large motivator to cause commuting behavior to change.  Employees will not think about the cashout on a regular basis.  We believe that parking charges will "irritate" SOV commuters.  These SOV commuters will think about the parking charges every day they commute. Eventually this irritant gnaws at them long enough to cause many to change behavior.  Changing commuting mode choice is a significant decision because of relatively high barriers to changing away from the convenience of driving alone.  This difficult decision is not a "snap decision" and may require pondering over many weeks.   The same $ value of irritant/stick has a much higher impact than the same $ value of cashout/carrot.    The intuitive theory is well substantiated from both field results and from "behavioral economics" research:

Our $4/day cashout combined with $2/day charges has not only a $2/day irritant that will continue to gnaw at SOV commuters over time, but the dollar benefit for green comuuting versus SOV commuting is $6 per day ($1,380 per year), a significant level of financial motivation that SOV commuters will think about (rather than ignoring) during this gnawing process.  The 1990 Ch2M Hill example given above achieved 25% mode shift via this combined carrot/stick approach, with a daily parking charge rate that was close to $2 per work day. 

A price difference for green commutes versus SOV commutes of $6 has the equivalent motivation of $10/gallon gas.  [Calculation: Gas costs $4 per gallon.  Average Bay Area daily, two-way commute is 32 miles.  Assuming cars get 32 mpg, one gallon of gas is used per two-way commute. Hence the perceived cost of a one-gallon  SOV commute is: 1 gallon of gas for $4 +  $6 price difference = $10.]   

Will SOV commuters be willing to pay others to be green and to not drive?

The cashout + charges program transfers money from SOV commuters to green commuters.  Will SOV commuter employees be willing to pay their co-workers to be green?  Here is evidence of some "willingness to pay for others to be green and/or to reduce congestion:"


Collective Action: Public Policy Innovation Theory

An opportune moment in green behavior change history

The Tragedy

 

Nation-wide diffusion strategy

Can we truly get all employers and cities nationwide to jump in simultaneously?  No, but we can start with small cashout + charges and spread the program over time.  Here is one very hypothetical example of spread: 

In this example, 3 companies jump in during January 2009: Companies A, B, and C.  In the graph above, they provide $1 per day cashout.  In the graph below, they are shown also charging $0.25 per day for parking.  Every 6 months, these 3 companies increase their cashout + charges until the maximums of $4 per day cashout and $2 per day charge are reached.  In July 2009, Companies A, B, and C raise cashout to $2 and charges to $0.50.  Also in July 2009, Companies X, Y, and Z jump-in, as well as some companies from the Irvine, CA job center.  This round jumps in with cashout + charges at the initial level.  In January of 2010, more companies jump in: Silicon Valley companies with more than 500 employees and some Washington DC-area employers (Tyson's Corner is a good candidate area).  In July of 2010, CA employers with more than 300 employees jump in.  In January of 2011, US employers with more than 300 employees jump in.  In July of 2011, smaller CA employers jump in. By being first movers, Companies A, B, and C have a slight real-estate disadvantage compared to X, Y, and Z.  However, from a Human Resources employee recruiting standpoint, the balance is not clear.  A, B, and C will obtain the "most green" moniker so will have a recruiting advantage over followers.  Further, we expect A, B, and C to be large companies, primarily concerned about competition with other large companies.  We have structured the spread to concentrate on motivating other large companies to jump in near the outset, to reduce competitive concerns. 

 

For a nation-wide diffusion strategy, some further thoughts on tactics follow: 

 

This is a "Grandiose" Scheme (compared to incremental public policy)

By "grandiose," we mean that this scheme is ambitious and elaborate. Some would suggest that a scheme to reduce CO2 by 51.7 tons per year via collective action and individual behavior change is delusional.  However, we'll argue within this section that a grandiose commute reduction scheme is necessary to achieve 2020 climate protection objectives. 

Grandiose schemes provide a stark contrast to U.S. public policymaking at regional and local levels.  In the Bay Area, MTC (Metropolitan Transportation Commission) is responsible for regional transportation policymaking. Like all U.S. metropolitan planning organizaitons, MTC's Board favors incremental changes such as: "a new bus system here, a new grant program there, a pilot program here, raise the gas tax by $0.05, etc." In 2005, MTC's 2030 long-range Transportation Plan provided an example of the incremental approach.  To accommodate 50% population growth, MTC's incremental policies and programs resulted in projected 40% VMT growth.  Projected 2030 SOV commute mode share declined incrementally from 71% in 2000 to 68.1% in 2030.  The plan represents a sincere effort to make things slightly less worse than if MTC did nothing. MTC did not acknowledge the obvious conclusion that 40% VMT growth will make the already-congested Bay Area far worse off in 2030 than in 2000. 

