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TRAC: Local Option Commercial Parking Tax Analysis
Final Report Research Project GC 8719, Task 30 Parking Tax Evaluation LOCAL OPTION COMMERCIAL PARKING TAX ANALYSIS by Cy Ulberg Research Associate Professor Graduate School of Public Affairs University of Washington, JE-10 4507 University Way N.E., Suite 204 Seattle, Washington 98105 Graciela Etchart Graduate Research Assistant Graduate School of Public Affairs University of Washington Bethany Whitaker Graduate Research Assistant Graduate School of Public Affairs University of Washington Washington State Transportation Center (TRAC) University of Washington, JE-10 The Corbet Building, Suite 204 4507 University Way N.E. Seattle, Washington 98105 Prepared for Washington State Transportation Commission Department of Transportation and in cooperation with U.S. Department of Transportation Federal Highway Administration January 1992 DISCLAIMER The contents of this report reflect the views of the authors, who are responsible for the facts and the accuracy of the data presented herein. The contents do not necessarily reflect the official views or policies of the Washington State Transportation Commission, Department of Transportation, or the Federal Highway Administration. This report does not constitute a standard, specification, or regulation. TABLE OF CONTENTS Section Page Executive Summary . . . . . . . . . . . . . . . . . . . . . . . .ix The Legislation. . . . . . . . . . . . . . . . . . . . . . .ix Alternatives for Implementation. . . . . . . . . . . . . . . x Empirical Research . . . . . . . . . . . . . . . . . . . . xii Criteria and Evaluation of the Alternatives. . . . . . . . xiv Conclusions and Recommendations. . . . . . . . . . . . . .xvii Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Problem Statement. . . . . . . . . . . . . . . . . . . . . . 1 Parking Taxes in Other Jurisdictions . . . . . . . . . . . . 2 The Legislation. . . . . . . . . . . . . . . . . . . . . . . 3 Legal Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 9 Constitutional Issues. . . . . . . . . . . . . . . . . . . . 9 Property vs. Excise Tax . . . . . . . . . . . . . . . . 9 Equal Protection. . . . . . . . . . . . . . . . . . . . 9 General Scope of Applicability. . . . . . . . . . . . .10 Models Illustrating Applicability . . . . . . . . . . .11 Issues Related to Implementation of the Commercial Parking Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Taxes Imposed on the Owner/Operator . . . . . . . . . .14 Tax Imposed on Consumers. . . . . . . . . . . . . . . .16 Limiting the Tax to Commuter Parking Only . . . . . . .16 Taxing Parking Paid for Through a General Office Lease.16 Limits to the Amount of Tax That Can be Levied. . . . .18 Allowable Classifications for Structuring the Parking Tax. .18 Geographic and Population Density . . . . . . . . . . .18 Purpose or Duration . . . . . . . . . . . . . . . . . .19 Degree to Which Parking is Subsidized . . . . . . . . .19 Accessory Parking . . . . . . . . . . . . . . . . . . .21 Legal Analysis Conclusion . . . . . . . . . . . . . . .22 Analysis of Parking Tax Alternatives. . . . . . . . . . . . . . .23 Definition of Alternatives . . . . . . . . . . . . . . . . .23 Alternative One: Status Quo . . . . . . . . . . . . . .23 Alternative Two: Amendment to Existing Legislation. . .23 I. Modification of the Present Legislation . . . .24 II. Commuter Parking Tax . . . . . . . . . . . . .24 III. The Employer-Based Transportation Demand Excise Tax . . . . . . . . . . . . . . . . . . . .25 IV. Comprehensive Amendment. . . . . . . . . . . .25 Alternative Three: Long-Term Parking Tax. . . . . . . .25 Alternative Four: Peak Period Parking Tax . . . . . . .26 Alternative Five: Parking Operation Tax . . . . . . . .26 Alternative Six: General Parking Tax. . . . . . . . . .26 Alternative Seven: Accessory Parking Tax. . . . . . . .26 iii TABLE OF CONTENTS (Continued) Section Page Analysis of Parking Tax Alternatives (Continued) Definition of Alternatives (Continued) Alternatives Removed from the Detailed Analysis . . . .27 Parking Subsidy Tax. . . . . . . . . . . . . . . .27 Short-Term Rebate Tax. . . . . . . . . . . . . . .27 Employee Head Tax (ESHB 1825, High Capacity Transit Funding. . . . . . . . . . . . . . . . . . . . . .27 Evaluation of Administrative Issues. . . . . . . . . . . . .28 Exemptions. . . . . . . . . . . . . . . . . . . . . . .28 Proof of Exemption. . . . . . . . . . . . . . . . . . .30 Collection of the Tax and Proof of Payment. . . . . . .30 Collection from the Parker . . . . . . . . . . . .30 Collection from the Parking Operator . . . . . . .31 Records . . . . . . . . . . . . . . . . . . . . . . . .31 Monitoring and Auditing . . . . . . . . . . . . . . . .32 Penalties and Fines . . . . . . . . . . . . . . . . . .33 For the Parker . . . . . . . . . . . . . . . . . .33 For the Parking Operator . . . . . . . . . . . . .34 Cost of Administering a Parking Tax . . . . . . . . . .34 Legal Issues Related to Administration. . . . . . . . .36 Request for Records. . . . . . . . . . . . . . . .36 Entry onto Commercial Premises for Inspection of Vehicles . . . . . . . . . . . . . . . . . . . . .37 Public Opinion Assessment. . . . . . . . . . . . . . . . . .37 Methodology . . . . . . . . . . . . . . . . . . . . . .38 Focus Groups . . . . . . . . . . . . . . . . . . .38 Interviews . . . . . . . . . . . . . . . . . . . .40 Issues - Parkers. . . . . . . . . . . . . . . . . . . .41 Administrative Complexity. . . . . . . . . . . . .41 Downtown vs. Suburbs . . . . . . . . . . . . . . .41 Incentives vs. Disincentives . . . . . . . . . . .41 Mass Transit Improvements. . . . . . . . . . . . .42 Need for Long-Range Transportation Planning. . . .42 Education and Marketing. . . . . . . . . . . . . .43 Support of TDM Efforts . . . . . . . . . . . . . .43 Income Equity. . . . . . . . . . . . . . . . . . .43 Accountability/Distrust for Local Jurisdictions. .43 Alternative Preferred by Focus Groups. . . . . . .44 Issues - Employers. . . . . . . . . . . . . . . . . . .44 Administrative Complexity. . . . . . . . . . . . .44 Downtown vs. Suburbs . . . . . . . . . . . . . . .44 Incentives vs. Disincentives . . . . . . . . . . .45 Mass Transit Improvements. . . . . . . . . . . . .45 Need for Long-Range Transportation Planning. . . .44 Education and Marketing. . . . . . . . . . . . . .45 Support of TDM Efforts . . . . . . . . . . . . . .40 Alternative Preferred by Employers . . . . . . . .46 iv TABLE OF CONTENTS (Continued) Section Page Analysis of Parking Tax Alternatives (Continued) Issues - Parking Operators. . . . . . . . . . . . . . .46 Administrative Complexity. . . . . . . . . . . . .46 Downtown vs. Suburbs . . . . . . . . . . . . . . .47 Education and Marketing. . . . . . . . . . . . . .47 Support of TDM Efforts . . . . . . . . . . . . . .47 Income Equity. . . . . . . . . . . . . . . . . . .48 Alternative Preferred by the Parking Operators . .48 Issues - Business Community . . . . . . . . . . . . . .48 Administrative Complexity. . . . . . . . . . . . .48 Downtown vs. Suburbs . . . . . . . . . . . . . . .49 Incentives vs. Disincentives . . . . . . . . . . .49 Support of TDM Efforts . . . . . . . . . . . . . .49 Alternative Preferred by the Business Community. .49 Issues - Developers . . . . . . . . . . . . . . . . . .50 Administrative Complexity. . . . . . . . . . . . .50 Downtown vs. Suburbs . . . . . . . . . . . . . . .50 Incentives vs. Disincentives . . . . . . . . . . .50 Need for Long Range Regional Transportation Plan .51 Education and Marketing. . . . . . . . . . . . . .51 Support of TDM Efforts . . . . . . . . . . . . . .51 Alternative Preferred by Developers. . . . . . . .51 Revenue Generation Assessment. . . . . . . . . . . . . . . .51 Parking Inventory . . . . . . . . . . . . . . . . . . .51 Methodology. . . . . . . . . . . . . . . . . . . .51 Aerial Photos. . . . . . . . . . . . . . . . . . .53 Windshield Surveys . . . . . . . . . . . . . . . .53 Employment Data. . . . . . . . . . . . . . . . . .54 Office Space Data. . . . . . . . . . . . . . . . .54 Parking Codes. . . . . . . . . . . . . . . . . . .55 License Data . . . . . . . . . . . . . . . . . . .55 Other Inventories. . . . . . . . . . . . . . . . .56 Revenue Potential . . . . . . . . . . . . . . . . . . .56 Evaluation of Alternatives . . . . . . . . . . . . . . . . .60 Criteria for Evaluation . . . . . . . . . . . . . . . .60 Behavioral Change. . . . . . . . . . . . . . . . .60 Equity . . . . . . . . . . . . . . . . . . . . . .60 Revenue Generation . . . . . . . . . . . . . . . .67 Legal Feasibility. . . . . . . . . . . . . . . . .67 Administrative Efficiency and Feasibility. . . . .68 Costs . . . . . . . . . . . . . . . . . . . . . . . . .68 Parking Operators and Owners . . . . . . . . . . .68 Employers. . . . . . . . . . . . . . . . . . . . .69 Market Responses . . . . . . . . . . . . . . . . .69 Acceptability. . . . . . . . . . . . . . . . . . .69 v TABLE OF CONTENTS (Continued) Section Page Analysis of Parking Tax Alternatives (Continued) Evaluation of Alternatives (Continued) Evaluation Results. . . . . . . . . . . . . . . . . . .70 Behavioral Change. . . . . . . . . . . . . . . . .70 Equity . . . . . . . . . . . . . . . . . . . . . .73 Revenue Generation . . . . . . . . . . . . . . . .75 Legal Feasibility. . . . . . . . . . . . . . . . .77 Administrative Efficiency and Feasibility. . . . .77 Costs. . . . . . . . . . . . . . . . . . . . . . .81 Market Response. . . . . . . . . . . . . . . . . .83 Public Acceptability . . . . . . . . . . . . . . .85 Conclusions and Recommendations . . . . . . . . . . . . . . . . .89 References. . . . . . . . . . . . . . . . . . . . . . . . . . . .95 Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . .97 Appendix A. Flow Charts Illustrating the History of the Alternatives. . . . . . . . . . . . . . . . . . . A-1 B. Legislative Alternatives to the Proposed Local Option Commercial Parking Tax (drafted by Preston, Thorgrimson, Shilder, Gates, and Ellis). . . . . . . . . . . . . . B-1 C. Flow Charts Illustrating Administrative Process by Alternative . . . . . . . . . . . . . . . . . . . . . C-1 D. List of Meetings. . . . . . . . . . . . . . . . . . . D-1 E. Employment Totals by County . . . . . . . . . . . . . E-1 F. Revenue Generation Estimation . . . . . . . . . . . . F-1 vi LIST OF FIGURES Figure Page i. Annual Parking Tax Revenue Estimation . . . . . . . .xiii 1. Parking Inventory Categories. . . . . . . . . . . . . .52 2. Annual Parking Tax Revenue Estimation - City of Bremerton. . . . . . . . . . . . . . . .62 3. Annual Parking Tax Revenue Estimation - City of Bellevue . . . . . . . . . . . . . . . .63 4. Annual Parking Tax Revenue Estimation - City of Seattle. . . . . . . . . . . . . . . . .64 5. Annual Parking Tax Revenue Estimation - City of Lynnwood . . . . . . . . . . . . . . . .65 6. Annual Parking Tax Revenue Estimation - City of Tacoma . . . . . . . . . . . . . . . . .66 vii LIST OF TABLES Table Page 1. Parking Taxes Administered in Other Parts of the Country. . . . . . . . . . . . . . . . . . . . . 4 2. Summary Evaluation of Administrative and Legal Issues of Parking Tax Alternatives. . . . . . . . . . . . . . . .29 3. Public Opinion Assessment . . . . . . . . . . . . . . .39 4. Estimates of Price Elasticity of Demand for Parking for Work Trips. . . . . . . . . . . . . . . . . . . . . . .59 5. Revenue Generation Estimation (Thousands $) . . . . . .61 6. Evaluation of Alternatives. . . . . . . . . . . . . . .67 VII EXECUTIVE SUMMARY Increasing, traffic is a major problem in the Puget Sound re- ion of Washington state. As the region's employment base expands, congestion is extending commute trips, degrading air quality, increasing fuel consumption and decreasing the overall quality of life in the area. There are no easy solutions to these problems, but one way that future commuter demand can be accommodated is through more efficient transportation demand management. Parking is a critical element in any transportation system. Research has shown parking to be the most important factor in modal choice as well as influential in investment and residential or job location decisions. In Washington state, free parking is the norm for most commuters. But parking is not free; if it is not paid for by the users., its cost is passed on to others. Free or subsidized parking also makes the cost of. driving to work very low in comparison to using transit. This reinforces an inefficient choice because of the considerable divergence between social costs and individual responsibility for these costs. State legislators have addressed these problems with a series of transportation initiatives. One of these initiatives is RCW 82.80.030 that provides for a "Local Option Commercial Parking Tax." The goals of the parking tax are (1) to discourage drive- alone commuting and (2) to generate revenue for transportation purposes. THE LEGISLATION The statute authorizes cities and counties to impose two different types of parking taxes. The first tax may be imposed on persons engaged in a commercial parking business. The rate of tax may be based either upon gross proceeds or the number of stall, available for commercial use and the rates charged must be uniform for the same class or type of parking business. The second form of commercial parking tax is imposed on the act or privilege of parking a motor vehicle in a facility for which a fee is charged and that ix is operated by a commercial parking business. This second form of the tax is available as an alternative to, rather than in addition to, the first tax. The statute establishes that the proceeds of either form of the tax may only be used for transportation purposes. This parking tax statute has defining legal characteristics which shape how the tax could be implemented and distinguish it from parking taxes in other states. First, the tax is imposed on the use of property for a particular purpose (parking) or for the privilege of operating a particular type of commercial franchise (parking business). Second, even though the parking tax law does not allow a jurisdiction to wholly exempt one type of parking or parker completely, it gives local governments latitude to vary tax rates according to a number of factors, including duration of parking, location, and type or use of vehicle. Also, a city or county could choose to impose a lower rate on parking facilities accessory to buildings that have approved Transportation Management Programs (TMPs) and a higher rate on facilities without TMPs. ALTERNATIVES FOR IMPLEMENTATION To create a framework for analysis of the tax, a number of