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Home My WebLink About26-City Attorney CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: JAMES F. PENMAN City Attorney Dept: CITY ATTORNEY /l"t f""" , ~ 'HI UUif;;.i<".d jl"tiJI.. Subject: Resolution Adopting Findings in Support of the Council's Decision to Overturn the Bureau of Franchises' Denial of the Petition for a Franchise Permit for AAA Inland Empire Cab Company Date: August 30, 2002 Synopsis of Previous Council Action: July 15,2002 - Appeal Hearing - Bureau of Franchises - Petition for Franchise Permit for AAA Inland Empire Cab Co., continued to August 5, 2002. August 5, 2002 - Appeal Hearing held, overturned Bureau of Franchises' denial of Petition, referred matter back to Bureau, and directed City Attorney to prepare Findings (see Staff Report for details). August 19, 2002 - Mayor and Common Council continued this matter at the request of both parties. Recommended motion: Adopt Resolution. \ \ ~?~ (/ Signature Contact person: James F. Penman Phone: 5255 Supporting data attached: Staff Report. Resolution Ward: City-wide FUNDING REQUIREMENTS: Amount: Source: Finance: Council Notes: OP.. . . J(,/"-I,,.,iJ;. ,.,a. i ulnO.,; 7 ,_ JLlv "'" 'f , f S/slo::J u.).,' <is/IC;JoJ#;JS }) , qjq)D;)" Agenda Item No. ' J (p '~~o~~rr', ~ - ;)<;8 STAFF REPORT Council Meeting Date: September 9. 2002 TO: Mayor and Common Council FROM: James F. Penman, City Attorney DATE: August 30, 2002 AGENDA ITEM: RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADOPTING FINDINGS IN SUPPORT OF THE COUNCIL'S DECISION TO OVERTURN THE BUREAU OF FRANCmSES' DENIAL OF THE PETITION FORA FRANCmSE PERMIT FOR AAA INLAND EMPIRE CAB COMPANY. On June 11,2002, the Bureau of Franchises denied a Petition for a Franchise Permit for AAA Inland Empire Cab Company. On August 5, 2002, the Mayor and Common Council held a public hearing on the appeal filed by AAA Inland Empire Cab Company. After receiving and considering the documentary evidence, testimony and arguments presented by the interested parties and the witnesses, the Council approved the following motions: I. That the hearing be closed. 2. That the Mayor and Common Council overturn the Bureau of Franchises' denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City. 3. That the matter be referred back to the Bureau of Franchises to determine whether the current holder of the permit shall be allowed to increase the number of vehicles in the same proportion that the total increase bears to the number of such vehicles theretofore operated by the holder or to grant the permit to the applicant. 4. That the City Attorney be directed to prepare the necessary findings, and that the matter be continued to August 19, 2002. 5. That the ordinance be referred back to Legislative Review Committee for review. Pursuant to the Council's direction, attached is the proposed Resolution adopting Findings in support ofthe Council's decision to overturn the Bureau of Franchises' denial of AAA Inland Empire Cab Company's Petition for a Franchise Permit. Recommended Motion: Adopt Resolution. HE/js[AAA.RPT] CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Rachel Clark, City Clerk C;" ; f Subject: Appeal of the Bureau of Franchises' denial of a Petition for Franchise Permit . .. for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino MICC Meeting Date: 7/15/02 Dept: City Clerk - . . Date: July 8, 2002 Synopsis of Previous Council Action: None Recommended Motion: Motion #1: That the hearing be closed, and the Mayor and Common Council uphold the Bureau of Franchises' denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. Or Motion #2: That the hearing be closed, and the Mayor and Common Council grant the appeal for a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. R~)f. CltuLfb Signature ~~ Contact person: Phnne: Supporting data attached: Yes Ward: All FUNDING REQUIREMENTS: Amount: NIA Source: (Acct. No.) (A,...,...t n,:lr.c::t"'riptinn) Finance: Council Notes: 7/J51/)~ , Agenda Item No. ~ ~ CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION Staff Report Subject: Appeal of the Bureau of Franchises denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. Applicant: J.K.S.O., Inc. DBA, AAA Inland Empire Cab 3000 Date Street Riverside, CA 92507 (909) 369-5581 Patrick Pashkam, Chief Executive Officer Background: A Petition for Franchise Permit for AAA Inland Empire Cab was previously denied by the Bureau of Franchises and a letter sent dated January 10, 2002 to the owners of AAA Inland Empire Cab notifying them of that fact. AAA Inland Empire Cab did not fIle an appeal of the decision but elected to re-submit their application based upon new information. On April 3, 2002, a new application fee was paid by AAA Inland Empire Cab. On June 11,2002, the Bureau of Franchises considered the new application submitted by AAA Inland Empire Cab. After presentations by both AAA Inland Empire Cab, BelllYellow Cab (existing taxi cab service), and discussion from the Board Members regarding whether there exists a public convenience and necessity for additional cab service, a motion to deny the Petition for Franchise Permit for AAA Inland Empire Cab carried on a 4-2 vote. Board Members Cole, Turner, Shultz and Carson voted in favor of the motion to deny: Members Fernandez and Martindale voted against the motion. Financial Impact: None Recommendation: That the Mayor and Common Council uphold the Bureau of Franchises' denial of the Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxi cabs in the City of San Bernardino. Or That the hearing be closed, and the mayor and Common Council grant the appeal for a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. JUL-Uc:.-c:.UUc:. IU!:. V't'l;' r(l rULLc,I\lvn L.L:.l1mm 1:.1 nL. .. 1111\ l'V. VVV UVU v~ ~v I' V. LAW OF"rICE.~ FULLERTON, Lf:MANN, SCHAEFER & IiWV~[b.,en~EhK ANNf'rTe: ge.e~\.\.\...t:.llll.I..E THOM,Al.o w. nOMlf',IICK wl~J'"nID c;. L.L."",^Nr.. E"'. LOPf"l. ~A Mlc:~,.t:~ (~ !",CHAE:F"ER 1.I~Al(IIE. 'I'I1\.l1l'JN 2ISNCR'H1 D r;TREET, J"I~~T n.OOR !lAN 85:RNARDINO. CAt..,F'DRNIA '9~~1.' 712 TF,LF.:.....ONE I~O.'l ".'!!J-3G91 ~ Jl-2 r"'c:OI....IL[ 101')?I eBo.:;j, I ~ F'mM WE:~SITC: WWW"INL.ANOEJU5INE~SLAW.COM OF COUNOr';\" RCLlf.RT V, rULLCRTON' P 5 :1 a~""',:,;""o"''''l.. CClu'n~A,T'~" ""''''foII DEIilCRT Of"T,C;C ",,,,,...c r......T...n ??SG....A t:;OUN.TAV c~uu 0'(. ,"UIT'E: 1 50 II'Al..M Dl!.lilllll.'T. e.... ?:!2' 1 C'/(;O) ???''.J~?Z FACSIMILE TRANSMISSION Dale; J lily 2, 2002 Numhcr of Pagcs; 2 [lnc1ulling this Page) Time: ~.. !)j) A.M8 384-5302 File # 01-802 Destin~lioll Phone tI Destination Fax 11384-5158 TO: FROM: RE: Roger Davis Sarah Adams Bell Cab & Yellow Cab of San BernardiLlo ( ) ( ) (X) () Other: Attached find request for eontimlance of the hearing set for July lS'h, A hard copy of the document willl>e delivered via courier. If any further documenlation is needed, plcase conlDcl me directly. Please sign transmittcd documenls and retUl1l them by Fax. For your infomlatioll. In accordance wilh YOllr request. Non,: It. YOU DID NOT REt:IiIVE ALL 01' Tim rAGES IN umBLE fORM, PI,[ASE CALL CINny AT (909) 889- 3691IMMF.nIATELY. ".- "'fi"~ CONFIDENTIALITY NOTICE "Ih,,' ui)Cunwnb acconlt';myin,; this tdccOplcr lfAX) t\':lns1Tli~~iun (;I)RIUilt confill,mL;al inCunlhilion bdnnsing to tllc sender which i5 Icgall)' privilcpt:J I'he illrOIllMiol\ \S hU~"1'Irl~d only l'hr the use ofthc indIVidual or entity n~1Ucd .:I.hUve. Ifyo\l:lil"C nollh~ inwll&.d rttipicnl,)'Cu :1.l'C ll\'f..-:by nolit'icd Il\;J.t Ufl) disclosllrc:. cop)"ing, distribution (lr the ukil"lJ of lIlIY t1ctiOll in rdillnce on lbc COl\ra1~ Of1his wlecopicd inrormalit)n is WifJJJl pmhihil~i:!.. If YllU r,:C(:IV~d lhii tch:l.:up)' il1 errOT. p1c:l..~ immcdia\1l1y c31l tile s...'T\dcrroll..L'~ IQ i\rr:'IOSc for th~rel~lIl\ ofrllc tdccapkd dce~rmcm... JUL-U~-~UU~ IUt Uq; j~ rn rULLtltlVI't Lr.nHl~l~ r.1 HL , rn^ nUt vuo uuo v11\J I. vc.... ~^W DFf'"ICE~. F'ULLt:RTDN, LF;MANN, SCHAEFER & DOMINICK, LLP ^l'iNCTTE Dt."a,F:L LEF"LUI\..LE T~C1MA!I';...., DUMIN1CK WI1..r,..llU t:. l,.E:M........!'oI MICtIACL. n. ll\CH1\tH':'R CRAIO F- WIl..I.:.ON Z 1:' "IQRTH 0 C"ff,(\:.C.T. FIRST FLOOQ IiAN BCRNAROINC. CALIF"DRI'IIIA '312401.17' 2 Tf'l.E:j:l1 tUN;: 10DOl .A"-3ti91 "AC~II"Ul.l" 19091 UUY.511 !) F'tRM WEBSITE:': WWW.INLANDBU5INEJ;.LAW.CDM E-M:!.i1: blclnol.nn@jnlilnclbu.~iltc~..l~\\'.com 0" C~:".I"'.~el.. RQOt,;Hr v. 'UL..LEf<TQN' .,. "HO' I.:==U:INA<.. CO""C"tA1Ig,,, 1-'.1.."" th:t:r"T n,.Flce J.o.....c CC......CIll 7756"'-4. COUHl'tY Cl.....n OR, SUITE I ~D PALM O.c:!"II"'IIT. C-. 9.3::1: 11 17601 '1'7~'9S'l;': July 2, 2002 VIA FACSIMILE & llANO DEUVERY Mayor Judith Valles & Common Council Office ofthc City Ckrk City of San Bernardino 300 NOI1h "0" Slreet San Bernardino, CA 92418 Re: Appeal oflhe Dceision of the Burcau of Franchises in rcgard to the Application of AAA Inland Empire Cab Dear Mayor Valles and Council Membcrs: As you may be aware, our lirnl is counsel to Bell Cab & Yellow Cab of San Bernardino ill the above- referenced maller. This letter shall serve as our request for a conlinuance of the hearing set for July 15, 2002. Mr. SCOll Schaffer, corporate representative for our clicnt, has a Public Utilities Commission matter and will be unavailable on JUlie 15'h. Mr. SchaIrer's palticipation is absolutcly necessary. Accordingly, because of the unavailability of Mr. Schaffer, we request the matter be continued until the next meeting date. We look forward to hearing from you. Very truly yours, FULLERTON, LEMANN, SCHAEFER & DOMINICK, LLP wilmki:! WCLsda OFFICE OF THE CiTY CLERK RACHEL G. CLARK, C.M.C. . CITY CLERK 300 North "D" Street- San Bernardino - CA 92418.0001 909.384.5002' Fax: 909.384.5158 www.ci.san-bernardino.ca.us '"' July 16, 2002 Patrick Pashkam, Chief Executive Officer AAA Inland Empire Cab 3000 Date Street Riverside, CA 92507 Dear Mr. Pashkam: At the meeting of the Mayor and Common Council held on July 15, 2002, the following action was taken regarding the appeal hearing relative to your Petition for Franchise Permit for AAA Inland Empire Cab: The matter was continued to the Council meeting of August 5,2002, at 4:00 p.m. If we can be of further assistance, please do not hesitate to contact this office. Sincerely, . ! --/' I /,-- -...)>- <,., ~,._' ~'.i"' !i. i" '/" ('Rachel G. Clark, CMC , City Clerk RC:lh cc: Business Registration Division CiTY OF SAN BERNARDINO A ."......TI'T.V'h ,",U ~ IH:n. v\ I Ill.''';:< Intporit\! . Arrnlmt~lhilitv . Resnect for Human Dignity. Honesty AFFIDAVIT OF MARJORIE JAMESON 2 3 I, MaIjorie Jameson, could competently testify to the following having personal 4 knowledge thereof: 5 1. On August 1,2002, at approximately 1:15 p.m., I called Bell Cab Company, at 6 7 (909) 808-1111, and requested that a taxicab pick me up at the Olive Garden Restaurant, on 8 Hospitality Lane, in the City of San Bernardino. 9 2. At the time I called for a taxi, I had my twenty (20) month old son with me. 10 3. At approximately 1 :45 p.m., Yellow Cab #262 arrived at the Olive Garden in 11 response to my request. 12 4. Before entering the taxicab, I inquired of the driver whether he had a child safety 13 14 seat for my son. The driver responded by saying, ''No.'' I then inquired whether any other Bell 15 Company cabs have child safety seats to which he replied, "No, none of the cabs have them" and 16 went on to state that it was my responsibility to provide a car seat. As I hesitated at the door, the 17 driver asked what my destination was. When I replied "Redlands" he stated, "You can just hold 18 him." After explaining that my child does not travel in a vehicle without a child safety seat or 19 proper restraints, the driver drove away. 20 21 I further certify under penalty of perjury under the laws of the State of California that the 22 foregoing is true and correct of my own knowledge. 23 24 Dated: 8/1/0fS- 25 Entered into Rat.... g/5/fJ2. I;.., ',cillCmyOe,C..._ 26 ~ f'~ '1\ 27 ~a Item - lJ re "" 28 ~~.J..J_ e.e~ City ClerldCOC See, 1 Cit' of San Bernlrdillo OFFICE OF THE CITY CLERK RACHEL G. CLARK, C.M.C. - CITY CLERK 300 North "0" SlIeet. San Bernardino. CA92418.000I 909.384.5002. Fax: 909.384.5158 www.ci.san-bernardino.ca.us '" August 7, 2002 Mr. Patrick Pashkam, Chief Executive Officer AAA Inland Empire Cab 3000 Date Street Riverside, CA 92507 Dear Mr. Pashkam: At the meeting of the Mayor and Common Council held on August 5, 2002, the following action was taken relative to the appeal hearing relative to your Petition for Franchise Permit for AAA Inland Empire Cab: That the hearing be closed; that the Mayor and Common Council overturn the Bureau of Franchises' denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino; that the matter be referred back to the Bureau of Franchises to determine whether the current holder of the permit shall be allowed to increase the number of vehicles in the same proportion that the total increase bears to the number of such vehicles theretofore operated by the holder; or to grant the permit to the applicant; that the City Attorney be directed to prepare the necessary fmdings, and that the matter be continued to August 19, 2002; and that the ordinance be referred back to the Legislative Review Committee for review. If we can be of further assistance, please do not hesitate to contact this office. Sincerely, ~h.~ Rachel G. Clark, CMC City Clerk RGC:ls cc: Business Registration Division CITY OF SAN BERNARDINO ADOPTED SHARED VALVES: Integrity. Accountability. Respect for Human Dignity. Honesty JOHN K. MlRAU' MARK C. EDWARDS ROBERT W. CANNON! STANLEY A. HARTER' .MICHAEL J. LEWIN . LA"Y_..OF,~I<E.ES OF MIRAU, EDWARDS~J~ANNON, HARTER & LEWIN =~,,:'C= _ .. _...:.;t::-:;;,-,~-'>':':~ A P~C>FESSIC>NAL,.~C>RPC>RA.TION j-f't . Cenified Spco;.list. Taxation Law, The Swe Bar of Cal;fomi~ Boanlllfl.epISp<<ialil<lliOfl 'CenifiedS~.li$l,Esllle P1:uU1;ng,TrustandProbaIC L1w,Thc:SweBarofCalifornia BoudofLeplSp<<;aliwion 1806 Orange Tree Lane, Suite C Redlands, CA 92374 telephone: (909) 793-0200 facsimile: (909) 79J,0790 medwards@mechlaw.com August 14, 2002 A2066-001 Huston T. Carlyle, Jr., Esq. Senior Assistant City Attorney City of San Bernardino 300 North "D" Street. 6th Floor San Bernardino CA 9240 I Re: Proposed City Council Resolution re Appeal of AAA Inland Empire Cab Company Dear Mr. Carlyle: We received and have reviewed the draft resolution which you faxed to our office yesterday. AAA Inland Empire Cab Company has no objections to the resolution in the form you faxed to us. As I will be on the East Coast the first part of next week, I have requested that the Mayor defer this matter until the next Council meeting which, I believe, will be held on September 2. I have advised Craig Wilson, Mr. Lemann's associate, of that request. That would still permit the matter to be heard by the Franchise Bureau on September 10th. Please call if you have any questions regarding this matter. Very Truly Yours, MIRAU, EDWARDS, CANNON, HARTER & LEWIN A Professional Corporation, Al2066/001/carlyI.002 Cc AAA Inland Empire Cab Company, attn Peter Withers Craig Wilson. ,Esq. LAW O~~ICE8 CONfiRMATION COpy FULLERTON, LEMANN, SCHAEF'ER & DOMINICK, LLP ANNETTE OEBELLEFEUILLE THOMAS W. DOMINICK WILFRID C. LEMANN MICHAEL R. SCHAEFER CRAIG E. WILSON 215 NOFilTH D..sTREET, FIRST FLOOR . BAN BERNARDINO, CALIF"CRNIA 924Cl-1712 TELEPHONE (909) SS9-3691 FACSIMII.E 1909l aSS-51 1 <;I FIRM WEBS1TE: WWW.INLANOBUSINESSLAW.COM E.Mail: cwilson@inlandbusincsslaw.com OF COUNSEl. ROBERT V. FULLERTON' 'A PROFESSIONAL CORPORATION PAI.M DESERT O"FICE PARC CENTe:R 77S64-A CCUNTRY CLUIS DR. SUITE 1 50 PALM DESERT, CA 9221 1 (7601 779-9572 August 29, 2002 VIA FACSIMILE (909-384-5238) AND FIRST CLASS MAIL Huston T. Carlyle, Jr., Esq. Senior Assistant City Attorney City of San Bernardino 300 North "D" Street, 6th Floor San Bernardino, CA 92401 Re: Proposed City Council Resolution/Appeal AAA Inland Empire Cab Company Dear Mr. Carlyle: We have had an opportunity to view the video of the city counsel hearing of August 6, 2002. We are not recommending any changes to the Resolution as drafted. Very truly yours, FULLERTON, LEMANN, SCHAEFER & DOMINICK, LLP ~.~.?-< ~raig E. Wilson CEW:t1n cc: Scott Schaffer Mark C. Edwards, Esq. 1?0. ,~~ ,--~\ '\\,(i (~..'-.::-/u Lf . 1 RESOLUTION NO. c . 2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADOPTING FINDINGS IN SUPPORT OF THE COUNCIL'S DECISION 3 TO OVERTURN THE BUREAU OF FRANCHISES' DENIAL OF THE PETITION FOR A FRANCHISE PERMIT FOR AAA INLAND EMPIRE CAB COMPANY. 4 BE IT RESOLVED BY MAYOR AND COMMON COUNCIL OF THE CITY OF 5 SAN BERNARDINO AS FOLLOWS: 6 SECTION 1. WHEREAS, on June I 1, 2002, the Bureau of Franchises denied a Petition for a Franchise Permit for AAA Inland Empire Cab Company; and 7 WHEREAS, AAA Inland Empire Cab Company filed a timely appeal of the decision of the 8 Bureau of Franchises to the Council; and 9 WHEREAS, on August 5, 2002, the Mayor and Common Council held a public hearing on the appeal filed by AAA Inland Empire Cab Company; and 10 WHEREAS, the Mayor and Common Council have received and considered the n documentary evidence, testimony, and arguments presented by the interested parties and the witnesses; o 12 SECTION 2. In accordance with San Bernardino Municipal Code Section 5.76.050, and based upon the documentary evidence, testimony, and arguments presented by the interested parties 13 and the witnesses, the Common Council makes the following Findings in support of the Council's reversal of the Bureau of Franchises' denial of the Petition for a Franchise Permit for AAA Inland 14 Empire Cab Company: 15 Further service in the nature proposed by AAA Inland Empire Cab Company is required by the public convenience and necessity. 16 17 There exists a public demand for an additional 25 taxicabs and the taxicab service currently being rendered is inadequate. Local economist John E. Husing wrote that three groups of San Bernardino residents are disproportionately dependent upon taxies: the elderly, the handicapped, and the poor. These three groups depend upon readily accessible taxicabs. Although Bell CabIY ellow Cab has a franchise to operate 45 taxicabs in the City of San Bernardino, Bell CabIY ellow Cab had only 12 drivers with current business registrations as of the August 5, 2002, Council hearing. Based upon the testimony at the public hearing and the written statements submitted, Bell CabIY ellow Cab has produced slow service on several occasions. The managers of the La Quinta Inn and the Hilton Hotel both cited the delay in current response times for taxicabs under Bell CabIY ell ow Cab. Disabled activists Robert Neves and John Anaya testified relative to Bell CabIY ell ow Cab and its delays in service being especially detrimental to the disabled who have few alternatives for transportation. Other persons provided written statements citing slow service. 18 19 20 21 22 23 24 c SECTION 3. The Council finds that further service in the nature of that proposed by AAA 25 Inland Empire Cab Company is required by the public convenience and necessity and therefore, the Council overturns the Bureau of Franchises' denial of the Petition for a Franchise Permit for AAA 26 Inland Empire Cab Company. The Council refers this matter back to the Bureau of Franchises for its determination, pursuant to San Bernardino Municipal Code Section 5.76.060(A), as to whether Bell 27 CabIYellow Cab should receive an increase of 25 taxicabs or whether AAA Inland Empire Cab Company should be granted a permit for the 25 taxicabs it has requested. 28 III HE/cj[burotTr2.res) 1 c 1 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO ADOPTING FINDINGS IN SUPPORT OF THE COUNCIL'S DECISION 2 TO OVERTURN THE BUREAU OF FRANCmSES' DENIAL OF THE PETITION FOR A FRANCmSE PERMIT FOR AAA INLAND EMPIRE CAB COMPANY. 3 4 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a meeting thereof, held on the _day 5 of , 2002, by the following vote, to wit: 6 7 COUNCIL MEMBERS: AYES NAYS ABSTAIN ABSENT 8 ESTRADA 9 LIEN 10 MCGI1'<'NIS 11 DERRY 12 SUAREZ 13 ANDERSON C 14 MC CAMMACK 15 16 Rachel Clark, City Clerk 17 18 The foregoing Resolution is hereby approved this _ day of ,2002. 19 20 JUDITH VALLES, Mayor City of San Bernardino 21 22 23 Approved as to form 24 and legal content: 25 JAMES F. PENMAN 26 City Attorney C /~ t .) 27 I~ () 28 HElcj[buroffr2.res] 2 LAW O~~ICES CONFIRMATION COpy FULLERTON, LEMANN, SCHAEFER & DOMINICK, LLP 0, ANNETTE OEBELLEI"'EUILLE 2 15 NORTH 0 "STREET, I"'IAST FLOOA . THOMAS w. OOMINIGK BAN BERNARDINO, CALIFORNIA 92401.1712 WILI"'AIO C. LEMANN TELEPHONE (9091 BB9-3691 MICHAEL R. SCHAEFER I"'AClIlMIL.E 19091 BSB-:S 119 CRAIG E. WILSON FIRM WEBSITE: WWW.INL.ANDBUSINESSLAW.COM E~Mail: cwilson@inlandbusincsslaw.com 01'" COUNSE:L. ROBERT V. I"'ULL.ERTON' 'A PROFE:SSIONAL CORPORATION PAL.M DESERT OFFICE PARC CENTER 77S64-A COUNTRY CLUB D~. SUITE 150 PALM DE:S1ERT, CA 9221 1 (7601 779-9572 August 29, 2002 VIA FACSIMILE (909-384-5238) AND FIRST CLASS MAIL Huston T. Carlyle, Jr., Esq. Senior Assistant City Attorney City of San Bernardino 300 North "D" Street, 6th Floor San Bernardino, CA 92401 c Re: Proposed City Council Resolution/Appeal AAA Inland Empire Cab Company Dear Mr. Carlyle: We have had an opportunity to view the video of the city counsel hearing of August 6, 2002. We are not recommending any changes to the Resolutiol1 as drafted. Very truly yours, FULLERTON, LEMANN, SCHAEFER & DOMINICK, LLP ~ '..z=r -? - ~ ~aig E. Wilson CEW:tln cc: Scott Schaffer Mark C. Edwards, Esq. c JOHN K. MlRAU" MARK C. EDWARDS R.OBERT W. CANNON! CNLEY A. HARTER" CHAEL 1. LEWIN . LA'1(,',OF..!ij,~;ES C>F "\ ""I.j . ~ MIRAU, EDWARDS/.GANNON, HARTER & LEWlN~W\iX~ A. PRC>FESSIC>NAL',__~C>RPC>RA.TIC>N ~ '~ ..'~'~cj~ ~.!t . CcnificdSp<<i;aJ;5I.TaQlion law.TheSlaleBarofCalifomi. 80ud ortepl Spcciali~liOll >('oIftifiedSpecialist,ElllIlC PlaI\lIinio TtII$IiIlId1'robate LIw, The Stale Bar of Calirnm;a BoudotLcgalSpcciali:cllioR 1806 Orange Tree Lane, Suite C Redlands, CA 92374 telephone: (909) 793.0200 facsimile: (909) 793-0790 medwards@mechlaw.com August 14,2002 A2066-00 I Huston T. Carlyle, Jr., Esq. Senior Assistant City Attorney City of San Bernardino 300 North "D" Street, 6th Floor San Bernardino CA 92401 Re: Proposed City Council Resolution re Appeal of AAA Inland Empire Cab Company Dear Mr. Carlyle: o We received and have reviewed the draft resolution which you faxed to our office yesterday. AAA Inland Empire Cab Company has no objections to the resolution in the form you fa'(ed to us. As I will be on the East Coast the first part of next week, I have requested that the Mayor defer this matter until the next Council meeting which, I believe, will be held on September 2. I have advised Craig Wilson, Mr. Lemann's associate, of that request. That would still permit the matter to be heard by the Franchise Bureau on September 10th. Please call if you have any questions regarding this matter. Very Truly Yours, MIRAU, EDWARDS, CANNON, HARTER & LEWIN A Professional Corporation, c Al2066/00 1/carly1.002 Cc AAA lnland Empire Cab Company, attn Peter Withers Craig Wilson, ,Esq. 23 24 Dated: JIt/OfS- Entered into.... II gli/fJ L M 25 Ll \r.lIlCmvDllYCms_ 26 rrr~ CL,~ C !~ 27 la Item -- 11 re .-\.' 28 Ck~ c'~J . L. City ClerklCDC Seey 1 - - - __..a!__ c 9 10 11 12 13 C 14 15 16 17 18 AFFIDAVIT OF MARJORIE JAMESON 2 3 I, MaIjorie Jameson, could competently testify to the following having personal 4 knowledge thereof: 5 1. On August 1,2002, at approximately 1:15 p.m., I called Bell Cab Company, at 6 7 (909) 808-1111, and requested that a taxicab pick me up at the Olive Garden Restaurant, on 8 Hospitality Lane, in the City of San Bernardino. 2. At the time I called for a taxi, I had my twenty (20) month old son with me. 3. At approximately 1:45 p.m., Yellow Cab #262 arrived at the Olive Garden in response to my request. 4. Before entering the taxicab, I inquired of the driver whether he had a child safety seat for my son. The driver responded by saying, "No." I then inquired whether any other Bell Company cabs have child safety seats to which he replied, "No, none ofthe cabs have them" and went on to state that it was my responsibility to provide a car seat. As I hesitated at the door, the driver asked what my destination was. When I replied "Redlands" he stated, "You can just hold him." After explaining that my child does not travel in a vehicle without a child safety seat or 19 proper restraints, the driver drove away. 20 I further certify under penalty of perjury under the laws of the State of California that the 21 22 foregoing is true and correct of my own knowledge. ~ =#~J ~fi9;':2-; ;(10 9Iq!o~ c o c DATE: TO: FROM: SUBJECT: COPIES: CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM CITY CLERK'S OFFICE July 12,2002 Mayor Judith Valles and Common Council Cindy Buechter, Business Registration Supervisor Appeal - AAA Inland Empire Cab Company Mayor and Common Council Meeting, July 15, 2002 Fred Wilson, City Administrator; Jim Penman, City Attorney; Rachel Clark, City Clerk; Roger Davis, Business License Inspector Please find attached background information submitted by the City Clerk's Office, Business Registration Division in regards to AAA Inland Empire Cab Company's appeal to be heard at the July 15, 2002 Mayor and Common Council meeting. =#;l.