In “How Can Transport Become More Sustainable?” (3.6MB, pages 54-62, http://onlinepubs.trb.org/onlinepubs/conf/CP37.pdf) Martin Wachs explains how all U.S. public policymaking is unable to bring about large-scale change. “In other (non - U.S.) cases, planning models were used, as they have rarely been in the United States, to 'backcast' rather than to forecast. That is, certain environmental and travel goals were developed for the target year of the plan, and the models were used to test alternative policies and consequently to select policies that would lead to the desired outcomes.” “Despite such urgings and many revisions to planning regulations included in the national highway program, progress in reforming the regional transportation planning process has been limited. We appear to be unable to achieve the dramatic institutional changes that would be needed to make regional planning more capable of addressing sustainability.” Hence, U.S. public policymaking is unable to develop grandiose schemes, but climate protection goals (such as those for California AB32 for 2020 or Kyoto 2020) require grandiose schemes.

Silicon Valley companies are able to think grandiosely.  Hundreds of business plans are created each year for ideas claimed to grow from nothing to a multibillion dollar market in two years.  Companies such as Google and eBay regularly develop strategies to achieve 90% worldwide market share in large markets. Unfortunately, Silicon Valley companies are not responsible for developing grandiose transportation schemes.  Rather, local regulations may force companies to adopt commute trip reduction scheme that, for a large company, might only affect 500 workers.  In contrast, the cashout + charges scheme would change the behavior of 17M workers. 

It is not currently the policy responsibility of companies to cut commuting by 23%, but it is important to inform the private sector than the public sector is unable to achieve this level of cuts.  If the private sector does not take on the responsibility act to cut commuting, then 2020 carbon reduction goals will not be met. 

There are two "camps" within the climate movement.  Camp 1 has determined that significant behavior-change-led demand reductions (such as cashout + charges) are required to meet 2020 targets.  Camp 1 members include {California State Climate Action Team, Al Gore, Bill McKibben, Lester Brown, Jared Diamond, Greenbelt Alliance, Bill Fulton, Robert Cervero, Don Weden, Peter Calthorpe, and Silicon Valley Leadership Group}. Camp 2 believes that behavior change is too difficult. Camp 2 members include {Vice President Cheney, James Hansen, Oak Ridge National Labs, Pew Climate Change Center, Amory Lovins, and many Cool Cities}. Within the state of California, demand-reduction (Camp 1) has been adopted as state policy.      

Backing Camp 1, Urban Land Institute's report, Growing Cooler: The Evidence on Urban Development and Climate Change states, "the projected 48 percent U.S. increase in the total miles driven between 2005 and 2030 will overwhelm expected gains from vehicle efficiency and low-carbon fuels." Please see: http://www.smartgrowthamerica.org/gcindex.html  for a two-page summary with a link to a 14-page executive summary. 

To meet AB32 climate goals, California has formed the Land Use Subgroup of the Climate Action Team (LUSCAT).  LUSCAT has a grandiose, ambitious charter, but has little implementation power.  LUSCAT is only allowed to look at projects/policies yielding 1M ton or greater annual CO2 reductions.  LUSCAT's limitation is that it is only able to pursue voluntary programs. Conceivably if LUSCAT could regulate, the state could impose a $6 per parking space per day tax which would reduce commuting by 23% to help easily meet 2020 target.  The cashout + charges scheme follows the LUSCAT philosophy:

 

Trust-based Employee Monthly Reporting

To implement parking charges, it is often necessary to have "access control" at parking lots to track the comings and goings of parkers for charging purposes.  Access control may be implemented via "a man in a booth controlling an access gate" or via more automated means. It is not excessively expensive to implement access control schemes, but, for cashout + charges, it is preferable to keep implementation costs as low as possible. 

One Bay Area company has pioneered low-cost, trust-based employee cashout monthly reporting.  Once a month, employees fill out a web-based form to record their commuting and to collect their cashout benefits. With self-reporting by employees, there is risk that employees could "cheat" and collect more benefit that they deserve. The company's periodic mode choice / parking count studies have found that employees under-collect their $4 per day cashout benefit by about 20%. Hence, for this company, self-reporting appears to work successfully.  It is also interesting to note that eBay built their company around the philosophy "people are good." Such self-reporting is in-line with the successful eBay philosophy. 