alternative approaches for implementation of the tax were devised and examined. The alternative options for implementation were originally designed to focus on transportation demand management (TDM) opportunities. Some of the parking tax alternatives were specifically designed as time and location specific TDM options. They are more successful at targeting peak-hour commuters and avoid taxing those parkers who travel during the off-peak. Other alternatives focused on revenue generation and placed less emphasis on TDM objectives. All the defined alternatives assume that the only exemptions permitted by a jurisdiction's parking tax ordinance are those specifically mentioned in the legislation. Tax exempt carpools, vehicles with handicapped decals, and government vehicles may be exempted from the tax. To target specific groups, e.g., commuters, the statute allows the x creation of categories of parkers and allows target groups to be taxed at varying'. including higher, rates. The revised alternatives proposed include the following options: (1) Status Quo -- no action is taken, (2) Long-Term Parking Tax -- higher rates are imposed on persons who park six or more hours, (3) Peak Period Parking Tax -- higher rates are imposed on persons who park between 6:00 a.m. and 9:00 a.m., (4) Parking Operations Tax -- the tax is imposed on parking operators, (5) General Parking Tax -- the tax is imposed on all parkers who use "commercial parking." (6) Accessory Parking Tax -- a lower tax rate is imposed on buildings with an accessory lot that implement and adhere to a TMP, and (7) Amend Existing Legislation -- includes the following proposals: Modification of Present Legislation, Commuter Parking Tax, Employer-based Transportation Demand Excise Tax, and a Comprehensive Alternative. The study shows that the cost and complexity administration of the tax is heavily influenced by the objective of the alternative. In general, the factors affecting the administration of a tax include the exemption process, the complexity of the rate structure, and the level of enforcement and auditing. To accomplish specific TDM goals, implementation of the tax becomes more complicated, as do the collection, monitoring, and auditing procedures. Alternatives with a revenue generation focus, on the other hand, are simpler and easier to implement. xi EMPIRICAL RESEARCH A public opinion assessment was conducted and its results are included in the report. The assessment had two primary goals. The first was to get various interest groups' reactions to the parking tax alternatives and to assess the relative support for each one. The second goal wa s to determine people's likely behavioral response to the imposition of each tax alternative. To achieve these goals, the analysis used interviews and focus groups. The interest groups considered in the public opinion assessment included parkers (commuters and shoppers), employers, parking lot operators and owners, retailers, and developers. A parking inventory was conducted as a background for revenue projections. The inventory sought to determine the amount of parking in the Puget Sound area and categorize the parking according to use. To better understand the supply and use of parking, two main categories were created: on-street and off- street. Off-street parking was further divided according to use: shopping and entertainment, commuter use, and empty stalls. In addition, classifications that cut across categories were identified. They include user-paid parking and leased parking. Each of the alternatives was analyzed in the context of five cities in the area: Bremerton, Bellevue, Seattle, Lynnwood and Tacoma to determine their ability to generate revenue. In addition, figures were calculated for one of the proposed legislative amendments, the Commuter Parking Tax. The study used information obtained from related literature about the elasticity of the demand for parking, data about the parking business in the area provided by parking operators, and the framework provided by ordinances in force in other jurisdictions of the country. Information from the literature review provided a basis for establishing elasticities and economic analysis. The revenue projections have been tallied and are displayed graphically in Figure i. The bar graph shows the revenue estimation for each alternative for the five jurisdictions for a 10 percent rate. xii xiii CRITERIA AND EVALUATION OF THE ALTERNATIVES Several criteria were identified as significant dimensions for evaluating parking tax options. These criteria included behavioral change, equity, revenue generation, legal' feasibility, administrative efficiency and feasibility, costs, market responses, and public acceptability. Behavioral Change. Assessment of behavioral change included an analysis of the extent to which the parking tax alternative influences travel behavior (mode split) and how that behavior changes. The assessment also included a study of the effects of the parking tax on the parking operators, employers, and business community. The study showed that each of the parking tax alternatives would have some effect on behavior because the tax would increase the price of parking, and any increase in price would reduce the quantity demanded. The alternatives that would have the most effect on individual parkers' travel behavior would likely be the Long-Term Parking Tax, the Peak Period Parking Tax, and the Accessory Parking Tax. These alternatives were designed specifically to focus on commuter parking and should be reasonably effective at reaching that target. Equity. Equity addresses the issue of fairness. The parking tax needs to be equitable across income groups (vertical equity), as well as within groups (horizontal equity). None of the parking tax alternatives are proportional to income, thus each of them would be regressive. The effects of this regressive attribute could be somewhat mitigated by directing the revenues from the tax especially to benefit lower income taxpayers. The parking tax could achieve this balance if the generated revenue were directed to mass transit improvements. However, if the revenues were used for street repairs, the inequities of the tax might remain unresolved. Revenue Generation. The amount of revenue to be generated by the tax is important for the local jurisdictions. The parking tax alternatives' capacity to generate revenues is based on the rate and the elasticity of the demand for parking. The elasticity xiv of parking is influenced by several factors, including the price of parking, the location of the lot, the time of trip, the duration of parking and the alternative means of transportation. Even though the Long-Term, Peak. Period, and Accessory Parking Tax alternatives could be implemented with relatively high tax rates, they were not designed to generate large amounts of revenue. The General Parking Tax and Parking Operation Tax were created to focus more on generating revenues than on managing specific types of transportation demand. Of the five alternatives suggested, the General Parking Tax would likely raise the most revenues. Legal Feasibility. With the exception of the Accessory Parking Tax, each of the parking tax alternatives was designed to meet the guidelines of the current legislation. The Long-Term Parking Tax, Peak Period Parking Tax, General Parking Tax, and Parking Operation Tax are all feasible under the current legislation. All parking which is included in the definition of "commercial parking" must be taxed, but different categories of parkers may be taxed at different rates to target specific categories of parkers or areas. Administrative Efficiency and Feasibility. The administrative efficiency of the alternatives is largely determined by the orientation of the option. Alternatives that sought to influence particular types of transportation demand would require a specific focus, varied rate structure, and complicated enforcement techniques. On the other hand, alternatives that aim primarily to generate revenue are more broad based and require less variation in the rates and less complex collection and monitoring provisions. Costs. Two concepts of costs were considered: the administrative costs of the tax and revenues forgone through the opportunity costs of implementation. For the parking operators, for employers who provided user-paid parking, and for building owners the two major components of the administrative costs of the tax are the salaries of additional personnel and costs of supplies. For the jurisdictions, with a tax collection system xv already in place, initial capital costs might be insignificant, and additional operating costs would be in the form of more salaries and costs of supplies. Foregone benefits, a product of the decrease in parking sales due to the tax, also need to be considered. A decrease in sales would depend on the price elasticity of the demand for parking that is a function of the parking price, the tax rate, and the alternatives to driving available to the parkers. The downtown areas that had the most transportation options would be likely to suffer the greatest decrease in parking sales and the highest opportunity costs. The Peak Period and Long-Term alternatives would likely have the highest opportunity costs because they would displace more parkers from the market. Market Response. Two types of market responses, other than the parking business itself were explored. One is the provision of office space and the other is the response from the retail business. The Long-Term and Peak Period Parking Tax alternatives are both directed at commuter parking. However, because of legal questions about the taxation of suburban office parks, downtown office space could be disadvantaged in favor of suburban locations. Retail business would not be directly affected, but retailers anticipate indirect costs. The General Parking Tax and the Parking Operation Tax alternatives would likely have less of an effect on office space and more of an effect on retail business. The Accessory Parking Tax, which would discourage use of accessory lots, would be the most successful at reducing the supply of parking without affecting retail business or favoring suburban office areas. Public Acceptability. In general, the public in the Puget Sound region is well aware of the area's traffic congestion and air pollution problems. They are supportive of measures to address these problems, but they are not generally in favor of taxes. The ability of the tax to be accepted by the public would be directly related to the public's xvi perception of how the tax would address these problems. Thus, it would be important for local jurisdictions to explain the goals of the tax, how the revenue would be used, and how the tax would fit into long-range transportation plans. The public is concerned with equity and efficiency. In general, all of the alternative options for the parking tax contain both inequities and inefficiencies. Therefore, it is unlikely that any of the alternatives would be wholeheartedly accepted by the public. However, the alternatives that are most efficient and have a clear TDM focus are most likely to be viewed as a partial solution to the area's transportation problems and win public support. CONCLUSIONS AND RECOMMENDATIONS Increasing traffic, and the impact congestion has on air quality and the general quality of life is an important problem in the Puget Sound region. The public is anxious for efforts to address these problems. At the same time, it is suspicious of government actions and governmental mismanagement of resources. In this study, parking taxes, as a proposed partial solution to these problems' were met with skepticism and doubt. However, with some effort to adapt a parking tax law to the needs of the region and use it in conjunction with a larger plan, a parking tax might have the ability to be a valuable tool in either reducing transportation demand or raising revenues. The parking tax legislation approved by RCW 82.80.030 could be implemented at the discretion of local jurisdictions. Each jurisdiction is free to make its own decision regarding the implementation of the tax and the alternative that best fits its transportation plans and goals. However, because of the regional nature of transportation systems and efforts to balance the distribution of development, it is critical to discuss the implementation of the parking tax with a more regional focus. A regional parking policy could simultaneously address the equity issues plaguing the tax and encourage the Puget Sound area to consider its transportation plans regionally. xvii Recommendation One: A parking strategy should not be developed independently. It should be devised only as an element of a regional transportation plan. The parking tax would increase the cost of single occupancy vehicle commutes and thereby discourage that form of commuting. The greater the ability of the tax to reach the commuting parker directly , the more effective it would be at discouraging these commuters from driving alone. Likewise, the greater the ability of the tax to apply in suburban locations, the more influential the tax would be on suburb to suburb commutes and on controlling the parking supply with demand. A parking tax is an effective way to discourage drive-alone commuting and raise revenues, but the imposition of the tax can result in other problems which are equally difficult to overcome and costly for society. For example, by addressing the problem of free parking with a tax, the tax creates, among other problems, additional costs for administration. In addition, the parking operators, who are not the target of the tax, would pay at least a substantial part of the tax burden. Regardless of whether the tax is placed on the commercial parking business or the individual parker, economic analysis reveals that the parking operator will be required to pay at least part of the tax through the laws of supply and demand. The current legislation has weaknesses such as a limited definition of "commercial parking" which exacerbate the problems of the parking tax without adding to its ability to achieve its goals. Inequity, or unfairness, is perhaps the most important shortcoming of the current tax. The inability of the Local Option Commercial Parking Tax to target free parking not only dilutes the effectiveness of the tax as a TDM tool, but also further accentuates the inequalities between free and user-paid parking. As currently written, the statute targets employers who try to encourage alternative commute modes through user-paid-parking, but it would not tax