~ 'tIt'! a 2... c\ NOTICE OF APPEAL AAA INLAND EMPIRE CAB COMPANY BACKGROUND INFORMATION SUBMITTED BY THE CITY CLERK'S OFFICE BUSINESS REGISTRATION DIVISION JULY 12, 2002 Following is a summary of the City's actions regarding the Petition for a Franchise Permit for AAA Inland Empire Cab and the action taken by the Bureau of Franchises. Also included is background information on Bell Cab/Yellow Cab and information on taxi drivers and the process required for the issuance of their business registration. In addition, our office researched the history of taxi companies operating in the City, the number of registered vehicles for each company (if known), ordinances pertaining to the regulation and limit of taxi vehicles, and the history of the Bureau of Franchises. Petition for Franchise Permit bv AAA Inland Empire Cab Companv o On January 8, 2002 the Bureau of Franchises considered the petition submitted by AAA Inland Empire Cab to provide taxicab service in the City of San Bernardino. The Bureau denied the Petition for a Franchise Permit for AAA Inland Empire Cab by a vote of 5 to 1 (minutes attached as Exhibit A). AAA Inland Empire Cab did not file an appeal to this decision. However, they subsequently submitted a new petition and paid the appropriate filing fees for the operation of25 taxicabs. The Bureau of Franchises heard the new Petition for Franchise Permit at their meeting on June 11,2002 (draft minutes attached as Exhibit B). The Bureau again denied AAA's petition by a vote of 4 to 2 based on not seeing a need for granting the Franchise. The Bureau was unable to approve the minutes of the June 11,2002 meeting, as there was a lack ofa quorum for the July 9,2002 meeting. AAA Inland Empire Cab Company filed a Notice of Appeal with the City Clerk's Office on June 26,2002. The City Clerk's Office then placed the matter on the agenda for the regularly scheduled meeting of the Mayor and Common Council to take place on July 15, 2002. On July 2,2002, the City Clerk's Office received a facsimile letter from Wilfrid C.Lemann of the Law Offices of Fullerton, Lemann, Schaefer & Dominick, counsel to Bell Cab & Yellow Cab, requesting a continuance of the hearing set for July 15, 2002 because of the unavailability of Mr. Schaffer, representative of Bell CabIYellow Cab. On July 10, 2002, the City Clerk's Office received a facsimile letter from Mark C. Edwards of the Law Offices of Mirau, Edwards, Cannon, Harter & Lewin, counsel for AAA Inland Empire Cab Company, stating their opposition to the request for continuance and further asked that the appeal hearing be held as scheduled. c C Background - Bell CabN ellow Cab Bell Cab Company submitted a Petition for Franchise Permit to the City Clerk's Office, Business Registration Division, on February 17, 1998. Bell Cab Company paid the required permit fee, plus the required fee for 36 vehicles. At the time of Bell Cab's application, Yellow Cab Co., Inc. was the only taxi company operating in the City of San Bernardino. In 1998, Yellow Cab was paying a business registration fee to operate 35 vehicles. Research shows that a permit was originally issued to Art Parlas of Red & White Taxi per Resolution No. 2528 on December 15, 1952. Records indicate that Red & White Taxi was transferred to Yellow Cab Company on August 4,1955. The Bureau of Franchises considered Bell Cab's petition at their meeting held September 8,1998 (minutes attached at Exhibit C). The Bureau approved Bell Cab's Petition for a Franchise Permit by a unanimous vote. c Bell Cab Company applied for the Business Registration Certificate on November 23, 1998 indicating a start date of October 15, 1998. Bell Cab paid the required business registration fee for 36 vehicles. Business registration records show that Yellow Cab Company closed their business and their business registration account was closed on February 12,1999 per instructions of the Business Registration Supervisor. When Bell Cab Company renewed their business registration for the year October 1, 1999 through September 30, 2000, they paid the required registration fee for 45 vehicles. Their application indicates the business name as Yellow - Bell Cab. Business registration computer records indicate that the payment reflects 34 vehicles for Yellow Cab & II vehicles for Bell Cab. Bell CabN ellow Cab has since continued to pay an annual business registration fee for 45 vehicles. Bell Cab Company's current business registration expires on September 30, 2002. Historv of Taxi Cab Ordinance The earliest record our research found was Ordinance No. 1454, "An ordinance regulating the operation of motor vehicles transporting passengers for hire within the City of San Bernardino", adopted December 15, 1930. The Ordinance set forth that a permit was required for the operation of taxicabs and the City Clerk and Police Department granted that approval. This Ordinance did not contain provisions as to limiting the number of taxicabs allowed. Ordinance No. 1809, adopted December 31, 1947 amended Ordinance 1454 and set forth driver regulations. Ordinance No. 1894 adopted September 5, 1950 amended the original ordinance and added sections pertaining to taxi meters. Ordinance No. 1936 adopted February 18, 1952 amended Ordinance 1454 by adding sections regarding driver regulations. c 2 c o c On July 6,1953, Ordinance No. 1987 was adopted and repealed Ordinance No. 1454. This Ordinance created the Bureau of Franchises. Although this Ordinance did not set a limit as to the number of taxicabs allowed to operate, it did set forth that "Such permit shall be for a specified number of vehicles which shall only be increased by authority of the Bureau. Such permit may, at the pleasure of the Bureau, be for a prescribed period or for an indefinite period. Ordinance No. 2401, adopted November 27,1961, amending Ordinance No. 1987 was the first time a limit was set for the number of taxicabs. This Ordinance set forth that "One (I) taxicab shall be permitted for each 2,500 residents of the City of San Bernardino, or major portion thereof." Ordinance No. 3002, adopted July 14,1969, amended Ordinance No. 1987 and changed the taxicab limit to "Not more than one (I) taxicab...for each 2,000 residents of the City of San Bernardino..." Municipal Code Section 5.76.060B currently allows for "Not more than one taxicab.. .permitted for each two thousand five hundred residents of the City, or major portion thereof." History of Franchises December 15, 1952 - Resolution No. 2528 granted an application for a permit to Red & White Cab! Art Parlas to engage in the taxicab business. September 8, 1998 - Bureau of Franchises approves Petition for a Franchise Permit for Bell Cab Company for 36 vehicles. Historv of Taxi Companies from Business Registration Records The Business Registration Division researched the history of taxicab companies through the business registration files. Attached Exhibits D & E show each of the companies found, how they merged and evolved, any reference to the number of vehicles they operated and a time line as to their operation. As recently as 1994, the City had three taxi companies operating. They consisted of Airline Taxi of San Bernardino operating 16 vehicles, Yellow Cab Co. Inc. operating 25 vehicles, and Checker Cab Company operating 15 vehicles. In 1994, Edward Parlas owned all three companies. In 1995, business registration records show that both Airline Taxi and Checker Cab closed their business and indicated that all their cabs were now registered under Yellow Cab. Yellow Cab's business registration application in January, 1995 shows an increase in the number of paid vehicles from 25 to 35. Yellow Cab continued to pay a business registration fee for 35 vehicles through 1998; their business registration account was closed February 12, 1999. 3 C Taxi Drivers - Business Registration Procedures Per Municipal Code Section 5.76.280C, (Exhibit F) "A person authorized to operate under carrier's permit by arrangement, contract or lease shall be deemed to be an independent contractor and shall obtain a City business license." In addition, per SBMC Section 5.76.290 (Exhibit G), all taxi drivers are subject to a background investigation by the Chief of Police. The Chief of Police will then forward a report to the secretary of the Bureau with their findings. Business Registration Division procedure is that the taxi drivers are sent to the Police Department, I.D. Bureau, for the processing of the background investigation. When the investigation is complete, the I.D. Bureau notifies the Business Registration Division of their recommendation (Exhibit H). If the Police Department recommends the approval of the driver, the division then notifies the driver by letter that they may obtain their business registration. A background investigation is also required annually at the time of the business registration renewal. o Business registration records indicate there are 17 drivers with Bell Cab/Y ellow Cab with current business registrations. Two drivers are in a delinquent status. A check with PD's Records Division indicates that two new drivers have recently submitted their papers for an investigation, however it is unclear if the two drivers in delinquent status have contacted the PD. c 4 c MINUTES BUREAU OF FRANCHISES FOR THE CITY OF SAN BERNARDINO REGULAR MEETING January 8, 2002 The regular meeting of the Bureau of Franchises was called to or- der by Chairman Dennis Cole at 2:15 p.m., Tuesday, January 8,2002 in the Management Information Conference Room located on the 6th floor of City Hall, 300 North "D" Street, San Bernardino. c ROLL CALL Roll call was taken by Chairman Cole with the following being pre- sent: Board Members Payne, Fernandez, Turner, Shultz, Wilcoxen and Secretary Lee Gagnon. Also present: Deputy City Attorney Henry Em- peno, Guy A. Harrell with AAA Inland Empire Cab, Frank McFadden with AAA Inland Empire Cab, Kevin King with AAA Inland Empire Cab, Peter Withers consultant for AAA Inland Empire Cab, Jeff Navidi with AAA In- land Empire Cab, Vanike Zadurian with Bell Cab/Yellow Cab, Scott Shaffer with Bell Cab/Yellow Cab, Greg Goumaskyan with Bell Cab/Yellow Cab, Javier Alba with Bell Cab/Yellow Cab, and Rusty Dea- ton with Bell Cab/Yellow Cab. Absent: Board Members Martindale and Enciso. APPROVAL OF MINUTES Board Member Turner made a motion seconded by Board Member Payne, and unanimously carried, that the minutes of the following meeting of the Bureau of Franchises be approved as submitted in their type written form: May 8, 2001 c NEW BUSINESS Chairman Cole opened discussion to consider the request by AAA Inland Empire Cab to provide taxicab service in the City of San Bernardino. Deputy City Attorney Henry Empeno opened discussion by indicating he had passed out a copy of Municipal Code Chapter 5.76 governing the operation of taxicab service in the City of San Bernardino. Mr. Empeno read Municipal Code Section 5.76.050 and emphasized the need for the applicant to establish the existence of public convenience and necessity. Mr. Empeno also added that no permit shall be issued unless there has been an affirmative showing of the existence of such public convenience and necessity. ,.. I.L., A c o c Mr. Empeno then referred to Municipal Code Section 5.76.060 subsec- tion B and indicated that not more than one taxicab, excluding dial-a- ride taxicab, shall be permitted for each two thousand five hundred resi- dents of the City or major portion thereof. The population of the City is now 190,232. If you divide 190,232 by two thousand five hundred you come up with a figure of 76 taxicabs now permitted in the City of San Bernardino. Mr. Empeno indicated Bell Cab was approved for 36 cabs in 1998. Therefore, there is the possibility that there could be an additional 40 taxicabs approved. Mr. Peter Withers indicated that the addition of another taxicab company would provide competition and that the standard of service would rise. He indicated that the primary users of taxicab service are the elderly, low income and disabled and that service should be a prime con- sideration. Board Member Payne asked if there had been any complaints received about taxicab service. Secretary Lee Gagnon indicated that no complaints had been received since 1992. Further discussion ensured concerning the current level of service. Non-emergency medical transportation will not be offered by AM Inland Empire taxicab under this Franchise. Board Member Fernandez asked if cab drivers would be employees of AM Inland Empire Cab or if AM would contract with the drivers? Mr. McFadden answered by saying that drivers would be independent contractors because they sign a lease agreement. Drivers are drug tested to make sure they are drug free. Further discussion regarding service en- sued. Scott Schaffer made presentation for Bell Cab/Yellow Cab. Mr. Schaffer stated that they do from 160 to 170 cab trips a day in the City of San Bernardino or 5000 trips per year, Fourteen months ago they did 8,000 or 9,000 trips per year. Mr. Schaffer said there had been no com- plaints regarding taxicab service to indicate that there was a need for more. Mr. Schaffer also indicated that if you put additional cabs in the City of San Bernardino the drivers will have to drive sixteen hours a day to make any money. Further discussion ensued relative to Bell Cab/Yellow Cab current service levels and the impact of additional cabs. Mr. Schaffer requested that the petition for Franchise Permit be denied. Further discussion ensued with respect to the market for further cab service. Chairman Cole indicated that the decision of the board should be based upon the public need and necessity for additional taxi- cabs and has the applicant substantiated that need. Board Member Payne made a motion seconded by Board Member Shultz that the Petition for Franchise Permit submitted by AM Inland Empire Cab be denied, carried by the following vote: Ayes, Board Mem- bers Payne, Fernandez, Turner, Shultz and Cole; Nayes, Board Member Wilcoxen. c o c Election of Officers Chairman Cole opened discussion relative to the election of officers for the 2002 calendar year. Chairman Cole indicated that a Chairman and Vice Chairman needed to be selected. Board Member Payne made a mo- tion that Dennis Cole be nominated as chairman for a second term and the motion was seconded be Board Member Turner. The motion carried unanimously. Board Member Shultz made a motion that Dr. Louis Fer- nandez be nominated as Vice Chairman and the motion was seconded by Board Member Payne. The motion carried unanimously. ADJOURNMENT At 3.33 p.m., Chairman Cole adjourned the regular meeting of the Bureau of Franchises to Tuesday, February 12,2002, at City Hall, 300 N "D" Street, San Bernardino, California. \ ''] .1 . ;; ~ - .~ Lee Gagnon, Secretary to Bureau of Franchises \ ~- ~ -'\-.._--~"-- c c c ~ ~ ~ MINUTES BUREAU OF FRANCHISES FOR THE CITY OF SAN BERNARDINO REGULAR MEETING June 11, 2002 The regular meeting of the Bureau of Franchises was called to order by Chairman Dennis Cole at 2:00 p.m., Tuesday, June 11,2002 in the Management Information Conference Room located on the 6th floor of City Hall, 300 North "D" Street, San Bernardino. Roll Call Chairman Cole took roll call with the following being present: Board Members Shultz, Turner, Carson, Martindale, Fernandez, and Secretary Lee Gagnon. Also present: Deputy City Attorney Henry Empeno, Greg Goumashyan - Bell CablY ellow Cab, Steve Lee - Bell CablY ellow Cab, Pat McGuire - Bell CablY ellow Cab, Kareen Gates - Bell CablYellow Cab, Frank Wu - Bell CablYellow Cab, Yanik Zadurian - Bell CablYellow Cab, Scott Schaffer - Bell CablY ellow Cab, Peter Withers - AAA Inland Empire Cab, Mark Edwards - Attorney for AAA Inland Empire Cab, Rusty Deaton - Bell CablY ellow Cab, Frank McFadden - AAA Inland Empire Cab, Wilfred Lemann - Attorney for Bell CablY ellow Cab, Alex Acuna - AAA Inland Empire Cab, Houan Hkann - AAA Inland Empire Cab, JeffNauidi - AAA Inland Empire Cab, Khachik Pashkam - AAA Inland Empire Cab. Absent Board Member: Enciso. Approval of Minutes Chairman Cole opened discussion regarding approval of two previous agenda items and indicated that Deputy City Attorney Henry Empeno wanted to comment on the action needed by the Bureau on these agenda items. Mr. Empeno indicated that the agenda for the last meeting was not posted and therefore the minutes for the February 12, 2002 meeting would have to be re-approved and the Petition for Franchise Permit submitted by Inland Medical Transportation would also have to be re-approved. Mr. Empeno indicated nothing had changed with these items and that he recommended approvaL Board Member Turner made a motion seconded by Board Member Shultz, and unanimously carried, that the minutes of the following meeting of the Bureau of Franchises be re-approved as submitted in their type written form: February 12,2002. Board Member Turner made a motion seconded by Board Member Carson, and unanimously carried, that the minutes ofthe following meeting of the Bureau of Franchises be approved as submitted in their type written form: May 14,2002. ,J., ~ c c c Old Business Board Member Shultz made a motion seconded by Board Member Carson and unanimously carried, that the Petition for Franchise Permit submitted by Inland Medical Transportation to provide non emergency medical transportation be re-approved. Chairman Cole opened discussion to consider AAA Inland Empire Cab Petition for Franchise Permit submitted by AAA Inland Empire Cab. Mr. Empeno indicated that the Petition for Franchise permit had been previously denied and a letter was sent dated January 10, 2002 to owners of AAA Inland Empire Cab notifying them of that fact. AAA Inland Empire cab did not file an appeal of the decision but elected to re-submit their application based upon new information. A new application fee was paid by AAA Inland Empire Cab on April 3, 2002 by the applicant. Mr. Empeno advised the Board to consider this as a new application and that such a motion be considered before the Board considered that matter. Board Member Carson made a motion seconded by Board Member Fernandez, and unanimously carried, that the Petition for Franchise Permit submitted by AAA Inland Empire cab to operate 25 taxi cabs in the City of San Bernardino be considered by the Board as a new application. Chairman Cole asked AAA Inland Empire Cab to make their opening statement. Mark Edwards, Attorney for AAA Inland Empire made a presentation to the Bureau from a six page cover document entitled, "Presentation of Mark C. Edwards, Attorney for AAA Inland Empire Cab Co. To The City of San Bernardino Franchise Bureau, June 11, 2002." Mr. Edwards indicated that they were charged with demonstrating and the Bureau was charged with determining if, "the public convenience and necessity" is served by pemlitting a second taxi cab company to operate in the City of San Bernardino. Mr. Edwards further indicated that AAA Inland Empire Cab is presenting material indicating that "a lot of agencies and individuals in the community who are not happy with the current taxi service and that Bell CablY ellow Cab is providing materials indicating that individuals think the service if fine." Mr. Edwards also indicated that there was no mechanism in place for consumers to complain to the Bureau regarding service. Mr. Edwards presented independent studies which he described "clearly demonstrate tl1at quality of service increases, cost of service decreases, and ridership increases if you have competition in the taxi cab industry." Mr. Edwards continued to give a summary of the independent studies. In addition, Mr. Edwards referenced San Bernardino Municipal Code Section 5.76.060 that, based on the limits set forth in the Code, allows for a total of74 cabs to be licensed to operate and currently Bell CablY ellow Cab has licenses for 36 cabs. Mr. Edwards also referred to a study by local economist John Husing, showing California cities with populations of 180,000 - 450,000, only two (Riverside and San Bernardino) have a single licensed taxi cab company. Every other city of this size had at least three licensed companies. Mr. Edwards also discussed that competition would have a positive affect on taxi cab drivers. "That what was hurting drivers, was the lack of competition." Mr. Edwards concluded by stating that the literature provided, "amply demonstrates the public necessity and convenience will be served by competition and will continue to be harmed if Bell Cab/Yellow Cab's monopoly in maintained." 2 c o c Chairman Cole called for any questions regarding AAA's presentation. Chairman Cole asked for clarification regarding statements made about the customer complaint process. Secondly, Chairman Cole asked for clarification of the status of AAA's application with the City of Riverside. Chairman Cole asked Mr. Shaffer of Bell CablYellow Cab to present their response. Mr. Shaffer indicated that he would first like to answer some of the issues that were raised by Mr. Edwards. Mr. Shaffer commented that the issue before the Bureau was not whether there was a monopoly, but whether there was a demand and a need for more taxi cab service. Mr. Shaffer reviewed some of the comments made by Mr. Edwards that he felt were taken out of context. Mr. Shaffer then commented on AAA's presentation in regards to independent studies. Mr. Shaffer indicated that all the studies that he has say that "it is a horrible thing to license cabs with no justification. It leads to market cost going up, drivers quitting, migrating to other businesses, insurance costs going up, taxi cabs not being repaired, and the company providing no insurance for their cabs because they can't afford to pay for the insurance." Also, Mr. Shaffer commented on John Husing's study indicating that many of the other cities noted provide millions of dollars in subsidized taxi cab business to do their ADA transfer work, which is what Omnitrans is doing here in the City of San Bernardino. Mr. Shaffer went on to say that you could argue both decisions, but that it is a policy decision that this Board will need to decide on. Mr. Shaffer also summarized the Price Waterhouse study. Mr. Shaffer submitted to the Secretary the information that gives the opposite side ofMr. Edwards's studies. Mr. Shaffer stated further the each city has its own specific characteristics and that what worked in another city, does not mean that it will work in San Bernardino. Mr. Lemann, attorney for Bell Cab/Yellow Cab, cited the San Bernardino Municipal Code and what is required. Mr. Lemann covered several issues that he believed the Code required including that it must be found that there is a public demand for the service, there needs to be some challenge about the adequacy of the current service, and the impact of service on traffic. Taxi cab driver, Careem Gates gave a brief statement saying that the addition of more cabs would be "destructive on the part of the cab business to bring on more cabs." Further discussion ensued regarding response times, where cabs are stationed, how many cabs are available at any given time, and the number of drivers. Mr. Empeno gave clarification that 76 cabs would be allowed in the City per the Municipal Code and current population figures. Mr. Empeno also clarified that with Bell Cab's application in 1998, a total of36 cabs were approved. However, since that time, Bell Cab has purchased Yellow Cab and a total of 45 cabs are permitted to Bell CablYellow Cab. Chairman Cole asked for a motion to approve or deny the petition made by AAA Inland Empire Cab. Chairman Cole reminded the members "that what we are voting on is just that, public convenience and necessity." In addition, Chairman Cole indicated that "As I read the regulations and the ordinances, what we are being asked to vote on is not an issue of competition, although that may play some into the public convenience and necessity." 3 c c c Board Member Shultz made a motion seconded by Board Member Turner, that based on not seeing a need, that the applicant's petition be denied. Motion carried by a vote of 4 to 2 to deny. Members opposed: Martindale and Fernandez. Chairman Cole summarized the appeal process per Municipal Code Section 2.64.030 indicating that a written notice of appeal would need to be filed with the City Clerk directed to the Mayor and Common Council. The appeal must be filed within a 15- day period. The appeal would need to be received by the City Clerk's Office by 5:30 p.m., Wednesday, June 26,2002. Adjournment Prior to adjournment, Chairman Cole recognized departing member John Schultz and his many years of service to the Bureau. in addition, Chairman Cole indicated that he would be gone for most of the month of July. At 3:40 p.m., Chairman Cole adjourned the regular meeting of the Bureau of Franchises to Tuesday, July 9, 2002, at City Hall 300 N. "D" Street, San Bernardino, California. 4 c MINUTES BUREAU OF FRANCHISES FOR THE CITY OF SAN BERNARDINO REGULAR MEETING SEPTEMBER 8,1998 The regular meeting of the Bureau of Franchises was called to order by Chairman Bill Payne at 2:03 p.m., Tuesday, September 8, 1998 in the Management Information Conference Room located on the 61h floor of City Hall, 300 North "D" Street, San Bemardino, California. ROLL CALL Roll call was taken by Chairman Payne with the following being present: Board Members Enciso, Cole, Turner, Shultz, Wilcoxen, Riccio, McCammack, Secretary Lee Gagnon. Also present: Scott Schaffer, Executive Vice President of Bell Cab Company, Rusty Deaton, Marketing Director of Bell Cab Company, Bob Simmons, Senior Deputy City Attorney for the City of San Bernardino, Absent: Board Member Fernandez. o APPROVAL OF MINUTES Board Member Turner made a motion, seconded by Board Member McCammack, and unanimously carried, that the minutes of the following meeting of the Bureau of Franchises be approved as submitted in their typewritten form: July 14, 1998. NEW BUSINESS < Chairman Payne opened discussion relative to the public hearing to consider application for taxicab service submitted by Scott Schaffer with Bell Cab Company of Ontario, California. Scott Schaffer made a presentation indicating that he runs about 300 taxicabs between Los Angeles County, Riverside County and San Bernardino County. During his presentation, Mr. Schaffer amended the number of taxicabs to be operated within the City of San Bernardino from 36 to 40 which would be allowable under Municipal code Section 5.76.060 subsection B. This subsection states that, "not more than one taxicab, excluding dial-a-ride taxicabs shall be permitted for each two thousand five hundred residents of the City, or major portion thereof." Mr. Schaffer said that Metrolink ridership is increasing and therefore the need for taxicabs will increase. He also indicated that Bell Cab is the largest provider of wheelchair accessible taxicabs in Los Angeles County and in San Bemardino County. Mr. Schaffer also stated that the current provider in the City of San Bemardino does not provide this service. c Rusty Deaton, Director of Marketing with Bell Cab indicated that their drivers wear uniforms with ties. Taxicabs are clean and air-conditioned. Drivers are drug tested by the San Bernardino County Sheriff's Department. Rusty indicated that they work with senior citizens because they have special needs. They also transport handicapped children to and from schools and provide car seats for children. ,.. dL. t..:.L (' c o c Board Member McCammack asked Mr. Schaffer if there would be a dispatch facility in the City of San Bernardino and he responded by saying yes. Mr. McCammack also asked if $1,000,000.00 was the correct amount of insurance and Chairman Payne responded by indicating that the $1,000,000.00 met the City of San Bernardino code requirement. Discussion ensued regarding the need for additional taxicabs. Board Member Wilcoxen made a motion seconded by Board Member Enciso that Bell Cab Company be approved for a franchise to operate 40 taxicabs in the City of San Bernardino, carried unanimously. ADJOURNMENT At 2:55 p.m., Chairman Payne adjourned the regular meeting of the Bureau of Franchises to Tuesday, October 13, 1998 at City Hall, 300 North "0" Street, San Bernardino, California. . " (i~' . 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'l c the rates or fares established and authorized by the Bureau (Ord 1987 918 1953 i 5.76.260 Rates to be displayed. Every vehicle used or operated under this Chapter shall. at all times. have displayed therein. in a location and manner approved by the Bureau the rates to be charged for such service. and which rates shall always be visible (Ord. 2078 (part) 1955.0rd 1987919 1953) 5.76.270 Refusal to pay fare. It IS unlawful for any person to refuse to pay the authOrized fare of any of the vehicles mentioned ILl this Chapter after having employed the same. and it is unlawful for any person to hire any vehicle defined in Section 5.76.020 with intent to defraud the person from whom it IS hired or engaged, of the value of such service (Ord. 1987 920, 1953) 5.76.280 Drivers. A c c Vehicles covered by this Chapter shall be operated only by the carrier. if a person, or by a person employed by the carrier, or by a person authorized by lease, contract or other arrangement, with a carrier to operate a vehicle undersuch carrier's permit; each such authorized person shall be subject to and comply with all the applicable provisions of this Chapter, and no carrier shall impose upon such person any contractual terms or conditions inconsistent with those set forth in this Chapter. If the applicant is not an employee, the proposed arrangement; contract; or lease under which such authority IS to be exercised shall be submitted in writing to the secretary of the Bureau. The secretary of the Bureau shall. after he has conducted or caused to be conducted such review and investigation as he deems necessary, approve or reject the proposed arrangement, contract or lease and shall communicate his decision to the applicant within ten days after the proposed arrangement. contract. or lease has been submitted If the secretary of the Bureau fails to communicate an adverse decision to the applicant within ten days after the proposed arrangement. contract. or lease has been submitted, it shall be deemed rejected If the secretary of the Bureau rejects the proposed arrangement, contract, or lease. the applicant may request in writing a hearing before the Bureau The request for a hearing shall be submitted to the secretary of the Bureau within five days after the decision of the secretary of the Bureau has been communicated to the applicant. The secretary of the Bureau shall promptly notify the applicant of the time and place of the hearing which shall not be more than thirty days after the request for hearing has been submitted The hearing shall be conducted informally pursuant to rules of the Bureau. The decision of the Bureau shall be final. No arrangement. contract or lease shall be approved if any of the terms thereof are not In conformity with the provISions of this Chapter. B Such approval may be withdrawn by the Bureau by the mailing of a ten-day notice of intention to the carrier and the driver. subject to the right to request a hearing under the same procedures and standards for the original approval. This provision permitting the withdrawal of approval shall he deemed to be a part of each such arrangement; contract or lease when so approved and 5-126 [Rev October 10. 