Commuter Financial Incentives

Parking Cash Out, Travel Allowance, Transit and Rideshare Benefits

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TDM Encyclopedia

Victoria Transport Policy Institute

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Updated 22 July 2008

This chapter describes various financial incentives that can be used to encourage use of more efficient commute modes. These include parking cash out, travel allowance, transit benefits, and rideshare benefits. They are often provided as an alternative to subsidized employee parking.

 

 

Description

Commuter Financial Incentives include several types of incentives that encourage alternative commute modes:

 

·       Parking Cash Out means that commuters who are offered subsidized parking are also offered the cash equivalent if they use alternative travel modes (Shoup, 2005).

 

·       Travel allowances are a financial payment provided to employees instead of parking subsidies. Commuters can use this money to pay for parking or for another travel mode.

 

·       Transit and rideshare benefits are free or discounted transit fares provided to employees (Commuter Check).

 

·       Reduced employee parking subsidies means that commuters who drive must pay some or all of their parking costs (Parking Pricing).

 

·       Company travel reimbursement policies that reimburse bicycle or transit mileage for business trips when these modes are comparable in speed to driving, rather than only reimbursing automobile mileage.

 

·       Tax and other government policies that support such programs (Inland Revenue, 2004; Commuter Choice Webpage).

 

 

Commuter financial incentives can be prorated according to how much employees use alternative modes. For example, employees who drive twice a week would receive 60% of the full Parking Cash Out allowance.

 

These strategies create more neutral travel incentives. Most employees who commute by car receive a free parking space with a typical value of $50-100 per month (Shoup, 1999; Litman, 1999). Employers offer employees subsidized parking because these benefits are usually untaxed. A typical employee must earn $1,500 or more in pre-tax income to pay for a parking space that costs their employer only $1,000 to provide. In the U.S., transit benefits are tax-exempt up to $100 per month (see the Commuter Choice website at www.commuterchoice.com for information on U.S. federal implementation resources and incentives). This policy has motivated an increasing number of employers to offer transit benefits as an alternative to parking benefits (Commuter Check). In Canada, transit benefits are currently taxable, so few employers offer them (employees would just as well receive cash), but there are efforts to change this policy (CUTA, 2005).

 

Parking Cash Out and transit benefits represent the savings that result from reduced parking costs. Businesses that own adequate parking may perceive little short-term savings from reduced parking demand. However, over the medium and long term most firms have opportunities to benefit financially from reduced parking demand: to provide additional parking to accommodate growth, to lease or sell excess parking, or to use the land for a new building, equipment storage, or greenspace. Parking Management allows businesses to take advantage of reduced parking demand. To make it easier for businesses to save from reduced employee parking demand, commercial leases can unbundle parking (parking spaces are leased separately rather than automatically included with building space), and list parking as a separate line item (parking rents are listed separately from building rents).

 

 

How It Is Implemented

This strategy is usually part of a Commute Trip Reduction program. Employers establish rules that employees must observe to quality for financial benefits, and may require participating employees to sign an agreement that specifies their responsibilities, such as the number of days per month that they may drive to work and still qualify for a Parking Cash Out bonus.

 

Appropriate Parking Management strategies can facilitate implementation of this strategy. Minimum parking requirements can be reduced for businesses with Commute Financial Incentives. Transportation Management Associations can serve as brokers for any extra parking capacity.

 

 

Travel Impacts

Models are now available which can predict the travel impacts of a specific Commute Trip Reduction program, taking into account the type of program and worksite. These include the CUTR_AVR Model (www.cutr.usf.edu/tdm/download.htm), the Business Benefits Calculator (BBC) (www.commuterchoice.gov) and the Commuter Choice Decision Support Tool (www.ops.fhwa.dot.gov/PrimerDSS/index.htm).   

 

 

Table 1            Summary of Parking Cash Out Impacts (MTS, 2006)

Location

Scope

Employees Affected

Financial Incentive ($1995/month)

Decreased Parking Demand

 

Group A: Areas With Little or No Public Transportation

Century City District, West Los Angleles

3500 employees surveyed at 100+ firms

3,500

$81

15%

Cornell University Ithaca, NY

9000 faculty & staff

9,000

$34

26%

San Fernando Valley, Los Angles

1 large employer ( 850 employees)

850

$37

30%

Bellevue, WA

1 medium-sized firm (430 employees)

430

$54

39%

Group Totals and Weighted Averages

             

13,780

$47

24%

 

Group B: Areas With Fair Public Transportation

Los Angeles Civic Center

10000+  employees at several organizations

10,000

              $125

36%

Mid-Wilshire Blvd., Los Angleles

              1 mid-size firm

430

              $89

38%

Washington DC Suburbs

5500 employees at 3 worksites

5,500

              $68

26%

Downtown Los Angeles

5000 employees surveyed at 118 firms

5,000

$126

25%

Group Totals and Weighted Averages

             

20,930

$110

              31%

 

Group C: Areas With Good Public Transportation

University of Washington, Seattle Wa.

