Free or subsidized employee parking is a valuable job perk, but there’s one serious downside: It encourages commuting by car and hinders efforts to promote environmentally sustainable alternatives. One tool for countering this effect is parking cash out, a policy that requires employers who provide free parking to offer the cash equivalent of the parking space to those who don’t drive to work. In service of its air quality and traffic reduction goals, California enacted a parking cash out law in 1992, but the idea has been slow to catch on: 30 years in, Santa Monica is still the only place in the state that requires eligible employers to offer parking cash out.
Among techniques for transportation demand management (TDM), parking cash out has proven one of the more successful at changing behavior and motivating people to choose options other than driving alone. So why aren’t more cities, counties and regions using it to advance their sustainability, equity and congestion reduction goals? SPUR interviewed air quality agencies to find out why and offers four ways California can revitalize this underused tool to reach its long-term transportation and climate goals.
What Is Parking Cash Out?
Parking cash out was devised to encourage employees who receive free or subsidized parking and drive to work to switch to alternative methods of commuting. It offers employees a choice: they can continue to use their free parking or receive the cash value of that parking spot instead. For employers, the cost of the parking cash out benefit is offset by the recouped cost of the parking space the business no longer needs to lease. The only cost the employer bears is administrative, and ideally the government agency enforcing the law would provide the guidance necessary to minimize that cost.
The policy is politically appealing because it’s cost-neutral and it doesn’t take away parking from those who wish to continue driving. Without changing the cost to employers or removing the option to drive, parking cash out prompts some employees who previously drove to seek other methods of transportation.
Evidence shows that the option to receive cash instead of a parking space can cause a significant number of car commuters to switch to other modes of travel. Case studies from Los Angeles County found that 17% of employees who previously drove to work switched to an alternative commute mode when their employer introduced a parking cash out benefit. In Santa Monica, 20% of employees at businesses offering parking cash out take advantage of the benefit. These large impacts show that parking cash out is a promising TDM policy.
Figure 1. Change in Commuting Mode at Eight Los Angeles County Employers
UCLA urban planning professor Donald Shoup studied the effects of parking cash out programs at eight employers in Los Angeles County. Across these sites, drive-alone commuting declined after parking cash out was offered, while carpool, transit, bicycle and walk commuting increased.
California’s Parking Cash Out Law
California’s 1992 parking cash out law requires employers to offer their employees a parking cash out benefit if they:
- Have 50 or more employees
- Lease parking and provide it free or at a discount to employees
- Can calculate the cost of the parking (i.e., the parking is not “bundled” with the building lease)
- Can reduce the number of parking spaces they lease without financial penalty
The law originally gave enforcement authority to the California Air Resources Board (CARB), but in response to lack of enforcement, the law was broadened in 2009 to authorize cities, counties, and air quality management districts to establish and impose fines for failure to comply with parking cash out requirements. Despite these changes to the law, the City of Santa Monica remains the only jurisdiction in the state, at any level of government, that enforces the parking cash out law.
SPUR interviews with CARB and the South Coast Air Quality Management District (SCAQMD) revealed that neither agency thinks the law as written can deliver benefits commensurate with the time and resources required to provide guidance and enforce it, but SPUR did not find evidence for such a conclusion. Their opinions were partly based on the assumption that the number of employers subject to the law is likely to be small. However, since CARB had not previously attempted to enforce the parking cash out law or collect survey data to measure its potential impact, the agency lacked hard data to formally assess the potential scope of impact. To its credit, SCAQMD ran a pilot program to assess the viability of a parking cash out requirement. However, this pilot only included a subcategory of businesses subject to the law and shouldn’t be considered a representative sample. In addition to concerns about the requirement applying to too few businesses, CARB and SCAQMD both stated that they did not have the resources or expertise (in areas like auditing commercial lease agreements) needed to enforce the law, even if they were inclined to do so.
Additionally, one air district employee said that the agency’s primary mission is managing air quality, and for that specific goal, parking cash out is not a particularly important tool given technological advances that have reduced emissions from passenger vehicles. However, data from CARB shows that, as of 2018, passenger vehicles still account for 28% of all greenhouse gas emissions in California. While it is true that passenger vehicles have become cleaner, it would be a mistake to disregard their environmental impact, as they remain the single largest source of greenhouse gas emissions in the state. In addition, there are benefits unrelated to vehicle emissions, such as reduced congestion; fewer deaths and injuries from collisions; reduced need for parking spaces; and stronger support for transit, biking and walking due to the increase in commuters relying on these options. These benefits fall outside of air districts’ primary responsibilities but are central to the state’s sustainability, equity and livability goals.