2001] ".J .1 ,,"t: c neither the carrier nor the driver shall have any legal recourse or right of action arising out of such withdrawal of approvai / ( C / ......--- A person authorized to operate under carrier's permit by arrangement. contract or lease shall be deemed to be an independent contractor and shall obtain a City business license 3877 S1 1979 Ord 3585 (part) 1976.0rd 2154 (part), 1957 Ord 1987 S21, 1953.) (Ord 5.76.290 Investigation of drivers. A. The Chief of Police shall conduct an investigation concerning the background, conduct. behavior, and character of any applicant io drive a vehicle under a carrier's permit or of any driver while operating a vehicle under a carrier's permit in order to present facts or information to aid the secretary in determining whether the prospective or cO[ltinued operation of a vehicle by a driver would be detrimental to the health, safety, peace, general welfare, good morals or con'lenience of the public. B. The investigation report shall be forwarded to the secretary of the Bureau, and he may utilize the report to determine whether to approve or reject an arrangement, contract or lease relating to an applicant or whether such approval should be withdrawn pursuant to Section 5.75280. (Ord 3877 S2,1979: Ord. 3585 (part). 1976, Ord. 1987 S22, 1953) No permit shall be granted to any carrier to operate any vehicle covered by this Chapter whose color scheme, name. trade name, monogram or insignia shall be in conflict with, or in imitation of. any color scheme, name, trade name, monogram or insignia used by any other carrier as defined in Section 5.76020, and which shall be of such character and nature as to be misleading or deceptive to the public. (Ord 1987 S26 1953) 5.76.310 Identity lights. 1~~W c 5.76.300 Identification of vehicles. Every taxicab shall be equipped with an identity light attached to the top of such taxicab. The identity light shall be constructed in one unit consisting of an illuminated plate or cylinder upon which is printed the words "For Hire," or as approved by the Bureau. The overall dimensions of such identity light shall not exceed six inches in height by twenty inches in length The lights of the identity light unit shall be operated manually to illuminate the identity light when the taximeter is not in operation, indicating the cab is vacant and for hire, and to extinguish the identity light when the taximeter is in operation It is unlawful to drive or operate any taxicab with such identity light illuminated while carrying passengers for compensation, and it is unlawful to drive, operate or be in charge of, any taxicab unless such identity light is illuminated when such taxicab ;5 for hire None of the foregOing provisions requiring the identity light to be illuminated shall apply during daylight hours (Ord. 2154 (part). 1957; Ord. 1987 S27, 1953.) c 5.76.320 Route - Passenger limit in taxicabs. A. Every driver of a taxicab who is engaged to carry passengers shall take the most direct route possible that will carry the passengers safely and [Rev October 10, 2001] 5-127 c neither the carrier nor the driver shall have any legal recourse or right of action arising out of such withdrawal of approval C A person authorized to operate under carrier's permit by arrangement, contract or lease shall be deemed to be an independent contractor and shall obtain a City business license. 3877 911979: Ord. 3585 (part). 1976. Ord 2154 (part), 1957: Ord 1987921,1953) (Ord 5.76.290 Investigation of drivers. A The Chief of Police shall conduct an investigation concerning the background, conduct. behavior, and character of any applicant \0 drive a vehicle under a . carrier's permit or of any driver while operating a vehicle under a carrier's permit in order to present facts or information to aid the secretary in determining whether the prospective or cOfltinued operation of a vehicle by a driver would be detrimental to the health, safety, peace, general welfare, good morals or con'lenience of the public. B. The investigation report shall be forwarded to the secretary of the Bureau, and he may utilize the report to determine whether to approve or reject an arrangement, contract or lease relating to an applicant or whether such approval should be withdrawn pursuant to Section 5.76.280. (Ord. 3877 92,1979: Ord. 3585 (part), 1976: Ord. 1987922,1953.) c 5.76.300 Identification of vehicles. No permit shall be granted to any carrier to operate any vehicle covered by this Chapter whose color scheme, .name. trade name, monogram or insignia shall be in conflict with, or in imitation of. any color scheme, name, trade name, monogram or insignia used by any other carrier as defined in Section 5.76.020. and which shall be of such character and nature as to be misleading or deceptive to the public. (Ord. 1987 926,1953.) 5.76.310 Identity lights. Every taxicab shall be equipped with an identity light attached to the top of such taxicab. The identity light shall be constructed in one unit consisting of an illuminated plate or cylinder upon which is printed the words "For Hire," or as approved by the Bureau. The overall dimensions of such identity light shall not exceed six inches in height by twenty inches in length. The lights of the identity light unit shall be operated manually to illuminate the identity light when the taximeter is not in operation, indicating the cab is vacant and for hire, and to extinguish the identity light when the taximeter IS in operation. It is unlawful to drive or operate any taxicab with such identity light illuminated while carrying passengers for compensation, and it is unlawful to drive, operate or be in charge of, any taxicab unless such identity light is illuminated when such taxicab ;l, for hire None of the foregoing provisions requiring the identity light to be illuminated shall apply during daylight hours. (Ord. 2154 (part), 1957: Ord. 1987927,1953.) c 5.76.320 Route - Passenger limit in taxicabs. A. Every driver of a taxicab who is engaged to carry passengers shall take the most direct route possible that will carry the passengers safely and [Rev October 10, 2001] 5-127 - , .1 .. :f::rl:-p /1.. c c c To: From: Subject: Date: Copies: City of San Bernardino San Bernardino Police Department Interoffice Memorandum Lee Gagnon, Business Registration Supervisor Robert 1. Goss, ID Bureau Supervisor ".,.J 1":1, Taxi Cab Permit Application For: DOMINQUEZ, Andres January 31, 2000 The Police Department has completed an investigation concerning the background, conduct, behavior, and character of the above applicant. x The Department does not recommend the application be rejected or previous temporary approval be withdrawn. The Department recommends the applicant be rejected, The Department recommends the previous approval be withdrawn. The Department recommends the previous temporary approval be withdrawn. THE SBPD IS COM1\ImED TO PROVIDING: PROGRESSIVE QUALm' POLICE SERVICE; A SAFE ENVlRONMENTTO IMPROVE THE QUALITY OF LIFE; A REDUCTION IN CRIME THROUGH PROBLEM RECOGNITION ..'ND PROBLEM SOLVING , J . J . L U- C CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION o c From: Rachel Clark, City Clerk Subject: Appeal of the Bureau of Franchises' denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bemardino MICC Meeting Date: 7/15/02 Dept: City Clerk Date: July 8, 2002 Synopsis of Previous Council Action: None Recommended Motion: Motion #1: That the hearing be closed, and the Mayor and Common Council uphold the Bureau of Franchises' denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bemardino. Or Motion #2: That the hearing be closed, and the Mayor and Common Council grant the appeal for a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. 'ae~>If. Cl~ Signature Contact person: Phnne: Supporting data attached: Yes Ward: All FUNDING REQUIREMENTS: Amount: N/A Source: (Acct. No.) (A,..,..t np.~rriptinn) Finance: Council Notes: g/f9/0J- d.~ Agenda Item No. _ c c c CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION Staff Report Subject: Appeal of the Bureau of Franchises denial of a Petition for Franchise Permit for AAA Inland Empire Cab to operate 2S taxicabs in the City of San Bernardino. Applicant: J.K.S.O., Inc. DBA, AAA Inland Empire Cab 3000 Date Street Riverside, CA 92507 (909) 369-5581 Patrick Pashkam, Chief Executive Officer Background: A Petition for Franchise Permit for AAA Inland Empire Cab was previously denied by the Bureau of Franchises and a letter sent dated January 10, 2002 to the owners of AAA Inland Empire Cab notifying them of that fact. AAA Inland Empire Cab did not file an appeal of the decision but elected to re-submit their application based upon new information. On April 3, 2002, a new application fee was paid by AAA Inland Empire Cab. On June 11, 2002, the Bureau of Franchises considered the new application submitted by AAA Inland Empire Cab. After presentations by both AAA Inland Empire Cab, BelllYellow Cab (existing taxi cab service), and discussion from the Board Members regarding whether there exists a public convenience and necessity for additional cab service, a motion to deny the Petition for Franchise Permit for AAA Inland Empire Cab carried on a 4-2 vote. Board Members Cole, Turner, Shultz and Carson voted in favor of the motion to deny; Members Fernandez and Martindale voted against the motion. Financial Impact: None c c c Recommendation: That the Mayor and Common Council uphold the Bureau of Franchises' denialofthe Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxi cabs in the City of San Bernardino. Or That the hearing be closed, and the mayor and Common Council grant the appeal for a Petition for Franchise Permit for AAA Inland Empire Cab to operate 25 taxicabs in the City of San Bernardino. c c o ,JUL-U.c::.-t::,UUc:. IUC. U'i'l" rll rUL.LCl\lvn 1..1,;.1101111 1:.1 m.. Illn l\V. vvv UUU V~l\'/ L^w Q,.rl:::E':O FULLERTON, ~EMANN, St:HAEFER 05< Iii~V~l6en4L~Ff'K ANNtrT': g~el!\.\.Li-LU!\.LE T~IOM^~ w. nn,..INICK WI~;nll:;) c;:, ,""1..""1!\.Nr.. G:~l LtJPfl. .JA ""11::~,.t:1.. (< !".~HA.l!:nLI'l: 1.'~AIIS IE. WI\....HJN 215NOR'1f1 D :;':TREET. ,.,JO:IiiT n.QCR ~AN I56.RNA.ADINC. CAI-,f"CRNtA ~a~1.1712 TF.l r:,....ONlE f'\il~')l ""l:J-3ti' 1 W' Jl-2 rAce'''''L!: 101]1)1 ..tI..~ I 1 ? F'IAM wE~SITC: WWW.INLANODUSINE~SLAW.COM Of" cou..:;;r;.. RDUf.RT V. "Ul..~t:ftru:-.: P 5 :, [1"..'::.;:.:.'0....... !;:O"'.I'l....,.,~.. po....... DIEDelllT Or-r.ce: _..lie r.,.""T,." ??SG4.A l.;:OUNTAV CLUJ.: e,l. "UlTt 1 SO ......."" DIlIlE"T. CA .,:2' 1 1'/(;0) 77?-'j!:l7Z FACSIMILE TRANSMISSION Date; J lily 2, 2002 Numher of Pages; 2 [Including this Page] Time: ~."~ File /I 01-802 A.M@ Destination Phone 1t 384-5302 Destination Fax # 384-5158 TO: Roger Davis Sarah Adams Bell Cab & Yellow Cab of San Bcrnardhlo () Please sign transmitted documents and retulll them by l'ax. () for your information. (X) In accordance with YOllr request. () Other: Attached find request for eontinllanee ofthe hearing set for July IS\h A hard copy of the document will be delivered via courier. If any further documentation is needed, please contact Ill" directly. FROM: RE: Non.: It" YOU DID NOT RF.t:lilvt AJ.L Of TilE rAGES IN U:G1BU: fORM, PI.EASt.: CALL CINDV AT (9091 889- 3691IMMF.DIATELV. ..... .---- ...:. ---- ..... -.- CONFIDENTIALITY NOTICE Thl.:' lkK;Urtll.~nb 'DC'i'<.'ln"t'i'tnyinQ thi:l tclCl:;Op1Cr If'AX) tr~n$rni:ij:ic)n c;.:lftlllin conri,!..:mitll inrUnlhilil)n b\:kmsin@'lv tlse sender which is Icg:.all)' privilc~cJ riu: inrolnt\\iOll \$ j"lcrukd only filf l~ use ofthc lnchvidual urenlilY a~nlCd ahuvt:. lfyou are flot'~ inMld..::d recTicn!.,)'Qu :ue hct\iby nolitil.~ ~l ilTI) clisclOlilTrc;. cap)"ing;. dD1rl\'outioll (II' tho: bkinl of allY o.ctiOl1 ill rdi:sncc on tbo CC'lnrenPl Of1hi$ ~lctopic~ jnformluion is ~ftjf.1l,)i pmbilUu;cl. If)'t.)\\ M.~I~I\'..:d Ihii tcl,,",uPY ill error. rlc~l.~ imrrwcJi<&\ely call1hc s..:nd..:r t2lli,;.'CJ 10 iUron~.c fnr the: n:l\ll\l of rIle t~h:copil,.-d cWt~lmCnl-.. o c c JUL-U~-~UU~ JUt Uq; j~ rn rULLtI\JUl't Ltntmt~ t, HL rnr:. !'tv. VUV UUO .J! 1" i..^W OFF1CE~ F"ULI.I::RTON, LEMANN, SCHAEf"ER & DOMINICK, LLP MoINCTTE o,:IIF.ll.[~\"wl\..I..E T...CTMo1I.~..... OUt.1IN.1C~ Wl1..rl~'U t,;. ~t:""'I"~""N M1CIIA.EL. n. SC,",^c."l:.A Cr:lAIO F: W':...",OI'O 4: ,::. tlCRTI-l 0 C.ff-cI.:.L:.1'. FIRn r'-OD~ SAN 8CRNAROINC. CALIFORNIA .,2401.1712 TCLI!:PIU,JNE (OOtll .A"'3c;.P, "AC:l'Jw\n.1" {?IJ'ill UUl;f.~' llJ F"IRM YlE!5SITE: WWW.INLANOBU9IN.G:~.LAW.eOM c-M:ail: blC:l'l~nll@jnlanclbul'iltC.~"bw,com July 2, 2002 VIA FACSIMILE & llAND DEI.IVERY Mayor Judilh Valles & Common Council Office of the City Ckrk City of San Bernardino 300 NOl1h "D" Slreet Sanllernardino, CA 92418 1. Vl... 0.. Cl.:U.....-:C.. ROI,h.Jo,Ir v. 'UL.LEr..ro"'l' .~ "'(C1.t.:~IC.U'~ e~"Ilo"'f"l,g.. """'L'" Ct:e;c..,. n""tec ~",.(1 cc:......c. '7'75601-1\. COUNIICY C\.un O. t\'JITC 1 ~D pM,.... DC:~".T, C... 92:11 I'7GOI """'9S'/~ Re: Appeal oflhe Decision of the Bureau of Franchises in regard to the Application of AAA Itlland Empire Cab Dear Mayor Valles and Council Members: As you may be aware, our liml is counsel to Bell Cab & Yellow Cab of San Bernardino in tllc above- referenccd matter. This leller shall serve as our request for a conlinuance of the hearing set for July IS, 2002. Mr. ScOll Schaffer, corporato representative for our c1icnt, has a Publie Utilities Commission matter and will be ull~vailablc on June 151h. tv! r. SchaIrer's pal1icipation is absolutely necessary. Accordingly, because of the unavailability of Mr. Schaffer, we requcst the matter be continued unlil the next meeling date. We look forward to hearing from you. Very truly yours, FULLERTON, LEMANN, SCHAEFER & DOMINICK, LLP Wilmtt2 WCL:sda 07/10/2002 12:39 FAX 7930790 lIEeR ItWVVJ. c) IOllN K. MlIlAI1- MARK C. E!)WAADS ROIiIiJlT w, CANNON+ STANLEY ^' HAllTEk' MlCIlA&.J. Lf:WIN Law Offices of Mirau, Edwards, Cannon, Harter & Lewin A Professio1l41 COlpOration Temeeula Office 41690 EnlCrpri.. Cln:le Suitc214 TcmecuJa, CA 92590 . Cenlft$t s,.iaIi1l.. T..ooo Law. tMS,*oIC11ifam. BoInIofl.fplSpeclal.bulon 0"",,","_- ~ 'tNG 0IId'10111~ t-. The $we..... oro.liimli~ BoanlofLeplSpecia6aricm 1806 Onnge Tree Lane, Suite C Redlands, CA 92374 (909) 793-0200 (909) 793-0790 (Fax) Rlverilde omce 3880 1.mlon AvtI1ue Suite 430 RivenidlC. CA 92501 File No. A2066-00l ~ :;g m ("') rn ~ <: j"r'1 u - i (;) Q -I "'0 -.:: - n r- ~ m x :T. FACSIMILE COVER LETTER DATE; July 10, 2002 FROM; Mark C. Edwards, Esq. PLEASE DELIVER THE FOLLOWING PAGES TO: NAME: Cindy Buechter c FIRM: San Bernardino City Clerk - Business Registration CITY, STATE: FAX NUMBER: San Bernardino, CA OFFICE NUMBER: (909) 384-5158 (909) 384-5159 ITEM(S) SENT: 7/10/02 correspondence re: AAA Inland Empire Cab Co. Appeal TOTAL NUMBER OF PAGES (Including Cover Letter): 3 PLEASE PHONE (909) 793-0200 IF YOU DO NOT RECEIVE ALL OF THE PAGES.48 SOON AS POSSIBLE. TBIS MiSSAGE IS INTENDED ONt Y FOR THE USE OF THE INDIVIDUAL OR ENTITY TO WHICH IT IS ADDRESSED, AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONl'lDENTIAL AND EXEMPT FROM DISCLOSmu: UNDER APPLICABLE LAw. IF THE READER OJ' THIS MESSAGE IS NOT THE INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DEUVl:RING THE Ml:SSAGE TO THE INTENDED RECIPIENT, YOU ARE HEREBY NOJulIW THAT ANY DISSEMINATION, DJSTRlBUTlON OR COPYING OF THIS COMMUNICATION IS STRICTLY PROHIBITl:D. IF YOU BAYt: RECEIVED THIS COMMUNICATION IN ERROR, I'LEASE NOTIFY US IMMEDIATELY BY TELEPHONE, AND RETURN THE ORIGINAL MESSAGE TO US VIA AIR MAlL. THANK YOU. c lIo.2Q 7/75"1 DO- 07/10/2002 12:40 FAX 79J0790 Mt.....J1 't!:lVV_ , JOlIN K. MIRAU" MARK C. EOWIJUlS R.oBERT Ill. CANNONT STANUY A, HARTER' OCIIA~J.l LEWIN .ClrUJ'"oe.I~..,l'aItIon 1.-.T1w:"-Dv.tCofi~ ,..,..tt.....~ 'l'Cl:l.ur_SpoD.I....~ ~TI\IIIl_''''''''' lA>ot'DoS-..."fOllIRlr.... ....."rl"'Pr5torc~.......... '. lA~!d:i~'F1c:;:1!S. c::)F " .' <.~" :,:.,..~.,-- l~~:rJ~ ~ 'MIRAU, EDWAIIDSif;ANNON, HARrER II LEwIN i~-;;~ bzl!.'Z , '..' -',' "",,\\/! A PRCIlFeS.s..o.;:";"_~:t _CORPOR.AYION ',., t 806 Orange l'rcc: tane. Suit~ C Redlands. CA 9237' wleph....: (909) 79H1200 facsimile: (909) 793.o790 mcdwazdt@m<eh1a>v,com July 10, 2002 A2066-001 Delivered via FaesimiJe and U.S. Mail Honorable Mayor Judith Valles Members of the Common Council City of San Bernardino c/o Cindy Buechter Office ofthe City Clerk 300 North "D" Street SaIJ Bernardino CA 92401 c Re: Appeal of AAA Inland Empire Cab Company; Request for Hearing Delay Dear Mayor Valles and Members ofthe Council: The undersigned represents AAA Inland Empire Cab Compauy. The City kindly provided, yesterday, a copy of the faxed correspondence from Bill Lemann. attorney for Bell Cab/Yellow Cab requesting a delay in the appeal hearing set for next Monday, July 15th, AAA Inland Empire Cab company respectfully disagrees with Mr. Lemann's conclusion that a delay is appropriate. We do so for two reasons. First, Bell CablYellow Cab is not a party to this appeal. Pursuant to City Code section 2.64.070, the party to present any opposition to AM Inland Empire Cab Company's appeal is the "department, agency, City officer, official or department head whose action is being considered..." While we are sure that Bell Cab/Y ellow Cab will want to comment on the appeal, if Mr. Schaffer is unable to attend, Mr. Lemann is an extremely articulate and informed representative for his client and was present at the Franchise Bureau meeting where the appealed froUl action was taken. Additionally, Mr. Lemann's letter cites a conflict with a Public Utilities Commission matter as the reason for Mr. Schaffer's unavailability. We note that the PUC meeting for the month is not scheduled until July 17th, two days after the appeal hearing. c c' c c 07/10/2002 12:40 FAX 79J0790 lIEeK 'Wuu"" July to, 2002 Page 2 AM Inland Empire Cab Company respectfully requests that the appeal hearing be held as scheduled. In the event, however, that the Mayor and Council detennine that additional time is necessary before the hearing, we will of course be prepared to present our appeal at the next regularly scheduled Council meeting. Very truly yours, MIRAU. EDWARDS, CANNON, HARTER & LEWIN A Professional Corporation, Al20491C011_lloIIcr.OOl Inland Empire Cab Company ~ C1 c c Statement of AAA Inland Empire Cab Co. To The City of San Bernardino Common Council in Appeal of the Decision of the San Bernardino Franchise Bureau July 15,2002 Introduction This is an appeal from the action of the City of San Bernardino Franchise Bureau denying, by a 4-2 vote, a franchise for AAA Inland Empire Cab Company to operate as the second taxicab company in the City. The appeal is on two grounds. First, AAA Inland Empire Cab Company believes that the decision of the Franchise Bureau was based on false and misleading information provided to the Bureau by the current City monopoly operator, Bell Cab/Y ellow Cab. Second, AAA Inland Empire Cab Company believes that in making its decision, the Franchise Bureau applied the wrong standard in determining whether "public convenience and necessity" required issuing a permit to AAA Inland Empire Cab Company. In a less legalistic sense, however, this appeal is about a more fundamental issue. This appeal is about the right of the residents of, and visitors to, the City of San Bernardino to have better and less expensive taxicab service. The alternative is to continue to be stuck with a single monopolistic cab company, which "serves" the City with a fraction of the cabs permitted by City code and its franchise, keeping service quality low and prices high. There is an alternative: competition. Competition is at the very heart of our economic system for a simple reason, It works. It allows the market to assure that quality is high and cost is low. As an immediate example of the benefits of competition, AAA Inland Empire Cab Company is specifically undertaking, if its franchise request is granted, that it be approved for rates lower than those currently charged in San Bernardino. San Bernardino Taxi Service To put the current appeal in perspective, a short history oftaxi service in San Bernardino is in order. For years, San Bernardino was served by a number of taxicab companies, many of whom were small operators who, in order to compete, would provide high levels of personal service. Over the years, these small operators were swallowed by the ''big fish" in the pond, Yellow Cab Company. In September of 1998, a new taxicab company came to San Bernardino, Bell Cab Company, and applied for a franchise. In its presentation to the City, Bell Cab touted the advantages of competition, and cited the need for expanded taxicab service. In response, the City Franchise Bureau granted Bell Cab its requested franchise. Within a few short months, Bell Cab eliminated the very competition it promised the City by buying Yellow Cab. Since that time, the combined Bell Cab/Y ellow Cab has enjoyed a monopoly in the City of San Bernardino while, as will be shown below, operating an extremely limited number of taxis in the City. In other words, while the City was promised competition and a higher level of service, what it was given was a monopoly, with a lowered level of service. The Current Level of Service-False Information Presented to Bureau As you will see from the transcript of AAA Inland Empire Cab Company's presentation to the Franchise Bureau, at Exhibit "A," one assertion of AAA Inland Empire Cab Company was that, despite the City Code permitting the operation of 74 taxicabs in the City and despite the fact that the current monopoly holder, Bell Cab/Y ellow Cab, has a franchise to operate 45 taxicabs in .:It ~5" ?J /rri/6 2- ~ o c c' City of San Bernardino Common Council Page 2 San Bernardino, Bell CabNellow Cab can operate no more than 12 total cabs (averaging less than 5 at anyone time). This is because only 19 persons are licensed to operate taxicabs in the City, and of those 19,7 no longer work for Bell CabNellow Cab (five currently work for AAA Inland Empire Cab Company in other cities. At the Franchise Bureau meeting, Bell CabN ellow Cab specifically denied that assertion (despite the fact that the number of licensed drivers came from the City Clerk's records). In response to a series of questions which followed from Bureau members, specifically asking how many taxis Bell CabN ellow Cab ran in the City of San Bernardino, representatives of Bell Cab/ Yellow Cab specifically stated that it had mnning, in the City of San Bernardino, no less than 30 and up to 45 cabs during the day, and between 25 and 30 cabs at night. That assertion, material, we believe, to the determination of the Franchise Bureau, was untrue. Indeed, the number of licensed drivers working for Bell CabN ellow Cab as presented to the Franchise Bureau by AAA Inland Empire Cab Company was correct. At Exhibit "B" you will find a copy of the City Clerk's print-out, showing each and every person licensed to operate taxis in the City. Only those licensees who have no date in the colunm marked "close date" have a current license (those are highlighted). You will see from counting that there are, despite the denials by Bell CabN ellow Cab, only 19 licensed taxicab drivers in the City. Additionally, of those 19, seven (those marked with a red asterisk) no longer work for Bell CabNellow Cab. In other words, despite Bell CabNellow Cab's representations to the Franchise Bureau, if Bell CabN ellow Cab had every one of its drivers working at the same time, it could place only 12 cabs on the street at anyone time, not the 45 it represented to the Bureau. What is even more shocking is that if Bell CabNellow Cab's drivers work five eight hour work days, Bell CabN ellow Cab can, on the average dispatch fewer than jive cabs to riders in the City of San Bernardino at anyone time! This current situation is unacceptable because it results, as the studies described below prove, in poor service and higher cost. Additionally, it is exactly the opposite of what the City was promised when Bell Cab was granted its franchise in 1998: better and expanded service. And lest you think that this low level of service is an aberration, we invite you to look at Exhibit "C" where, once again based on the City Clerk's records, we have counted the number of licensed taxi drivers at each January 1 st and June 1st through the period that Bell CabN ellow Cab has held its monopoly. You will see that the current number is not only not an aberration, but is actually an historic high! On an average, since the purchase of Yellow Cab by Bell Cab eliminated the positive effects of competition, the combined Bell CabN ellow Cab has had fewer than 12 drivers it could dispatch in the City. Who does this lack of competition hurt? Those who have no choice but to use a taxi for transportation. In a city like San Bernardino, where tourism is not a large industry, that means the poor, the elderly, and the disabled. One can hardly think of groups more deserving of the simple assistance this Council can provide by introducing competition back into the taxicab industry. o c c City of San Bernardino Common Council Page 3 Erroneous Legal Standard The City Code contains a number of factors to consider in making the determination whether the 'public necessity and convenience" dictate granting a franchise. Those factors, at section 5.76.050 of the City Code are: "the public demand for such service, the adequacy or inadequacy of service being offered by other carriers, the effect of such service upon traffic, the financial responsibility of the applicant, the amount of wages to be paid to employees, the character of equipment proposed to be furnished, and any other facts which the Bureau may deem relevant." Statements made by the members of the Franchise Bureau, when discussion was held and a vote was taken on the application of AAA Inland Empire Cab Company, indicate that the Bureau members focused on and believed that they needed, in order to grant the franchise, to find one thing: that a second taxicab company in the City was indispensable; that, in essence, taxi users in San Bernardino could not obtain service from the single franchise holder. In making its determination, therefore, we believe the Franchise Bureau too narrowly considered the factors set forth in the City Code and applied too strict a standard in making its finding. "Public necessity and convenience" is a common standard applied, throughout California and the country, in granting franchises. For that reason, the courts have interpreted the standard, and have found that the standard is far less strict than the Franchise Bureau seems to have concluded. In San Diego & Coronado Ferry Company v. Railroad Commission of California the California Supreme Court described the standard of "public necessity and convenience" as follows: ''Necessity must be taken in a relative sense....The word necessity is not used in its lexicographical sense of 'indispensably requisite." If it were, no certificate of public necessity or convenience could ever be granted. . . .Any improvement which is highly important to the public convenience and desirable for the public welfare may be regarded as necessary." Our 2nd District Court of Appeals, in Luxor Cab Company v. Cahill described the standard as follows: "Public convenience and necessity has been defined as a public matter, without which the public is inconvenienced to the extent of being handicapped in the practice of business or wholesome pleasure or both, . .. Public necessity does not mean indispensable to the public, but