23% less commute VMT: Paid Office Parking

Using “cities jump in together” & “synchronized intention signaling” to reduce risk

(Paid parking reduces commute trips by 23%, producing very large CO2 reduction)

First Version: 10/15/06, current revision 6/15/07

 

Past efforts to convert free office parking to paid parking in the U.S. have failed.  This proposal comprehends past failures and employs two new strategies related to a) the Tragedy of the Commons, and b) real-estate economics.  Because of the real-estate economics, this is an "economically painless" pricing strategy, where no constituent group loses financially.  Further, this is an aggressive in-fill strategy: free up wasted surface parking for smart new development and leap forward to the next level of green-ness!  We have spoken to MTC staffers who are a) in favor of paid office parking, and b) talk about this policy as being very hard to achieve, but being the "holy grail of VMT reduction."  By permanently reducing cars parked at offices, this scheme enables smart new in-fill on land that was considered to be "built out."  

Requested is a "named" and staffed MTC program (current examples include TLC and HIP).  As envisioned, MTC staff will lead a city by city advocacy campaign to bring about the policy, then will help administer city implementations.  Stuart Cohen raises the issue that MTC is hesitant to bring about new named programs, but, as stated in the paragraph above, MTC is very solidly in favor of this policy.  Because this policy brings about a very large VMT reduction,  it should be a standalone item in TALC's RTP proposal to MTC.  [There should be no confusion between such a major MTC policy adoption and the open-ended innovation grant programs we are separately proposing.] 


Public Policy Innovation Theory

Impact of paid parking for suburban offices

1) Most transportation demand management (TDM: transportation demand management, commute trip reduction, etc) programs are crucially important, but, for "non-central business district free surface parking" offices, only one technique produces more than a 10% net shift away from driving alone.  (A 10% “net” shift means single occupancy vehicle [SOV] mode share drops from 85% to 75%.) EPA's Best Workplaces for Commuters (http://www.bwc.gov/index.htm ) has compiled a spreadsheet with 41 TDM case studies to examine effectiveness. Please see: http://www.cities21.org/epaModeShiftCaseStudies.xls.  

Charging for parking (or implementing parking cash-outs, see this EPA reference for details: http://www.bwc.gov/pdf/parkingcash.pdf ) is the single successful TDM method to bring about reduced commute trips.  Average net reduction is 23.6 percent:

EPA Case

net SOV decrease

10

16%

11

25

18

28

27

20

33

16

35

25

36

34

38

25

avg

23.625%

 

2) Impact:

For calculations, please see: http://www.cities21.org/wrkfrc_PA_VMT.xls , and select the “SRP paid pkng” tab. 

Rough outline of a citywide office parking charge policy (example given for Palo Alto)

(There are many ways for such a policy to be brought about, your actual policy and mileage reduction will differ, depending on many factors.  This proposal addresses implementation obstacles before the policy is brought into action, ensuring that “jumping in” is safe.  To make things easy for employers, three different implementation options are provided.  To make land owners enthusiastic, a large real-estate gain is provided.)  

Palo Alto will adopt the parking charge policy in January of 2008, if the following conditions are met:

By January 2008, we expect all office areas of four or more contiguous acres to implement paid parking or parking cash outs for employees working 20 or more hours per week.  We expect a minimum daily charge or cash out of $1.  By 2009, we expect that value to go to $2.  By 2010, $4 per day.  By 2011, $6 per day.  If such office areas do not conform, we will bring an office parking tax ballot measure to the voters.  (New taxes require a 2/3 supermajority to pass.)  Parking tax proceeds will go to cover enforcement and will go to the General Fund.

For office land that can prove traffic reduction after Jan 2008, we intend to entitle smart growth in-fill development to recapture unused surface parking spaces, to allow traffic to grow back to Jan 2008 levels.

Office park real-estate smart growth in-fill scheme (simplified version)

 

Relevant Expert Quotes:

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

Constituent impact of paid parking

Let's assume we have an office with a landowner, an employer that leases the office, and employees at that office. Let's assume a parking charge of $6 per day is collected and collection/enforcement costs are negligible.   

MORE DETAILED EXAMPLE OF REAL-ESTATE ECONOMICS:

Assumptions:

Landowner Example:

Landowner hates having to provide parking spaces. Landowner makes money from having employers have employees in cubicles producing work to make profits to pay the rent. If all the employees bike to work, then there's no need to waste space on surface parking. Surface parking is unproductive. Landowner wants more employees working on landowners property.