those employers who provide free parking. xviii The parking tax under the current legislation might also work to the disadvantage of retail businesses in CBD areas, where most parking is user-paid compared with the shopping malls that provide free parking for their patrons. One of the alternatives recommended in this report is to amend the current legislation. On the basis of the information gathered in the public opinion assessment and the strengths and weaknesses of the current parking tax, four alternatives to the current legislation were identified and explored. The proposed amendments represent an attempt to create new legislation that would correct the problems with the current legislation and make the parking tax a more feasible option for accomplishing both revenue goals and transportation demand management goals. One of these suggestions, the Commuter Parking Tax, would be the most successful and acceptable alternative to both raise revenue and support TDM policies. Recommendation Two: The Local Option Commercial Parking Tax should eventually be amended to address inequities and unwarranted exceptions. Most of the analysis of Bill 6358 for this project was conducted before Second Substitute House Bill 1671, the Commute Trip Reduction Act, was passed by the Washington State Legislature in May 1991. The Commute Trip Reduction legislation mandates that each major employer (100 or more employees) in a jurisdiction develop a commute trip reduction program in accord with a local jurisdiction plan, and includes parking as one of the aspects to target. Because the goals of the Commute Trip Reduction Act complement the parking tax, analysis of one should consider the other. In fact, the Commute Trip Reduction Act could help address some of the shortcomings of the parking tax, namely the tax's inability to broadly reach all major work sites. Additionally, the parking tax could work with the Commute Trip Reduction Act to enforce its goals . Local jurisdiction who implemented the parking tax could use their taxing authority to reinforce the trip reduction goals of SSHB 1671 with price incentives. xix Recommendation Three: A revised parking tax should take the passage of the Commute Trip Reduction Act into account. If a jurisdiction is primarily interested in 'raising revenues for transportation purposes, the parking tax might be able to fulfill such needs. The tax enables a jurisdiction to fully tax the commercial parking business, as well as parkers who already pay a fee for parking. The tax would be especially effective if there is a major work site located in a particular jurisdiction which provides limited or no free parking. Additionally, the tax might provide the jurisdiction with an opportunity to tax nonresidents as well as residents in exchange for use of the transportation infrastructure. Recommendation Four: Local jurisdictions that decide to enact the Local Option. Commercial Parking Tax should apply revenues to-transportation demand management purposes. By itself, the parking tax would not likely solve the entire spectrum of transportation problems. By itself, the parking tax could neither reduce transportation demand enough to alleviate congestion or significantly improve the quality of the air. However, used in conjunction with a comprehensive transportation plan, the Parking Tax could be an important component to successfully discourage drive-alone commute trips and raise revenues to support transportation demand management programs. xx INTRODUCTION PROBLEM STATEMENT Increasing traffic is a major problem in the Puget Sound region of Washington State. As the region's employment base expands, congestion is extending commute trips, degrading air quality, increasing fuel consumption and decreasing the overall quality of life in the area. There are no easy solutions to these problems. The days of building new freeways or significantly increasing street capacity to serve new commuters have passed. Future commuter demand therefore, needs to be accommodated through efficient transportation management systems. Parking is a critical element in any transportation system. It is not only essential for the traveler, but it is also a crucial Variable that influences investment decisions and residential or job locations decisions. Parking is also the most sensitive variable in modal split models. In Washington State, free parking is the norm for most of the commuters between King and Snohomish counties. For instance, in King County about 80 percent of the people driving to work receive free parking. (W) But parking in itself is not free, and if it is not paid by the users, its cost is passed on to others. Free or subsidized parking also makes the cost of driving to work very. low in comparison to using transit. This reinforces an inefficient choice because their, is considerable divergence between socially and privately perceived cost. The importance of parking makes any policy affecting its price is a sensitive political issue. A parking tax is just one tool to manage transportation demand. The degree of change that a parking tax engenders can be debated. However, the transportation demand management impact of a parking tax can be targeted to those particular groups whose travel behavior is most susceptible to change. For instance, a parking tax that applies most intensely to commuters traveling in the peak hour will help alleviate peak hour congestion and pollution. Park_Tax.Text 1 1/13/92 The goals of the parking tax study are to better understand the role parking tax may play in managing transportation demand. The study sought to identify which parking tax alternatives are likely to generate sources of revenue and which could be used for transportation demand management. Growth management legislation also calls for transportation demand management policies and strategies. The parking tax study was intended to analyze the alternatives. in light of their ability to meet growth management goals. Additionally, the study sought to identify areas in the law that need strengthening in order to make the Parking Tax a viable tool for transportation and growth management, as well as for generating revenue. PARKING TAXES IN OTHER JURISDICTIONS Parking taxes are currently used in several U.S. jurisdictions. In all cases but one, revenue generation is the primary goal (the exception is in Montgomery County, where the tax was vetoed by the county executive). In all these examples except Montgomery County, the tax is either part of the sales tax or an excise tax that all parkers pay. It is either a flat fee or is charged as a percentage of the parking fee. The jurisdictions target the privilege of parking a vehicle in a parking facility for which a fee is charged. And they define parking lots, garages, or parking facilities as any covered or uncovered spaces where vehicles may be parked for a fee or charge. Montgomery County's vetoed strategy provided a different perspective. Its primary goal was to encourage commuters to use HOVs or mass transit on their journeys to work. It proposed that any person who made available land for public or for employee .parking pay a tax on the use of the land for parking purposes. This parking tax proposal was also different because it established that all the proceeds of the tax were to be paid to the transportation trust fund of the county (not the general fund), earmarked to finance transportation projects. 2 Table I presents a comparative analysis of parking taxes already in existence or those that have been considered in selected jurisdictions. It also includes a brief description of the status and rates, as well as some of the administrative issues involved. THE LEGISLATION State legislators have addressed local transportation problems with a series of legislative initiatives. One of these initiatives is included in RCW 82.80.030, "Local Option Commercial Parking Tax." (2) The goals of the parking tax are (1) to encourage drive- alone commuters to make a commute choice on the basis of the approximate cost of their commute and (2) to generate revenue for transportation purposes. A parking tax can be viewed as a transportation demand management tool. By raising the cost of parking, jurisdictions will encourage automobile drivers to switch to other modes of travel or to travel less where and when A parking tax applies. For instance, a parking tax that applies mostly to commuters traveling in the peak hour may help alleviate peak hour congestion and pollution. However, targeting a tax to a particular population (e.g., peak hour commuters) may result in higher administrative costs and reduce the net revenue realized from a parking tax. The revenue potential from a parking tax is greater if that tax can be applied broadly. For instance, a recent study conducted by the Washington State Transportation Center (TRAC) estimated that in King County, a tax of 50 cents per day on all off-street parking used by peak hour commuters would generate almost $100 million a year. (3) The revenue potential from a parking tax applied only to commercial parking would, of course, be much less. Generating revenue from a parking tax is not necessarily incompatible with a transportation demand management objective. In fact, travel behavior may change significantly only if a fairly sizable tax is applied to a broad range of parkers. 3 4 An important potential impact of a parking tax results from how it is allocated. In most jurisdictions, revenues from parking taxes simply go into a general fund to be used for a variety of needs. However, if the revenue from a parking tax is directed to transportation purposes, it may inadvertently reduce transportation demand management impacts by providing greater street and highway capacity. If the tax revenues are used to build bigger and better roads, the increase in traffic may offset the reduction caused by the increased cost of parking. On the other hand, if the revenues are allocated to transportation demand management measures, such as transit subsidies or ridematching programs, the tax can provide a consistent impetus for a mode shift from single occupancy vehicles. RCW Section 82.80.030 entitled "Local Option Commercial Parking Tax," authorizes cities and counties to impose two different types of parking taxes. The first tax may be imposed on persons engaged in a commercial parking business. The rate of tax may be based either upon gross proceeds or the number of stalls available for commercial use. The rates charged must be uniform for the same class or type of parking business. The law presumes that the cost of the tax to the operator will be passed on to the users of the facility. The second form of commercial parking tax is imposed on the act or privilege of parking a motor vehicle in a facility operated by a commercial parking business. This tax is not imposed on the operator of the commercial parking business but directly on the person parking in such a facility. This second form of the tax is available as an alternative to, rather than in addition to, the first tax. In levying the tax, the city or county may require the following: (a) the tax be paid by the operator or the owner of the motor vehicle; (b) the tax apply to all parking for which a fee is paid, whether parking is paid or leased, including parking supplied with a lease of nonresidential space; 5 (c) the tax is collected by the operator of the facility and remitted to the city or county; (d) the tax is a fee per vehicle or is measured by the parking charge; (e) the tax rate vary with zoning or location of the facility, the duration of the parking, the time of entry or exit, the type or use of the vehicle, or other reasonable factors; and (f) exemptions for tax-exempt carpools, vanpools, vehicles with handicapped decals, or government vehicles are granted. These provisions are not mandatory and suggest options available to the cities or counties. Apparently, the same geographic limitations of the first tax apply to the second tax. The statute provides a few definitional and interpretative provisions applicable to both taxes: (a) "Commercial parking business" is defined broadly to include the to ownership, lease, operation, or management" of a commercial parking lot in which fees are charged. A commercial parking lot includes covered or uncovered stalls. (b) The county or city may collect payment of either tax on a monthly, quarterly, or annual basis. (c) The proceeds of either tax may only be used for transportation purposes in accordance with RCW Section 82.80.070. (2) These purposes include the operation and preservation of the roads, streets, and other transportation improvements; new construction, reconstruction, and expansion of city streets, county roads, and state highways and other transportation improvements; development and implementation of public transportation and high-capacity transit improvements and programs; and planning, 6 design, and acquisition of right-of-way and sites for transportation purposes. (d) A city may impose either tax within its incorporated boundaries. and a county may impose either tax only within its unincorporated area. (e) Each local government may develop by ordinance or resolution rules for administering the tax, including provisions for reporting by commercial parking businesses, collection, and enforcement. 