an urgency less pressing." In our presentation to the Franchise Bureau (reproduced at Exhibit "A") AAA Inland Empire Cab Company demonstrated that the factors set forth in the City Code are served by granting a franchise. We showed that competition will produce a higher level of service, lower cost of service, increased driver earnings, and increased ridership. This is not the bare assertion of AAA Inland Empire Cab Company, but the finding of study after study after study by other cities, by universities, and by independent think-tanks. Due to the volume, we have not c c c City of San Bernardino Common Council Page 4 reproduced all of the studies presented at the Franchise Bureau meeting for each member of this Council, but have instead provided a single copy of those studies to the City Clerk for reference by the Council Members, should they desire to read them. A list of those studies is included as Exhibit "D," as is a copy of the single study focusing on taxi service in the Inland Empire, that of respected local economist John Husing. We have also shown that the results of a monopoly predicted in those studies, poor service at high costs, are being experienced in San Bernardino. We have included as Exhibit "E" some of the written statements of members of the San Bernardino community who have first- hand knowledge of the fact that the current monopoly is producing poor taxi service, at high cost. San Bernardino taxi users, especially the poor, disabled and elderly, are suffering poor service at high cost as a result of the current monopoly. Remedying that situation by the re- introduction of competition is a matter of public necessity and convenience which warrants this Council acting to grant the requested franchise. The City deserves what Bell Cab promised in 1998, competition and a higher level of service. To quote Scott Schaeffer of Bell Cab/Y ellow Cab: ''Bell Cab Company is not a supporter of market deregulation but strongly opposes monopolies that result in lower levels of service, minimal marketing and lead to hostage pricing by service companies and taxicab operators. Reasonable levels of competition lead to higher levels of service, stable consumer prices, better accessibility to taxicabs and availability at all times of day." (emphasis added) Lower Cost for Riders In 1998 Bell Cab promised the benefits of competition, then eliminated that competition. AAA Inland Empire cab Company intends to see that the benefits of competition actua1ly come to the residents of San Bernardino. Therefore, AAA Inland Empire Cab Company will, if granted the requested franchise, charge a rate that is 10 tents lower per flag drop and 10 cents lower per mile than the current maximum rate permitted in the City and is charged by the current franchise holder. Additionally, AAA Inland Empire Cab Company will offer a 15% discount to seniors and to the disabled. hiefExecutive Officer AAA Inland Empire Cab Co. o o o JOHN K. MlRAU' - MARK C. EDWARDS ROBERT W. CANNON! ~~y A. HARTER' ~L J. LEWIN .Ct:rtifiDdSpcc....lUIlion L..w,TbeSl*BarotCalifomiro lbldofLeplSpccia/iulian tQo1lf"lIdSpecialilt,1!aIe ~TnIIlIlldProbMe Law,Tbe State Bar ofCalifornja BoIrdofLepl~iZlIlion 1806 Orange Tree Lane, Suite C Redlands. CA 92374 telephone: (909) 793-0200 facsimile: (909) 793-0790 medwards@mechlaw.com Presentation of Mark C. Edwards Attorney for AAA Inland Empire Cab Co. To The City of San Bernardino Franchise Bureau June 11,2002 Today, I am charged with demonstrating, and you are charged with determining, if ''the public convenience and necessity" is serYed by permitting a second taxi cab company to operate in the City of San Bernardino. The alternative is to permit the current monopoly to continue. c At first blush, neither of us has an easy job. Look what has happened so far. My client, AAA Cab, has presented to this Bureau a stack of statements from individuals and businesses citing the poor quality of the current serYice. The holder of the current monopoly, Bell Cab/Y ellow Cab, in response, has presented its own statements, asserting that service is fine. Who do you believe? Is it enough for your finding that we have demonstrated a significant portion of the population is dissatisfied with the current level and quality of service? Bell Cab/Y ellow Cab, on the other hand, would have you believe that you should look at the lack of complaints to this Bureau. Were there a formal mechanism for riders to make such a complaint, as there is in other cities, we might agree. However, if you get into a BelllY ellow cab, there is NO sign or other indication as to how to contact this Bureau or any other person or agency of the City. Further, in the City telephone listing, this Bureau is not listed, nor is there any listing under taxi or taxi regulation. Call City Hall, and the operators have no idea who is responsible for taxi service regulation. The only indication, in a BelllY ellow cab, as to who to complain about bad taxi serYice is in small letters at the bottom of a 4 inch by 4 inch rate sticker which says "Inquiries or complaints should be addressed to Yellow Cab at (909) 884-6100." So we really don't know how many complaints there are, and the fact is, as things now stand, it doesn't really matter. As long as BelllYellow Cab remains the only game in town, riders have no choice but to accept the level of serYice offered (or not use taxi service) and BelllY ellow Cab has no incentive to address riders' complaints. c So we have competing citizen statements and no way to know how many complaints there are. How do you make the determination you are charged with making? Fortunately, we have two other things. First, we have study after study after study demonstrating that quality of serYice decreases, and the cost of serYice increases, when there is no competition. Conversely, . c c G City of San Bernardino Franchise Bureau Page 2 these studies clearly demonstrate that the quality of service increases, the cost of services decreases, and ridership increases when there is competition in the taxicab market. These are not the competing positions of AAA Cab and BelVY ellow cab, these are independent studies by governmental agencies, universities, and think tanks throughout the nation that concluded one thing: If you want better taxi service, introduce competition. I have included a number of those studies in the materials I've given you today, and I will refer to them throughout my presentation. I've also included a study by local economist John Husing, who points out the advantages of competition in the taxicab industry specifically in the Cities of San Bernardino and Riverside. That study is located at Tab 1. Second, we have our common sense. I could bring you reams of economic treatises proving, through mathematical models, that competition lowers costs and increases the quality of service. But you already know that. Common sense tells us that. And it is a fundamental principal of the entire American economic system. If you don't like the lunch salad you get at T.G.I. Fridays today, you can go to Chili's tomorrow. And after a fair number of Friday's customers do that, Fridays is going to improve their food. If they don't, they won't survive. If, however, through some bizarre regulation, there were only one place you could go to get lunch, what incentive would that restaurant have to improve food or service? So let us turn to the independent studies. These are located at tabs two (2) through thirteen (13) of the materials I've provided to you. BelVY ellow Cab would have you believe, from the materials they have submitted to you that the current system of regulating entry into the taxi-cab business was born of a need to protect the quality of service. That is untrue. In fact, the Federal Trade Commission found that the genesis of these restrictions came in the great Depression, when out of work individuals turned to operating their cars as taxis to survive. As a result, the large cab companies sought to protect their monopolies. The FTC found that the drive for regulation had nothing to do with public interest but plenty to do with protecting monopolies. The Institute for Justice's study of Boston's closed taxi cab system described the historical basis for restrictions of the taxicab industry in this way: "Entry restrictions did not even pretend to protect the ''public interest," and were often couched in explicitly anti-competitive terms. Improved safety or reduced congestion and pollution were occasionally given as reasons, but only after-the- fact rationalizations. In reality, regulators wanted to. ...enable the organized cab fleets and transit companies to increase their profits" (Tab No.2, Page No.2) The folly of these historical restrictions is amply demonstrated in both the literature, and in practice in the increasing number of cities which have opened their taxi markets to competition. This trend is simply explained by the Oregon based Cascade Institute, which concluded: c c c City of San Bernardino Franchise Bureau Page 3 "The argument for opening taxicab markets rests on the principle that government should not protect for-profit cab companies from competition to the detriment of the riding public..." (Tab No.3, Page No.2) So lets talk about quality of service and costs. Without a single supporting authority, Bell Cab/Yellow Cab asserts (and in fact makes it the heading of its written materials) that ''More Competition Won't Improve Taxi Service." That is not what experience and the independent studies have found. As the Cato hlstitute concluded in a study authored by the Mayor of Indianapolis: "Because the local (taxi) industry was protected from competition, the near universal judgment was that service was poor, expensive and highly selective. If you happened to live in a neighborhood that the dominant providers did not want to serve, namely, low income and high crime areas, you were out ofluck." (Tab No.4, Page No.5) The hlstitute for Justice, in studying Baltimore's closed taxicab systern found: "Baltimore's restrictive system of taxicab regulation has deteriorated working conditions for the drivers and has produced poor results for consumers." (Tab No.5, Page No.8) And who is most adversely affected by the results of a monopoly in the taxicab industry? The poor and minorities, those who most need the service, especially here in San Bernardino. As the Consumer Policy Institute in Toronto found: "Taxicab regulation discriminates against single mothers, low and fixed-income wage eamers and the physically disadvantaged by reducing supply in their neighborhoods and making the product uncompetitive and unaffordable." (Tab No.6, Page No.2) Perhaps the best description of the effect of the taxi-cab monopoly in San Bernardino is found in the Toronto study, where the results of a closed systern were described as producing: "a network of inefficient taxicab operators who use the taxi stand as an opportunity to sit in their vehicles and wait for the business to come to them." (Tab No.6, Page No.7) Does that bring to your mind, as it does to mine, the current situation in San Bernardino, with cabs lined up at the bus depot, and nowhere else? What is happening in San Bernardino? City Code, at section 5.76.060, limits the number of taxicabs to one for every 2,500 residents. With a population of 185,401 (according to the 2000 census) this means that San Bernardino may legally have up to 74 taxis. Bell/Yellow has a o c c City of San Bernardino Franchise Bureau Page 4 permit to operate 36 cabs, slightly less than half of the code authorized number. However, a review of the City Clerk's records reveals that there are only 19 drivers licensed to operate in San Bernardino for Bell/Yellow. If these drivers were to work 8 hour shifts with two days off, this means that the average number of cabs on the road at anyone time would be less than 5 (4.52 to be exact). But even if Bell/Yellow got all ofits drivers working at one time, it can still only serve San Bernardino with Y. of the authorized number of cabs. Why is BelJ/Y ellow keeping so few cabs operating in San Bernardino? Because without competition, public service is not a factor they need to consider. Lowered costs and maximizing profit are the only factors the market requires them to consider. Now, Bell Cab/Y ellow Cab would have you believe that all sorts of social ills will result from putting more cabs on the streets. But that's not the reality. First, if AAA is granted the license it seeks, it will operate 25 cabs in San Bernardino. 25 additional automobiles spread throughout the City will have no adverse impact on traffic and, in fact, as ridership increases (as I will speak about in a moment) it could have the effect of reducing traffic by taking private vehicles off the road. Bell/Y ellow Cab will have you believe that additional cabs will reduce per taxi usage, and decrease earnings by drivers. In fact, again without citing any basis for the staternent, BelJ/Y ellow Cabs states, in their materials to this Bureau, that: "Even though the number of taxis increases in an area, the number of trips in that area stays the same, or even decreases." That statement is simply not true. The independent studies reveal just the opposite. As competition increases the availability of cabs, reduces the wait time, and increases the quality of service, ridership actually increases. In fact, the Buckeye Institute for Public Policy Solutious, in studying taxicab regulations in Ohio, responded to just the argument that Bell/Y ellow Cab is making, and soundly rejected that argument stating: "If this (ridership levels remaining flat) were true, cities that deregulate would not experience a significant increase in the number of cabs operating in their cities. The demand would be insufficient to sustain a larger number of cabs and cab companies. They would quickly go out of business. The fact that almost all cities that deregulate their local taxicab market experience an increase in the number of taxis in operation suggests that substantial unrnet demand exists for these services." (Tab No.7, Page No.9) If this Bureau permits competition in the taxicab industry in San Bernardino, what you will no longer have is a single company with its cars lined up at the bus station, and a phone listing waiting for the customers to corne to them, because they have no other choice. What you will have is two ( or more) companies competing for the business, by increasing the quality of service, reducing wait times, and corning up with innovative new ways to serve the public. This clear and well documented advantage is the reason that study after study after study supports competition in the taxicab industry, and city after city after city is abolishing the old monopolies, in favor of a competitive taxicab market. As Jolm Husing's study points out, in California cities with a population of 180,000 to 450,000, only two, Riverside and San c c c City of San Bernardino Franchise Bureau Page 5 Bernardino, have a single licensed taxi company enjoying a monopoly. Every other such city has at least 3 licensed companies. And that study is about to become outdated. Last month, Riverside's Transportation Committee voted to end BelllYellow's monopoly and recommended a license for AAA Cab to also operate in the City of Riverside. Finally, let me address the drivers, as BelllY ellow will have you believe that competition will hurt them. But again, that is not the case. In fact what is hurting the drivers is the lack of competition. Currently, BelllY ellow Cab charges a driver, in San Bernardino, more than $300.00 per week MORE to lease a cab than AAA Inland Empire cabs charges its drivers. Now in fairness, I should note that AAA will, shortly be increasing its weekly lease rate by $100.00. However, even after that increase, a driver working for AAA Cab would, without working a single extra hour or taking a single extra rider, earn over $800.00 more a month than he would earn with Bell CabN ellow cab. But he can't. Why, because there is only one employer for taxi drivers in San Bernardino and that monopoly allows that employer to continue to charge exorbitant lease rates to its drivers. The single company monopoly doesn't protect drivers, it hurts them. Competition will help them. If another cab company is permitted to operate in San Bernardino, BelllY ellow Cab will be forced to reduce its lease rates in order to keep the best drivers. So who do you believe? I think that even the most cursory review of the literature, including the studies I've provided to you, arnply demonstrate that public necessity and convenience will be served by competition, and will continue to be harmed ifBelllYellow Cab's monopoly is continued. But if you still don't know who to believe, then I suggest you listen to Bell CabNellow Cab. Yes, that's correct, listen to Bell CabNellow Cab. But not the statements made in the submittals to you, but the statements made outside of their efforts to preserve their monopoly. In Bell Cab Company's February 12, 1998 application for a permit to operate in the City of San Dimas, it said the following: "Bell Cab Company is not a supporter of market deregulation but strongly opposes monopolies that result in lower levels of service, minimal marketing and lead to hostage pricing by service companies and taxicab operators. Reasonable levels of competition lead to higher levels of service, stable consumer prices, better accessibility to taxicabs and availability at all times of day." (Tab No. 14, Page No.8) That statement was signed by Scott Schaeffer of BelllY ellow Cab. And lest you think that was an isolated position, you need look no further than the July 11, 1997 San Bernardino County Sun wherein the following appears: "Vanik Zadurian, General Manager of Bell's Ontario office, said choice is critical for consumers. (quoting Mr. Zandurian) 'To have a monopoly is not right. When there's no competition, the level of service goes down.'" (Tab No. 15, Page I) c c c City of San Bernardino Franchise Bureau Page 6 These statements, and a number of similar statements made by BelllY eHow cab in the newspaper are set forth at tabs 14 and 15 of the materials I've given to you. We assert, and BelllYellow Cab agrees (in their statements outside this room), that public necessity and convenience are served by reasonable competition in the taxi industry, and are harmed by the current monopoly. We respectfully request, therefore, that this Bureau approve the introduction of such competition into the San Bernardino market. Respectfully Submitted Mark C. Edwards Mirau, Edwards, Cannon, Harter & Lewin, a professional corporation Attorneys for AAA Inland Empire Cab Co. o o o (ST 1-" (::~ ~ ~ ~ ~ ~ 00 ........ .l:$~ ~'d! 1)~ 'I 00 tot; o X,ll" .... ~+ N(I'I "'.... p:~ 00 ~',... ttlttl VI (1'1 'ttlN P.... 00 ~~ -i)-i) ~p P.... .~ ~'~. VI VI ~:'~ 0.0 :E:E VI&> ."-i -i 'XI (1'1(1'1 -i~ pp VI VI P.... 00 :E:E (}1(}1 -i-i ,II IJlIJl -i-i ~ GH.., ...m 0"'1 m~l 0, Z '0,: ::0 Cl4 r;&. :-<'C l, .tli'".',. ", ~. i ,-,(1'1 Df'll <::0 HGl f'll.... ::00 D"O rf'll to::O Df'll o .... D I I :I::I: ....#. "".,. 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I ! j c City of San Bernardino Number of Licensed Taxicab Drivers 06/01/02 19 01/01/02 17 06/01/01 14 01/01/01 13 06/01/00 9 c 01/01/00 8 06/01/99 8 01/01/99 8 c o o I I I 10 I I j c c c Economics & Politics, Inc. 3142 Cutn. Clrde Hlgbland, CA 92346-1739 (909) 425-8952 Pbone lobnllillobnbustn..com www.lobnbustn..eom Taxi Service Market Considerations Cities of San Bernardino & Riverside by John E. Husing, Ph.D. In considering whether to open their taxicab markets to some competition, the cities of San Bernardino and Riverside would be well served to address a single question: . Which is more likely to enhance the quality of taxi service provided to citizens of their communities: monopoly taxi service or competitive taxi service? This question arises as each city considers whether "public convenience and necessity" will allow the permitting of a second company. Certainly, neither community is inundated with excess taxicab service. In San Bernardino's case, there is only one legal cab per 5,284 residents. In Riverside, it is one legal cab per 7,181 residents. Monopoly Service. The <lI1estion of "monopoly vs. competitive" taxi service is posed as the two cities are unique among the 13 rnid-sized California communities of 190,000-450,000 people in that each is only served by'a single taxicab company (Exhibit 1). Exhibit 1,-Number of Taxi Companies, 2002 California Cities, 190,000 to 450,000 1 27 '~/ ,.il> ~ ,,~ ,/ <1"./ / ,,~~ ,,~ .f' </ / "'~ .,? "",'" ". ... ,,~ :J#o$> ,j> <1'''> ~ ,,-sf' I> '/ ~ I S01U"CC: Cities I ~. Elderly. Handicapped. PQor. In addition, the question is important as the ultimate purpose of a municipal goyernment is >"to ensure that its citizens are well served and protected. In San Bernardino and Riverside, this standard is important with regards to taxi service because unlike huge cities such as Los Angeles, San Francisco and San Diego, taxi service is needed for local residents not business or tourist travelers. In particular, three groups of city residents are disproportionately dependent upon taxis: Taxi Service 1 Economics & Politics, tnc. c c c 1. Elderly. Many elderly persons can no longer drive. It is also difficult for them to reach fix line bus stops. In addition, older persons often fear exposure to danger on the streets, a fear exacerbated in the evenings when they might need medical services. The elderly would thus prefer increased access to door to door taxi service. 2. Handicapped. The handicapped are in similar positions to senior citizens. Many cannot drive. It is difficult for them to reach bus stops. At night, should they need access to doctors or to be picked up from a medical facility, they are almost completely dependent upon taxi service. 3. Poor. The poor often cannot afford automobiles. In addition, they are most likely to live in neighborhoods that, given a choice of other customers, taxi drivers would prefer to avoid. If they cannot get taxi service, the only alternative for the poor is fix route bus service. In both cities, the total of persons in these groups is quite large. In San Bernardino, for instance, the San Bernardino County Social Services Department indicates that some 59,083 city residents were on public assistance,or 31.4% of the city's population in 2000. In Riverside, the Census 2000 Supplementary Survey indicated that 17.0% of residents were below the pational poverty level. Population Per Lee:al Taxicab. In asking whether the existing companies are providing a high level of service to the puqlic, a question that arises is whether there are objective measures of taxi service quality. A re"ljew of the literature on such service indicates that two standards are most frequently applied. The first is the population per legal taxicabs. On this measure, data are available for II of California's 13 mid-sized cities (Exhibit 2). They break into two groups: . Four cities had; over 5,000 residents per cab with Modesto the highest (8,836) and both Riverside (7.181) and San Bernardino (5,284) in this category. . Seven cities had well under 3,000 residents per taxi with Glendale the highest (2,653). Significantly, the four cities with the highest number of persons per taxi also were the four with the least amount of competition. As indicated, Riverside and San Bernardino were the only monopoly situations (Exhibit 1). Stockton and Modesto each had only three companies. Exhibit 2.-Populatiol1 Per LCgill Cabs. 2002 California Cities, 190,000 to 450.000 8,836 # ,,/ ~e'b ~:" #~ ~ ~<> ".sf' <>..i' j'~ ~l o J#~ ~ ./~ Note: Data not available for Huntington Beach &: Santa Ana Source: Oties Tul Service 2 Economics & ponu.., Inc. c c c Square Miles Per Le2al Taxicab. A second objective measure used to determine the quality of taxi service is the number of square miles covered per legal taxicab. Data were also available from 11 of the 13 cities in the 190,000-450,000 range (Exhibit 3). Here, seven cities had less than one square mile per taxicab and four had more than one square mile per cab. The city with the most area to cover per taxi was Riverside (2.09 miles). The next highest was San Beruardino (1.65 miles). The least was Oakland (0.17). Again, the four with the most area per legal cab were the same four that had the fewest number of companies. ExllllJlt ') '--;("I,Ilt' r.1i1" , P\'1 l~lXICJb Cellfolllle C,IIl'S 190 UUU to 450,000 0.17 /~//,,/~// /,,//// if ." I Note: Dllanoc=c~ti~Beach I Summary. Looking at the data, the cities of San Bernardino and Riverside are shown to be the only cities of California's 13 communities with 190,000 to 450,000 people that confine their taxi service to monopoly providers. They are two of four cities in this group with over 5,000 residents per legal taxicab. And, they ranked highest in terms of the square miles per taxi. In each case, the cities with the least competition scored the poorest on these objective measures of quality. Given that San Bernardino'has a very high percentage of residents on public assistance (31.4%) and Riverside has a large number of citizens living below the federal poverty level (17. O%), they are communities in which the elderly, handicapped and poor appear to have a major need for taxi service. These facts argue'. strongly that the introduction of competition into the taxi markets of Riverside and San Bernardino is in the public interest on the grounds of both convenience and necessity. Why Cities Have Transitioned From Monopoly to Competitive Taxi Service Looking beyond objective measures of service quality, there is another dimension to the issue of regulated monopoly versuS competitive suppliers for taxi service. That is the question of why many cities are now transitioning towards the competitive model. This is an important consideration since that is 'Yhat both Riverside and San Beruardino are being asked to do. Whv Re2ulated MonoDolies? The use of regulated monopolies to supply taxicab service was founded on the depressioncera notion that taxi companies are similar to such public utilities as telephone, electricity, natural gas companies. As such, the public is best accommodated by having one regulated organization supply this service as opposed to several companies in competition. The historic logic for such monopolies was fivefold: Taxi Service 3 Economics & PoUtlcs, Inc. c c c . Lar2e Investments. Cities once believed that there was a need to protect certain firms from marketplace competition due to the huge financial investments that they needed to make in order to commence operations. This rationale was applied to taxi companies since in the early days, it was very expensive to set up two-way radio systems and acquire fleets of cars. Like other utilities, they were thus given protection from competitors so that they would have a chance to recoup their investments. However, this logic no longer applies as the costs of establishing taxi service is not extremely expensive. Compared to incomes, vehicles cost a fraction of what they did in the Depression. Meanwhile, wireless communications is inexpensive in today's world. As a result, the cost of entering the taxi business no longer justifies protecting firms from competition. . Unnecessary DUDUcation. In some sectors, cities believed that it would be a burden on their infrastructure to have more than one company supplying services. This was obvious with regards to telephone lines and power poles. The logic was extended to taxicabs out of fear that too many competitive companies might clog city streets. However, with so many people driving automobiles and so few taxicabs, this fear is now unfounded. Even if the number of taxicabs tripled in the two communities, Riverside would have just III legal cabs and San Bernardino would have just 108. These would not be operating 24,hours a day and the number on the streets at anyone time would be a minute fraction of the fleet of private vehicles on city streets. . Oualitv. Cities