50,000 faculty, staff & students

50,000

$18

24%

Downtown Ottowa, Canada

3500+ government staff             

3,500

              $72

18%

Group Totals and Weighted Averages

             

53,500

$22

24%

Overall Totals and Weighted Averages

 

88,210

              $46

26%

 

 

The travel impacts of a Commuter Financial Incentive program are affected by the magnitude of the benefits, the quality of travel choices, and demographics. In urban areas, travel tends to shifts primarily to transit and walking, while in suburban areas it tends to shift more to ridesharing, telecommuting and cycling. The Transport Elasticities chapter provides information on the travel impacts of various price changes. The figure below illustrates the effect such economic incentives typically have on single occupant vehicle (SOV) commuting.

 

Figure 1          Effect of Economic Incentives on SOV Rates (Rutherford, 1995)

SOV travel decline as economic incentives for other modes increase.

 

 

Below is an example from the Trip Reduction Tables chapter, based on information from a major study for the Institute of Transportation Engineers (Comsis Corporation, 1993). This table show the effects of transit financial benefits on commute trips for various geographic conditions. For example, a $1 (in 1993 U.S. dollars) per day transit subsidy at a transit-oriented activity center is predicted to reduce automobile commute trips by 10.9%, while in a rideshare-oriented Central Business District, the same subsidy would only cause a 4.7% trip reduction. Other Trip Reduction Tables indicate reductions for Transit and HOV subsidies if matched with parking fees.

 

Table 1            Transit/HOV Subsidy Vehicle Trip Reductions (www.vtpi.org/tdm/tdm41.htm)

Worksite Setting

$0.50/day

$1/day

$2/day

$4/day

Low density suburb, rideshare oriented

0.1%

0.2%

0.6%

1.9%

Low density suburb, mode neutral

1.5%

3.3%

7.9%

21.7%

Low density suburb, transit oriented

2.0%

4.2%

9.9%

23.2%

Activity center, rideshare oriented

1.1%

2.4%

5.8%

16.5%

Activity center, mode neutral

3.4%

7.3%

16.4%

38.7%

Activity center, transit oriented

5.2%

10.9%

23.5%

49.7%

Regional CBD/Corridor, rideshare oriented

2.2%

4.7%

10.9%

28.3%

Regional CBD/Corridor, mode neutral

6.2%

12.9%

26.9%

54.3%

Regional CBD/Corridor, transit oriented

9.1%

18.1%

35.5%

64.0%

This table shows the predicted vehicle trips reduced by a given daily transit subsidy under certain conditions (Based on Comsis Corporation, 1993)

 

 

A study of 1,110 Los Angeles area employee commute trip reduction programs found that financial incentives were the most effective of all the strategies evaluated (Cambridge Systematics, 1994). The table below summarizes the findings.

 

Table 3            Effect of Various Financial Incentives on Commute Trips

Type of Benefit

Change in Drive Alone Mode Share

Bicycle Subsidy

-2.7

Vanpool Seat Subsidy

-5.4

Transit Subsidy

-3.1

Other Employee Benefits

-4.1

 

 

Transit voucher programs typically shift 20-percentage points of recipients’ commute travel from auto to transit (Oram Associates, 1995; Schwenk, 1995). Shoup (1997) found that total vehicle trips declined by 17% after Parking Cash Out was introduced at various urban and suburban worksites, as illustrated in Figure 2. These automobile trips reductions tend to increase over time: one employer found that solo commuting continued to decline each year after Parking Cash Out was introduced, as more employees found opportunities to reduce their driving and take advantage of the benefit.

 

Figure 2          Cashing Out Impacts on Commute Mode (Shoup, 1997)

Parking Cash Out results in reduced automobile commuting and increases in carpooling, transit and nonmotorized travel.

 

 

Mode shifts tend to be greatest if current use of alternative modes is low. In New York City, where transit commute rates are already high, transit benefits only increased transit use by about 20%, while in Philadelphia, where more commuters drove, transit commuting increased 32% among recipients (Schwenk, 1995). Similarly, only 30% of employees who received transit benefits who work in San Francisco increased their transit use, while 44% of those in other parts of the region commuted by transit more (Oram Associates, 1995). These probably represent the lower range of potential mode shifts since they are marketed primarily as an employee benefit and are therefore most attractive to firms with high current levels of transit commuting.

 

Table 4            Travel Impact Summary

Travel Impact

Cash Benefits

Transit Benefits

Comments

Reduces total traffic.

2

1

Only affects commute trips.

Reduces peak period traffic.

3

2

 

Shifts peak to off-peak periods.

0

0

 

Shifts automobile travel to alternative modes.

3

2

 

Improves access, reduces the need for travel.

0

0

 

Increased ridesharing.

3

0

 

Increased public transit.

3

3

 

Increased cycling.

3

0

 

Increased walking.

3

0

 

Increased Telework.

2

0

 

Reduced freight traffic.

0

0

 

Rating from 3 (very beneficial) to –3 (very harmful). A 0 indicates no impact or mixed impacts.

 

 

Benefits And Costs

Benefits include:

 

·       Increased Affordability, Transportation Options and Equity for employees who use alternative modes.

 

·       Reduced peak-period automobile traffic, resulting in reduced Congestion, road and parking facility savings, crash reductions and environmental improvements.

 

·       Increased demand for alternative modes can lead to improved Transportation Options (increased ridesharing, more transit service, bicycle and pedestrian improvements, etc.) due to economies of scale and increased public support.

 

·       Employee satisfaction. Employers have praised such programs for their fairness. It can help to recruit and retain some employees.