7 8 LEGAL ANALYSIS This section contains a summary of various legal aspects of the commercial. parking tax statute. This summary is based on a legal analysis conducted by Preston, Thorgrimson, Shilder, Gates and Ellis. (4) CONSTITUTIONAL ISSUES Property vs. Excise Tax A tax is an excise tax if it is imposed on the use or transfer of property, rather than on the property itself. A tax for the beneficial use of property, as distinguished from a tax on the property itself,. is also an excise tax. In its current form, the new statute imposes a tax on the transaction of leasing commercial parking or using property for that purpose, or for the privilege of operating a commercial parking business, rather than on property used for parking. Therefore, the enacted local option commercial parking tax can be thought as an excise tax. Nonetheless, there is some authority suggesting that a tax imposed on the parking lot owner for income derived from renting parking spaces is a property tax. Article VII, Section 1, of the Washington State Constitution requires uniformity of taxation in the-case of property taxes. If it is construed as a property tax, the parking tax would not withstand constitutional scrutiny because it does not tax all property uniformly It taxes one type of property (i.e., that used for parking) differently from other types of property. The constitutional provisions requiring uniformity do not apply to excise taxes. Equal Protection To comply with equal protection requirements, a legislative classification must meet and satisfy three requirements. First, it must apply equally to all persons within a designated class. Second, there must be reasonable grounds for making distinctions between those who fall within the class and those who do not. Third, the disparity in treatment must be germane to the object of the law that allows it. 9 Legislative bodies such as a city or county council have very extensive powers to make classifications for purposes of legislation. The general test is whether "any state of facts reasonably can be conceived that would sustain the classification." For purposes of excise taxes on businesses, a classification based solely on a difference in the method of operation of a particular kind of business is permissible. If the principal purpose of the tax legislation is to regulate traffic and highway safety in the exercise of the municipality's police power, then only the classification must bear a reasonable relation to the police power goal. While the parking tax statute is drafted primarily as a revenue measure, it can be interpreted to contain both regulatory and revenue producing purposes. Section 1 of the law, Chapter 24, Laws of 1990, entitled "Purpose of State and Local Transportation Funding Program," contains findings only with respect to revenue raising for transportation purposes. (6) However, RCW 82.80.030, which authorizes the commercial parking tax, contains exemptions that at least suggest a regulatory purpose. General Scope of Applicability RCW Section 82.80.030 (1) (2) authorizes cities and counties to impose a tax on It all persons engaged in a commercial parking business within [their] respective jurisdiction[s]." Section 82.80.030 (2) (2) provides that in lieu of a tax on all persons engaged in a commercial parking business, a city or county "may fix or impose a tax for the act or privilege of parking a motor vehicle in a facility operated by a commercial parking business." Section 82.80.030 Number (3) defines "commercial parking business" as "the ownership, lease, operation or management of a commercial parking lot in which fees are charged." The Section goes on to define "commercial parking lot" to mean "a covered or uncovered area with stalls for the purpose of parking motor vehicles." Consequently, the tax sweeps quite broadly and appears to apply to facilities that supply parking and receive some consideration for providing that space, whether that 10 consideration is from the end-user of the parking or from a lessee of nonresidential space that provides parking to the end-user. The meaning of the term "commercial" is somewhat unclear as it is used in the statute, as is the extent to which a definition of that term is relevant to the-interpretation of the statute. As noted above, the statute says that a "commercial parking business" encompasses any "commercial parking lot in which fees are charged." A "commercial parking lot" is defined merely as "a covered or uncovered area with stalls for the purpose of parking motor vehicles," without regard to whether the lot is "commercial" or not. Thus, when the definitions of those defined terms are substituted for the defined terms themselves, the word "commercial" drops out altogether. The tax arguably applies to any parking lot in which fees are charged (or paid through a lease of nonresidential space). If the word "commercial" does in fact drop out, then the tax would seem to apply equally to any facility that charges for parking, regardless of the ownership of the lot (i.e., public vs. private) and regardless of whether the lot is a "commercial" lot (i.e., run for profit) or the fees charged are merely sufficient to cover costs of operation. An argument might be made that the term "commercial" is meant-to qualify or limit the terms "parking business" and "parking lot," but the term "commercial" is not defined independently in the statute. Section 82.80.030 (2) (b) provides that "the tax applies to all parking for which a fee is paid, whether paid or leased, including parking supplied with a lease of nonresidential space." The use of the word "paid" twice in succession is somewhat confusing unless the second "paid" is read in contrast to "leased" and is meant to mean "paid parking on a cash basis as used" as opposed to "leased parking" paid on a monthly or some other basis. Such parking would include parking paid for as part of a lease of nonresidential space, such as office space. Models Illustrating Applicability Because the statute is somewhat ambiguous, it is difficult to reach definitive conclusions on the scope of this tax without some legislative clarification or judicial 11 interpretation. However, for purposes of analysis, a few models suggest the possible parameters of the tax. The first model is the typical Diamond Parking Lot. There is little question that it meets all the requirements of the statute. It is a facility with stalls for parking and it charges a fee for parking. This type of lot is clearly a "commercial parking lot." Furthermore, regardless of the definition of "commercial" that 'is applied, it is "commercial" both in the statutory sense and in the sense that it is geared to the marketplace, available to the public, and run by an entity that is in the parking business for profit. The second model is the parking facility in the Columbia Seafirst Center, which has both hourly parking available to the public and parking available to certain tenants of the building as part of their lease. Clearly it is also a facility with stalls for parking and it charges a fee. While the fee for the stalls that come with a commercial office lease may be difficult to ascertain because lease terms may vary, it is probably fair to say that a lease with parking stalls. is more expensive than' a lease without parking stalls and therefore the parking has a value or a fee paid through the terms of the lease. To the extent that the operation must be a "commercial" one, the portion of the lot that provides hourly parking presumably meets all definitions of commercial because the rate probably reflects both the marketplace rate and a return on investment The portion of the lot that provides parking as part of an office lease, while not available to the public and perhaps not priced for profit as parking, nonetheless has attributes of commercial parking as opposed to free parking available without regard to the market or profit of the owner or manager. A third model is the parking available at a suburban office park that does not charge for parking by visitors to the offices and may or may not provide specified stalls or be sized to guarantee parking to tenants. Where the parking is metered except for specified stalls reserved for tenants, the situation is probably analogous to the Columbia 12 Center. Where no parking is reserved and the parking facility is sized to accommodate the likely number of tenants and expected visitors, the parking may not be taxable because no fee is charged and no business is engaged in commercial parking. A fourth model is a shopping mall where no fee is charged and employees of commercial tenants are not permitted to park in the lots. It would be difficult to identify the facility as a "commercial parking business" because no fees are paid, though clearly management of the parking facility is central to the commercial success of the shopping mall and is an important aspect of overall facility management. Arguably, the tenants pay for the parking of customers through their leases, but no specific spaces are reserved for any business and on any day the customers of one tenant may park in disproportionate numbers to the lease amount paid by the tenant. A fifth model involves parking at a Metro park-and-ride lot. At the present time no fees are charged, so it is virtually impossible to characterize it as subject to tax. If charges were made, it is less clear whether operation of the lot would be subject to tax. If one applies the most literal interpretation of the statute, the tax would apply because a fee was charged. However, if the tax is interpreted to apply only to "commercial" parking, application of the tax would turn on whether such a facility was characterized as "commercial." While the price for parking would presumably be geared to the marketplace, Metro does not earn profit in the "commercial" sense. It is not in the parking but in the transit business. Its charge for parking would be subordinate to other goals. This would differ from the owner of privately owned commercial parking lot, such as the Diamond Parking Lot. A sixth model is the parking facility at a Boeing Manufacturing Facility. Here no charge is made for parking, and clearly Boeing is in the airplane rather than the. parking business. It makes no profit from the provision of parking and does not collect anything from its employees in return for providing parking. It would be very difficult to levy a tax on the privilege of parking in such a lot. 13 Lastly, an interesting question has been raised in the context of parking provided by the-Port District at the airport. Here, a fee is clearly paid for parking. The fee is at market rate and is paid for directly by the user. It has all the attributes of a "commercial business" except that the Port does not-make profit in a "commercial sense." Consequently, the question of whether the Port is subject to the tax turns on whether the tax applies to all paid parking or only to "commercial" paid parking, in which case the definition of "commercial" would be the determining factor. ISSUES RELATED TO IMPLEMENTATION OF THE COMMERCIAL PARKING TAX Taxes Imposed on the Owner/Operator As noted above, it is important for constitutional reasons that the tax reach the use of property (i.e., be an excise tax), rather than merely tax the property itself (i.e., be a property tax). If the leasing of parking spaces is viewed as merely a form of a rental of real estate, the tax may possibly constitute a property tax, since a tax on income derived from real property has been interpreted, in some cases, as a tax on the property itself. However, the commercial parking tax is structured as a tax on the beneficial use of property as opposed to a tax on the property itself. The tax imposes an excise on the use of property for a particular purpose (parking) or the privilege of operating a particular type of commercial franchise (parking business). Consequently, the nature of the tax is excise, regardless of the fact that the activity taxed and some measure of the tax may, depending on the form of tax ultimately adopted, derive from the use of property. A parking tax is also factually distinguishable from a tax on rental income. Under current law, amounts derived from the rental of real estate are exempt from the business and occupation tax. However, both the statute and regulations clearly distinguish between "lease or rental" of real estate and a "license" to use real estate. The former is not taxed, whereas the latter is taxed. 14 State law says that a lease exists where the lessee has the absolute right of control during the term of the lease. To constitute a lease, the relationship created must be one of landlord and tenant. In contrast, a license exists if the user has merely a right to use the real property of another but is not entitled to exclusive dominion and control of the property. The grant of parking privileges is thus a license rather than a lease. Consequently, the income derived is not "rental income," and the cases prohibiting nonuniform taxation of rental income would appear not to apply. The current statutory framework also appears to support this conclusion, as the revenues of automobile parking and storage businesses are presently subject to the retail sales tax, which is a form of excise tax. Notwithstanding the general conclusion that the tax is an excise tax, the tax may be viewed differently, depending on the measure of and manner in which the tax is imposed. For example, the closer the tax is imposed to its "source" (i.e., to the real estate), the more the tax looks like a tax on the property itself. Similarly, a tax assessed against the number of parking spaces, without reference to use, is more likely to be construed as a tax on property than a tax measured by gross proceeds from use. Thus, a tax imposed on owner/operators on the basis of the number of spaces or the value of those spaces, regardless of use, could possibly be construed as a property tax. A commercial parking tax imposed on an owner/operator on the basis of use of the property, as measured by gross proceeds, would be construed as an excise tax, despite the language in certain court decisions suggesting that "rental income" is property. Notwithstanding these conclusions, rental income of all types may be viewed as threatened if a tax, on parking income is upheld. Imposition of an indirect tax on property may also draw fire from constituencies that perceive the tax as a precursor to the imposition of an income tax. 15 Tax Imposed on Consumers If the tax is imposed on the consumer as opposed to the owner/operator, the concerns discussed above will not be relevant. First, the consumer's interest is far enough removed from the real property to be considered "rental income." Second, a tax on the consumer is also more clearly a use or privilege tax than a property tax. Limiting the Tax to Commuter Parking Only The Act gives local governments latitude to vary tax rates with a number of factors, including duration of parking, location, and the type or use of vehicle. Thus a jurisdiction may tax commuter parking or parking in high use areas at a higher rate than parking during off-peak hours or in less congested zones. Importantly, this authority merely allows variable rates and does not allow a jurisdiction to wholly exempt one type of parking (or parker) altogether. A municipality's ability to create exemptions is limited to those enumerated in the statute. The statutory exemptions are permissive, rather than automatic. The statute was drafted as a tax statute. While municipalities implementing the tax will have a fairly free hand in setting up classifications for purposes of establishing differential rates, those classifications must still be reasonably related to the purposes of raising revenues. Attempts to use the tax for regulatory purposes that cannot be justified in terms of raising revenues or to establish classifications that unreasonably narrow the applicability of the tax to a very small group could be found unconstitutional. Taxing Parking Paid for Through a General Office Lease, Section 82.80.030 (2)(b) of the statute specifically authorizes a city or county imposing a tax on those who park in a commercial parking facility to apply the tax on "parking supplied with a lease of nonresidential space." (2) Section 82.80.030 specifically authorizes each local government to "develop by ordinance or resolution rules for administering the tax, including provision for reporting by commercial parking businesses, collection, and enforcement."