once identified certain services like telephones and electricity as essential to their citizens. They believed that the best way to ensure a high level of service was through a single tightly regulated company. In the early days, many people did not have automobiles. Taxi service was thus seen as a necessity to be provided by a single utility with city regulation guaranteeing quality. However, over the years, Americans have come to realize that competition is the most efficient method cif ensuring that companies deliver services at the quality levels demanded by their customers. Where competition exists, those companies ~at do not perform well find ~ernselves losing clients. In fact, the benefits of competition are so well established that govermnents now work hard to encourage more, not less of it. It is thus an historical anomaly that consumers are not given the power of choice with regards to taxi service. hnagine the outcry if cities decided that only a single municipally regulated food or oil firm were allowed to provide these essential items to the public! For cities like Riverside and San Bernardino, the issue of quality has taken on a new dimension in recent times. As indicated, with so many people driving, the groups most dependent upon tmri service are now the elderly, the handicapped and the poor. Quality of service can thus be defined as having taxicabs readily accessible to these three groups. Increasingly, cities' are finding that the best way to achieve this result is to foster competition among taxi companies so that they each have an upside interest in adding to their customer base. . Goulrlnl!. On occasion, cities have tried to keep the prices of necessities low by allowing only a single supplier of a service and tightly regulating their prices. This was applied to taxi service in the ~elief that it was a necessity and that this was the way to keep down the price. Here, it must be remembered that price gouging is a natural symptom of , Taxi Service 4 Economies & Politics, Ine. c c c markets dominated by sole providers as lack of competition allows the monopoly to charge whatever prices they feel will maximize their profits. Where strong competition exists, prices tend to be lower as firms compete for customers. When a city permits a single taxicab company to operate as a monopoly, it is imperative that fares be regulated to keep prices down. Even where a small amount of competition is allowed, it is necessary to have some price regulation. However in this case, many cities are finding that it is in the public interest to establish orice maximums and allow companies to set prices below that level if they feel it is in their competitive interest. . Public Safety. Cities always have had sectors whose activities impacted public safety. These sectors are tightly regulated to ensure that unscrupulous operators do not harm the public. As taxi service involves passengers entering a vehicle alone, the strategy for protecting public sarety was to have all drivers work for a single tightly regulated firm. However, today, cities regulate numerous activities with an eye towards public safety without resorting to the establishment of monopoly providers. Conclusion. The cities 'of San Bernardino and Riverside are unique among California's communities of 190,000-450,000 in still using regulated monopolies to provide taxi service. Further, it has been shown'that they, together with Stockton and Modesto, have the least amount of competition and the highest number of persons and most area to cover per legal taxicab. In addition, both cities haveJarge numbers of elderly, handicapped and poor persons who need ready access to cabs. Finally, it has been shown that cities are generally moving away from the use of regulated monopolies to provide taxi service because each element of the Depression era rationale for using this form of organization is no longer valid and the competitive model is a more efficient method of obtaining quality service. Taxi Service 5 Economics & Politics, Inc. c c c Studies Demonstrating the Benefits of Competition in the Taxicab Industry "Taxi Service Market Considerations - Cities of San Bernardino & Riverside" by John E. Husing, Ph.D. Economics & Politics, Inc. Highland, California May 2002 "Opening Boston's Taxicab Market" by John E. Kramer, Director of Communications and William H. Mellor, President Institute for Justice Washington, D.C. Prepared for Pioneer Institute's "1995 Better Government Competition" "Open the Door to Portland's Taxi Entrepreneurs" by John E. Kramer, Director of Communications and William H. Mellor, President Institute for Justice Washington, D.C. Published in the Portland Oregonian newspaper on February 17, 1997 Provided by Cascade Policy Institute Portland, Oregon "Regulation and the Urban Marketplace" by Stephen Goldsmith, Mayor of Indianapolis, Indiana January 1997 Published in Regulation by the Cato Institute Washington, D.C. c c Page Two "Putting Customers First - Taxicab Reform in the Greater Toronto Area" by Consumer Policy Institute of Toronto, Canada April 1997 "Taxicab Regulation in Ohio's Largest Cities" by The Buckeye Institute for Public Policy Solutions Dayton, Ohio 45402 "Scared Yellow: An Analysis of Taxicab Competition in Allegheny County" by Eric Montari, Research Associate Allegheny Institute for Public Policy Pittsburgh, Pennsylvania January 2000 "Taken for a $1 Billion Taxi Ride" by Terence Corcoran, Columnist Toronto Globe and Mail AprilS, 1997 "1998 Public Convenience and Necessity Hearing Report for Taxicab Medallions to the Police Commission, City and County of San Francisco" by John Ehrlich, Captain of Support Services Member Mayor's Taxicab Task Force From August 1997 - April 1998 PC&N hearings "Reforming Taxicab Regulations: Focus on the Passenger" by Rudy Svorinich, Jr. Los Angeles City Councilman Transportation Committee Member 1998 C Published by Metro Investment Report c c c Page Three "Taxi Regulation in Wisconsin - Law and Policy" by Peter Carstensen, Professor of Law University of Wisconsin Law School April 3, 2000 Presentation to the Madison, Wisconsin Parking and Transit Commission "Toward a 21st Century Taxicab Regulatory Framework: The Case of Madison" by Samuel R. Staley, Ph.D., Director of Urban Futures Program Reason Public Policy Institute Los Angeles, California June 5, 2000 "An Economic Analysis of Taxicab Regulation in Portland, Oregon" by John W. Boroski and Gerard C.S. Mildner Portland State University April 1998 o o o Peter Withers AAA Inland Empire Cab 3000 Date Street Riverside, CA 92507 Dear Peter, Healthy competition is the essence of our free enterprise system. It follows that your endeavor to bring choice to Inland Empire residents should be good for both patrons and the local economy. A number of our fans are elderly or disabled. Having a choice of taxi service will hopefully spur competition for riders, improve service and help keep the focns on providing the best taxi service possible. c As business operators, we know how important it is to provide customer service and create repeat customers. If you can accomplish those goals, your new operation should be a smashing success. Sincerely, 'tfW~ Doug Vair Director of Development C ~"o'n~l'19" v.j~t. 'j J20(~~/ C'hamp\o'\\'" 280 South 'E' Street. San Bernardino, California 92401 Phone 909-888-9922 . FAX 909-888-5251 www.stampedebaseball.com -~~. ~ Seattle Mariners Minor League Affiliate c Executive Board President Dr. Paul Scott President Elect Donna Hunter Vice President Claudia Stoll Treasurer Bill Calvert Secretary Louise Lorenzen i'~~~"'"""'\ ~t Highland SENIC)R Center Highland District Council on Aging, Inc. "Seniors Helping Seniors" July 10,2002 Mayor and City Council City of San Bernardino Dear Ladies and Gentlemen: I am the Executive Director of the Highland Senior Center (which is located on the grounds of Patton State Hospital in the City of San Bernardino). I am writing in support of the effort to establish a second taxicab service in San Bernardino. The Highland Senior Center serves our senior population with meals, activities, and companionship. We have observed that a large number of our seniors are no longer Board of Directors able to drive, for both health and economic reasons. In fact, one of our services is to arrange for transportation for seniors, both to and from the Center, and for other essential trips, such as to the doctor's office. Past President Mark Edwards Tom Battaile, Jr. Fred Berry CJe Booth Margaret Hill Doris Jaynes Audrey Martinez Alice Miller Marty Miller Nancy NelBOn Don Rude Emerals St. John John Tackett Executive Director Penny Lilbum c In arranging such transportation, the current taxi service is considered a last resort, and is seldom used. This is for two reasons. First, the current taxis service is slow, taking along time to get to the Center to pick up the seniors. Second, the current service is very expensive, beyond the means of many seniors who live on a fixed income. If an additional taxi service will result in faster service and lower cost for the seniors in our community, I am fully su ortive of establishing that second service. e Truly Y oursn ~'(f\ ;LkJ L.{;\}IL--... Penny Lilb Executive D ctor, Highland Senior Center 3102 E. Highland Avenue, Patton, CA 92369 . P.O. Box 948, Highland, CA 92346 (909) 862.8104 . Fax (909) 862.8196 . e-mail- HighSenCtr@aol.com . ARROWHEAD UNITED WAY AGENCY c c c John Anaya, Sr. Volunteer Advocate for the Americans With Disabilities Act 1450 North LaCadena Drive, Colton, CA 92324 (909) 218 5886 July 10, 2002 Mayor Valles San Bernardino City Council San Bernardino, CA Dear Mayor Valles, My name is John Anaya Sr. I am a person with a disability and am a volunteer advocate for the Americans With Disability Act. I would like to take some time to share my own personal story and my experiences with transportation in San Bernardino. There are a number of ways to travel in the area. One is the bus, which does not run in the evening hours. Thus there are times when I would like to attend a social event in the city of San Bernardino but am unable to because the time schedules and routes mean that I am prevented from taking wheelchair accessible buses. My girlfriend is also a person with a disability - we are both wheelchair users. There are times when we would like to go see a movie or to a baseball game at San Bernardino stadium but there are neither buses nor accessible taxi cabs available. AAA Inland Empire Can has accessible vans which we can use in areas outside San Bernardino but at present they are prevented from offering service to people like me and my girlfriend within the City. I would like to see this company extend its services in the City of San Bernardino. I believe that persons with disabilities and senior citizens should be able to have the freedom of mobility to travel to medical appointments, visit friends, do their shopping and enjoy the evening hours. It is also important to note the real health dangers arising from high summer temperatures and poor air quality. There is a high health risk for senior citizens and wheelchair users forced to wait at bus stops in the open air. This situation exposes them to both respiratory and heatstroke problems which could be avoided with greater access to reliable point-to-point transportation. As an advocate for the city of San Bernardino I feel it would be a great benefit for senior citizens and persons with disabilities in this community to have this service through AAA Inland Empire Cab company extended to San Bernardino. I now use this service, as does my lady friend, and we find it of great benefit - but we are prevented from using it within the city of San Bernardino. A choice of transportation is definitely in the interest of people like us. YJX:' ~ 31. John Anaya, Sr. Roll.n. .ea.-e. Inc:. 'ndependent """,'n. Center Servin. San Bernardino. Inyo and Mono Counties February 24,2002 Dennis Cole Chairman, Bureau of Franchise San Bernardino City Hall San Bernardino, Calif. 92401 Dear Chairman Cole: c I am writing this letter of support on behalf of the many consumers with disabilities who have a need for 24-hour accessible transit options. Public transportation at this time cannot accommodate this very important, and special need. At present many people of disabilities must pattem their lives around specific hours of public transit, which gives them a lack of spontaneity in their lives. From time to time we have events where we bring many people with disabilities to our community for special events that we offer. In the past we have found it to be a great challenge finding ways to shuttle out of town wheelchair users to various venues while visiting. With the addition of Inland Empire Cab this will give us more flexibility when planning events in the City of San Bernardino. It has recently come to my attention that Inland Empire Cab has applied for a franchise from the City of San Bernardino. It is my understanding that Inland Empire Cab has a number of wheelchair accessible vehicles in their current fleet. Although Bell Cab has some accessible vans available more vans are needed to meet the growing needs of persons with disabilities who are being empowered to take a more active roll in work and community life in general. I fully support having Inland Empire Cab become part of the solution for the accessible transit needs of my consumers and the persons with disabilities in the community at large. Your consideration is greatly appreciated. c Sincerely vtw ro~~ Fran Bates Executive Director c TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only one taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the .public convenience and necessity" requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity" the City Council takes into consideration a number of factors, including: . The public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers and/or members are reliant on taxicab service for transportation it is my belief that: . Public demand exists for additional taxicab service in the City of San C.' . Bernardino . My clients, customers and/or members are not being adequately served by the existing taxicab company . The "public convenience and necessity" will be better served by, the comm::~Of:eb;:;";e;~"::.:::.~. fl~. ". ( J(~F~ 6fl ~~ .~ ~C~~~~ ;; ~-jf- . ~cJ? ~~/ t:JAAJL ~c0 _ ,.~~ _ oJ / a-v--e.~U ,. A~~~ ,?J~ V&- .4.fl/1~ . ~-= .~, Co..;;2 rcr-~..eAl. Date: c> ,..z ;:2, Name: 13 / II. tJ, /; 1/ / ~ ?. c, ~ ~ Title: 0e-.K e/ A C:;;'et.l7 ' C OrQanization: AmT;(A K. .FEB-06-01 03:17PM FROM-INLAND EMPIRE CAB c c- c 9093693049 HC5 P.Ol TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only ~ taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the .public convenience and necessity" requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity" the City Council takes into consideration a number of factors. including: . The public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers and/or members are reliant on taxicab service for transportation it is my belief that: . Public demand exists for additional taxicab service in the City of San Bernardino . My clients. customers and/or members are not being adequately served by the existing taxicab company . The "public convenience and necessity" will be better served by the introduction of taxicab competition in the City of San Bemardino. Hi9 Comments: Or!-> t-...'~0l.<A Oc...c-"-*'" Cf'o'V:l we.. ~ ~ trD1 p"w" ^,-c'?f4 -1TMA (~ g:4~fHYI)' J-tu ~ w;L.- fA.,O -k ~ -ff>bY>'l. a.. -Ia.4 i fJvYtt:l we- aM Io-U ~ -fI..J tuMf ~ b.R. frFYVI aM. J,..n..ty -h CM1 /MwY ~ tl.- Ae1f' ~~~ 1<.. M.:"'-'t" J,/u, JW><d 'I ~+ ~ SiQned'::I:iiMJ~A......LL Date: Fe-h U I ~O'). Name: CA/Zr;~ tl. UJIAtJ~ Title: 7ic4w ~ Oraanization: /hn-+r~ . t TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only one taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the "public convenience and necessity" requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity" the City Council takes into consideration a number of factors, including: · The public demand for a competing service · The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers and/or members are reliant on taxicab service for transportation it is my belief that c . Public demand exists for additional taxicab service in the City of San Bernardino . My clients, customers and/or members are not being adequately served by the existing taxicab company · The "public convenience and necessity" will be better served by the introduction of taxicab competition in the City of San Bernardino. Comments: QfYL (Q~ ;) ~ fwi ~ c.o~ ohoiil -&rnqtJc ob woit XlrmY.oJr1d tJP :tJtIl rnvJd . J &JL fY}'W}'GUJOv"K m .DVm;}aA ~TJ ~~ ~ Date: ) - {) i-or:) dJ )!1ho Orl- Signed: c Name: ) ,LJArzLit Title: dfPt (llrJ?L Organization: :=qJ.f11? 1, m .oTo Q t TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only one taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the "public convenience and necessity" requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity" the City Council takes into consideration a number of factors, including: · The public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers and/or members are reliant on taxicab service for transportation it is my belief that c . Public demand exists for additional taxicab service in the City of San Bernardino . My clients, customers and/or members are not being adequately served by the existing taxicab company . The "public convenience and necessity" will be better served by the introduction of taxicab competition in the City of San Bernardino. Comments: ~ '-k, ~ [e LL C 4 b ,t/'t' Y2; 't 7 S P'f 11 Vile Cb,c-Z ~ uc" LVe(-{ l Clv' c( lor1cJ t 1f'Vl 0.{.. ("J r- -+-/1'+ III -I- 0 <;).., o <-c) vp ;" ,i/ , //] (.~'r (/ it "l Date: 1-~3-o~ '-.....i . s............ / ((:" -,~ ( , IQIICU+-_",i>. (/ I /[,;'-t , ../ . , . _. c Name: t1 ?Il.S' J: R/lIC. 1M c /["r;...~/;),f/e/<'S Title: 1C1cY/y l0~S Orqanization: Ca..1/ /(\ G.....f/o~ Gnvv{) --';'.a<>-<...-L- . c c c TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only one taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the .public convenience and necessity. requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity. the City Council takes into consideration a number of factors, including · The public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients. customers anj/or members are reliant on taxicab service for transportation it is my belief that . Public demand exists for additional taXicab service in the City of San Bernardino . My clients. customers andlor members are not being adequately serve:J by the eXisting taXicab company . The public convenience and necessity" will be beller served by the Introjuctlon of taxicab competition in the City of San Bernardino Comments:.J(//(Jl,V ilia '--/akiS DUfl<. 3u n7;^-.I /)JCKc. f 0 17U2<A- VL6L Lj./IJLL- vJ-(. v(!.ALI. 73U .' {c K..l ell L } . C^- O'L 12-- ----k'AJ. (nt.-i (]uA.-lo}/)-f1/(25 .JIu -h;"J-J.. LA.X ~)f--:V /1 J /i7C" jo WL:U: f, a I1-L+ /OI) 7f-K:.. u./Z(. u/-JS< -+ '+ LA. J l;r 0 s;"n.~,~i ""1/ ;d"u"t? Name: t1:. I-...;/yrl<j MJ241?1U Title: 117 A}J;q...C7 ~f..z Orqanization: /IQ;-7 ':?/5 <-f BOX5 Date: 1 / C::F31 [i Q... I t- I,. 9-A/J BrYl1aE..o/AJO c TAXI SERVICE IN THE CITY OF SAN BERNARDINO STATEMENT OF PUBLIC CONVENIENCE AND NECESSITY At present, only one taxicab company is permitted to operate within the City of San Bernardino. No permit can be issued to allow a competing taxi service in the City unless the City Council determines that the "public convenience and necessity" requires such competition. (City Ordinance 5.76.050) To determine "public convenience and necessity" the City Council takes into consideration a number of factors, including: · The public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers an:jlor members are reliant on taxicab service for transportation it is my belief that . C . . Public demand exists for additional taxicab service in the City of San Bernardino MI clients. customers and/or members are not being adequatell serve:] by the existing taxicab company The ..public convenience and necessity". will be better served by the Introduction of taxicab competition in the City of San Bernardino Comments: S;Q"d, ~ , V V/~~ Date: /-L.J-..:>"L Name: 'Nt'<-. V .4t1d.l#~ c Tille: -zJ/tl",.r-'tf. 6r: .u.rUA.~1 Orqanization: j(, '/".:/,1>1 ,.r- Sn,v rJuNl"uel/./V4 . , . I TAXI SERVICE IN THE CITY OF SAN BERNARDINO . STATFMFNT m: 01 BLIC CONVENIENCE AND NECESSITY ~ mpany is permitted to operate within the City of be issued to allow a competing taxi service in the ermines that the .public convenience and tition. (City Ordinance 5.76.050) upe Child Development Program 1633 W. 5th Sl./ P.O. Box' 7130 San Bernardino, CA 92411 PAUUNE BECERRA. lliAlcIor AURORA FLORES. Bookkeeper JULIANNE G. MARTINEZ, Secretery CARMEN R. LUAS. Maintenance (909) 885-0510 (909) 884.5914 Center: (909) 885-7422 ce and necessity. the City Council takes into rs. including: . I he public demand for a competing service . The adequacy or inadequacy of service being provided by the existing taxicab company As the representative of an organization or institution whose clients, customers and/or members are reliant on taxicab service for transportation it IS my belief that c . Public demand eXists for additional taxicab service m the City of San Bernardino . r'/I; clients. customers and/or members are not bemg a::Jequat""l! s."u-= J by the eXisting taXicab company . Th", publiC convenience and necessity" Will be better served by the Ir,lrO:h:tlon of taXicab competition In the City of Sa'! Bernardmo com:;<~~ -Iff~ ~ . ~-a.k~ O-p~ ~k~ SiqneO/)H/~ &~ Dale: I /.3tJ /~:;... I Nalnc:G~~ -&.t~ Title: J.P. .iA..u~ OrQanizalion: fidA. A ..0 A ). to" d..LJ. JJJ .i.J ~ . PI-\ 01\/ E " c . . , c c c " Transcript City of San Bernardino Franchise Bureau September 8,1998 (grant of franchise to Bell Cab Company) RECEIVE~.-Clrr CLERK '02 Jtl 31 P 4 :50 Note: The following transcript was prepared from the City of San Bernardino tape recording of the September 8, 1998 Franchise Bureau meeting. Only where an individual identifies him or herself, or where the speaker's ideutity is clearly apparent, is the person named in this transcript. The various Bureau members did not identify themselves and are not, therefore, named in the following transcript . :ft- d. S- '6//1/6'L c c c Bureau of Franchises Hearing - September 8, 1998 Page 1 of 20 Q. I'd like to call the meeting to order of the Bureau of Franchises. It's September the 8, 1998, at about 3 minutes 2:00 p.m. in the afternoon. I don't believe we've got anybody here who would like to comment on any items not on the agenda but if there is, they have got five minutes to do so. [Unintelligible comments] Q. Since there is no one here for public comments, we will close that portion of the meeting. Has everybody had an opportunity to review the minutes from the last, previous meeting of July 14th? Q. [female] I move that the minutes be approved as submitted. Q. I second it. Q. Moved and seconded that the minutes be approved as written. All those in favor? [affinnative group response] Opposed? [no response] Motion is carried. The only item that we have on the agenda today is the consideration of an application for taxicab service in San Bernardino that's by Bell Cab Company, and I believe that Scott Schaefer is going to give us a presentation. The floor is yours if you would like to... Schaefer: I will try to keep it relatively short. There is more papers here than conversation. I passed out three documents and I will speak to some of the documents. I will start offby introducing the [unintelligible] that are here today. Rusty Dayton is in charge of our local community marketing out here in San Bernardino County. I am the Vice President with Bell Cab. We run about 300 cabs between Los Angeles County, Riverside County and San Bernardino County, from the High Desert, from Yucaipa to out towards Agoura, so I am in my car quite a bit. I apologize that we were here in February and didn't come back now until the summer. We were doing some more studying, and then there was some discussion with the other cab company about market share and Omnitrans and we have solved some of those issues. The senior management at Bell has about one hundred years of experience, and there are four principals that manage the company, and they have run companies in Los Angeles and Riverside. [Names of two individuals] are in a meeting in Los Angeles or they would have been here. I'll highlight some ofthe issues in this, and then I'll speak to some other issues. The graphics that I have passed out talk about the ordinance speaks to one cab per every 2500 residents. Currently, with about 195,000 residents, there is sufficient room to add cabs, assuming the Franchise Bureau thinks there is enough market for service. Some of the things that contribute to that demand are Metrolink, and I will read from the SANBAG work plan that I just picked up: "The Metrolink ridership here in San Bernardino County, c c c Bureau of Franchises Hearing - September 8, 1998 Page 2 of 20 since 1992, has been ihe most successful of any of the lines. The three Metrolink lines serving San Bernardino County are continuing to experience growih. At the end of February '98 ofihis year, average daily patronage on the San Bernardino line was 8,028, an increase of 8 percent increase over one year ago. On the Riverside line, the average daily patronage was 4,400, an increase of over 18 percent. The Inland Empire / Orange County line was 1,617, an increase of 16 percent over the same period a year ago. Together in February 1998, these three lines carried nearly 55 percent ofthe total Metrolink service. The San Bernardino line is by far the most successful and is currently experiencing some overcrowding on most ofihe trains. There is currently plans before SANBAG to add additional service for the Metrolink Service." Our company operates a large amount of Metrolink feeder service, wiih cabs and vans, all the way from Burbank to Covina. We are not doing any currently in San Bernardino County but we hope maybe a partnership with the City or Omnitrans will promote more ofihat to increase the ridership on the line. I have also passed out, in that same packet, there is some letters of support, and ihere is also some letters of complaints about the existing service, but I didn't want to focus on the existing service, just what we could bring to the table. The Omnitrans survey that was done and coordinated, or asked for, by the Board of Directors ofOmnitrans. I have highlighted two different, or at least one tab, and it talks about service levels. The Board funds about 120,000 cab trips a year. And on one of them, it says, "38% of the survey respondents commented that they often have to wait too long for their cab. Many recounted having to wait from two to four hours to be picked up after calling ihe cab company, or be stranded." We are now currently providing Omnitrans service in every city in the County wiih the exception of San Bernardino, which has caused a lot of confusion because ihey have not redone the brochure. So we are not doing as much volume as we would like to. The current brochure only lists the two Yellow Cab operators: the one ihat operates from Fontana east through here, and then the one that operates from Fontana through Montclair. The Board is now going to issue a brochure out next month, so based upon this hearing, they mayor may not include San Bernardino as part of the Omnitrans project. In the application, I spoke about wheelchair accessible taxicabs. The current provider doesn't have any. Where ihe large provider, ABA Taxicabs, in LA County, and I ihink ihe only provider in San Bernardino County, there is only three cab providers currently, there is two different Yellow Cab franchises and ourselves. Of the 36 cabs in the application, six of those would be wheelchair cabs. Actually, I spoke to Lee at ihe start of the meeting, we were hoping to amend the application to 42. We have