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

• There are many well-known, sound policies to bring about large-scale climate protection, the problem is more in getting these policies implemented.  Because the politics of “big change” is so difficult, we have to be on the lookout for “leveraged” political situations that we can exploit, where there is some “political hunger” that can be molded towards high-impact ends.   

• The work of the CA Climate Action team coupled with local city climate protection efforts creates a unique opportunity to bring about innovative climate protection policies.  Should innovative policies be adopted by Bay Area cities, then there is a very good chance such policies will spread nationally and beyond. Many cities are adopting Climate Protection policies and a healthy competition is arising as cities vie to be the greenest and the most innovative.  Thus, there is a political hunger to stand out from other green cities (and to not issue hollow global warming proclamations). 

• Many cities are signing the U.S. Mayors Climate Protection agreement (the Sierra Club has the portal of signatory cities: http://www.coolcities.us/).  Thus, for these cities to be “self-consistent” with their stated green intentions, they will be pressured to match innovations brought about in other competing cities. There appear to be about 60 signatory cities in California.  The South Bay has a particularly large office markets. Palo Alto, Mountain View, Cupertino, Sunnyvale, and San Jose are already “cool cities.”  Once Santa Clara joins, more than 500,000 “free surface parking” office workers will be covered.   

• With paid parking, it’s possible to bring about a transformation where everyone comes out even or better.  There do not have to be losers.  However, such a “no-lose” version of the policy ends up being correspondingly more complicated than a simpler version with losers. 

• If there is a “no loser” way to bring about paid parking, why can’t we bring it about?  (Every single surface parking space at U.S. offices has free parking. [Where the office has no parking structure and the office is not in a central business district].) Because of the Tragedy of the Commons: (The inability to act in the larger collective interest because of local counter-incentives. http://en.wikipedia.org/wiki/Tragedy_of_the_commons ).  If one city with 5,000 office surface parking spaces starts charging for parking, then that city becomes uncompetitive with the rest of the local office market (not to mention the national market).  Thus, cities need to “jump in together” to overcome the tragedy of the commons.  (The goal will be to have multiple major U.S. office sub-markets jump in by charging a small amount, on the assumption that 75% or more of the office market will still have free parking.  The policy will then spread with a time lag to new markets, and the parking charges will increase over time.) 

• An example of “cities jump in together?”  From an anonymous source: Interesting example in the Twin Cities.  This was always said about changing bars and restaurants to non-smoking.  Every time any city council member proposed it, they were shouted down by people who said, "But people will go somewhere else and all our businesses will lose out."  Then one December day the city of Bloomington (largest suburb) passed a smoking ban.  The following month St Paul did the same, then Minneapolis right after.  It turns out they had been in agreement all along about who would go first and who would follow next.  

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:

2) Impact:

• Cars removed from Palo Alto's 28,000-employee office park: 6,600.  Annual CO2 reduction: 22,000 tons.

• Cars removed from Bay Area offices: 354,375 .  Annual CO2 reduction:  1.1MM tons.  New real-estate land value provided to Bay Area office landowners: $8.6BB

• Annual CO2 reduction if policy spreads nationally: 73.9MM metric tons

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:

• Mountain View, Santa Clara, Cupertino, Sunnyvale, San Jose, Menlo Park, and Redwood City adopt the same policy
• 50 U.S. “cool cities” with 5,000 or more “free surface parking spaces for offices” adopt the same policy 
• A survey of businesses (such as could be conducted by Silicon Valley Leadership Group, Silicon Valley Chamber of Commerce, or Bay Area Council) shows a supermajority of Bay Area businesses are willing to support this policy
• The Palo Alto Chamber of Commerce endorses this proposal
• Silicon Valley Leadership Group, Urban Land Institute, and Sierra Club endorse this proposal
• The U.S. EPA’s Best Workplaces for Commuters endorses this proposal
• Palo Alto voters vote with a supermajority for this policy, via an "advisory ballot measure."  

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)

• Start with a 1,200-acre, 20,000 employee office park like Stanford Research Park. 

• A city “caps” parked cars in the office park at 17,000 cars.  Verifiable counts of cars are taken a few times per year. 

• In advance of the paid parking scheme, the city agrees to the following.  For each verifiable car that is removed from an office parking lot, the city grants 350 square feet of new development rights (hopefully for dense residential) to the landowner.  The rights are transferable and can be sold to other landowners within the office park.  The rights allow for new in-fill development on any parcel within the office park.   The "350 square foot of new rights" scheme is brought about by a Development Agreement.  Such agreements require careful legal drafting, take up city staff time, and require a public process. 

• Parking scheme is implemented.  25% of cars disappear.  Office park landowners obtain new development rights.  Some landowners buy development rights from other landowners and in-fill. Because of the new development, the office park fills back up to the capped level of 17,000 cars. 

