Wednesday, August 22, 2007

Car pooling

This article starts the (for now) two-part series on car pooling, where readers of financial blogger Andrew Tobias debate pros and cons of car pooling.
Ever since I joined Genentech in 2005, I have carpooled with several other employees who live in southern Marin County. Genentech has its main campus in South San Francisco some 25 miles from my home in Tiburon. My commute is certainly scenic. I cross Sausalito, the Marin headlands, the Golden Gate Bridge, The San Francisco Marina, San Francisco Civic Center, and then a dreary drive down the 101 south to near SFO.

If I drive alone I have a $5 toll southbound on the Golden Gate Bridge, there is no toll northbound on my return trip. My 1990 C280 Mercedes has an average fuel efficiency of 23 miles to the gallon combined city and freeway that is representative of my commute to work. Therefore, if I drive alone each day I would consume slightly more than 2 gallons of premium gasoline. The Bay Area has perhaps the highest gasoline prices in the US so gasoline would cost me approximately $7 per day. My car is paid for and pretty close to fully depreciated so I will only account for out of pocket maintenance and repair expenses. The car costs $500 to service every 10,000 miles (5 cents a mile), needs a new set of tires costing $600 every 30,000 miles (2 cents a mile),and needs brakes costing $600 every 30,000 miles(2 cents a mile). This totals 9 cents a mile, therefore the 50 mile round trip commute equals a cash maintenance and repair cost of $4.50 each day I drive to and from work. The total cost for tolls, gasoline, and cash maintenance costs is therefore $16.50 per day. A new car that is not fully depreciated would cost substantially more than the $16.50 per day.

Carpooling to work, I only have to drive about one quarter of the time. We have 6 members but it is a casual carpool and sometimes we have only 2 or three in the car but mostly we have 4 or 5 in the car. Let's assume I drive 6 times a month to work and that there are at least 3 people in total in my car when I drive. I save the Golden Gate Bridge toll because a car with 3 people or more can travel toll free. My monthly out of pocket cash costs for the 6 days I drive total 6 times $11.50 or $69 per month. Had I driven alone, my monthly out of pocket cash cost would equal 22 (workdays in a month) times $16.50 or $363 per month.

There is still another offset to my commuting cost. Genentech for commercial and societal reasons wants to limit the number of vehicles that are parked on the main campus. They have instituted a reward program titled gRide. For every day that an employee does not bring a car on campus the company pays the employee $4. Therefore for the 16 days that I was in another member of my carpool's vehicles, I get $64 added to my paycheck. After taxes this equals $40. My $69 out of pocket monthly commute expense is therefore reduced to only $29 a month. The gRide reward program also saves Genentech a bunch of money. To build a seismically braced parking structure in the Bay Area requires an investment of some $15,000 to $20,000 per parking space exclusive of land acquisition cost. Genentech pays less than $1,000 per year to the employees for the elimination of a parking space under the gRide program. The money that would have been spent on a parking structure is better invested in research for a life saving drug and the company has motivated the employee with an added reward. This is the perfect example of a "win-win" situation.

The gRide program is very successful. 10 months after its inception we now have over 2,000 employees participating and over $1 million in rewards will be paid out this year. Each month the gRide program saves over 50,000 gallons of gasoline and eliminates a million pounds of CO2 emissions. This example shows the benefit of carpooling to employees, corporations, and society. We call our carpool participants "Carpooligans" but we are a tight knit group who enjoy our companionship during the commute, we all care about the environment, and we definitely appreciate saving money.

The federal government should give corporations a tax credit for a gRide type program. The money would be far better spent and provide immediate fuel savings compared with all the nonsense about fuel cells, hydrogen, clean coal, carbon sequestration, ethanol and the myriad programs that simply line some special interest's pocket
2nd in a two-part series.
Lisa Strong: “I’m all in favor of carpooling, but for most of us it won’t work. Few of us are actually able to leave work at the official quitting time, so, that would leave all members of the carpool waiting for the latest member each day. But at this time, I am fortunate to be a full-time telecommuter. My employer saves over $1000 per month by allowing me to telecommute. This is in the Midwest – bet it would save more on the coasts. I save money and time. And for every telecommuter, there’s one less car on the road clogging up rush hour. We use phone, instant message, email, conference calls, and a software tool that allows us to ‘share’ our computer screen with others on the call. This is practical for many people (not most), but still very few employers permit it. Dr Leveen was correct that carpooling is a great idea. Saves money for all parties, less stress for drivers, and even less traffic congestion for those who cannot carpool. However, I take great exception to the statement, ‘The federal government should give corporations a tax credit for a gRide type program.’ Dr. Leveen noted that this is already a “win-win” situation. The participants and corporations already derive financial and other benefits. By waiving the toll in his case, the local government is already subsidizing his carpool. Why should the federal government take dollars from the people who earned them, transfer them through a government that’s more than broke, and distribute those dollars to other people and organizations who will benefit from the situation without the appropriation of someone else’s dollars? My apologies to Dr. Leveen, who wrote an otherwise thoughtful commentary.”

Tobias: Perhaps a compromise would be a five-year incentive, to draw attention to the possibilities and speed their adoption? Or maybe just a good front-page Wall Street Journal story recounting Genentech’s success?