We start to implement the scheme. We provide the landowner with a high probability of a $17MM profit 3 years from now. [calcs: 250 parking spaces saved.  350 square feet per parking space.  $200 profit per square foot (conservative) in-fill development = 250*350*200=$17.5MM.]  The landowner owns 5% of the office park land, and provides cubicles for 1,000 workers. So, the landowner reduces the rent charged to employer by $500,000 per year.

Given proper NPV calculations, landowner comes much out better off.  But that's not all, landowners property value increases because of the new development rights, so landowner comes even farther ahead. 

Employer Example:

Employer hates having to pay rent for parking spaces. Employer wants to pay rent for cubicles where employees produce work to make profits to pay the rent. Parking spaces don't produce any work. They are useless. Employer wants all employees to bike to work. (OK, maybe this is an overstatement for firms where employees need to work til midnite every nite in order to meet deadlines to make profits - but it's not too too much of an overstatement.) Employer takes $500,000 rent reduction and starts to charge for parking. But, the employer will do this in such a way so that no worker is worse off.

(Before paid parking, employer had been subsidizing SOV commutes for years. Employer had been paying rent on a parking space for SOV commuters, but had not paid rent for commute alternative employees. Hence, subsidy for high GHG behavior. What gives?)

For employees who park, employer will pay employee $X per day for the $X per day paid parking (this is pre-tax). SOV commute employees come out even.

We end up with about 650 cars for 1,000 workers with 60% SOV mode share plus some cars for carpoolers.

For employees who park, employer comes out nearly even: collects $X per day per parking space and pays out $X per day per parking space, and pays $W per year in parking charge implementation costs.

For the 350 employees who take commute alternatives, employer will pay $Y per day in transit or vanpool benefits (much of this is pre-tax) or will pay $Z per day in post-tax green incentive salary. Green commuters come out better. Hey, now there's an incentive for green commutes!

For green employees, employer draws on the $500,000 rent reduction to pay $Y or $Z per day. But remember, these are business expenses, so the profitable employer's tax burden is reduced as well - a good thing.

How much is available for green commute employees per day? With 250 work days, we have $2,000 available per work day for 350 employees: about $6, before increasing this because of employer tax reductions. (35% corporate tax rate?)

For just the parking, employer comes out even or better off, thanks to the rent reduction.

But there's more. We in-fill with employee preference housing, so employee retention increases. If we reduce employee turnover by 4% per year for 1,000 employees, that's worth $4MM per year. (For retention economics, see: http://www.cities21.org/workerHsngDetails.htm#Retention )

Employee Example:

SOV employees comes out even.  Green commute employees come out better off by $6 per day.  .

******

In summary, we've cut commute VMT by 25% (nominal) at no taxpayer cost, and all constituents have come out better.

 

Frequently Asked Questions (thanks to AMB)

1. Won't adjacent residents demand residential permit parking to avoid "spillover parking?" 

A: Yes, residential permit parking may be necessary.   The sizable real-estate profits involved allow for the accommodation of permit parking.

2. There will be various other objections to paid parking, how will this be handled.

A: The sizable real-estate profits involved allow for the accommodation of various objections. 

3. There are legal problems with trip reduction schemes applied to existing developments. 

A: TDM cannot generally be “grandfathered” on to existing development. TDM is normally applied to new development that intensifies development and produces new traffic that must be mitigated. However, for our Paid Parking scheme, the Development Agreement will be voluntarily entered into, so will not represent grandfathering of TDM.

4. There are specific prohibitions on trip reduction ordinances in the California code.

A.  In 1995, SB 475 limited TDMs for purposes of improving Air Quality.  Our Paid Parking scheme will be brought about via a voluntarily-entered Development Agreement, rather than by imposition of TDMs.  This is a "carrot-based" scheme, rather than a stick-based TDM scheme.  In addition, since SB 475 passed, cities have regularly imposed TDMs for traffic mitigation and growth management (but not for air quality).  With the 2006 passage of AB32 for climate protection, there may be interest in modifying SB 475 to allow imposition of TDMs for climate protection. 

5. A parking tax would require voter approval.

A: A subtle point of the scheme is that, while we threaten employers with a tax, we make it in the employers' interest to collect the parking charge revenue for themselves. If we tax the employers, they come out worse off. If the employers collect for paid parking, they come out even or better off.

But, we still do need to have a credible threat of the implementation of a parking tax.  This translates into obtaining verifiable polling data showing that a parking tax will win voter approval.  Hence, a political and educational campaign is required.  Note that we start slowly, with $1 per day parking, to make parking charges most palatable.  

Luckily, protecting the climate is a "mom and apple pie" sort of issue that Paid Parking can glom onto. 

