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Free city staff parking a taxable benefit

City staff have reviewed the taxable benefit status of free parking provided for city employees downtown and concluded that an employer-provided benefit is considered income and therefore must be treated as a taxable benefit.Exemptions to the tax benefit status of parking include an employee who is provided a parking spot due to a disability and employees who use their vehicle for regular business purposes. As per Canada Revenue Agency guidelines regular use of a vehicle for business purposes constitutes an average of 3 or more days in a five day work week.

Free parking downtown is currently provided for 365 city employees, including union and non-union members, and six members of council. (I gave up my parking space, and pay the market rate for parking when I need it).

The review came as a result of a staff direction I brought during the 2014 budget discussions after researching CRA rules and reading about a court ruling against Kitchener. In that case, where employees had free parking, Revenue Canada said it should have been a taxable benefit and the city ended up paying over $1 million in back taxes owed on behalf of employees.

I wanted to avoid that situation in Burlington, both for our employees and for taxpayers.

Read my 2014 article here: Treating free employee parking as a taxable benefit

The 2015 budget includes $150,000 to provide salary adjustments to downtown employees to offset the annual impact of the take-home pay reduction arising from the taxable benefit status of free parking. The goal of the adjustment is to treat all city employees equitably (those that work downtown versus employees who work in other areas of the city where emplyer provided parking is not a taxable benefit.)

Downtown employees have always had the option of a free transit pass or free parking; the transit pass was always treated as a taxable benefit.

My Take:  Treating employer-provided parking as a taxable benefit is not only the right thing to do, it’s required by the CRA, so making this change protects both city employees who receive this benefit and ultimately taxpayers. I’m pleased to have been a part of bringing it about.

Regarding the salary adjustment, I understand the thinking behind it and the desire for fairness, however it potentially introduces unfairness, and ultimately takes us down a path of the city covering private tax matters, not a road we want to go down. If CPP, EI or income-tax rates go up, causing a reduction in take-home pay for employees, would the city cover that too? If employees car-pool, walk or cycle to work – options we want to encourage – and don’t take the free parking benefit, do they still get the raise? If they take the free parking benefit one year, but not in later years, is the pay increase clawed back? Will the folks who took a transit pass, which was always a taxable benefit, instead of free parking, also get a salary adjustment in the spirit of fairness?

These are just some of the issues that may arise and I have asked staff for further information on these matters. Fairness in this case will be elusive if not impossible. I believe the most prudent course is simply to treat this as a private tax matter between employees and CRA, as we have historically for the transit benefit.

The larger issue here is whether the city should be providing free parking for employees, which is ultimately paid for by taxpayers as a transfer to the Downtown Parking Reserve Fund for the value of that parking ($217,000 in 2014). My view has always been that transportation to and from work, including associated expenses (parking, gas, depreciation) are costs that should be borne by the employee, not by taxpayers.

Transportation is a choice, and providing free parking provides an incentive to drive, at a time when we are trying to encourage residents to use transit, cycle or walk.

I was inspired to seek public office because I believe, like so many of you, “I can do something about that” on the issues we face. As councilor, my role is to take a stand on what’s best for residents and go to bat for it. Pushback is inevitable from those who don’t have the community’s interests at heart. I will stand with you and for you, to achieve the best interests of our city, without caving to unacceptable compromise in the name of consensus.

14 Comments

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  1. if the city provides 365 parking spaces for employees, there is an additional “cost” in lost revenue to the city as those spaces would have been available to those who pay for parking ; 365 x 220 x $10.00 = $730,000.
    Allan

  2. Most people are expected not only to find a way to work, but also to pay for parking. I believe that the employees of our City should be expected to also do so.

  3. What are other municipalities doing for their employees?
    Brampton at least used to charge employees at city hall for the parking garage…
    Mississauga, Toronto would all have city buildings in similar situations.

    I don’t think charging a subsidized rate for a permit is unreasonable either is the taxable benefits but it should be an equitable solution to other people who work in the downtown area. OtheR downtown employees non municipal should be offered the same subsidies for parking permits or have the same tax benefit advantage. We know live in a time of equitable and accessible community.