For implementation of cashout + charges, a company would probably decide that monthly web reporting should not allow double commuting benefits. For days when a worker commutes via modes where the company provides some subsidy or funding, the $4 per day cashout would not be provided.  

A hypothetical self-reporting web screen example is provided below for "Company Y" in San Jose.  Company Y participates in the Commuter Check program, where employees buy transit passes with pre-tax dollars and Company Y subsidizes transit pass purchases.  Company Y has decided that Commuter Check is a sufficiently large benefit that the $4 per day cashout will not also be provided on days when employees commute using Commuter Check.  Likewise, Company Y provides an express commute bus from San Francisco to San Jose for employees, with a company funded cost of $20 per commute per day.  The express bus and $4 cashout are also mutually exclusive.  In this example, there are 22 work days in May.  The employee submits the report and Company Y pays this employee $36 ($40 worth of parking cashout less $4 worth of parking charges).  If an employee parks a car at the office a majority of days, then that employee will owe Company X for parking charges.  

May 2008, 22 working days        
Days $/day $ comment
Vacation / sick days 1 0 $0  
Commuter Check days 7 0 $0 Using pre-tax Caltrain or VTA passes
SF->SJ express bus 2 0 $0  
Other green commutes 10 $4 $40 rideshare, telework, bike, walk
Parked car at office 2 ($2) ($4) Did not share a ride
total 22   $36  

For the Bay Area company's self-reporting system, workers can track their parking once a month, or more frequently. With once-per-month reporting, implementors guess that employees who vary their commutes may tend to be off by a day in their reporting, with errors canceling over the course of a year. Many employees spend less than two minutes per month on their reporting, so the self-reporting system is not burdensome. 

Cities Grant Real-estate Benefit to Virtuous Employers

Discussions with employers have made it clear that there is no one, single benefit that a major employer's real-estate department is looking to obtain from a city in exchange for implementing cashout + charges.  Real-estate situations experienced by different employers vary greatly, influenced partly by the current financial performance of each company.  Some companies wish to expand, some wish to contract, some have severe parking shortages, some have large parking surpluses, some own their land and buildings, some lease their land and buildings.

At $4 cashout and $2 charge, parking revenue does not completely cover cashout cost.  Unless other benefits are created, a company "loses money" for being virtuous.  A example below calculates cashout cost and parking revenue.  For this example, an additional benefit of $1.35 per green commuter per work day would break even. 

The example below is for a typical employer with 80% SOV commute mode share in 2008 and 1,000 employees. Cashout cost and parking revenue under the $4/$2 scheme is calculated for 2012 below. To put this in perspective, in 2008, the employer's annual subsidy to accommodate parked cars is $1.4M - much, much larger than cashout cost.  In 2012 when a 23% commute mode shift is achieved, the potential "car parked subsidy" savings on the 23% of cars that disappear would be $419,000 (at $7.59 per car parked per day), far in excess of the cashout cost.   
 

CASHOUT COST  
employees 1,000
2008: 20% non-parking 200
2012: 43% non-parking 430
work days/yr 240
2012: daily reward/green $4
2012: cost/yr ($412,800)
PARKING REVENUE  
2012: 57% park 570
2012: daily charge $2
2012: rev/yr $273,600
ADDITIONAL BENEFITS  
HR recruiting advantage  
CEO ego benefit  
Parking shortage fixed  
Real-estate reward from City  
Real-estate in-fill benefit possibly huge

Cities are hard-pressed to meet climate protection and traffic reduction objectives. Because the cashout + charges scheme is so very effective compared to other policies, cities should reward employers that provide leadership on this scheme. Employers' real-estate departments should ask cities for real-estate rewards.  Cities should be as creative as possible, with staff taking the following perspective: "What real-estate reward should the city provide if the fate of humanity rested on the cashout + charges scheme."   

 

Expert Opinions:

FAQ (Frequently Asked Questions)

QUESTION 1. "I don't foresee our company ever imposing a parking fee directed towards our employees. We prefer to offer incentives to use alternative transportation (such as our commuter shuttle service) verses implementing a system that penalizes employees. For example, recruitment and employee retention are vital to our success. Telling our employees that they have to pay for parking would not fly."

[Variation on Question 1 from a second employer] "Charging is not in keeping with our culture. We have lots of incentives in place."