6. Why is a Development Agreement used?

A: Development Agreement is necessary to to "lock" in a city to providing new development rights for car reduction. Otherwise, a new city council could be voted in, and could overturn this policy.  Real-estate developers require certainty before they will act.

7. Are you suggesting that it will be easy to bring about a Development Agreement for every US office park with 20,000 workers, and for smaller areas of office parking? 

A: No, it won't be easy.  For an office park with 100 landowners, the process will require the formation of a working group comprised of landowners, long term lease holders, tenants, and city staff.  The working group should explore the concept and wrestle with details.   We expect that national coordination of local policy development will arise, and there are a number of organizations that have a natural fit for this role.

We do not expect that 100% of landowners will sign each Development Agreement.  Rather, it may be reasonable to win over 80% of landowners in the first year, and then bring on more signatories over time as the Paid Parking scheme spreads and succeeds. 

A public process is required for a Development Agreement, so residents will need to be educated and will need to have their concerns addressed.   A good portion of residents are enthusiastic about capping car counts and capping traffic. 

And, Development Agreements cost money for expert legal advice and for the time of city staff.  There are some grant programs that may help fund pioneering Paid Parking scheme development.  Note that Paid Parking is one of the world's most effective carbon reduction measures.  It is in the same order of CO2 reduction magnitude as having  everyone buy a Prius, at a tiny fraction of the economic cost.  And, it's much faster than "turning over" our national auto fleet.

8. Many City Councils and Planning Commissions have anti-infill tendencies

A: We've taken an empathetic approach to Planning Commissions and City Councils, anticipating their objections and having a good solution to those objections. The proposal does comprehend that you have to count cars and prove that car counts decrease. We're attempting to bring some more rigor / rationality to the city planning process.  With the passage of AB32 for climate protection, we do have a sea-change in policy formulation that we can exploit to bring about innovative local policies that were impossible in the past.  Cities are competing with each other to be the most green.  That helps this effort. 

9. "I am 100% in favor of paid parking and I agree that there are huge economic benefits with this scheme, but I'm still cynical about local policymaking being able to do the right thing."

A: It wouldn't be so bad to try this proposal out, only to have it fail.  If we try out 20 policy innovations with huge CO2 reductions, and each innovation only costs $500,000 to try out, and if only 1 works, then we come out far ahead.  Better to fail and then pass lessons learned onto other climate advocates.  Now is not the time to wimp out of trying for innovation because of cynicism (not matter how valid that cynicism).  We especially need to try for some "demand reduction" policy innovations because they are many times more cost-effective than many of the "green" schemes being advanced by powerful special interests.  With demand reduction, there is very little downside and huge upside.  If we think like entrepreneurs, this is a risk well worth taking.  Also if we pioneer this type of in-fill, then it will morph and be applied in other creative ways. This is a chance to really green-up human settlement patterns. Contrast the promise of this Paid Parking scheme compared to raising US gas prices to European levels.  This scheme has a much better chance of succeeding.  

10. Many office parks have grants for new development rights that have yet to be exercised.  Employment ebbs and flows with the economy.  Employers come and go, with different numbers of employees per 1,000 square feet.  How do you accommodate complexities like these.

A: You count "cars per 100 employees" (you have to also take an employment census when you count cars), then you extrapolate to full employment.  You end up rewarding changes in cars per 100 employees.  But, this is a really complicated detail that should be avoided in this type of document, but must be handled in the Development Agreement.  The main point is that there is a commonsense approach to specifying these details.  No scheme will be perfect, but there's a way to arrive at a reasonable, rational, fair scheme.

Notes per chat w/ Stu Cohen, Exec Director, Bay Area Transportation and Land Use Coalition, 6/15/07

"This is an exciting and ambitious proposal. It fits in well with the big picture, into the regional smart growth vision blueprint process and with AB32 state climate protection law. In-fill is good. It is a feasible suggestion, but it will take an 18 to 24 month process of analysis and open public meetings, with a well-funded, multiple-consultant study with urban planning, land use law, and GIS expertise. The study should forecast the reduced traffic and reduced CO2 from this proposal. The emphasis should be in the South Bay where the vast expanses of surface parking at offices are. An entity such as MTC might be able to fund such a study. There will have to be a 'grand agreement,' with MTC, BAC, SLVG, cities, and major Silicon Valley employers backing the proposal. It has been interesting to see South Bay residential projects move forward at the Hitachi and IBM sites. That is an interesting precedent. <C21: and note the 30 story condos going up in Denver Tech Center and Tysons>

Note that, for various reasons, this type of proposal is probably outside of the MTC RTP 2009 scope."
 

This proposal brought to you by:

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