(2) 16 One could imagine rules adopted by a city or county that would require each commercial parking facility to identify the lessees of its spaces, for such lessees to identify the individuals using such spaces, and for specific notice of such tax to be provided to the ultimate user. While the tax would be the obligation of-the individual operator or owner of the vehicle parked, the tax could be paid on behalf of the ultimate user by his/her employer or by the building owner. A failure to pay the tax would be the responsibility of the user. Alternatively, the tax might be assessed on each user of space, with responsibility for collection placed upon the operator. A flat tax (or possibly a percentage based tax) would be imposed on every car entering the parking facility. As the operator would be responsible for paying the tax, the operator would very likely find some manner of passing along the tax to the actual user, regardless of whether the user paid for parking or received "free" parking through his or her office. Accurate reporting might be enhanced by requiring that counting devices be installed or by creating some rebuttable presumption as to levels of use, using perhaps the number of available stalls as a surrogate measure of use. A tax on the, user of the space may have some advantages over a mechanism requiring identification of and notice to lessees, particularly in those instances where "free" parking is provided by office lessees, which are allocated a certain number of spaces with their lease, or where parking charges are simply lumped in together with the rent on the office space, rather than broken out and charged separately. A tax on the consumer is clearly an excise tax and is less likely to draw a constitutional challenge than a tax on the operator for reasons discussed above. Because it can be imposed without reference to gross proceeds, of which there may be none, and without reference to the "value" of the property dedicated to parking, the parking tax lends itself well to parking offered in connection with office leases. These characteristics of office parking suggest distinctions that could also be used to justify the use of a tax on 17 the user of parking offered as part of a commercial lease, while imposing a gross proceeds, percentage-based tax on "pay parking." The purpose of imposing the tax on the ultimate user is presumably to cause the true cost of parking to be more clearly internalized so that alternatives to parking will be considered. However, there is little the city or county can do if office lessees choose to absorb the tax as a fringe benefit to their employees or if the demand is so inelastic that individuals will park regardless of price. Limits to the Amount of Tax That Can be Levied For the purpose of raising revenues or regulating conduct, a city or county will have significant discretion in exercising the authority recently granted to it by the legislature. ALLOWABLE CLASSIFICATIONS FOR STRUCTURING THE PARKING TAX The cities and counties may make reasonable distinctions in the ways they apply the tax to different classes of property or individuals, provided the distinctions do not violate the State's equal protection provision. Geographic and Population Density A reasonable distinction could be made simply on the basis of geography, so long as has either a regulatory purpose or revenue result. If a city or county found that parking in a certain area posed particular traffic problems or was of a particular type, such as commuting (as opposed to shopping), then a reasonable distinction perhaps could be made to justify a separate classification for purposes of imposing the tax. If the city chose to tax commuter parking on one end of town but not another, without any reasonable distinction, then it would be subject to attack on the basis of equal protection by those who paid the tax or perhaps by the businesses that might suffer from a change in parking patterns. 18 Differences in population density or density of use might also form the basis for distinguishing between tax rates, especially if density figures were further supported with findings on the correlation between density and the impact upon traffic flow, air pollution, or road maintenance. Taxation based on density would relate to both the statute's regulatory and revenue raising purposes. If the city had a comprehensive parking code that distributed long-term and short-term parking throughout the city according to its land use plan, then a pattern of taxation in furtherance of such use would have an additional basis for classification. Purpose or Duration Distinctions based upon purpose or on the duration of parking might also form the basis for differential tax rates. The city might find that parking connected with office buildings differed in the times of use and frequency of use and created different pressures on scarce parking resources than paid parking associated with shopping or retail activities. Duration is one distinguishing characteristic. Commuter office parking will generally be longer- term than parking associated with retail activities. Taxation based on purpose or duration reasonably relates to the tax's regulatory and revenue raising purposes because longer-term, commuter parkers are also more frequent and regular parkers. A tax that supported the users paying a heavier burden of the cost of maintaining or repairing roadways or to support new construction of roadways and mass transit would seem reasonable. Degree to Which Parking is Subsidized Differentiating the level of tax on the basis of the degree of parking subsidy would create a disincentive to individuals who commuted by car bore no direct parking cost. A city or county might find that the cost of parking influenced the decision to commute by car or mass transit or to commute alone or in groups. If a city or county could find a means to gather this information and could establish a mechanism for 19 administering a tax on this basis, it would force individuals to internalize the true economic cost of parking. There are a number of potential problems with this form of a tax. First, assuming that the degree of subsidy could be divined, this manner of taxation would be individualized to such a great extent that it might violate the uniformity provision required by the equal protection clause. For example, individuals parking in. the same lot in the same building might be treated differently on the basis of their subsidy, giving the appearance of inequality. This appearance would be enhanced if, in addition to the degree of subsidy, the tax varied in different geographically identified zones. In that case, an individual might be taxed at one rate in the lot in which he or she was entitled to a subsidy but be taxed at a different rate in a lot within the same zone in which he or she was not subsidized. A second potential problem with this form of a tax is that it could be extremely difficult to administer. It might be difficult to gather information on the degree to which an individual's parking was subsidized by his or her employer. Even if that information could be gleaned, the question how to collect the tax would remain. Whether the operator or the city or county was given the responsibility of collecting the tax, it would need to collect an enormous amount of information. No doubt, that information would change frequently as individuals moved between places of employment and became entitled to different levels of subsidies, and as employers changed their policies regarding subsidies. Thus, while this method of taxation probably would be the most economically efficient means of employing the tax, the administrative burdens might make it problematic. This form of a tax might also be construed as a property tax because it would appear to be taxing the value of a form of fringe benefit. Thus, the tax might be interpreted as an income based tax and therefore an unconstitutional tax on property. 20 Accessory Parking Assuming that the parking tax could be accommodated under existing TDM requirements and that the TMP regulations applies equally to all buildings (or all of a given class of buildings), a city or county could implement the tax in a way that imposed a lower tax rate to parking facilities that had approved TMPs and a higher rate on facilities without TMPs. This is a reasonable classification and would not violate equal protection. Adopting findings should be included in the ordinance that linked accessory parking to pressure on transportation resources. However, there are a number of potential problems with this scheme of taxation. First, not all buildings might be subject to the same regulations for development of TMPs. Some TMPs would have been developed before the existing TMP program and might have been individually negotiated. A tax that applied to varying extents on the basis of individually negotiated agreements would probably be unconstitutional. To avoid this problem, jurisdictions would probably have to create a window of time during which all buildings with privately negotiated TMPs would have an opportunity to change their TMPs to match current standards. Second, as long as the building operator was also running the accessory parking facility, there would not be legal problems, but there would be no authority to tax a building owner if the accessory parking facility were independently owned and merely contracted with the building owner. The building owner in this latter situation would be engaged neither in a commercial parking business nor enjoy the privilege of parking. If a tax on accessory parking could not be implemented to reach all building owners, without regard to whether they operated their own parking facilities or contracted with third parties, the tax could be unconstitutional. It would treat parties in almost identical positions differently and would violate equal protection. 21 LEGAL ANALYSIS CONCLUSION The new authority granted to cities and counties in this legislation provides a range of parking tax options. While there may be some legal limitations to such authority, political and practical constraints are likely to be the most relevant limitations. 22 ANALYSIS OF PARKING TAX ALTERNATIVES DEFINITION OF ALTERNATIVES The following is an overview of proposed alternative parking taxes. The alternatives were originally designed to focus on transportation demand management opportunities. In consideration of the most recent legal analysis, they have been refined according to a narrow interpretation of-the law. Three of the options, the Long-Term, Peak Period, and Accessory Parking Tax alternatives, have clear TDM goals. The Parking Operation and the General Parking Tax alternatives emphasize the revenue generation possibilities of the statute. The alternative descriptions assume that the only exemptions permitted by a parking tax ordinance are those specifically mentioned in the legislation. Tax exempt carpools, vehicles with handicapped decals, and government vehicles might be exempted from the tax. In order to target specific groups, e.g., commuters, the statute allows the creation of categories of parkers and allows target groups to be taxed at varying, including higher, rates. Additionally, the statute permits the creation of regions within a jurisdiction and permits those regions to be taxed at varying, including higher rates, to target highly congested areas. Flow-charts with the history of the development of each alternative are included in Appendix A. Alternative One: Status Quo The jurisdiction chooses not to implement the parking tax. No further action is taken. Alternative Two: Amendment to Existing Legislation In recognition of the limitations of the parking tax statute as it is currently written, alternatives to the legislations have been drafted. Each of the suggested alternatives seeks to correct the shortcomings uncovered in the examination of the current legislation. Each 23 of the proposed amendments requires that 75 percent of the revenue generated be allocated for TDM-oriented projects. The following is a brief description of the amendments. The draft amendments are included in Appendix B. I. Modification of the Present Legislation. Acknowledging the difficulty of passing new legislation, the best alternative might be to modify the existing legislation to widen its applicability and to enhance its effectiveness as a TDM tool. Modifications include three major changes to the current legislation. (1) Expand the definition of "commercial parking business" to include parking supplied with a lease of non-resident space, parking provided at reduced rates, and parking provided at no charge by employers for the benefit of their employees. (2) Increase the ability of the tax to reach state and county parking facilities such as the Port of Seattle's Sea-Tac Airport, Kingdome parking, and University of Washington parking lots. (3) Assure that an employer or other entity that leases parking or receives the right to lease parking enjoys the "privilege" of parking and therefore is taxed. II. Commuter Parking Tax. Proposal Two is an attempt to reach commuter parkers to a greater extent than would be accomplished by either the Long-Term or Peak Period Parking Tax. Commute trips are defined as trips made from a worker's home to a work site during the peak period of 6:00 a.m. to 9:00 a.m. on weekdays. The Commuter Parking Tax would levy a tax on the privilege of commuter parking and would be imposed on the driver. Responsibility for collection would be imposed on one of the following entities: (a) the operator of a commercial parking facility, (b) the employer, or (c) the owner of a commercial office building. The tax would include implementation options that could be used to reduce tax to entities that reduced single occupancy vehicle trips through TDM programs. 