Answer 1. Most tech companies have offices in major metropolitan cities where employees pay for parking. There is not a worldwide free-parking policy for tech workers. Google has a New York City office at 76 Ninth Avenue, eBay has their Stubhub development center at 199 Fremont Street in San Francisco, Yahoo has 200,000 square feet at 475 Sansome Street in San Francisco, and Adobe's large San Francisco office is located at 601 Townsend Street. Parking is an expensive hassle at these sites. At major silicon valley job sites, the subsidy for each SOV commuter is $7.59 per day or higher. Well-educated and green-leaning tech workers will understand these facts when they are explained. This education will lead to their being more open to cashout + charges.  We believe that the majority of employees will favor cashout + charges and we will take steps to validate this belief to employers. SOV tech worker commuters have already shown a willingness to pay for other people to adopt transportation alternatives. See the examples in the subsection: "Will SOV commuters be willing to pay others to be green and to not drive?"     

Answer 2. As far as the HR recruiting disadvantage of having your employees pay for parking, we'll have all your competitors also charge for parking, so there won't be a disadvantage. Every office worker in the US will pay for parking. So we're addressing the HR recruitment/retention objection by having all companies hold hands and jump in together (to overcome the Tragedy of the Commons). Further, if you felt it absolutely necessary, your company could just give each employee an equivalent pay raise to compensate for the parking charges.  In the 1990 CH2M Hill example above, CH2M Hill provided a $40 per month raise (a transportation allowance) and charged $40 per month for parking. 

Answer 3: Sticks are much more cost-effective for trip reduction than carrots.  See the section entitled "Parking Cashout Versus Parking Charges." 

Answer 4: We can't meet 2020 CO2 targets without cashout + charges (or some variation).  The fate of humanity rests on your company working in the collective interest with other leading tech companies.  (See the "Camp 1" discussion in the "Grandiose" Section).

QUESTION 2. Charging for parking is regressive, it impacts lower-income workers more than higher-income workers.

Answer: A parking charge-only scheme indeed is regressive. Cashout + charges is progressive. It is not clear to what degree it is progressive, but cashout + charges create a transfer payment from higher-income workers to lower-income workers, because lower income workers use commute alternatives more, so are more likely to collect the cashout reward than higher-income workers.

QUESTION 3. Not all companies are equally located to have access to transit or carpooling opportunities. For some locations, transit options are terrible. Cashout + charges will harm such companies.

Answer: We agree that office locations are not equal. Cashout + charges will make the office real-estate market more efficient, by internalizing the cost of a bad commute location selection that creates negative commute externalities.  Note that the lowest income workers don't work for major tech employers, they are contract workers working for a security, maintenance, or food service contractor. These lowest income workers could be given a different charge/reward scheme, with a lower charge or higher reward. The lowest income workers aren't the first targets of this scheme. And off-shift workers might be deserving of special consideration.

 

Thanks to

 

- Steve Raney, Cities21.org, http://www.cities21.org/ , Palo Alto, CA

********** even more details ***********

Additional Notes

 

Meeting with Prominent Bay Area TDM Consultant, June 30, 2008

 

Chat with CA State Government staffer, July 2, 2008

 

Chat with Don Shoup, UCLA Professor, author: High Cost of Free Parking, June 23

Opinions from a Bay Area company’s TDM staff, June 19 meeting

Complicated (but solvable) implementation details that will need to be addressed

Complexities within this document

 

Challenges with Complex Policies

Cashout + charges is more complicated that previous charging/cashout policies.  This complicated solution crosses eight knowledge domains, so is best analyzed in a cross-disciplinary manner.  The eight domains are:  

In “How Can Transport Become More Sustainable?” (http://onlinepubs.trb.org/onlinepubs/conf/CP37.pdf , pages 54-62), Martin Wachs explains the difficulty with complex policy proposals. “Societies do not do well with complexity, nor do conference workshops. We need to find a way of reducing our discussion to manageable components, just as we need to find ways of enacting policies through manageable steps and workable components. We need to acknowledge complex relationships among the elements while focusing on them one at a time. We only seem to be able to enact laws and regulations, to take actions, and to set priorities one bite at a time.”

Winners & Losers

Winners & Losers     employee: employee:  
  govt rev employer SOV non-SOV mode shift
$6 tax W L L   23%
$6 charge   W L   23%
$4 cashout   L   W 4%
$2 charge + $4 cashout     L W 23%

Future Research Work Items

Employer X Cashout Calculation

$4 cashout example.  "Before" mode split is 78%.  "After" mode split is 74%  
We'll use 100 employees to make the math easy  
 
$4 cashout paid to 22 existing non-parking employees $88
$4 cahsout paid to the 4 employees who change modes because of cashout $16
  total cashout payout $104
   
Cost of program per new non-parking commuter =  
  total cashout payout / 4 employees $26