4 Ways to Revitalize the Promise of Parking Cash Out
Due to lack of enforcement across the state, parking cash out has largely fallen out of the TDM conversation in California. One transit professional described the policy as “one of the least enforced ordinances on the books, next to jay-walking.” His impression was that, given how little enforcement had occurred in the 29 years since its initial passage, “a lot of TDM professionals wouldn’t even know it’s still on the books.”
SPUR offers four potential strategies to revitalize parking cash out’s promise as a TDM policy:
1. Promote Awareness of the Parking Cash Out Law
At bare minimum, CARB and regional air districts should implement outreach programs to make sure that local jurisdictions, employers and employees are aware the law exists. Some businesses who are obligated to comply are likely to participate once made aware of the requirement, and others may choose to offer the benefit voluntarily.
2. Organize Employees to Advocate for Parking Cash Out
Increased participation in parking cash out might also be accomplished if advocates were to inform employees that they may be missing out on the parking cash out benefit and encourage them to ask for it at their workplaces. Absent any enforcement from state or local governments, businesses may still feel compelled to adopt a parking cash out program if employees make their benefits administrators aware of the law’s existence. Though this strategy should not be seen as an acceptable substitute for proper enforcement of the state law, it can provide a path to bring parking cash out to some major employers even before more meaningful enforcement action is mobilized. Successful examples of parking cash out at individual businesses would provide data to support increased enforcement and may build momentum for expanding the number of employees covered by the law.
3. Pursue Local Enforcement
Santa Monica’s success with parking cash out should serve as a model for other cities to implement their own rules for enforcement, especially those where the law would apply to a meaningful number of employees. The Metropolitan Transportation Commission already encourages Bay Area jurisdictions who receive transit funding to enforce the state’s parking cash out requirement (see page 14 of MTC's Priority Development Area planning guidance), but no cities or towns have followed this recommendation. San Jose's update of its TDM standards may be an opportunity to implement enforcement of California's parking cash out law in the Bay Area’s largest city.
Additional local examples of successful implementation and enforcement of parking cash out at the municipal level could then serve as an impetus to consolidate enforcement at agencies with a broader geographic reach, such as county transportation authorities or air districts. One agency worth pursuing is the Bay Area Air Quality Management District, which told SPUR that it was examining a more robust parking cash out program down the line, though not in the next year or two. Research shows that the benefits of parking cash out are as high as four times the implementation costs. By this measure, parking cash out appears to outperform many of the Bay Area’s proposed regional transportation investments and is a policy regional agencies should be considering. (Compare the benefit/cost ratios on page 75 of Donald Shoup’s Parking Cash Out Report vs. Appendix 2 of the Plan Bay Area 2050 Performance Report.)
4. Expand the Number of Businesses Subject to the Law
Expanding the parking cash out law so that it applies to more employees would increase its impact by addressing the primary reason for inaction cited by agencies that are in a position to enforce the law.
A major limiting factor in the law’s reach is the criteria that parking must be leased separately from the building. According to many of the city and air district staff interviewed for this article, most business leases have parking “bundled” in with the commercial space being rented, meaning it is not given a separate line item, making it more difficult for employers to calculate the cost of any parking they provide. This condition exempts the majority of businesses from the parking cash out requirement, reducing the law’s potential impact.
Another limiting factor is the criteria that exempts employers who either own their own parking or lease it in bulk (e.g., an entire floor of a parking structure), so that they can’t tailor the total amount of parking they lease. The largest businesses are likely to either own their own parking or lease it in bulk, and bringing these employers under the parking cash out requirement would expand the reach of the law and allow many more employees to benefit. Such a proposal could be made politically palatable by grandfathering in existing leases and only applying the law to new or renewed parking arrangements.
There is precedent for expanding parking cash-out to include all types of subsidized employer parking. A newly passed law in Washington, D.C., applies to bundled parking when a current parking lease ends or is up for renewal or extension. The law also applies to employer-owned parking if the parking is purchased after the effective date of the new law.
When California’s parking cash out law was last reformed in 2009, the state legislature passed a bill that would have eliminated bundled parking going forward by requiring new leases to list parking costs as a separate line item, but it was vetoed by Governor Schwarzenegger. The state legislature should introduce new legislation that would expand the number of employees who could benefit from the flexibility that parking cash out affords, and Governor Newsom should sign it.
Parking cash out expands commuter choice and has shown promise for encouraging employees to make more sustainable commute choices where it has been tested. The law is already in place and, where implemented, has reduced automobile use. Given the long-term environmental and congestion challenges that result from excessive single-occupant vehicle commuting, governments at the state, regional, and local levels should expand the number of employees who can choose cash instead of driving.
About the Author
Alex Singal recently completed a Master of Public Policy at UC Berkeley's Goldman School of Public Policy. For his graduate policy research project, Alex partnered with SPUR to assess implementation of California's parking cash out law. SPUR is grateful to Alex for his leadership on this work.