24 III. The Employer-Based Transportation Demand Excise Tax. This tax would impose a Transportation Demand Excise Tax on all employers who employed 25 or more people. The tax would be imposed in recognition of the employer's contribution to transportation demand. A basic rate of tax would be imposed on a per employee basis. The basic rate might vary with the size of the employer and/or the extent of the employer's participation in a TDM program. The basic rate might also vary with the zoning or location of the employer, the number of employees, or other reasonable factors. IV. Comprehensive Amendment. This alternative would combine the employer-imposed Transportation Demand Excise Tax with a tax substantially similar to the present Commercial Parking Tax, to create a comprehensive tax that reached all work site parking and all paid parking. All parking for vehicles used for commuting would be taxed in a manner similar to the way parking would be taxed under the present statute. To address some of the faults of the parking tax, the comprehensive tax would clearly establish that it applied to all parking for which a fee was paid, including parking facilities owned and/or operated by the state, its agencies, and by municipalities that charged for parking. Alternative Three: Long-Term Parking Tax The Long-Term Parking Tax imposes a tax on people who park a motor vehicle in a commercial lot. A special category that levies higher rates will be created for people who park for six hours or longer to target commuters who drive to work and do not use their car all day. Those who park for less than six hours will be taxed at a nominal rate. To target congested areas within a single jurisdiction, these areas can be identified and taxed at varying rates. The tax is collected from the parker by the parking operator as a flat fee or a percentage based tax. The operator is required to post the amount of tax visibly and separately from the parking fee, specifying the increase for long-term parking. 25 Alternative Four: Peak Period Parking Tax The Peak Period Parking Tax imposes a tax on people who park in a commercial parking facility. A special category that levies higher rates is created for people who park between 6:00 a.m. and 9:00 a.m., to target those who contribute the most to congestion by driving during the peak period. After the peak period, the rate will decrease to a nominal rate. Additionally, regions within a jurisdiction could be created to identify highly congested areas and tax those areas at a higher rate. The tax is collected as a flat fee or percentage based fee from the parker by the parking operator. The operator is required to post the amount of the tax visibly and separately from the parking fee, specifying the peak-period increase. Alternative Five: Parking Opera The Parking Operation Tax is a tax on parking operators. Categories are created to apply different rates according to the number of parking spaces (lot size) or on gross proceeds. The tax may be levied as either a flat fee or as a percentage of gross proceeds. The tax is collected by the jurisdiction from the parking operator. To target the most congested areas, categories within a jurisdiction could be created and taxed at a higher rate. Alternative Six: General Parking Tax A tax is imposed on every person who purchases parking in a commercial parking lot. The tax may be in the form of a percentage of the parking fee or as a flat fee. The tax must be posted visibly and separately from the parking fee. The tax is collected from the parker by the operator. The operator is required to post the amount of the tax visibly and separately from the parking fee. Alternative Seven: Accessory Parking Tax A tax is imposed on the owner or manager of a building if that building has an accessory parking facility and if the use of the parking is tied to that particular building. The tax is collected from the owner according to a category based on the number of 26 spaces in the accessory lot. The tax is levied at a higher rate if the building does not have a transportation management program (TMP), or if the goals of an existing TMP are not met. If the building complies with a TMP, only a nominal tax will apply. Owners of' facilities that do not have a TMP have the choice to either implement and adhere to a TMP and pay a low tax, or pay the higher rate. Alternatives Removed from the Detailed Analysis The following is a brief description of alternatives that were considered but were dropped from the detailed analysis because of legal and/or administrative feasibility problems. Parking Subsidy Tax. The parking subsidy tax is a tax imposed on all employers who provide their employees with free or partially subsidized parking. The original parking subsidy model imposed the liability for the tax on the employer. The authority for such a tax is not in the current statute even where employers arguably transfer the privilege of parking. There are also potential equal protection problems with the parking subsidy tax because of the potential disparate. treatment of similarly situated parkers. Short-Term Rebate Tax. A parking tax is levied on people who park in commercial parking facilities. To target commuters, short term parkers can receive a rebate for up to 4 hours' worth of tax per day through a token system. The token is distributed by retail establishments and can be used to pay the tax or on public transit. This alternative is opposed by the downtown business association, and an easy and equitable system of token redistribution has not been identified. Employee Head Tax (ESHB 1825, High Capacity Transit Funding. Every employer is required to pay a head tax for every full-time employee. The employer receives an exemption from the tax for every employee who uses a means of' transportation other than the single occupancy vehicle. The exemption applies as soon as the mode split for the employer is higher than the ambient level established for the zone or area where the business is located. Employers can choose their own TMP to improve 27 mode split. This alternative does not fall under the specifications of the parking tax legislation, but it was considered because it had effects similar to other alternatives. EVALUATION OF ADMINISTRATIVE ISSUES This section describes the administrative issues that should be considered in levying a parking tax. Some of the issues apply to each alternative, while other issues are specific to particular alternatives. If not otherwise stated, the issue applies to all of the alternatives. Table 2 summarizes the administrative issues according to alternative. In general, the factors that would-affect the administration of the tax include the exemption process, the complexity of the rate structure, and the level of enforcement and auditing. The administration of the tax would be heavily influenced by the objective of the alternative. To accomplish TDM goals, implementation of the tax would become more complicated, as would the collection, monitoring, and auditing procedures. Alternatives with a revenue generation focus, on the other hand, would be more simple and easier to implement. Exemptions Cities and counties have little flexibility to wholly exempt parkers from the parking tax. However, flexibility and some degree of variation is permitted through the use of a varied rate structure. One exemption is permissible as outlined in RCW Section 82.80.030 (f)RCW: - Carpools, vanpools, vehicles with handicapped decals and government vehicles. While the following circumstances are not specifically exempted from the legislation, the researchers interpret the law to mean that the tax does not apply to them: - Residential parking, - Any parking area used only for storing business vehicles and not for employee parking. 28 29 In the case of the Accessory Parking Tax, wholly exempting buildings that complied with a transportation management program (TMP) would not be permitted by the current legislation. To reward a building or company that adhered to a TMP, a varying rate structure might be applied. Proof of Exemption The ability to prove the right to be exempted would be required in each case. Government cars, registered carpools and vanpools, and cars of handicapped persons are already easily recognizable and their identification would make them automatically tax exempt. In the case of a carpool that had not registered with the jurisdiction, tickets or cards could be distributed for display in the vehicle's windshield. Collection of the Tax and Proof of Payment Collection from the Parker. Each of the alternatives except the Parking Operation Tax and the Accessory Parking Tax would require that the tax be collected from the individual who parked her or his car. The tax would be collected by the operator of the parking lot or garage at the same time and in addition to the charge for parking the vehicle. This would be true whether the charge was made on a daily, weekly, monthly, or other long-term basis or contract. When parkers paid the tax, they would receive proof of payment from the parking operator. On lots with an attendant, the parking operators might be required to issue numbered, two-part receipts. All who parked and received a receipt would be required to display their part of the parking receipt as proof of payment. The parking operators are required to keep the second part of the receipt together with their records. Parking lots with drop boxes would pose problems. These facilities would have to add the appropriate tax to the fee. Variations of this procedure would include the jurisdiction's installation of ticket machines that produced proof of purchase tickets upon payment of the parking tax. The ticket would then have to be displayed on the car while it was parked and show the date to avoid reuse. This variation would provide the parker 30 with a proof of tax payment and the jurisdiction with the ability to monitor parking facilities. However, it would be inconvenient for parkers who were obliged to make payments in two different machines before parking in a facility. An alternative to the issuance of tickets would be to make the parking operators wholly responsible for the collection of the tax and not to specifically require them to detail the tax in the receipts. Collection from the Parking Operator. Anyone who charges for parking is categorized as a parking operator. This category includes employers and building owners and managers. In each of the alternatives the tax must be collected from the parking operator. The tax would be collected from parking operators on a timely basis to be established by the jurisdiction. For the given time period, each parking operator would have to declare his or her total parking fees charged, received, and the amount of tax collected. The operator might be required to fill out a statement or a tax return form. The statements for each parking facility would have to contain information such as the business' name, address, lot capacity, fees or rate structure, number and type of transaction, and any other information considered necessary or convenient to fully collect the tax. For this same time period, the operator would remit the full amount of the tax due, whether it had been collected from the parker or not, to the jurisdiction's tax collector. All taxes collected by operators would be held in trust for the account of the jurisdiction until the payment was due. The jurisdictions might establish special reporting periods, depending on the volume of operations or the number of parking spaces provided by the business. Records All alternatives would require either the parking operator, the building owner and/or manager, or the employer to keep records and possibly receipts. 31 In the case of the Long-Term Parking Tax alternative, the receipts would have to distinguish between short-term and long-term parking or somehow otherwise establish the length of parking. For the Peak Period Parking Tax, each part of the receipt would have to establish the time of entry. The parkers who rented or leased parking would be given one part of the parking ticket, which showed that the parking fee and parking tax had been paid separately. For the Peak Period and Long-Term Parking Tax alternatives, parking operators might be required to keep complete, accurate, separate records of all parked vehicles, together with the amount of tax collected from all transactions. For the Long-Term Parking Tax alternative, the records would also have to include information about the length of the parking period. For the Peak Period Parking Tax alternative, the time of arrival would have to be included in the records. Employers who provided parking but charged a fee for its use would have to keep records of the parking provided and used and any other documents that might be necessary to determine the amount of the tax. Owners or managers of buildings with accessory parking facilities who also had a TMP in effect would be required to keep records of the program's achievements. Monitoring and Auditing Monitoring and auditing mechanisms would vary in degree and complexity, depending on the complexity of the alternative. The monitoring and auditing described would be a detailed and extensive process to assure full compliance. The requirements that would help assure compliance include proof of payment, ticket machines, fines, and record keeping. The analysis describes the levels of enforcement that would be necessary for the jurisdiction to assure full compliance with the tax. If the jurisdiction was willing to accept a lower compliance percentage, it might not have to employ all the mechanisms outlined in this report 32 Parking operators would have to make their records, and all other documents that might be necessary to determine the amount of the, tax, available for inspection during business hours. When employers provided parking but charged for its use, employer records would also be subject to audit. In each case, a warrant might be needed for the tax collector to audit records. If the parking operator were made wholly responsible for the collection of the tax, a site might need to be monitored to ensure the operator was reporting the correct number of long-term or peak period parkers. An alternative to this would be implementation of random, on- site inspections to control the appropriate display of stickers, tickets, and receipts proving that the tax had been paid. This would be especially important for lots with drop boxes, where people might attempt to park without paying the tax. In these cases, random inspections, with two or more visits per inspection, might be needed to ensure payment of the tax. The jurisdiction would be left to use its discretion to determine which control