  4. So we (the City) have entered into agreements with people to do work for us. and as part of that work we have given them a place to park their cars. I do not agree that it makes sense to just cut that out without making some concession to those employees. Based on the cost of a parking pass in the garage, that’s equivalent to taking a pay cut of $1,584 after taxes, or about $2,500/year on their base salary. It’s tough enough for the city to attract high quality employees without being downright adversarial towards them. That’s a meaningful amount to the vast majority of your staff.

    The best solution to this would be as you have said…to actually charge these employees the going rate for the use of parking, and for those whom “free” parking was part of their deal, bump up their salary to cover a significant portion of the cost. They can then deal with their transportation needs as they choose – driving and parking at a nearby lot (or even a cheaper one if they’re willing to forego the convenience), buying bus passes, parking their car, buying a bicycle, or putting it towards finding a location closer to work. Ultimately everyone who uses the parking ends as well off as they were before. Those employees who change their mode of transportation end up better off, and ultimately we all do better by incenting more people to use the alternatives. You also don’t need to use up your HR resources in administering a complex policy.

  5. I never believed an employee should have to pay to park at their workplace. Many people don’t. An employee parking lot is provided. As it should be! City workers or hospital workers should NOT have to pay to park where they work! The whole thing is just another tax grab by the Feds. Just a bunch of BS.

  6. Having been involved with employee parking as a federal government facilities manager for over 20 years, my response is, what took the city so long! I am totally opposed to compensating employees for this taxable benefit. The City should not be involved. Period. Good on you Marianne for getting the city to do what their administration should have done years ago.

  7. I totally agree to not paying tax impact of this taxable benefit also agree should remove this perk in this day and age few if any staff anywhere get paid parking GO to Toronto costs me about $3K a year.

  8. The City of Burlington should not at all be involved in the employee parking issue. Free parking downtown in December is fine but with restrictions or consider the use of a parking disks http://en.wikipedia.org/wiki/Disc_parking This would prevent people from just parking their vehicle for the entire day on a city parking lot because it is FREE. The Downtown BIA would also benefit by allowing more vehicle turnover on its downtown parking facilities.

  9. Similar to my comments last year I am totally opposed to any subsidy for employees transportation to work, after over 40 years of working in the private sector with no subsidy of any kind I am at least glad to see the movement to add it as a taxable benefit to create fairness but am opposed to a salary adjustment to compensate them for it. It strikes me that the city needs to be more creative in solutions if downtown employees are at a disadvantage compared to those receiving free parking. Maybe all employees should be assessed a taxable benefit.

  10. I totally agree Marianne. Free parking for 365 city employees downtown is ridiculous. Even more ridiculous is giving them a raise to make up the difference if it is now considered a taxable benefit. If the city wants to pay for free parking, how about paying for all of the family members who go to Joseph Brant every day to feed their loved ones because there is not enough staff to feed them, or the volunteers who spend hours working there for free.

    • Actually hospital volunteers are provided free parking but not visitors assisting family. I do know able bodied volunteers have been asked to park at the beach and walk due to the hospitals parking shortages. With the new parking structure hopefully this will not be necessary.

  11. I didn’t realize city employees were getting free parking. I am not surprised. Didn’t anyone know or care that it was considered a taxable benefit.
    Ultimately it was the taxpayers who picked up the tab when the city was caught. Another waste.

  12. I agree free parking should be a taxable benefit,I think seniors should ride free during certain hours ,not during rush hours.

  13. I totally support Marianne’s position on this issue. Other employees are expected to arrange their own transport to and from their workplace. And if precedent has been set with the transit pass, parking falls into the same category, especially in the eyes of the CRA. Taking something away from someone that has been included in their package for years is never easy, but those of us who are self employed or in the private sector (especially in sales) deal with this sort of situation almost every year, being asked to charge less for our services (if not provide them for free) and without the opportunity to charge out very appropriate hard costs of doing work in order that clients/businesses can meet their budgets or save money. The CIty should be focuing on this as well.

What's your take?