Volume 1, Number 1: July 2002

New Report on Parking Cash-Out Law

The program is ignored and unenforced.

A California law that grew out of a decades-long campaign by Institute of Transportation Studies Los Angeles researcher and Urban Planning Department Chair Donald Shoup to eliminate hidden subsidies for free parking in the workplace is languishing on the books, unenforced and unpublicized, according to the state's Legislative Analyst Office in a March 19 report (in html or PDF).

“Most of us think that when a law is passed, the government will enforce it,” Shoup said. “But that turned out not to be the case.”

California's “parking cash-out” legislation, which became law in 1992, requires certain employers who offer free parking to their employees to eliminate the free benefit or offer cash equivalents to employees who decline the parking privilege.The law was intended to reduce the incentive to drive to work and thereby reduce traffic congestion, air pollution and fuel consumption.

But 10 years after the law was passed, most employers are unaware of it, and the California Air Resources Board, which is charged with administering it, has made little progress in publicizing or enforcing it, according to the LAO.

The Invisible $31.5 Billion Benefit

Shoup’s interest in parking cash out was sparked in 1980 when he realized that employees who got free parking at work were receiving a fringe benefit that employees who took buses, walked, or bicycled (or who paid to park) did not. “I started out by thinking it was unfair,” he explained.

U.S. employers provide 85 million free parking spaces for commuters, according to the 1990 Nationwide Personal Transportation Survey, and 95 percent of commuters who drive to work park for free when they get there, making employer-paid parking the most common tax-exempt fringe benefit in the U.S. The resulting tax-exempt parking subsidies are worth $31.5 billion a year, according to Shoup.

Inadvertently or not, Shoup argued, the result is to promote driving to work by an employer-paid matching grant: the employer pays the parking cost of parking at work if the employee pays for purchasing a car and driving it there.

Moreover, he found that men were more likely than women to park free at work, and whites received the benefit more often than non-whites. That suggested that free parking wasn't being distributed fairly.

Besides being fairer, parking cash out promised to reduce congestion, air pollution and fuel consumption by giving employees an incentive to stop commuting by car. Those who wished to continue to receive free parking could do so. Employers, who must comply with the law only if they lease space for parking from a third party, would be able to lease fewer spaces if employees choose to cash out, and the government would collect income tax on the new cash that non-parking employees would take home.

“There is no such thing as a free parking space. Someone must pay for it. If motorists don't, who does?”—Donald Shoup, researcher at ITS Los Angeles

Shoup suggests that the most beneficial aspect of the law is that it begins to put a price on a commodity—parking—that has long been thought of as costing nothing. “There is no such thing as a free parking space,” says Shoup. “Someone must pay for it. If motorists don’t, who does?”

Cash Incentives Work

More than a decade after Shoup began investigating free parking's pervasiveness and its effects on transportation patterns and policies, the law was passed. But it failed to require the Air Resources Board to conduct any type of outreach or monitoring, and it did not require employers to report whether they were in compliance. The law was largely ignored.

Still, some companies did comply, and in 1997 Shoup examined eight firms in southern California to learn if it altered employees’ travel behavior. The results varied widely from firm to firm, but overall Shoup found significant changes. On average, solo driving dropped 17 percent, carpooling increased by 64 percent, transit use rose by 50 percent, bicycling and walking rose one-third, and vehicle-miles traveled and vehicle emissions each fell by about 12 percent per employee per year. The report with these findings is available here.

Based on more recent interviews with employers, the Legislative Analyst Office predicts that 10 to 20 percent of employees would participate in parking cash-out programs, depending on how far they drive to work, how well they are served by transit and the amount of cash they’d receive in lieu of parking.

Few Businesses Required to Comply

Even if the law is fully enforced, it was written so narrowly that it only affects a small number of employers: those with 50 employees or more and those who lease, rather than own, their employees' parking spaces. Employer-owned parking spaces—which account for 84 percent of all free parking spaces in the state—are exempt from the law. Of the 11 million free parking spaces in the state, the LAO estimates only three percent, or 290,000, fall under the parking cash-out law.

Using that 290,000 figure, the LAO estimates that if 15 percent of commuters cashed out, 43,500 trips would be eliminated statewide each workday (out of an estimated total of 21 million workday trips). That would reduce vehicle emissions by two tons a day, which is a small fraction of the daily burden. In 2000, in the South Coast District alone, a 10,700-square-mile area of southern California that includes Orange County and portions of Los Angeles, San Bernardino and Riverside Counties, about 1,300 tons of smog-forming pollutants were emitted by vehicles each day.

Despite these discouraging numbers, Rebecca Long, who authored the LAO report, believes it is important that the law be publicized and enforced.

“There is no silver bullet for these [pollution and congestion] problems, so we need to look at every possible option,” she said. In addition, parking cash out is a much less costly way to cut emissions and congestion compared to proposals such as light rail, which requires substantial capital investment. Implementing parking cash out could also influence future decisions regarding growth. “It will make us more mindful about the costs of parking.”

Mark Brucker, transportation air quality planner for the Environmental Protection Agency, goes further and suggests that once the program is publicized, employers and employees of companies not under the mandate may voluntarily choose to participate.

In the report that she prepared for the LAO, Long suggests expanding the program to smaller firms with fewer than 50 employees. “If the law were broadened to include all firms statewide, we estimate that an additional 334,000 employees could be offered the cash-out option. This would more than double the number of employees affected by the law,” she wrote.

Another argument in its favor is that parking cash out has the potential to have the greatest impact where congestion and pollution are the worst: in crowded urban centers. Shoup suspects that most large employers with high-rise offices in San Francisco, Oakland and downtown Los Angeles lease rather than own the parking lots their employees use, which would put them under the law's jurisdiction.

The Hunt for Employers

Jeff Weir, associate transportation planner at the Air Resources Board, said that even before the legislative analyst's report was released, the board had identified about 50,000 employers with 50 employees or more. The board intends to inform all of them about the law, even though only a small fraction will have to comply. In addition, the board is working with the Metropolitan Transportation Commission to spread word about the program to employers in the Bay Area.

Shoup believes the Air Resources Board isn't suited for this type of task. “They don’t enforce any similar law that deals with individual employers,” he said.

More than two decades after he began his research, Shoup says he’s learned a valuable lesson. “Those of us in academia work hard to get the research done, but that’s not enough. We have to work harder in the policy arena to get anything to happen.”

ITS Review Online, Volume 1, Number 1: July 2002

The state Legislative Analyst Office's March 19 report, "A Commuter's Dilemma: Extra Cash or Free Parking? or PDF.

The California Air Resources Board .

The parking cash-out section of the ARB Web site.

Donald Shoup's 1997 report, "Evaluating the Effects of Cashing Out Employer-Paid Parking," is available here.

Click here to download a PDF (250 K) of this article.

Click here to download a PDF (1.7 MB) of the entire issue (excluding the TRB presentation abstracts).

The state Legislative Analyst Office's March 19 report, "A Commuter's Dilemma: Extra Cash or Free Parking?" (html version) or (PDF)

The California Air Resources Board.

The parking cash-out section of the ARB Web site

Donald Shoup's 1997 report, "Evaluating the Effects of Cashing Out Employer-Paid Parking," is available here.