procedure to implement. In the case of the Accessory Parking Tax, the jurisdictions might control compliance with mode split requirements or other performance standards. Penalties and Fines Penalties and fines for failure to pay the tax are authorized, but not specified, by law. The penalties and fines in Chapter 82 of the Revised Code of Washington, or their local counterparts, might serve as reasonable guides for setting initial levels of penalties. For the Parker. Enforcement measures could be taken against parkers who failed to display a proper receipt evidencing payment of the tax. However, there is probably little reason to assume that in the same lot, some parkers would avoid the tax, while others would pay the tax. It would probably be more economically and administratively efficient to use enforcement resources to police collection by operators, 33 leaving the operators to police payment in their own lots for fear of penalties found through audits of their records. For the Parking Operator. Enforcement would focus on the lot operators. For parking operators who failed to keep records, the tax collector of the jurisdiction might estimate the amount of tax due on the basis of similar businesses. Failure to keep records might lead to fines; for example, the fine might be an amount equal to the tax due, plus an additional 25 percent. Whenever operators failed to collect or remit the tax to the jurisdiction's tax collector, the tax collector might assess them with the amount of the tax due, plus interest at the rate of 1 percent per month or fraction of a month, plus a penalty of 5 percent of the amount of the tax due per month of delay, up to 20 percent of the amount of the tax. This would apply to the Long- Term Parking Tax, the Peak Period Parking Tax, the Parking Operation Tax, the General Parking Tax, and the Accessory Parking Tax alternatives. (7) For the Accessory Parking Tax, whenever building owners or managers failed to keep the records required to prove their compliance with their TDM programs, the tax collector of the jurisdiction could use a factor developed by surveying other buildings with similar standards in the same area to compute the amount of tax due-. The flow-charts of the administrative processes of each alternative are included in Appendix C. Cost of Administering a Parking Tax The administration of a parking tax would have different additional costs for all the actors involved: jurisdictions, parking operators, building owners, and employers who charge their employees for parking. In the case of the jurisdiction, the alternative adopted, combined with the possibility of linking the collection and monitoring of the tax to other taxes already in force, and the number of parking facilities that are subject to the tax would determine the cost of administration. Depending on the system already implemented, initial capital 34 costs might be insignificant. Operating costs would include the salaries of additional full or part-time employees needed to collect, monitor, and enforce the tax. Other operating cost would include variable components such as the cost of stickers and forms, printing costs, and communications. The city of Seattle, for instance, estimates that the cost of collecting and auditing the new Parking Tax would be between $120,000 and $200,000 per year, depending on the alternative selected and the complexity of the option implemented. (8) The city of Bremerton, on the other hand, could use the mechanisms and forms established for collecting and auditing other taxes, so the Parking Tax could be added without major changes. Officials from the city are confident that current staff could process the new tax. In the case of the parking operators, even though capital investment might not be needed, additional operating costs would depend on the alternative adopted by the jurisdiction. The major components of those costs would be salaries of additional full or part-time employees needed to attend the facility and to keep records and accountancy. Other costs would include variable components such as the costs of receipts, supplies, and communication. If the Peak Period Parking Tax alternative was implemented, for instance, the estimated increase for a surface lot of 50 to 100 stalls would be an average of between $800 and $1,000 per month per facility because of the increase in staff hours necessary for attending and accounting purposes; an additional amount of about $50 per month per facility would be needed for supplies. (2) Building owners and managers would be faced with the costs of developing and administering a transportation management program. These costs should entail few capital investments and would be largely the sum of salaries and time devoted to the development and maintaining of the transportation program. The costs to employers who charged for parking would be similar to the costs to parking operators. There would be few capital costs, if any. Most of the costs would involve the salaries and costs of administration. 35 The review of the administrative processes and costs of each alternative suggests that the more TDM oriented the alternative was, the more complex (and costly) it would become from an administrative perspective. Legal Issues Related to Administration RCW Section 82.80.030 of the current parking tax legislation gives local jurisdictions authority to enact by ordinance or regulation the rules that are necessary for collecting and enforcing the tax. (2) However, there are constitutional strictures on the method and manner of enforcement. These limits are imposed by article 1, .7 of the Washington Constitution and by the fourth amendment to the United States Constitution, which protect individuals from unreasonable searches and seizures. These provisions generally require that searches or seizures (i.e., inspections for enforcement of the parking tax) be conducted pursuant to a valid warrant. In the case of searches performed for administrative ends, "probable cause to believe that a violation of the law has occurred" is not required, as it is under the criminal law. A search is reasonable and a warrant may be issued if it is shown that a specific business has been chosen for inspection on the basis of a general administrative plan for enforcement derived from neutral sources. The constitutional provisions of the Washington and United States constitutions also protect only against intrusions into areas in which an individual has some expectation of privacy. Thus, while an administrative inspection or search of private premises not open to the public is unconstitutional, inspection activities on public streets, parking lots, or other open places does not involve an invasion of privacy and, therefore, may not even require a warrant to be constitutional. Request for Records. Business and operational records are generally kept in areas that are not open to the public; access to these records implicates a privacy right. A warrantless search, then, is not justified, and a summons or warrant is probably required 36 for a search of such records. However, as noted above, a warrant may be obtained without "probable cause". pursuant to an administrative enforcement plan. Entry onto Commercial Premises for Inspections of Vehicles. If a lot is' operated out-of-doors or is generally open to the public, agents of a municipality may enter the premises for inspection and enforcement purposes without invading the privacy of the business owner. In this case, the state and federal constitutional concerns expressed above are not implicated. If a lot is operated on a restricted basis, a warrant may be necessary to gain access to the premises. In this case again, a warrant for an administrative search does not require a showing of probable cause and may be obtained as a part of a program of regular enforcement inspections. As an alternative, unannounced, warrantless inspections of parking facilities could probably be conducted by stationing an auditor outside of the facility who could count cars entering a given facility. These counts would later be compared to reported taxes to ascertain compliance with tax collection obligations. Should the results of random audits suggest that the parking tax was being violated, a warrant might be issued on that basis permitting further inspections of books, records, and accounts. To avoid constitutional problems with any enforcement program, a municipality must enact an ordinance regulating the manner by which it will carry out its enforcement program in reasonable detail. This is necessary to establish that periodic, random audits are being conducted in accordance with a neutral, pre- established plan and are neither based on discriminatory factors nor targeting specific individuals. PUBLIC OPINION ASSESSMENT The public opinion assessment had two primary goals. The first was to get various interest groups' reactions to the parking tax alternatives and to assess the relative support for each one. The second goal was to determine people's likely behavioral responses to the imposition of each alternative of the tax. To achieve these goals the 37 analysis used interviews and focus groups. The interest groups included parkers (commuters and shoppers), employers, parking lot operators and owner s, retailers, and developers. A list of all interviews and focus group conducted in conjunction with the Public Opinion Assessment is attached as Appendix D. Ten major concerns surfaced throughout the interviews and with each of the interest groups. The concerns were raised by the interest groups and represent what they told the researchers. Naturally, their comments reflected the position they brought to the parking tax, and the definition of each concern varied among the groups. The major concerns were administrative complexity, inequity between downtowns and the suburbs, using incentives vs. disincentives, the need for better mass transit services, the need for long-range and regional transportation planning, the importance of education and marketing, understanding and support of Transportation Demand Management (TDM) projects, income equity, and accountability. The text that follows identifies each of the interest groups and their concerns about the parking tax. The concerns expressed by each of the interest groups are organized according to issue. The information collected from responses to questions is also incorporated in the evaluation of the alternatives. Table 3 provides an overview of the issues and the interest groups. Methodology Focus Groups. The focus groups consisted of a guided discussion among eight to ten people, led by a moderator, about the concerns of "parkers." The discussion group began with an introduction of the parking tax study and its goal of hearing the participants' reactions and opinions about a change in parking prices, particularly a parking tax. The moderator explained that the focus groups were chosen to reach commuters and shoppers. The focus group continued with a discussion of people's reactions to the parking tax. The questions and discussion naturally led to more examination of transportation problems and solutions. 38 39 To assess how people would react to a particular set of alternatives, the researchers selected organizations on the basis of location. They sought groups who either paid for parking and would be affected by the parking tax, or groups that were faced with very limited parking and were forced to consider their transportation options. Finally, to get a cross section of the public, the researchers targeted organizations that employed a range of workers with varying pay rates and benefits. By choosing these groups, they hoped to hear views from a wide variety of people who faced different commuting choices. The researchers conducted focus groups at the following locations: Preston, Thorgrimson, Shilder, Gates, and Ellis (Seattle), The Bon March‚ (Seattle); Department of Social and Health Services (Olympia); Paccar (Bellevue); Washington State Department of Transportation (Eastgate); Bremerton-Seattle Ferry (out of Bremerton); and Department of Social and Health Services/Smith Kline Laboratories (South Seattle). With the exception of the focus group conducted on the Bremerton-Seattle Ferry, each of the groups was held during the lunch hour. Participation was voluntary and lunch was served as an incentive. Interviews, Interviews were conducted with employers, parking operators, retail and business groups, and developers to assess their reactions to the parking tax. The individuals interviewed were contacted by phone. After they agreed to meet with the researchers, they were sent an overview of the parking tax project describing the legislation, implementation alternatives, and TDM goals. The interviews varied according to interest groups. Geographically, the organizations contacted represented an attempt to include all of the counties in the Puget Sound region. The participants were also chosen to represent both downtown and suburban locations, and large and small firms. 