recently signed a contract wiih the Lorna Linda V A which transports a lot of veterans from the High Desert into the lower portion here. So we actually could use some additional service, and those would also be wheelchair cabs. The last pass-out was statistics that I got from the Department of Welfare and Social Services about Welfare-to-Work. There will be over a million dollars from SANBAG available for local transportation vouchers, cabs and bus passes, trying to get people off c c c Bureau of Franchises Hearing - September 8, 1998 Page 3 of 20 the Welfare rolls. The second page talks about San Bernardino specifically. Of particular note, the City of San Bernardino has gone from 30% of its population on Welfare last year to 32%, a drop of more than 10,000 people. In addition to finding employment, they felt that they needed to critically support some of the transportation to get the people to and from jobs, and the transportation, or the cab vouchers and bus passes, will be the means to help assist that. And we think that will help stimulate more demand. There was some discussion brought up in these meetings, and the other provider is not here, there was some discussion about congestion or too many cabs would be a bad thing. And I am not supporting deregulation. Deregulation would saturate the market. These cabs would work the region so its not as if these 42 cabs would be sitting here congestion in San Bernardino. They'd actually be multi-licensed so they could work anywhere in the County. But there would be enough cabs then available so that the service times would be within ten to fifteen minutes which should stimulate more demand instead of reducing the demand and the drivers having concerns about not making an adequate revenue. I mentioned the proposal about the anti-drunk driving programs. We will work closely with the Police Department, and Students Against Drunk Driving and Mothers Against Drunk Driving, to make sure that the taxicabs are used in both of those programs. We are one of two providers now at the Ontario International Aitport and that is probably where that new terminal opens on September 27th which they forecast that terminal is a growth of almost 200%. That is probably a little bit unrealistic on the short-run, but we think that gradually that ridership will increase. We are getting between 200 and 400 calls a month now from people for return service back that we take to San Bernardino. So we think that would be another element for the Board to consider. I will let Rusty talk for a couple minutes and then the Board may ask some questions and I will respond to those questions. Rusty: Hi, I'm Rusty Dayton and I am the Marketing Director for the Inland Empire and I work closely with the communities. Among the things that I would like talk about today are our drivers. Our drivers are uniformed, they wear black and white: white shirts, black pants, and ties. When they are picked up, and it doesn't matter what the citizen or client is, they are always in uniform. Our cabs are magenta and white. They're clean. They're air conditioned, and we do what we can to make the comfort level for our people. Our drivers are also drug tested, and their clearances are given through the Sheriffs Department here on Third Street. The next thing I would like to talk about is a little bit about the marketing. I am actively involved in the majority of communities that we participate in, in that in Montclair, I am in the Neighborhood Partnership Program. In the City of Rancho Cucamonga, I work with the senior citizens, and I am just not getting involved with the senior citizens in Fontana. They go to lunches, they have their hot meals, and they need transportation c c Bureau of Franchises Hearing - September 8,1998 Page 4 of20 back. They also need timely transportation, and that's one of the missions that Bell Cab has had, and that's to get our seniors back in a timely fashion. We don't like the two and three hour waits, and believe me, as becoming Ornniservers, we've heard our share of complaints from our seniors. So that is a level of interest for me, and I do actively participate in the senior citizens' communities, the parks, and things of that nature. And we also do after school care. We take children to and from school. As a matter offact, I have contacted the San Bernardino School District, and we are going to hopefully participate in their program where their children are handicapped, taking them to and from school, to help alleviate the purchase of more buses. We do that currently in the cities of Chino and Chino Hills, we do it in Ontario, and we do it in Fontana just recently. The last thing I would like to tell you is that we're a family service in that we also provide car seats in all of our vehicles for children that are going to be transported to and from the airports and things of that nature. This is the actual car seat. A [unintelligible] complaint has always been that the car seat is too large to fit into the trunk along with luggage, and groceries, and all the other things that go along with it. This accommodates my driver, who needs that space, but it also assures the safety of that child. I am an active participant here in the community. I live in Mentone. I have lived in San Bernardino, and I have been familiar with this community for better than 17 years, and I would love an opportunity to service you. Thank you. Q. Did you get a packet? Q. Yes, and I read the material that was sent to me. Q. Do we have any questions? We can go around the table. David, why don't you start. David: Yeah, I had a couple of questions here. One of them is: dispatching. Where will they be dispatched from? Ontario or from... A. Currently, out of Ontario, but we are looking to also get some space here locally in San Bernardino. It has been our experience that the closer we are to the community, the better the service levels are, and the involvement. Okay? Q. That will be in San Bernardino? A. Yes. And we can supply that new address to the staff. Q. The other thing that I was concerned about: We just went through the ambulance program and they have 2 million dollars worth of insurance on all, for their vehicles. I notice you have one million. C A. Right. c c c Bureau of Franchises Hearing - September 8, 1998 Page 5 of20 Q. Is that statewide, or is that... A. Actually, that's, because we are one ofthe ADA providers for LA County, we carry, mostly cab companies only carry 150. I think the current cab company here in town only carries 350. Q. Per person. A. Combined single limit... Q. Combined single limit. A. .. . and I am not an insurance guy, usually. But years back, we couldn't even get a million dollars insurance because they considered cabs to be high risk, being out there 24 hours a day at all times. So we haven't been asked to get more than that. But the MT A and Omnitrans asked us to carry the million. Q. I wondered, since you are dealing in wheelchair, whether that's required for more, or something that we need to look into, for insurance? I don't know. Q. I believe that meets the City's requirement for liability insurance. Q. Okay. Q. Well then the state requirement for transportation has gone to 750 transporter. So, if they have a million, that's... Q. Okay. Then the only other thing is: are we going to put this up for review like we do the ambulance once a year? Give them a five year contract but review their record every year? Q. They constantly report to. . . Q. To Lee... Q....to Lee's office, and as far as their drivers are concerned, they would have to be registered with the City Police Department, and they go through their checks for any convictions of a sexual nature or whatever that would make them not quality to be... Q. Cause I've heard some horror stories about them. Q. That's one of the questions that I have. As a matter of fact, I have several questions about that aspect, and also about health. So, my first question, I'll just take off on that point. You said that you go through the San Bernardino Police Department for checks on your drivers? Bureau of Franchises Hearing - September 8, 1998 Page 6 of20 c A. Currently, we don't, no. The Code requires that we go through the San Bernardino Police Department. We go through the Sheriffs Department which is out here, so we would also get the Police Department to go through that same check, or if they felt comfortable not redundantly, actually using the Sheriffs Department, we prefer to use the Sheriffs Department. Q. Okay then, is there any special license, is this a Class III we are talking about? Or is it a Class B? A. No, it's a traditional Class III license. Q. Class III. A. They also go through additional sensitivity and wheelchair training cause of the wheelchair cabs. Q. Okay, and dealing with accidents, are you on the system, what we call the "pulse system?" A. The D&B [?] pulse, correct. c Q. Now, your drivers are drug tested. Now, is that a random sampling, or is that a group, or is that specific? A. Upon condition of employment, they go through the initial drug screening, and then every three months, there is a random pull. Q. A random pull? Meaning that if you have 400 drivers, you would pull a sample out of the 400, all 400? A. One out of every four drivers. 25%. Through the year, quarterly, all of them will have been done. The drivers are less transient than you would think by watching Danny DeVito on television. So, we don't go through a lot of drivers. And the interesting thing here, the ethnic make-up of cab drivers is not necessarily typical of most cab drivers, as opposed to Los Angeles. So they stay with us for quite a while. Q. Okay, well my concern was that most ofthe drug programs are fairly inefficient in that they pull from a pool, and so, if you do have a great number of drivers, very few of them are being tested. So, and being random, its really not effective, its... A. The current situation is supposed to provide that everyone gets tested in addition, at least once a year. Potentially, they could be tested at least four times a year. C Q. Okay, so they are tested at least once a year? Bureau of Franchises Hearing - September 8, 1998 Page 7 of 20 c A. Yes. And then if any ofthem have been charged with accidents, they also go through the test, just to clarify that. Q. Okay, now you seem to run the gamut of transporting: the baby seat, meaning that you are hauling infants; and then you specifically spoke about senior citizens. The baby seat, I got a glance of it. That pad, is that in the back or the front? A. [Rusty] It can go either position. Typically, we do not put children in the front seat. The requirement, by law, we also have an infant car seat. This is not an infant car seat. This is for two years and above. The infant car seat is in the back, and it is turned backwards. Q. Okay. A. And that is upon request. This one is for any child that we happen to be picking up, and if we are at the airport, if we are at a hotel, or whatever, we use this one. And this one is in the back seat, as well. And its set up, it meets all state requirements, and Federal guidelines. And what this does, this is fastened onto the back, and then this is how the child is positioned. All of our drivers are trained in this, as well as wheelchair, so that they know how to set up the, and it's convenient for the child. C Q. SO, a thrust to the front, the child would move approximately how far from the seat? A. I think the guidelines here, I think it's, it's less than 12 inches, because this is so firm and tight. And what it is, it's geared to your shoulder harness, and your shoulder harness doesn't go more than, what is it, 6 inches? Q. Okay. Any training for handling senior citizens? A. [Rusty continues] Absolutely. Because we are access certified, our drivers go through training for seniors, as well as wheelchair. Q. And they carry a certification? A. They carry a metal [?] certification for it, they carry access training to be access certified. Yes. And it shows that they comply with ADA. Q. Are the drivers part of a union? A. [Schaefer] Nope. Q. So they are non-union? A. Correct. c Q. Are they owner-operators? Bureau of Franchises Hearing - September 8, 1998 Page 8 of 20 c A. We have owner-operators. None of them in San Bernardino County are. We have offered some of them that option. We haven't had any takers. Interestingly enough, probably 90% of the cabs we operate in LA County are all owner-operators. Q. One point about the cabs themselves. You will be employing, or deploying, about how many cabs? A. 42 in this eastern region. We are running about 45 to 50 right now, from Fontana through Montclair. Q. Do you have any servicing of those vehicles in San Bernardino? A. None currently, but we will be doing it here locally. Q. Establishing your own place, or involving some company? A. Ifwe were successful today, we will be leasing some property right here. Q. Okay. So then revenue would be generated here? c A. Uh hah. [affirmative] Q. You mentioned the access program. Will the qualifications for riders be the same as they are, the guidelines? A. The access program gets confusing because we are the largest. . . Q. .. .we are talking about Dial-A-Ride, yeah... it's the different... A. We are currently doing the ongoing [unintelligible] ...the access training to qualify Ornnitrans.. . Q. . ..the access training, yeah. But the Dial-A-Cab, will that be the same criteria as now, the same rates and everything? A. Yes. Yes. Actually our rates are cheaper in this packet. Our rates are $1.60 a mile. The current cab provider is $1.80 a mile. So those rates hopefully will stimulate more business for us with the Ornnitrans contract. Q. And then you will have airport transportation from San Bernardino City? A. Yes. Yes. C Q. Which we haven't had. Bureau of Franchises Hearing - September 8, 1998 Page 9 of20 c A. The current company isn't providing it? Q. What are the rates? A. The rates are $1.90 when you get in the vehicle, and $1.60 a mile. Q. To the airport? A. No. We would offer [unintelligible] ... to the airport, but I think it runs about $24.00 from here. Q. Does everybody have the ordinances having to do with taxicabs and ambulances? I passed that out at one ofthe previous meetings. Basically, Bell Cab has to show us, as a Board, the need for additional taxicab service within the City in order for us to grant them a franchise. I believe that the ordinance that sets forth, somewhere in here, the number of cabs within the population base is one per every 2,500. And, unfortunately Yellow Cab isn't here today, and I don't know how many cabs they currently have in operation. A. They are licensed for 35. c Q. They are licensed for 35? A. Yeah, which mayor may not reflect that they are even running 35. Q. This says one for every 5,242. A. Well, that's my... Q. That's actual. . . A. That's... I was comparing actual cabs versus population. The suggestion in the Code is that there should be no more than one cab for every 2,500 residents. And that's on page 338, or 576060. Q. Using the same population base as we did for the ambulance service, that would work out. Q. The figures of 183,474. Is that the most recent? Q. 184,000 what? Q. Residents in the City of San Bernardino? C A. Correct. c c c Bureau of Franchises Hearing - September 8, 1998 Page 10of20 Q. Yes. That is the one we have maintained in the census. Q. I have one other thing. We have a smog problem. That's obvious. It's pretty obvious. I notice the age of these vehicles are three to seven years, or actually, four to seven years. In some cases, they. . . A. We have a vehicle schedule. But we have replaced probably 70% of those since we were last here. Before we put anything in service here, we will get staff the new vehicle schedule. Q. Okay. A. And part of that would be the Ontario Airport opening. The airport has suggested that the cabs be no older than 5 years. More for esthetic reasons than any [unintelligible] reasons. But, there is a benefit to that it's the fact that the newer the cabs are, the more favorable they are for people to ride in. So we replaced most ofthose vehicles since then. Q. Is there any way to possibly, I know Onrnitrans has gone to propane, and some of these other alternative fuels to help our smog problem? A. Sure. Well, two things. One is the ordinance itself can address the vehicle age. Almost all of the other ordinances I work with have a maximum vehicle age for taxis. Q. Okay. A. Some of the shortest ones I've seen have been five years. And then the longest is seven. Ontario just has adopted seven. So that might be something for the Board to consider at one point. Pasadena, in fact, mandates that a certain percentage are wheelchair cabs and then a certain percentages are what they would consider clean fuel vehicles. Onrnitrans is actually talking about getting out of the CNG vehicles because some of the fuels that are available allegedly are just as clean as CNG. We have had minimal success using CNG. We also had a Super Shuttle franchise in the San Fernando Valley, and we have had tons of maintenance problems. Maybe that's our mechanics, or maybe it's the CNG. But we're not opposed to trying it again. I am not sure of the availability ofCNG stations out here. Q. Yeah, I'm not either. Ijust was concerned about that. Maybe a limitation on vehicles and looking in the future to alternative fuels might be a possibility? Q. I don't know that we have that right as a Bureau... Q. . ..as a Board... Q. .. .yep. I'm sure that AQMD will eventually catch up with them like they have the rest of us! Bureau of Franchises Hearing - September 8, 1998 Page 11 of20 c A. The vehicle age thing is probably an important issue, because from a public safety standpoint, most of these vehicles are ex-police cars which have probably already gotten pretty good abuse as police cars. And then the cab drivers obviously drive them reasonably hard when they work two shifts a day. So it is something that we look after, and have had to replace most of those since then. Q. You just brought up another subject then. How many hours can they drive at one? A. Eleven per shift. Q. Eleven per shift. Has that ever presented any problems as far as...? A. No, in fact, unlike the television show where people come in, and they go to the garage and stuff, a lot of the drivers now lease cabs full time. And that's fairly standard with most of the companies. Because business patterns are sporadic. If they pick Dave up in the morning, and he goes to Fontana, they want to go back later to pick him up. So, they'll change their schedules around. But all of our cabs have computers and they track the amount of time that these guys log in and log off. So for safety standards, they are not allowed to work more than eleven. o Q. Okay. The state standard is twelve. Q. Is it really? Q. Didn't you say two shifts a day, though? A. Well, there are some vehicles that can be leased two shifts. Not to the same driver. But a lot of the drivers actually do lease the cab full time because it gives them flexibility. This particular contract with the V A allows some of these guys to make some lucrative money. We actually go to Palm Springs, and up to Victorville and Barstow, and bring people back to Lorna Linda. Those are high-end trips for a cab driver so he would like to be around to take them back home. They don't do too much work other than the V A if they can get those trips. We actually take some people to the V A in Brentwood from here in Lorna Linda which is about a $150 cab ride. I'm not so sure where the Federal government is getting all that money but they spend it quite vigorously on transportation. Q. 42 cabs will be licensed here in the City of San Bernardino? A. Yes. And I don't think... The one company currently hasn't had an attempt to go out there and do a lot of marketing, or get involved. Because whatever it is, it is. And we think most people probably aren't aware that the cabs are even available, or even when they do call, the service is there. So the cabs... All these cabs here would be licensed from Rialto, Colton, Victorville, this whole end of the area. So they would be legal to C pick up anywhere. c c c Bureau of Franchises Hearing - September 8, 1998 Page 12 of20 Q.How... A. Because you asked me that because you would imagine 40 new cars driving around all of a sudden? Q. No, no. I just, if the. .. we're allowed to have one per 2,500 some residents? And there are 35 licensed now? Q. A total of about seventy-some under the [unintelligible]. Q. Yeah, seventy-some, so they will be a little... A. It exceeds the... Q. ...it will be about one in 2,400 if you go to 42. A. So you want me to ask for 40 instead of 42? So it's a little bit closer? Q. I'm just saying it will push the numbers at 42. Q. Yeah, I'm still having a little problem as to whether we have established that there is a need. Obviously, with Yellow Cab not here to defend themselves but they are the sole provider at the present time. Q. That's a question that I wanted to ask you. I assume they are inadequate. How inadequate is it now? Q. Lee gets all the complaints, and the last time I talked to him about it, we don't seem to get that many complaints? Q. From what I get in calls, about one a year. Q. So, you know... and I haven't seen a public outcry for additional cab service. A. On the complaint issue, having been in the paper from here to San Dimas for public hearings, as we [unintelligible] last year, no one ever gets complaints. Nor do they get complaints at Bell Cab, and we have complaints. They call the cab company to complain. Q. Sure, as well they should. A. You're right. Nor are we that motivated. Initially, we would have to call each and every municipality. In most of the cities, there is a rate card which says if you have problems, call such and such. That isn't available in the Yellow Cabs here. In Ontario now, we have big placards on the back of the seats. So there is a mechanism to call Bureau of Franchises Hearing - September 8, 1998 Page 13 of20 c because there is often debates that, gee, ifit's not broke, don't fix it. There's no problems. In all of our analysis going out there looking for business, there is a huge problem. Which is slightly evidenced by the three or four letters that we supply. We actually had public speakers at the meeting here in February. But it becomes horribly adversarial. If I said left, Yellow Cab would say right. Q. Sure. c A. And I don't think it's necessarily [unintelligible] of me to go out there and find thirty or forty people who hate Yellow Cab because if they tried hard enough, I'm sure they could find forty or fifty people that don't like Bell Cab. So I didn't think that's where we should focus, on the complaint issue. But, the fact that Lee only gets one complaint a year, isn't necessarily reflective that there is problems or not problems. I think there is a lot more problems. The Ornnitrans survey in itself suggests that there is serious problems with trips from home. If one were to follow the spirit of the ordinance in the population thing, Yellow Cab should run 56 cabs here in 1952. There has been astronomical growth. 291 %. They're not supplying more, they are supplying less. And that's with Metrolink opening in '92, Dial-A-Cab starting in 1995. There has been nothing but more demand. AQMD Rule 2202 mandating ride share programs. It is 250 now, it used to be 100 for employers. Their graph should have gone the opposite way along with the population graph. They have chosen to reverse that trend. He probably gets a higher per capita profit per cab but that doesn't necessarily stimulate better service. If people wait 45 minutes to an hour, they're not going to call a cab. Q. Without being the owner of a cab company, it would be my thought that if the business is out there, you would have as many cabs as you cumulatively could have to generate the business. But quite the opposite, he decreased his number of cabs which would indicate to me that the business is not as readily out there as what you indicate to us. You know, obviously, if a new cab company comes into town, whatever business is there is going to be cut in half. A. You are assuming the business is static. And I don't believe it to be initially static. It is static at airports where you just get in line and whoever is first in line. Ifwe went out there and got involved with issues, with Route 66, or the Visitors Bureau, and promoted the business, we believe that people would actually use taxicabs significantly more. I can't understand his own rationale either, although I have come against it with one other operator in the San Bernardino Valley that just runs less. He charges his drivers more, and he feels in his mind that he has less of an insurance risk, and you're in the insurance business. !think he's nuts. I think you're what[unintelligible]. I don't get it. We believe in operating more cabs, maybe at less of a profit, and providing higher service. Ted, who I know personally because we both sat on a state board together, got that business from his father. I don't think Ted is that motivated to be running cabs as we are. That's fine. That's Ted's prerogative. c c o Bureau of Franchises Hearing - September 8, 1998 Page 14 of20 Q. Well, I think...I think a consideration would be that it's statistics bear out that another company can come in. I think it's, you know, kind of a moot point as to whether it would cut the business in half or not. I am kind of a competitive kind of guy and sometimes it just needs stimulation through competition to get things going again. But if the figures bear out that an additional company can come in, and the ordinance provides for that, and what he has provided is a pretty good package, and if there were losses sustained because of a lack of business, it would be his loss. So he would be going in looking at it with his eyes wide open and I don't have a problem with him coming in. Q. That's right, so, anyone want to make a motion to accept their... Q. I just want to know, there is a [unintelligible] thing, excuse me, under 0-5-0 in the hearing, it says that "before granting any such permit, the Bureau shall require it's engineer or other authorized officer to present an oral or written report which shall include his opinion as to the existence of public convenience and necessity for the operation proposed by the applicant." And I'm not sure who the engineer or other authorized officer would be, I guess anybody you authorize, but it appears to me that it's a statutory requirement. Q. It's not established on this Board. It would be an appointed. Q. This is under the taxicabs, it's the 5.76.050. He read most of it. I will read the whole thing so that you guys know it's the burden on us. It says: "No permit shall be granted to any carrier, as defined in Section 5.76.020, except after a hearing thereon, conducted under and in accordance with such rules and regulations as may, from time to time..." Q. That is the one you're reading, right? Q. That's correct. "...be prescribed therefore by the Bureau, and until the Bureau shall have determined that the public convenience and necessity require the operation proposed by the applicant for such permit. The Bureau, in determining whether or not such facts exist, shall take into consideration the public demand for such service, the adequacy or inadequacy of service being rendered by other carriers, the effect of such service upon traffic, the financial responsibility of the applicant," which has been done, "the amount of wages to be paid to employees, the character of equipment proposed to be furnished, and any and all other facts which the Bureau may deem relevant. Before granting any such permit, the Bureau shall require its engineer or other authorized officer to present an oral or written report which shall include his opinion as to the existence of public convenience and necessity for the operation proposed by the applicant. However, the burden of establishing the existence of public convenience and necessity shall always be borne by the