Relevant Expert Quotes:

• See also this October 2006 LA Times article: "California State Law Does Little to Limit Free Employee Parking," http://www.planetizen.com/node/21503
• Berkeley Professor Robert Cervero (author: Transit Metropolis and America’s Suburban Centers), "Parking lot laden office parks are one of our biggest blights, but they also represent our largest opportunity for in-fill development because of their inefficient use of land."
• Peter Calthorpe (author: The Next American Metropolis) at the Congress for New Urbanism Conference (CNU XIII), June '05: "We new urbanists didn't focus on the growth of office parks. This was a huge mistake. We need powerful strategies for these job centers."
• UCLA Professor Donald Shoup (author: The High Cost of Free Parking) at CNU XIII. "Parking lots within our office parks represent a 'land bank.' Office parks can be transformed in ways that few people now envision."

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

• Parking charge enforcement.  (One solution for the 1,000 acre Stanford Research Park ’s [SRP] 20,000+ employees: Expand the SRP TMA [transportation mgmt assn] to handle parking at all the offices.  Provide monthly parking stickers. TMA staff checks stickers and issues tickets.  There are also more automated parking solutions - see for instance: "Paid Automated Smart Parking Design for a Large Office Park," Steve Raney, Intelligent Transportation Systems World Congress, 11/8/05, http://www.cities21.org/ITSWC_SmartParking_071505.doc.)
• Residential permit parking adjacent to office land (to prevent spillover parking)
• Negotiating a Development Agreement with landowners via a public participation process where long term land lease holders and tenants play an important role.  
• Amending office parking requirements to have a parking maximum based on SOV commute trip levels 25% lower than we currently see in Silicon Valley    
• Deciding whether carpools should be provided with reduced parking charges or with free parking. 

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.   

• Palo Alto landowners come out ahead from $200MM in new real-estate profits.  Note that a permanent parking charge policy that is imposed by the government is required to signal to the real-estate market that parking demand will be permanently reduced (and that in-fill is enabled).  Real-estate developers are hesitant to make investment when a policy is voluntary or is somehow not permanent (because they want their property to be able to accommodate a variety of future uses and realistic parking demand scenarios).  
• The employer's daily cost per the 350 square feet dedicated to each surface parking space is about $12 per day (rent + maintenance).  Thus, employers don't want to pay for surface parking - they just feel compelled to incur this expense because employees all over the U.S. expect it.  Note that employees utilizing alternatives to solo driving commuting subsidize SOV commuters who receive their $12 free parking benefit each day.  Hence, if employers collect $6 per day per space from employees, they incur lower expenses.  In addition, the landowner will have to negotiate a lower lease rate with the employer in order to obtain permission to in-fill.  Furthermore, the employer might wish to expand on the existing site but be prevented from such expansion because the site is "maxed out."  Given proven parking reductions, this limitation may be overcome.
• Will employees wish to foot the $6 per day bill for parking-policy-induced climate protection?  No.  They will negotiate additional compensation from their employers.  The employer may be able to provide this $6 per day pre-tax.  (The national Commuter Check program allows employers to pay employees for their parking, transit fees, carpooling expenses, etc.  This money can be provided tax free.  Otherwise, a $6 parking charge would require a $8.10 payment from the employer to employee, when employees are in a 35% tax bracket.  Parking charges of up to $8.54 per day are supported by this program, but only transit subsidies of $4.37 are supported.   :(    see: http://www.commutercheck.com/  or IRS Revenue Procedure 2006-53 for an explanation of the Qualified Transportation Fringe benefit.  See 3.13 in http://www.irs.gov/pub/irs-drop/rp-06-53.pdf )  
• When all the negotiations are settled, and equilibrium is reached, there will be no losers.  Many employees will switch from SOV commutes and will enjoy more productive commute time (reading on the train, etc) and lower commute expenses.
• Future generations will come out, far, far, far ahead
• An even more detailed example is provided below. 

MORE DETAILED EXAMPLE OF REAL-ESTATE ECONOMICS:

Assumptions:

• 20,000 employee office park
• Before paid parking, 17,000 cars per day park
• After $6 paid parking implemented, 12,000 cars per day park (a 25% nominal SOV mode shift).  At 350 square feet per car removed (and wasted parking space freed up), this frees 40.7 acres for in-fill development.
• The land is already paid for, so the in-fill development is especially lucrative.  We conservatively give $350MM in-fill profit for this scenario, but, picking the most profitable type of development to build, profits will be higher. [calcs: 5,000 parking spaces saved.  350 square feet new development rights per parking space.  $200 profit per square foot (conservative) in-fill development = 5,000*350*200=$350MM.]
• Landowner owns 5% of the office park, providing cubicles for 1,000 workers.  250 cars are removed from this property. 

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:

• The U.S. Environmental Protection Agency’s Collaborative Sustainability Network “Transforming Office Parks into Transit Villages” study provides support for innovative office parking policy research. 
• The Mayor's Green Ribbon Task Force (GRTF) on Climate Protection for Palo Alto and Stanford (goal: achieve 1990 greenhouse gas levels by 2020).  The GRTF is a volunteer ensemble, and this "parking charge" proposal is one of many proposals being considered.
• The Transportation and Land Use Coalition's "MTC 2009 Regional Transportation Plan Land Use / Climate Change Working Group."  This is one of many proposals being considered. 

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