40 Issues - Parkers Administrative Complexity. The participants of the focus groups were concerned with the administrative complexity of the parking tax. They thought the tax seemed extremely complicated and confusing. They had many questions about how informal carpools could be exempted, how a-market value for a leased space could be determined, and how jurisdictions could successfully ensure the parking operators were giving the tax dollars to the government. The participants were concerned about creating a cumbersome bureaucracy to contend with parking, and they felt that the tax could not possibly raise enough money to cover enforcement, auditing and collection costs. Downtown vs. Suburbs. The participants felt that the parking tax would do nothing to address suburb to suburb traffic. They felt it would be unfair to tax the people who commuted to downtown and not the people who commuted from one suburb to another. The downtown commuters who already paid for parking would be taxed, and the suburban commuters who did not pay for parking would not be taxed. The focus groups generally commented that the parking tax would encourage shoppers to go to the malls. They also felt that an inequity existed between those who commuted from a short distance and, those who commuted from far away. Both, types of commuters would pay the same tax, even though they do not impose the same cost on the transportation system. On the other hand, they also recognized that more remote suburbs had fewer transit options, and it would be unfair to tax people who had no alternatives. The participants felt that unless the tax could be levied evenly among downtown businesses, malls, and industrial parks, it would be unfair and not solve congestion and commuting problems. Incentives vs, Disincentives. The participants almost uniformly agreed that incentives were. preferable to disincentives. In the same sentiment, they preferred the 41 Accessory Parking Tax option because it rewarded those who worked with Transportation Management Programs. They felt sure that the parking tax would make people angry. They preferred innovative and positive approaches to problem solving. The focus groups complained that the parking tax would not effectively change behavior, it would only serve as a minor irritant. Mass Transit Improvements. Each of the focus groups complained about the transit options. They were especially angry about taxing parking when they felt there were no alternatives to driving alone. The participants admitted that, when there was bus service in the area where they lived, they could get to work on the bus, but the time commitment was so long that the bus was not a feasible alternative. Specifically, the focus group participants complained about the lack of express buses, evening schedules, and safety at the bus stops and park-and-ride lots. They also complained that there were no advantages to taking the bus if it sat in traffic with the other traffic. They also suggested that many of the buses were already operating at full capacity. How can people be encouraged to use the transit system when it is operating at full capacity? Need for Long-Range Transportation Planning. There was a general feeling that "if you build it, they will come" when the focus groups talked about transportation needs. They felt the transportation plans could dictate development and growth. The participants said that the Puget Sound region needs to address the causes of the transportation problems, not the symptoms. This would involve the creation of an integrated mass transit system. The bus tunnel, for example, does not do much to address 'downtown congestion because it exists in isolation. The tunnel, like other TDM ideas, needs to be integrated into a larger, comprehensive plan. They felt strongly that the plans must be developed for the future, not the present. If an integrated system was built, development would follow around it. A light rail system was mentioned several times, but some participants felt that a light rail system 42 would be too expensive per capita for the Puget Sound region because of the low population density. Education and Marketing. The focus groups said that the success or failure of the parking tax would, be dependent on marketing efforts, or the extent to which commuters understood what they were paying for. On one occasion, Portland, Oregon's MAX was cited because it had a sign at a parking facility that read, "Your parking dollar is going to mass transit." If the public were educated about the reasoning behind the tax, they might be more accepting of the issue. Support of TDM Efforts. The focus group participants, with the exception of one participant, felt that the area has serious congestion and air pollution problems and they were supportive of efforts to address and mitigate these problems. Income Equity. Many of the participants felt that the parking tax would burden the segment of the population that could afford it the least. The people who are already driven out of greater Seattle because of high housing costs are displaced from the transit system. They have no alternative to driving alone and would be forced to pay the tax that they could hardly afford. Lower income participants said they could not afford to pay higher parking costs and would have to be extremely creative about avoiding the tax. One participant mentioned she might be forced to quit her job. Others said they would be extremely inconvenienced. The higher income participants, on the other hand, said they could afford the higher costs. It would just make them angry at the government. Accountability/Distrust for Local Jurisdictions. The focus group members did not like the idea of taxing commuters for parking, then using the revenue for building roads. They also were concerned about how a local jurisdiction could improve transit options because Metro is a regional organization. Yet, they also felt the revenue should be earmarked for mass transit improvements or to provide more options for the commuting population. 43 Alternative Preferred by Focus Groups. No alternative was preferred by the participants in the focus groups, although some of them suggested that the Accessory Parking Tax was the best option. The focus groups preferred the Accessory Parking Tax because they felt it was an integrated approach that worked with them to find alternative ways to get to work. Issues -- Employers Employers were interviewed to determine the effects a parking tax might or might not have on hiring decisions, location choices, and transportation benefits. The researchers asked the employers to describe their current transportation benefits policies. They were interested in the employers' perceptions of the transportation problems and ideas they felt might be effective in addressing those issues. The employers were also encouraged to evaluate each of the alternatives. The study's employer contacts included Safeco (Seattle- University District), Nordstrom (Seattle-Downtown), Puget Power (Bellevue), and Fluke Manufacturing (Snohomish County, Everett). The issues of greatest concern to the employers are explained in the following text. Administrative Complexity. In cases where the employers provided parking for their employees and. charged their employees, the employer would be responsible for collecting the tax. The employers were very resistant to being held liable for collection. They claimed that the tax, at the very least, would force them to hire additional personnel to collect the tax. Additionally; because parking was paid for on a monthly basis and individual sales were not recorded, determining peak-period or long-term parkers would be extremely complicated. Downtown vs. Suburbs. Employers were concerned about the impact of a parking tax on employee recruiting ability. In particular, those employers who had suburban and downtown locations liked to promote employees and bring them to their 44 downtown offices. Parking costs were already a deterrent and ate away at the employees' salary increases; higher costs for parking would certainly exacerbate this problem. In general, the employers felt it was unfair to discriminate and tax businesses located in downtown areas. They thought the tax would be unfairly borne by central business districts (CBDs), and this was especially unfavorable because suburb to suburb commutes were equally responsible for congestion, air pollution, and wear on the roads. Incentives vs. Disincentives. The employers felt frustration about the use of disincentives to change behavior. Companies that already provided a wide range of transportation benefits in particular felt that they should be rewarded, not penalized, for these efforts. They favored the Accessory Parking Tax. For the most part, the employers who were already "doing something" felt that they would be exempt from the Accessory Parking Tax. The exception to this was Nordstrom, which provides no transportation benefits except a recommendation to their employees that they ride the bus. Nordstrom estimated that, at its downtown location, 80 percent of its employees rode the bus. Mass Transit Improvements. The employers were concerned about Metro services and felt for the most part that Metro did not provide a flexible enough schedule for their employees. In particular, they felt the night schedules were insufficient and general service in suburbs was not extensive enough. Need for Long Range Transportation Planning. The employers felt that comprehensive plans that provided employees with more services and options were needed. Employers in the suburbs and those with suburban locations were especially vocal about this point. They commented that their employees wanted commute options but were frustrated in finding them. Education and Marketing. Employers felt strongly that if employees were going to be charged for something, they needed to know why. The employers said there is a need for extensive education about the causes and costs of congestion and commute 45 travel. If employees were not fully aware of what they were paying for, they would be very angry and disagreeable. Support of TDM Efforts. The employers were all extremely supportive of developing transportation options and discouraging single occupancy vehicle travel. They expressed concern about their employees arriving to work frazzled and exhausted, and they each voiced concern about the environment. The employers also expressed a willingness to work with the local governments, Metro, and their employees to encourage carpools, transit use, and alternative commute choices. Alternative Preferred by Employers. The alternative preferred by employers was the Accessory Parking Tax. The employers felt that the Accessory Parking Tax would reward them for their efforts to encourage ride-sharing and alternative commute choices. Issues - Parking Operators To understand how the parking tax would affect the parking industry, the researchers interviewed six parking operators. The parking operators were asked general questions about the parking business and the types of lots they managed. They were asked to comment on each of the proposed alternatives. They were encouraged to talk about the administrative efficiency of each alternative, how the market for parking spaces would react, and their preferred alternative. The parking operators interviewed represented those who service the entire region and those who serve a more limited area and group. The operators interviewed included Diamond Parking, Inc., Bruce Caplan Parking, AMPCO, International District Merchants and Parking Association, University District Parking Association, U-Park, and Key Park. Administrative Complexity. The parking operators expressed concern about the administrative costs and complexity of the parking tax. They were particularly worried about the Peak Period and Long-Term Parking Tax alternatives. Operators who managed drop box lots were especially concerned because they did not record individual sales; 46 therefore, keeping records according to time of entry and length of stay would be complicated and costly. Also, making exemptions and reporting varying rates would create problems. The operators explained that their business was not particularly healthy. Their profit margin was much slimmer than most people thought because they did not necessarily own the land the parking lots occupy. Thus, additional administrative costs would create hardships and limit their ability to stay in business. Additional administrative problems pointed out by the parking operators included double use lots, lots in downtown buildings with fixed contracts, and carpool exemption stickers. Downtown vs. Suburbs. The parking lot operators were united in expressing concern about the equity of taxing downtown lots. They said that it was unfair to tax the downtown commuter when the suburb to suburb commuter was at least as much of a cause of traffic congestion. Unless the parking tax would equally address office parks and shopping malls, the parking operators felt the tax would be unfair. One operator suggested a study of the traffic flow down 1-5 because he felt that the bulk of the traffic came from north of Seattle and drove to south of Seattle. Education and Marketing. The parking operators agreed that the parking tax must be fully explained and understood. They felt it was important that the public knew why their parking fees had been increased and what they were paying for. Support of TDM Efforts. Most of the parking operators were supportive of TDM efforts, some more than others. One operator explained that even though he was opposed to the parking tax, he felt it might alleviate congestion and it was to his benefit to see downtown traffic mitigated. He told the researchers that if the perception was that downtown was completely congested and no parking was available, people would be discouraged from coming downtown at all. Another parking operator was working on efforts to improve transit use. 47 In general, the operators understood the problems of congestion and pollution and the need to work out solutions to those problems. However, two of the operators told the researchers that the parking tax was a limitation of people's freedoms and their ability to make a free choice. Income Equity. The parking operators expressed a concern about who would actually be paying the tax. They felt it would be an extremely regressive way to tax people, and inevitably the poorer people would pay in greater proportions. The single mother who must bring her children to school or day care was identified as a commuter who must work, must drive, and would be least able to pay the tax. Alternative Preferred by the Parking Operators. The parking operators preferred the General Parking Tax to the other options. They felt the General Parking Tax represented the least administrative burden and would be the easiest to pass on to the parker. Issues - Business Community. Business groups were interviewed to understand the reaction of the retail industry to the imposition of a parking tax. The researchers were interested in understanding how and why the businesses felt the parking tax would affect them and what their concerns were. The business groups were also asked to comment on each of the alternatives. The following groups were interviewed: Downtown Seattle Association (DSA), Folk Art Gallery (U-District, Seattle), South Snohomish County Chamber of Commerce, Pierce County/Tacoma Chamber of Commerce, Greater Seattle Chamber of Commerce, and Greater University Chamber of Commerce. Administrative Complexity. One of the groups questioned whether the tax would actually pay for itself. They felt the tax was too expensive to administer, and the administration would cause more problems than would be resolved (if any problems would be resolved). 48 Downtown vs. Suburbs. The business community felt strongly that the parking tax would discourage shoppers from going to downtown areas. They explained that the conditions already placed downtown areas at a disadvantage to the malls, and the parking tax would further lead to the demise of the downtown areas. One of the groups claimed that even if th