applicant, and no permit shall be issued unless there has been an affirmative showing of the existence of such public convenience and necessity by such applicant. The foregoing provisions and requirements shall also apply where an increase in service is C requested." And this was, I won't give you all the dates, it was... c c c Bureau of Franchises Hearing - September 8, 1998 Page 15 of20 Q. So what we need to do is... We have satisfied a portion ofthis. And all we need to do is figure out the portion that we haven't satisfied. [Several individuals speak at once.] Q. Well, I read that we are being... I read that we have to... We all corne from different wards. So when we get this material in the mail, we are to deal with that information. Now, I did in my ward. I looked to see ifthere was a necessity for additional cabs, etc. etc. and I find that there is. And dealing with churches, schools, and places that use cabs the most, I find that there is a need in the Sixth Ward. So I have pretty much satisfied that for myself. Yes, and I read that you are the agent, you know, if you want to apply that sentence, you are the agent or the individual who would need to finalize the report, unless that goes to Lee? Q. I don'tknowwhat... Q. Are you talking about the "engineer"? Q. Yeah. I would think that you would take reports from all the different wards and do a summary report that would satisfy that requirement. That's what I thought. Q. What I heard, and I think was the first thing that you have to do is go back to the current cab company and discuss the inadequacies of the service and equipment and everything else. And if they are not willing to work with you, then we need to start considering [unintelligible]. Q. Since they are not here today... Q. Yeah, I don't know... Q. What I have seen of the cabs, they don't look like they are less than five years old either. Q. I didn't read that anywhere. Q. He says his cabs are less than five years old. Q. No, I mean... Schaefer: In some areas. Q....I didn't read that where we needed to go to the cab company. They were sent an inquiry, right? Q. They were put on notice that we were going to... Bureau of Franchises Hearing - September 8, 1998 Page 16 of20 c Q. Yes, that's right here. So that was satisfied. Q. Well, who would be the engineer? Is that somebody you appoint, or Lee? Q. Traditionally, it's me. Q. It's Lee. Lee Gagnon: I want to tell you something from my perspective. To be totally honest with you, and to get it on the record. I possess no specific skill to make a determination whether or not it's needed. Because a lot of these things are not based upon just need. A lot of times, they are based upon competition. And I saw this issue come before this Board when it came to ambulances, and a number of issues over the years. It's not always a case of whether or not we really need them. It's whether or not we want the competition, and things of that nature. So, if you want my opinion, I have one just like everyone else does. And I have dealt with Mr. Parlos [??] for a long time and I can give you that, and it would be just that. So you have to understand that. Q. Are you going to verbalize that opinion? c Lee: Okay, I will come down on it this way. My opinion is that competition, because, first of all, I work in both worlds. I don't only work for the government. I also own a business in this community. So, I walk in both worlds and I know what competition is. To me, usually, competition stimulates good things. And it would for this community, I believe. The other thing I would look at is: if you have a total number of permits available, and you're only using part of it, just like Mr. Wilcoxson said, it's incumbent upon the new person to make it work. Ifit doesn't, he's not going to make money. And I think competition is good. But, you could make that, you could make a stipulation if you wanted to look at it in a year, things of that nature. You could do a lot of things. Q. You said there are a certain number of permits and they're not taking advantage of using those permits. That's a perfect reason to go outside to find somebody else to use the rest of the permits. Lee: Exactly. Because the end result is that there are going to be more people out there, or more cabs out there, for the residents to choose from. Q. And competitive cabs. Lee: Yes. But then again, there is also another end to that. Will there be some problems with that? Will you have somehow two cabs showing up at one location for a fare, I think. I dor;,'t know. I haven't been involved in that before, but my feeling is, my opinion is, that competition is good. c Bureau of Franchises Hearing - September 8, 1998 Page 17 of 20 c Q. Any inv~lvement, with your involvement in the franchise thing is technical guarantor, both sides, where you are sort of guaranteeing that cab companies [unintelligible] that you will give them access to our community and in turn they will be available. So we all, we have an obligation to that guarantor before we go outside. I'm not saying don't do that, I'm just saying we have to satisfy that, or maybe I'm not understanding... Q. Well, the fact is, we have a franchise available by virtue of the population. So essentially, it's up to the Bureau, and the Council obviously has to approve it. Ifwe feel that he has proven to us that there is a need within our community, and Mr. Wilcoxson says that he has checked in his area, and there is obviously a need for additional cab service. And I believe that Lee has given his opinion. Q. [female] Does the existing cab company have, can do business in Fontana and Rialto and in our surrounding communities? Q. I don't know. They would have to, whatever those cities... Q. [female] My question is, are we creating a pocket to where they are driving... Say they have a fare that needs to come from Ontario or Fontana into the City of San Bernardino. Are we creating a pocket to where... c Q. They can drop off in the City of San Bernardino from any location. They cannot pick up from within the City of San Bernardino without being a franchise cab company. Q. [female] So that creates a situation to where if you had people that were going back and forth between communities and all, it's a difficult situation. Q. Well, assuming that they follow the law, they would not be able to pick that person up 15 minutes later. Schaefer: I think the question is, how many cities are they licensed in? Q. [female] Yeah. I have used this, I have a daughter that's disabled and I have attempted to use this various times, and I have checked basically the mileage so that she would have enough money with her to pay for it. It always came out to about five dollars more than the actual fare should have been. And so, we quit using it. Schaefer: Actually, the SANBAG Work Plan says that the ridership has gone down without cabs. And a lot of it is probably in that survey.. . Q. [female] We quit using it and we use ACCESS now and some of the other, "mother transportation. " c Q. As far as proving the need, or establishing the need, I think a lot, to me, that goes to establishing the need for something different is the letters from the various businesses in Bureau of Franchises Hearing - September 8, 1998 Page 18 of20 c San Bernardino. That almost all of them address the fact that they are having problems with the current cab company. That their clients are having delay that is impacting their business, and impacts hotels' businesses, and that is lost revenue to the city. Q. Keep in mind that those letters, I presume, were somewhat solicited. c Q. I agree, and that could go the other way too, but as Yellow Cab did not take the opportunity to be here and present any contrary information... But like, even Amtrak is in here saying they experience delays, and that's having traveled by bus, Amtrak, airplanes, everything else from around Southern California to the East Coast. I know for me, it's very inconvenient, and I hate going to a community that has no competition for service to where, as a user, and I hate to say this, but I can pit one against the other and get good service. I would like to see us have something that's of a competitive mode in this city. I think it's good for growth. And as we are looking at, our mayor is looking at moving our city forward, and having growth, and bringing in businesses and stuff, I think we need to be in a position, and look forward to being in a position to providing transportation services for whatever growth comes to us. And if our current licensee is not providing the quality of service we need... I can speak from limited experience, from people that use it, seniors that use it at the church that I go to, and I know that they sit out in the sun a lot on the streets waiting. And that is a limited experience, cause it's just one small church. But, I know they sit out there. I have stood with them in the heat waiting for service so. . . Q. Yeah, I'm sure that Bell probably, they're not always going to pick up people at the time that they would like to pick up. There's always going to be a certain amount of wait unless we've got 20 cabs sitting there at the bus station. Q. [female] Will you have taxi stands located throughout the city? Or how does that operate? Schaefer: We will apply for cabstands within the city, yes. Q. That is another issue to come before the Bureau. Q. [female] Another issue. Q. Where do you guys anticipate the source of your business? I'm not sure where you get it from. Is it, do you have so much coming from Dial-A-Cab, and so much from Metrolink, so much from the hotels? A. Obviously, those are normal staples. The bars and restaurants and anything. I think you are from the car dealership. C Q. Yeah. c c c Bureau of Franchises Hearing - September 8, 1998 Page 19 of20 [END OF FIRST SIDE OF TAPE] A. Most ofthe business is [unintelligible] deliveries, that [unintelligible] accounts for almost $55, 000 a month. And some of that demand will be coming from this area here. So, it's just, years back we used to run the railroad crews, before the merger, from Colton back and forth to LA., to Bakersfield, to La Paz, Arizona. Because by contract, they had to stop at a certain point, because of the Department of Labor, they couldn't be on the trains more than X. And they would fund these guys in cabs all over Timbuktu. So there is lots, there is more cab work than somebody not in the cab business would think. But it's not necessarily the guy flagging somebody down on the street, because you probably will never flag a cab down on the street here. A. [Rusty] Yeah, we look for non-traditional avenues, as well. The seniors. The seniors taking lunch, taking them to and from, that type of thing. A. Schaefer: Ms. Turner, you said your daughter is disabled. We do a lot of work for the Regional Centers. Less here, for whatever reason, in the Inland Empire than the other regional centers, which fund transportation for developmentally disabled. That's what started with the infants, because we transport probably 100 Down's Syndrome infants a day in LA through the Regional Center. But they don't tend to fund as much transportation out here. Q. Can we move on to the question? Did you make a motion? You move to approve the granting of a franchise for what, 35 cabs? Q. Yes, for the number stated. I believe it is 35. Q. I thought he asked for... Schaefer: I asked for 40. Q. He wanted to amend it to 42. Schaefer: I asked for 42 because there is concern that started to push the envelope with the population. Q. I'll move for the 42. Q. Okay. Q. Didn't we establish that exceeds, didn't we say that that exceeds slightly the.... Schaefer: Yeah. I looked at my calculator. .. 40 is fine. c c c Bureau ofFranebises Hearing - September 8, 1998 Page 20 of 20 Q. My reasoning was that 42 is not that much different than 40. But a lot of times when I listen to a person present, I listen to him for many things. And it seems to me that he has been really fair the first time I met him, and fair now. And sometimes, we can enhance things by... and I will give you just a crazy little story... Q. The forty cabs are what... Q. Ifwe can't do 42, then we must stick with 40. Q. We have to stick with the ordinance that grants based on a population base. So we can't give him more than what that ordinance already calls for or we're not doing our job. Q. So we are just going to strike, he doesn't have to re-write then? Q. We are going to, based on your motion, for granting him a franchise for 40 cabs. Q. But he doesn't have to re-write it? Weare just going to deal with the number? Q. Yeah. Q. Okay. Schaefer [?]: You just need to pay me more money. Q. Is there a second to that? Q. Do we have a second? Q. You will second it? Q. Okay. It's been moved and seconded that we approve granting a franchise to Bell Cab Company for 40 cabs. All those in favor? [Affirmative group response] Opposed? [no response] It's unanimous. Schaefer: Thank you. [closing comments - explanation that decision will go before City Council for approval giving Yellow Cab the opportunity to oppose - Bell Cab should be present to answer any questions from the Council] Meeting adjourned. ) c ,"( o cnllJ;:O (1) (1) c: "'0 = en _0_ (1) '< 3Q)o C"C"Q) (1) ~~ ..., Q) 0 CX>"";:j '" ~(1) (O~ (O;:j cx>CC o ~:i '. ..., (1) ("') _ o ..., c ~o :::Tc: ;:::+..., (1)0.. en ~. :::T< --(1) ~..., en en ~~ tl) (1) ("') c: "';:j "Ocr Q) ..., ;l3 ~en (1) Q) _0.. ;:j- 0.. :::T _(1) -"'< m ~ - (1) Q) _ ..., :::TC" (1)_ '<Q) tl) ("') ..., '" (1) Q) tl) ;:j - 0.. ~ :iE '< :::T en_ (1) ;:j -- c: ;:j 0' ..., 3 " C/l OJ ::l OJ et> .., ::l OJ .., C. :oj" o -<G) et> .., -et> 0,< :;: :::r aO OJ e 0-5- =ll:OJ I'Ve OJ", (}1 O' 0 OJet> et>-o =0 a7 OJ '- O-e =ll:- (}1'< -.,JUJ .):>0 0", o o I'V ~ o -0 3 'J w (. ** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT ** RESOLUTION AGENDA ITEM TRACKING FORM Meeting Date (Date Adopted): ~, 'I-O;l Item # ;:)~ Resolution # Vote: Ayes /- f) Nays J?J Abstain & Change to motion to amend original documents: d CQ;)- ,?qS" Absent (3 Reso, # On Attachments: - Contract term: - Note on Resolution of Attachment stored separately: -=- Direct City Clerk to (circle I): PUBLISH, POST, RECORD W/COUNTY q -I I-c).? '1-\ ').-O~ '1- t3-<.v Date Sent to Mayor: Date of Mayor's Signature: Date of Clerk/CDC Signature: Date emo/Letter Sent for Signature: 60 Day Reminder Letter Sent on 3 90 Day Reminder Letter Sent on 45th day: See Attached: See Attached: ee ached: Request for Council Action & Staff Report Attached: Updated Prior Resolutions (Other Than Below): Updated CITY Personnel Folders (6413, 6429, 6433,10584,10585,12634): Updated CDC Personnel Folders (5557): Updated Traffic Folders (3985, 8234, 655, 92-389): Copies Distributed to: City Attorney v' Parks & Rec. Code Compliance Dev. Services Water Public Services Police Notes: NullNoid After: - By: Reso. Log Updated: V Seal Impressed: v Date Returned: - Yes .,/ No By Ves NoL- By Ves No~ By Ves No~ By Yes NoL B EDA Finance MIS Others: BEFORE FILING, REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term, etc.) Ready to File: i\11' Date: q'n-c?- Revised 01!l2/01 .- MARK C. EDWARDS ATIORNEY LAVV OFtlCES c)F '~?;<"""'" MlRAl.l,EDWAmS~ON, HARrER ~ I A PROFESSICt:!Al., CORPORATION f;!'d':':":.' 1806 Orange Tree Lone, Suite C Redlonds, CA 92374 telephone: (909) 793-0200 facsimile: (909) 793-0790 e-mail: medwards@mechlaw.com AAA Inland Empire Cab Co. Presentation of Mark C. Edwards, Esq. To the City of San Bernardino Franchise Bureau June 11,2002 - q/c;/o:; .:(:1 ;) ('! - JOHN K. MlRAU' MARK C. EDWARDS ROBERT W. CANNONt STj/lii(;Y A. HARTER' ~LJ. LEWIN -CenilicdSpeeialist,Taxation Law,TheSlale8arofCalifomia BoardofLeplSpcc:iaIiDtion tceflifiedSpecialiSl,Estate Plmming,Trustand Probale Law,TheStltcBarofCalifomia lloardofUgalSpecialization 1806 Orange Tree Lane, Suite C Redlands, CA 92374 telephone: (909) 793.0200 facsimile: (909) 793-0790 medwards@mechlaw.com Presentation of Mark C. Edwards Attorney for AAA Inland Empire Cab Co. To The City of San Bernardino Franchise Bureau June 11, 2002 Today, I am charged with demonstrating, and you are charged with determining, if "the public convenience and necessity" is served by permitting a second taxi cab company to operate in the City of San Bernardino. The alternative is to permit the current monopoly to continue. o At first blush, neither of us has an easy job. Look what has happened so far. My client, AAA Cab, has presented to this Bureau a stack of statements from individuals and businesses citing the poor quality of the current service. The holder of the current monopoly, Bell CabN ellow Cab, in response, has presented its own statements, asserting that service is fine. Who do you believe? Is it enough for your finding that we have demonstrated a significant portion of the population is dissatisfied with the current level and quality of service? Bell CabN ellow Cab, on the other hand, would have you believe that you should look at the lack of complaints to this Bureau. Were there a formal mechanism for riders to make such a complaint, as there is in other cities, we might agree. However, if you get into a BelINellow cab, there is NO sign or other indication as to how to contact this Bureau or any other person or agency of the City. Further, in the City telephone listing, this Bureau is not listed, nor is there any listing under taxi or taxi regulation. Call City Hall, and the operators have no idea who is responsible for taxi service regulation. The only indication, in a BelINellow cab, as to who to complain about bad taxi service is in small letters at the bottom of a 4 inch by 4 inch rate sticker which says "Inquiries or complaints should be addressed to Yellow Cab at (909) 884-6100." So we really don't know how many complaints there are, and the fact is, as things now stand, it doesn't really matter. As long as BelIN ellow Cab remains the only game in town, riders have no choice but to accept the level of service offered (or not use taxi service) and BelIN ellow Cab has no incentive to address riders' complaints. o So we have competing citizen statements and no way to know how many complaints there are. How do you make the determination you are charged with making? Fortunately, we have two other things. First, we have study after study after study demonstrating that quality of service decreases, and the cost of service increases, when there is no competition. Conversely, o c c City of San Bernardino Franchise Bureau Page 2 these studies clearly demonstrate that the quality of service increases, the cost of services decreases, and ridership increases when there is competition in the taxicab market. These are not the competing positions of AAA Cab and Bel1/Y ellow cab, these are independent studies by governmental agencies, universities, and think tanks throughout the nation that concluded one thing: If you want better taxi service, introduce competition. I have included a number of those studies in the materials I've given you today, and I will refer to them throughout my presentation. I've also included a study by local economist John Husing, who points out the advantages of competition in the taxicab industry specifically in the Cities of San Bernardino and Riverside. That study is located at Tab 1. Second, we have our common sense. I could bring you reams of economic treatises proving, through mathematical models, that competition lowers costs and increases the quality of service. But you already know that. Common sense tells us that. And it is a fundamental principal of the entire American economic system. If you don't like the lunch salad you get at T.G.I. Fridays today, you can go to Chili's tomorrow. And after a fair number of Friday's customers do that, Fridays is going to improve their food. If they don't, they won't survive. If, however, through some bizarre regulation, there were only one place you could go to get lunch, what incentive would that restaurant have to improve food or service? So let us turn to the independent studies. These are located at tabs two (2) through thirteen (13) of the materials I've provided to you. Bel1/Y ellow Cab would have you believe, from the materials they have submitted to you that the current system of regulating entry into the taxi-cab business was born of a need to protect the quality of service. That is untrue. In fact, the Federal Trade Commission found that the genesis of these restrictions came in the great Depression, when out of work individuals turned to operating their cars as taxis to survive. As a result, the large cab companies sought to protect their monopolies. The FTC found that the drive for regulation had nothing to do with public interest but plenty to do with protecting monopolies. The Institute for Justice's study of Boston's closed taxi cab system described the historical basis for restrictions of the taxicab industry in this way: "Entry restrictions did not even pretend to protect the "public interest," and were often couched in explicitly anti-competitive terms. Improved safety or reduced congestion and pollution were occasionally given as reasons, but only after-the- fact rationalizations. In reality, regulators wanted to.. ..enable the organized cab fleets and transit companies to increase their profits" (Tab No.2, Page No.2) The folly of these historical restrictions is amply demonstrated in both the literature, and in practice in the increasing number of cities which have opened their taxi markets to competition. This trend is simply explained by the Oregon based Cascade Institute, which concluded: o c o City of San Bernardino Franchise Bureau Page 3 "The argument for opening taxicab markets rests on the principle that government should not protect for-profit cab companies from competition to the detriment of the riding public..." (Tab No.3, Page No.2) So lets talk about quality of service and costs. Without a single supporting authority, Bell CabNellow Cab asserts (and in fact makes it the heading of its written materials) that "More Competition Won't hnprove Taxi Service." That is not what experience and the independent studies have found. As the Cato Institute concluded in a study authored by the Mayor of Indianapolis: "Because the local (taxi) industry was protected from competition, the near universal judgment was that service was poor, expensive and highly selective. If you happened to live in a neighborhood that the dominant providers did not want to serve, namely, low income and high crime areas, you were out ofluck." (Tab No.4, Page No.5) The Institute for Justice, in studying Baltimore's closed taxicab system found: "Baltimore's restrictive system of taxicab regulation has deteriorated working conditions for the drivers and has produced poor results for consumers." (Tab No.5, Page No.8) And who is most adversely affected by the results of a monopoly in the taxicab industry? The poor and minorities, those who most need the service, especially here in San Bernardino. As the Consumer Policy Institute in Toronto found: "Taxicab regulation discriminates against single mothers, low and fixed-income wage earners and the physically disadvantaged by reducing supply in their neighborhoods and making the product uncompetitive and unaffordable." (Tab No.6, Page No.2) Perhaps the best description of the effect of the taxi-cab monopoly in San Bernardino is found in the Toronto study, where the results of a closed system were described as producing: "a network of inefficient taxicab operators who use the taxi stand as an opportunity to sit in their vehicles and wait for the business to come to them." (Tab No.6, Page No.7) Does that bring to your mind, as it does to mine, the current situation in San Bernardino, with cabs lined up at the bus depot, and nowhere else? What is happening in San Bernardino? City Code, at section 5.76.060, limits the number of taxicabs to one for every 2,500 residents. With a population of 185,401 (according to the 2000 census) this means that San Bernardino may legally have up to 74 taxis. BelIN ellow has a o c c City of San Bernardino Franchise Bureau Page 4 permit to operate 36 cabs, slightly less than half of the code authorized number. However, a review of the City Clerk's records reveals that there are only 19 drivers licensed to operate in San Bernardino for BelINellow. If these drivers were to work 8 hour shifts with two days off, this means that the average number of cabs on the road at anyone time would be less than 5 (4.52 to be exact). But even if BelINellow got all of its drivers working at one time, it can still only serve San Bernardino with 14 of the authorized number of cabs. Why is BelIN ellow keeping so few cabs operating in San Bernardino? Because without competition, public service is not a factor they need to consider. Lowered costs and maximizing profit are the only factors the market requires them to consider. Now, Bell CablY ellow Cab would have you believe that all sorts of social ills will result from putting more cabs on the streets. But that's not the reality. First, if AAA is granted the license it seeks, it will operate 25 cabs in San Bernardino. 