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Section 2, Chapter 6
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
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Employer
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Employee
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Community
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- Reduced parking needs
- Best way to recruit new Commute Solutions
participants
- Increased participation in Commute Solutions
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- Additional income
- Possible Guaranteed Ride Home
- Increased participation in Commute Solutions
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- Less need for parking structures/lots
- Increased participation in Commute Solutions leads to
other community benefits
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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
Commute Solutions programs. 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, an
ETC can structure the program so that there is little or no cost
to the employer.
1. Assess the Parking Situation
The site analysis (See Section
1, Chapter 3) should give the ETC 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.
2. Determine Cash Out Payment and Procedure
The ETC then works 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
(See Section 2, Chapter 9) 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.
Paying Employees Who didn't Park Before
the Program
ETCs 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.
Structuring the Cash Out to Promote Retention
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.
Allowing the Cash To Go Toward Commuter
Programs
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.
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 ETC 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 ETC simply works with the parking
management company and appropriate person at their employer 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 ETC 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
budget3. Determine Administrative Needs for Cash Out Programs
The ETC 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.
(See Section 4)
4. 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 ETC 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.
Resources
Environmental Protection Agency (EPA)
The Commuter Choice Leadership Initiative
www.commuterchoice.gov/resource/benefits.htm
1-888-856-3131
The EPA site includes an excellent and comprehensive brief on parking
cash out strategies and case studies.
Also See Resources
Section for Commuter Brief Download.
Case Studies
Downtown Minneapolis Transportation
Management Organization
An intense effort to get major employers in the downtown Minneapolis-St.
Paul area to participate in parking cash out programs yielded remarkable
results.
A 2000 study by Downtown Minneapolis Transportation
Management Organization, the Saint Paul Transportation Management
Organization and Metro Commuter Services, found that seven major
employers with about 20,000 employees averaged a 47 percent increase
in employees who used transit after implementing parking cash out.
Most of the employers offered the workers
the chance to give up their subsidized parking space in exchange
for a heavily discounted monthly bus pass. Some 11 percent of the
20,000 employees opted to take another mode of travel to work rather
than park their cars.
AIM Management, Austin
AIM Management Group, Inc. of Austin offers its 270 employees a
choice of whether they need a full-time parking space, or whether
they would rather use the cash out from the space for themselves
or their commute.
In addition to getting the $100 cash out,
participating employees receive three coupons per month that allow
them to park in visitor parking for days when they need a car.
The cash out program has encouraged use of other Commute Solutions
strategies, and many of the 21 program participants have chosen
to join vanpools.
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