Parking Management

“I think it’s great to have a choice on whether I need parking.  In my case, biking to work is convenient, so my employer pays me for the space I don’t use…we all come out ahead.”
– Thomas Butler, Employee, Downtown Austin Alliance

Need help getting to and around downtown?

Movability Austin helps employers investigate and implement new options that can save them money, solve problems, and contribute to the vitality of downtown.  They also help employees find and use options that will cut gas cost, save them from the frustrations of traffic, even improve their health and well-being.  Check it out here!

Definition

Parking cash out is a program that allows employees to opt out of having a parking space and instead receive compensation. The employer who leases (or owns) a space pays the employee not to park.

Benefits

Employer

  • Reduced parking needs
  • Best way to recruit new Commute Solutions participants
  • Increased participation in Commute Solutions

Employee

  • Additional income
  • Possible Guaranteed Ride Home
  • Increased participation in Commute Solutions

Community

  • Less need for parking structures/lots
  • Increased participation in Commute Solutions leads to other community benefits such as decreased congestion, improved air quality, greater community connectivity, and higher rates of exercise

Challenges

  • Additional payroll taxes for employer
  • Possible need to pay employees who already don’t use parking
  • Bundled parking leases for employers may delay savings or complicate implementation
  • Employees who take the cash out and park elsewhere

Implementation Steps

Parking cash out can be an easy way for many employers to reward their employees financially while promoting alternative transportation. Free parking is the single biggest obstacle to getting employees to trying alternatives to the solo commute.
By offering money to give up that parking (and thus driving), the employer will take a huge leap in its efforts to implement Commute Solutions programs. In most situations, the program can be structured so that there is little or no cost to the employer.

Assess the Parking Situation
A site analysis should provide a good look at how the employer manages its parking. You’ll need the following information:

  • The number of employees who park at work (include those that may not be able to find an employer-provided space)
  • The number of employees who don’t use parking spaces because they utilize other Commute Solutions 
  • How many spaces are available for employee parking (Be sure to note types as well, like “Compact Car Only,” “Disabled,” etc.)
  • How much the employer pays for the average employee space (If the employer owns the lot, try to get an estimate on how much construction and maintenance costs are for an average spot. Your facilities manager should be able to help with the estimate.)
  • The lease agreements and particulars (how the employer pays for spaces) for leased parking. Lease agreements can be by reserved spaces, or simply a number of spaces overall. Additionally, some leases are for bundled parking, meaning the employer doesn’t have the option of adding or subtracting individual spaces each month since the cost is included in the rent.
  • Determine Cash Out Payment and Procedure
    Employers work with management to establish the proper cash out payment. For simplicity’s sake, you could assume that if an employer pays $80 for a space, the cash out participant will get $80 a month. However, different strategies offer the employer and employee different benefits.
  • Payroll tax deduction
    When employers pay a cash out, they are essentially adding to the employee’s monthly salary. The employee pays income taxes and other withholdings on the amount, which is unavoidable. The employer also has to pay added payroll taxes, which may seem like a deterrent to using the program. To avoid the problem, the employer simply can pay the employee 90 percent of the space’s cost and pocket the rest. So, on an $80 space, the cash out participant would get $72 dollars, and the employer would recoup $8 to cover additional payroll taxes.
  • Keeping a Portion of the Cash or Paying More Than the Space Is Worth
    No regulations guide how much an employer keeps on the cash out. So on an $80 parking space, an employer could pay the employee $60 and keep $20.Remember, however, that one of the main benefits from Commute Solutions programs is the goodwill your employees feel toward their employer for receiving benefits. If the employee knows the company is coming out ahead, part of that goodwill may be lost. Conversely, some employers opt to give employees even more than the value of the parking space, because they value the cash out decision and associated benefits it provides.Still, retaining a portion of the parking cash out offers some flexibility for companies who are experiencing tough times. For example, retaining an extra $5 of a monthly $80 cash out could go toward funding a Guaranteed Ride Home program for all Commute Solutions users, or a company could reserve a few open spaces that cash out participants can check out if they do have to bring a car occasionally.Employers should consider the ramifications of establishing a cash out program if there are already many employees who don’t drive to work and instead use Commute Solutions. To be fair, these employees should receive a cash-out payment as well, and if the employer isn’t recouping money immediately from leasing less parking, the program could seem like a major expense. To help offset those costs, the ETC can consider different strategies to retain a small portion of the cash out for the employer.
  • Paying Employees Who didn’t Park Before the Program
    Some employers, wary of keeping some of the cash, have opted to pay employees for cash out by how long they remain with the organization. For example, on an $80 space, an employee who had been at the job for one year or less might only get $50 in cash for giving up a space, while a three-year employee would get $60, and so on.
  • Structuring the Cash Out to Promote Retention
    One of the best ways to structure a program is to allow employees to cash out their parking space and use the money to purchase transit or vanpool passes. The transaction can then be handled all at once through payroll, and the employee then gets the added benefit of having no taxes paid on the commuter fare. For example, on an $80 space, the employer could pay $70 for the cash out. The employee could use $25 of that amount (tax free) for a vanpool pass, while pocketing the remaining $45 (taxed) each month as extra money.
  • Allowing the Cash To Go Toward Commuter Programs
  • Offering a Daily Cash Out
    Some employers have an innovative trade worked out for employees who don’t choose to park on a given day. With this system, the employer usually owns the parking lot or garage and is looking for a way to reduce demand when not enough spaces are available. As an example, one U.S. company gives workers who don’t park on a given day a pass good for $3 off at the on-site cafeteria.
  • Paying a Flat Monthly Commuter Allowance
    Many employers simply offer their workers a flat allowance (say $80) each month to pay for parking or other options for getting to work. Therefore, a driver can use the money for parking, while a vanpool rider with a typical fee could pay $25 for the pass and pocket the rest as cash.
  • Requiring Parking Cash Out Participants to Use Commute Solutions
    A possible downside of the cash out program is the potential for an employee to take the cash and still drive to work. Such employers simply find a cheaper space farther away that doesn’t belong to the employer. An employer could require that participants use other Commute Solutions strategies, but this might draw the ire of some employees who feel they aren’t getting fair treatment for their desire or need to drive to work. A better idea is to encourage these drivers to try commuting alternatives occasionally.Cash-out participants who continue to drive shouldn’t be a large problem, because most would find it hard to save a substantial amount of money on parking alternatives—not to mention they probably are sacrificing security and convenience to save a few bucks.
  • Setting up a cash out system on leased spaces
    For unbundled leased spaces, the employer simply works with the parking management company and appropriate person at their company to subtract spaces for cash out participants.For bundled parking space agreements, the process can be a bit trickier. The employer may have to wait until the lease has expired to renegotiate the terms and number of spaces. Or a renegotiation could be initiated before the expiration if the owner of the spaces is willing.Unfortunately, the owner of the spaces will only benefit on cash out programs if there is someone else in the building or area that is willing to lease them when they become empty. On the other hand, the owner may be extremely willing if not enough parking is available for their tenants. So the employer must assess the situation and work creatively toward a cash out system that provides benefits to all involved.
  • Setting up cash out system on owned spaces
    If an employer owns a space, it probably isn’t paying a fee for it each day. So, what would be the benefit of paying employees not to park? Often, employers:

    • Don’t have enough parking spaces for their employees and will be receptive to finding ways to reduce the number of people who need spaces. Reducing the need makes employees who have trouble finding parking happier and possibly precludes a need to construct costly new parking spaces.
    • Are relocating and want to reduce their parking cost by building fewer spaces
    • Have enough parking, but may be able to lease empty spaces to other employers for a profit
    • Have enough parking but want to increase the number of spaces for customers or visitors
    • Have enough spaces, but must cut the maintenance budget. Determine Administrative Needs for Cash Out Programs

    The employer will need to work with payroll to develop a simple election form that allows employees to choose the cash out program. Like other payroll systems for commuter programs, these elections are usually straightforward and easy to administer.

  • Develop Incentives
    Parking cash out develops its own incentive…cash! But remember, most people who give up their parking space will need to find another way to work, so the employers should explore the incentives that support other Commute Solutions strategies. And since the employee is likely giving up car commuting entirely, three incentives are particularly helpful:

    1. Offering a Guaranteed Ride Home program
    2. Allowing them to use employer fleet or pool vehicles for meetings, personal use, etc., during the day
    3. Keeping extra open spaces and allowing the employee to “check-out” a parking space if needed

Cost / Savings

The costs and savings for parking cash out are dependent on whether the employer leases or owns a space, and how much an employee is paid to not use the space. (Some states also offer tax credits for employers who institute parking cash out, but Texas is not included.)

In a typical example, an employer can save money on each participating employee:

  • A downtown law firm provides each employee with a leased parking space at $80 a month.
  • About 15 percent of the employer’s work force of 170 enrolls in a parking cash out program sponsored by the firm.
  • The firm pays each of the 25 participating employees a fee each month not to park. Employees who have been at the firm one year or less get $50, those who have been there three or more years get $60, and those with more than five years get $70. The numbers of employees in those categories are five, 15 and five, respectively.
  • The firm pays a few dollars for each employee in added payroll taxes, an amount that will be offset by overall savings.
  • The firm saves about $460 a month with the program. Additionally, it saves a significant amount of money in increased retention of employees and worker productivity.

 

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