25 additional automobiles spread throughout the City will have no adverse impact on traffic and, in fact, as ridership increases (as I will speak about in a moment) it could have the effect of reducing traffic by taking private vehicles off the road. BelIN ellow Cab will have you believe that additional cabs will reduce per taxi usage, and decrease earnings by drivers. In fact, again without citing any basis for the statement, BelIN ellow Cabs states, in their materials to this Bureau, that: "Even though the number of taxis increases in an area, the number of trips in that area stays the same, or even decreases." That statement is simply not true. The independent studies reveal just the opposite. As competition increases the availability of cabs, reduces the wait time, and increases the quality of service, ridership actually increases. In fact, the Buckeye Institute for Public Policy Solutions, in studying taxicab regulations in Ohio, responded to just the argument that BelIN ellow Cab is making, and soundly rejected that argument stating: "If this (ridership levels remaining flat) were true, cities that deregulate would not experience a significant increase in the number of cabs operating in their cities. The demand would be insufficient to sustain a larger number of cabs and cab companies. They would quickly go out of business. The fact that almost all cities that deregulate their local taxicab market experience an increase in the number of taxis in operation suggests that substantial unmet demand exists for these services." (Tab No.7, Page No.9) If this Bureau permits competition in the taxicab industry in San Bernardino, what you will no longer have is a single company with its cars lined up at the bus station, and a phone listing waiting for the customers to come to them, because they have no other choice. What you will have is two (or more) companies competing for the business, by increasing the quality of service, reducing wait times, and coming up with innovative new ways to serve the public. This clear and well documented advantage is the reason that study after study after study supports competition in the taxicab industry, and city after city after city is abolishing the old monopolies, in favor of a competitive taxicab market. As John Husing's study points out, in California cities with a population of 180,000 to 450,000, only two, Riverside and San City of San Bernardino Franchise Bureau Page 5 o Bernardino, have a single licensed taxi company enjoying a monopoly. Every other such city has at least 3 licensed companies. And that study is about to become outdated. Last month, Riverside's Transportation Committee voted to end BelllYellow's monopoly and recommended a license for AAA Cab to also operate in the City of Riverside. Finally, let me address the drivers, as BelllYellow will have you believe that competition will hurt them. But again, that is not the case. In fact what is hurting the drivers is the lack of competition. Currently, BelllY ellow Cab charges a driver, in San Bernardino, more than $300.00 per week MORE to lease a cab than AAA Inland Empire cabs charges its drivers. Now in fairness, I should note that AAA will, shortly be increasing its weekly lease rate by $100.00. However, even after that increase, a driver working for AAA Cab would, without working a single extra hour or taking a single extra rider, earn over $800.00 more a month than he would earn with Bell CabN ellow cab. But he can't. Why, because there is only one employer for taxi drivers in San Bernardino and that monopoly allows that employer to continue to charge exorbitant lease rates to its drivers. The single company monopoly doesn't protect drivers, it hurts them. Competition will help them. If another cab company is permitted to operate in San Bernardino, BelllY ellow Cab will be forced to reduce its lease rates in order to keep the best drivers. c So who do you believe? I think that even the most cursory review of the literature, including the studies I've provided to you, amply demonstrate that public necessity and convenience will be served by competition, and will continue to be hanned if BelllYellow Cab's monopoly is continued. But if you still don't know who to believe, then I suggest you listen to Bell CabNellow Cab. Yes, that's correct, listen to Bell CabNellow Cab. But not the statements made in the submittals to you, but the statements made outside of their efforts to preserve their monopoly. In Bell Cab Company's February 12, 1998 application for a permit to operate in the City of San Dimas, it said the following: "Bell Cab Company is not a supporter of market deregulation but strongly opposes monopolies that result in lower levels of service, winimaJ marketing and .lead to hostage pricing by service companies and taxicab operators. Reasonable levels of competition l~ad tn.higl1er levels of service, stah]& con.lImer ~ces, better accessibility to taxicabs and availability at all times of day." (Tab No. 14, Page No.8) That statement was signed by Scott Schaeffer of BelllY ellow Cab. And lest you think that was an isolated position, you need look no further than the July 11, 1997 San Bernardino County Sun wherein the following appears: o "Vanik Zadurian, General Manager of Bell's Ontario office, said choice is critical for consumers. (quoting Mr. Zandurian) 'To have a monopoly is not right. When there's no competition, the level of service goes down.'" (Tab No. 15, Page I) c c c City of San Bernardino Franchise Bureau Page 6 These statements, and a number of similar statements made by BelIIY ellow cab in the newspaper are set forth at tabs 14 and 15 of the materials I've given to you. We assert, and BelIlYellow Cab agrees (in their statements outside this room), that public necessity and convenience are served by reasonable competition in the taxi industry, and are harmed by the current monopoly. We respectfully request, therefore, that this Bureau approve the introduction of such competition into the San Bernardino market. Respectfully Submitted ark C. Edwards Mirau, Edwards, Cannon, Harter & Lewin, a professional corporation Attorneys for AAA Inland Empire Cab Co. c Economics & Politics, Inc. 3142 Cactus Circle Highland, CA 92346-1739 (909) 425-8952 Pbone lobnliillobnbnsln2.com www.lobnbuslo2.com Taxi Service Market Considerations Cities of San Bernardino & Riverside by John E. Husing, Ph.D. c In considering whether to open their taxicab markets to some competition, the cities of San Bernardino and Riverside would be well served to address a single question: . Which is more likely to enhance the quality of taxi service provided to citizens of their communities: monopoly taxi service or competitive taxi service? This question arises as each city considers whether "public convenience and necessity" will allow the permitting of a second company. Certainly, neither community is inundated with excess taxicab service. In San Bernardino's case, there is only one legal cab per 5,284 residents. In Riverside, it is one legal cab per 7,181 residents. Monopolv Service. The <p1estion of "monopoly vs. competitive" taxi service is posed as the two cities are unique among the 13 mid-sized California communities of 190,000-450,000 people in that each is only served bya single taxicab company (Exhibit 1). , Exhibit 1.-Number of Taxi Companies, 2002 California Cities, 190,000 to 450.000 'JI'/ .l' ~ ..~ /"' ~" qff"" ...if " , -1:l .::1' ..,1$- &-<Y <(!'... ~t'f/' ..~ .# ./ c/ ",/ ...0 f!'~ :.4-" "" ~'" I Source: Cities I c '% Elderlv. Handicapped. Poor. In addition, the question is important as the ultimate purpose of a municipal government islo ensure that its citizens are well served and protected. In San Bernardino and Riverside, this standard is important with regards to taxi service because unlike huge cities such as Los Angeles, San Francisco and San Diego, taxi service is needed for local residents not business or tourist travelers. In particular, three groups of city residents are disproportionately dependent upon taxis: Taxi Service 1 Economics & PoUtlcs, Inc. c c c 1. Elderly. Many elderly persons can no longer drive. It is also difficult for them to reach fix line bus stops. In addition, older persons often fear exposure to danger on the streets, a fear exacerbated in the evenings when they might need medical services. The elderly would thus prefer increased access to door to door taxi service. 2. Handicapped. The handicapped are in similar positions to senior citizens. Many cannot drive. It is difficult for them to reach bus stops. At night, should they need access to doctors or to be picked up from a medical facility, they are almost completely dependent upon taxi service. 3. Poor. The poor often cannot afford automobiles. In addition, they are most likely to live in neighborhoods that, given a choice of other customers, taxi drivers would prefer to avoid. If they cannot get taxi service, the only alternative for the poor is fix route bus service. In both cities, the total of persons in these groups is quite large. In San Bernardino, for instance, the San Bernardino County Social Services Department indicates that some 59,083 city residents were on public assistance .or 31.4% of the city's population in 2000. In Riverside, the Census 2000 Supplementary Survey indicated that 17.0% of residents were below the p.ational poverty level. Population Per Lel!al TaXicab. In asking whether the existing companies are providing a high level of service to the puqlic, a question that arises is whether there are objective measures of taxi service quality. A review of the literature on such service indicates that two standards are most frequently applied. The first is the population per legal taxicabs. On this measure, data are available for II of California's 13 mid-sized cities (Exhibit 2). They break into two groups: . Four cities had; over 5,000 residents per cab with Modesto the highest (8,836) and both Riverside (7,181) and San Bernardino (5,284) in this category. . Seven cities had well under 3,000 residents per taxi with Glendale the highest (2,653). Significantly, the four cities with the highest number of persons per taxi also were the four with the least amount of competition. As indicated, Riverside and San Bernardino were the only monopoly situations (Exhibit 1). Stockton and Modesto each had only three companies. Exl1ibit 2.-PopuliltIOIl Pel Le'~JI C"bs. 2002 California Cities. 190.000 to 450.000 # ,/' <; #'" ~~ #"" ,. .# __,:#<1> '<~ " ~ ,;- 0/' "" ; r~<i' .1 Note, Data not avollablo "" Huntington Beach " Santa Ana Source: Otis ~" .,-sf' ;l o .ll' .'#' ~ JI"~ ~ .# ./ Taxi Servl<e 2 Etonoml.. & Polities, Int. -- l..- c c Square Miles Per LeJ!a1 Taxicab. A second objective measure used to detennine the quality of taxi service is the number of square miles covered per legal taxicab. Data were also available from 11 of the 13 cities in the 190,000-450,000 range (Exhibit 3). Here, seven cities had less than one square mile per taxicab and four had more than one square mile per cab. The city with the most area to cover per taxi was Riverside (2.09 miles). The next highest was San Bernardino (1.65 miles). The least was Oakland (0.17). Again, the four with the most area per legal cab were the same four that had the fewest number of companies. Exhibit.... ()qll,l!C' r,.li1f>c; P{'r TZlxlcab COllloll110 Cities, I ~O,OOO to 450,000 0.19 0.17 .i'" ~~/ ./ ,,/ ~/ /~ ~if ,,/ / / ./ <; I ~DaDCt=~dnPBeach I Summary. Looking at the data, the cities of San Bernardino and Riverside are shown to be the only cities of Califomia's 13 communities with 190,000 to 450,000 people that confine their taxi service to monopoly providers. They are two of four cities in this group with over 5,000 residents per legal taxicab. And, they ranked highest in terms of the square miles per taxi. In each case, the cities with the least competition scored the poorest on these objective measures of quality. Given that San Bernardino'has a very high percentage of residents on public assistance (31.4%) and Riverside has a large number of citizens living below the federal poverty level (17. a%), they are communities in which the elderly, handicapped and poor appear to have a major need for taxi service. These facts argue strongly that the introduction of competition into the taxi markets of Riverside and San Bernardino is in the public interest on the grounds of both convenience and necessity. Why Cities Have Transitioned From Monopoly to Competitive Taxi Service Looking beyond objective measures of service quality, there is another dimension to the issue of regulated monopoly versuS competitive suppliers for taxi service. That is the question of why many cities are now transitioning towards the competitive model. This is an important consideration since that is what both Riverside and San Bernardino are being asked to do. Whv Rel!ulated MonoDolies? The use of regulated monopolies to supply taxicab service was founded on the depression-era notion that taxi companies are similar to such public utilities as telephone, electricity, natural gas companies. As such, the public is best accommodated by having one regulated organization supply this service as opposed to several companies in competition. The historic logic for such monopolies was fivefold: To:d Service 3 Economics & ponti... Inc. ,- ~ . Larl!e Investments. Cities once believed that there was a need to protect certain firms from marketplace competition due to the huge financial investments that they needed to make in order to commence operations. This rationale was applied to taxi companies since in the early days, it was very expensive to set up two-way radio systems and acquire fleets of cars. Like other utilities, they were thus given protection from competitors so that they would have a chance to recoup their investments. However, this logic no longer applies as the costs of establishing taxi service is not extremely expensive. Compared to incomes, vehicles cost a fraction of what they did in the Depression. Meanwhile, wireless communications is inexpensive in today's world. As a result, the cost of entering the taxi business no longer justifies protecting firms from competition. . Unnecessary DUDlication. In some sectors, cities believed that it would be a burden on their infrastructure to have more than one company supplying services. This was obvious with regards to telephone lines and power poles. The logic was extended to taxicabs out of fear that too many competitive companies might clog city streets. However, with so many people driving automobiles and so few taxicabs, this fear is now unfounded. Even if the number of taxicabs tripled in the two communities, Riverside would have just 111 legal cabs and San Bernardino would have just 108. These would not be operating 24, hours a day and the number on the streets at anyone time would be a minute fraction of the fleet of private vehicles on city streets. . Qualitv. Cities on~e identified certain services like telephones and electricity as essential to their citizens. They believed that the best way to ensure a high level of service was through a single tightly regulated company. In the early days, many people did not have automobiles. Taxi service was thus seen as a necessity to be provided by a single utility with city regulation guaranteeing quality. However, over the years, Americans have come to realize that competition is the most efficient method of ensuring that companies deliver services at the quality levels demanded by their customers. Where competition exists, those companies that do not ~ perform well find themselves losing clients. In fact, the benefits of competition are so well established that goverurnents now work hard to encourage more, not less of it. It is thus an historical anomaly that consumers are not given the power of choice with regards to taxi service. Imagine the outcry if cities decided that only a single municipally regulated food or oil firm were allowed to provide these essential items to the public! For cities like Riverside and San Bemardino, the issue of quality has taken on a new dimension in recent times. As indicated, with so many people driving, the groups most dependent upon twti service are now the elderly, the handicapped and the poor. Quality of service can thus be defined as having taxicabs readily accessible to these three groups. Increasingly, cities' are finding that the best way to achieve this result is to foster competition among taxi companies so that they each have an upside interest in adding to their customer base. . GOUl!inl!. On occasion, cities have tried to keep the prices of necessities low by allowing only a single supplibr of a service and tightly regulating their prices. This was applied to taxi service in the belief that it was a necessity and that this was the way to keep down the price. Here, it must be remembered that price gouging is a natural symptom of - '- c Taxi Service 4 Economics & Politics, Ine. c c c markets dominated by sole providers as lack of competition allows the monopoly to charge whatever pnces they feel will maximize their profits. Where strong competition exists, prices tend to be lower as firms compete for customers. When a city permits a single taxicab company to operate as a monopoly, it is imperative that fares be regulated to keep prices down. Even where a small amount of competition is allowed, it is necessary to have some price regulation. However in this case, many cities are finding that it is in the public interest to establish price maximums and allow companies to set prices below that level if they feel it is in their competitive interest. . Public Safety. Cities always have had sectors whose activities impacted public safety. These sectors are tightly regulated to eusure that unscrupulous operators do not harm the public. As taxi service involves passengers entering a vehicle alone, the strategy for protecting public safety was to have all drivers work for a single tightly regulated firm. However, today, cities regulate numerous activities with an eye towards public safety without resorting to the establishment of monopoly providers. Conclusion. The cities 'of San Bernardino and Riverside are unique among California's communities of 190,000-450,000 in still using regulated monopolies to provide taxi service. Further, it has been shown'that they, together with Stockton and Modesto, have the least amount of competition and the highest number of persons and most area to cover per legal taxicab. In addition, both cities have, large numbers of elderly, handicapped and poor persons who need ready access to cabs. Finally, it has been shoWn that cities are generally moving away from the use of regulated monopolies to provide taxi service because each element of the Depression era rationale for using this form of organization is no longer valid and the competitive model is a more efficient method of obtaining quality service. Taxi Service 5 E.onoml.. & Politi.., Ine. o o o c c c The folIowing study was an award winning proposal from the hllrtitute for Justice for the Pioneer Institute's 1995 "Better Government Competition". OPENING BOSTON'S TAXICAB MARKET by John E. Kramer and William H. MelIor INTRODUCTION The argument for taxicab deregulation rests on the principle that government should not protect for-profit taxi companies from competition to the detriment of the riding public as welI as would-be entrepreneurs. Government's proper role is to ensure public safety with driver background checks, vehicle safety inspections, and inspections for insurance. THE PROBLEM: BOSTON'S CLOSED TAXICAB MARKET Since 1930, the city of Boston, through its police department's hackney unit, has imposed an unofficial moratorium on the number of taxicab medallions (licenses required to operate a taxicab) it issues. These regulations do little more than protect existing medallion holders from much-needed competition at the expense of current and would-be drivers and the riding public, especially the poor and minorities, who receive inadequate, unreliable, and costly taxicab service. In addition, such a system creates an inflated price for city-issued taxi licenses far beyond the reach of average entrepreneurs, never mind those on the bottom rung of the economic ladder. Because the city restricts the number of medallions it issues at welI below the market level, Boston taxi medallions selI at $95,000 on the open market. 1 What is most striking about this statistic is that the City of Boston charges a mere $175 to secure a medallion--a $75 contribution for the Elderly Coupon Fund, which allows senior citizens to ride for a discount, plus $100 in administrative fees. In essence, the city has created a black market that encourages businesses to obtain a piece of city property-the medallion--and selI it for an enormous profit, to their own (and no public) benefit. A comparison conducted in 1995 of Boston's taxicab fares with three deregulated cities shows that Boston's fares average II percent higher.2 A study published in 1982 of Boston's taxicab industry as it was in 1970 estimated that Boston's medallion system had kept taxi fares as much as 25 percent above market rates because of its restricted entry and price controls.3 c c c From 1930 until today, Boston has issued only 40 new taxi permits from the original ceiling of 1525 medallions. That occurred in 1992 to allow 40 handicapped accessible vehicles to operate. Applications for an additional 300 medallions were submitted nearly two years ago, but there are no plans to process new applications, according to an officer working in the hackney unit.9 Approximately 300 of the existing medallions are equally divided between two fleets--Checker and Town--with another 267 operating as Boston Cabs. Many of the remaining medallions are limited to operators under the Independent Taxi Owners Association. As a result of the restricted entry, countless qualified individuals have been denied the right to earn a living in a business ideally suited to entry-level entrepreneurs. The birth of the modem taxicab in the United States occurred without restrictions on the free market; still, those restrictions were not long in coming. Some believe today's heavy regulation of the industry in the United States began in response to "ruinous competition" that harmed the public during the Great Depression. To the contrary, close historical analysis indicates that, not only was there no "rninous comroetition," but the majority of taxicab regulations were already in place in the late 1920s. 0 During the 1930s car prices and wages fell, bringing large numbers of drivers into the industry. According to a report by the Federal Trade Commission, . "Many unemployed workers entered the taxi industry using rented cars, and as a result taxi fares, occupancy rates, and revenues per cab declined Pressures for restrictions on the toxi industry came from the American Transit Association, public transit firms, the National Association of Taxicab Owners (which passed a resolution favoring entry and minimum fare controls) and the established taxi fleet. J J " Entry restrictions did not even pretend to protect the "public interest," and were often couched in explicitly anti-competitive terms. Improved safety or reduced congestion and pollution were occasionally given as reasons, but only as after-the-fact rationalizations. In reality, regulators wanted to "drive many cut-throat cabs, operating without authority, from the streets and. . .enable the organized cab fleets and transit companies to increase their profits.,,12 There has been little change in the way taxicabs are regulated since the wave of restrictions of the 1920s and 1930s. For example, with the 1937 Haas Act, New York issued 13,566 taxicab medallions. Today, there are fewer than 11,800 medallions in the City.13 Existing medallions can be sold to new operators, but at a price of$140,000 apiece, most aspiring entrepreneurs lack the resources to enter the profession. Similar artificially high costs of entry exist in the majority of U.S. cities. Over the years, the taxicab industry in heavily regulated cities (like Boston, Buffalo, Albany, Houston, Los Angeles, Miami, Salt Lake City, San Antonio, and San Francisco) has stagnated. Poor quality, high fares, and long waiting times are standard in many cities where taxicab giants have taken control of the market with the aid ofregulation. A 1970 study of Los Angeles, where regulations forbid new taxicab services, clearly illustrated this pattern: powerful monopolies bought out the competition and raised taxicab fares, while new competition couId not enter the market.14 o c c As Dr. Walter Williams remarked in 1982 about such laws that block entrepreneurship, "The[ se] laws are not discriminatory in the sense that they are aimed specifically at blacks. But they are discriminatory in the sense that they deny full opportunity for the most disadvantaged Americans, among whom blacks are disproportionately represented. ,,24 The Solution: Opening Markets/Opening Opportunity To improve poor taxi service and offer opportunities to would-be entrepreneurs, we suggest fundamental changes to the cornmand and control monopoly imposed on Boston's taxi market with its fixed number of cabs as well as fixed pricing. The hackney unit of Boston's police department should open entry into the taxi industry and regulate cabs to protect public safety by requiring a license, a background check on drivers, a safe vehicle, and adequate liability insurance. Beyond that, regulations trench on the basic civil right to pursue a business or profession free of arbitrary and oppressive government regulation. To allow market forces to work, the City Council should couple a change in rate structure along with opening entry to the industry. This would allow drivers to expand their base of customers by offering competitive fares, especially to the elderly--the fastest growing segment of society who rely heavily on taxicabs, but many of whom also have fixed incomes. To protect visitors to the city as well as others who rely on taxi service who may not be familiar with rates, a fare ceiling may be imposed to restrict any price gouging that may occur. Indianapolis used this approach recently with successful results. This price ceiling, below which competitive fares could be offered, would in all likelihood be what cabs must charge now. With this kind of price competition joined with competitive services, the taxi industry can compete for customers like grocery stores, dry cleaners, or any other less regulated industry. Why should the City of Boston maintain regulations that protect current taxi medallion holders from competition offered by otherwise qualified and capable citizens, who merely want an opportunity to work for themselves and earn an honest living? The answer is simple. It should not. Perhaps the best statement that can be made on the subject of opening opportunity by opening taxi markets was written by Linda Cagnetti of the Cincinnati Enquirer, who wrote, "No city should erect barriers that shut ouLentrepreneurship. A vote for deregulation is more than a squabble over taxicabs. It's a stand for e~ual opportunity, jobs and individual initiative--basic ingredients of the American dream." 5 To deregulate the taxicab industry in Boston, we offer model legislation (attached at the end of this report), which was used in Indianapolis in that city's effort to open up opportunity for those who have been shut out of the system. Optimally, we would like to see the benefits of freedom extended to the entire transportation industry, including C Reducing the Value of Medallions When taXi markets such as Boston's are opened, the inflated value of medallions can be expected to drop dramatically. This is not surprising when one considers that the city of Boston would currently charge a resident $175 to issue a new taXi medallion. But, because the city has created such a scarcity of medallions, well below the market demand, the price a taXi owner pays for a medallion has risen to as much as $96,000. In some instances, people have taken out substantial personal loans or invested their life savings to secure a medallion, and therefore they will fight vigorously to retain the value of their investment. Because government created this potential problem, an argument can be made for the city to buy back all or a portion of the value of the existing medallions to mitigate any individual financial loss. In 1994 Cincinnati Mayor Roxanne Qualls perhaps best summed up the lunacy of retaining the current system as her city moved to deregulation: "Both consumers and cab drivers have suffered because of an ill-advised council policy which uses "public convenience and necessity" as the basis for issuing licenses. The city interjects its judgment in determining need rather than allowing the marketplace to do so. The current law requiring the safety director to issue licenses based on the public convenience and necessity is too vague. The new ordinance would remove "public convenience and necessity" and replace it with directions that the safety director issue a license to anyone who has a safe driving record, a safe vehicle, insurance and the required license fee. This is a very important change. One of the major problems within the industry has been the hoarding of licenses by companies and individuals. An increase in demand has created a black market on cab licenses so that a cornmodity that can be purchased from the city for $161 is sold on the street for $3,000 or more. City policy should not facilitate the creation of black markets. The second problem with the city's current policy as it relates to taXicabs is that cab companies that control the limited supply of licenses turn around and lease those city- issued licenses to drivers for a profit. Drivers pay as much as $100 to $200 per week for the privilege of using a city-issued cab license. City policies should not create a system where individuals or companies are making a profit by leasing city property. ,,26 c Taxis as Utilities The taXi industry sometimes describes itself as a utility--an entity that is as vital to a city as water or electricity. But while historically it may have been cornmon for governments to protect large capital investments of electric and water companies, such practices have !c c c c "We used to describe the Colorado Public Utilities Commission [which oversees taxi regulation] as an Eastern European-like agency for its suffocating oversight of transportation, but lately that label has become an unfair insult to most of Eastern Europe. Yet even as Poles, Czechs, Slovenians and the like liberate themselves from the shackles of anti-competitive laws, our own PUC continues to coddle artificial monopolies that punish consumers and bar small-time entrepreneurs from making a decent living. ..29 Through the Institute's efforts, similar deregulation was successfully carried out over the past two years in Denver and Cincinnati, as well as Indianapolis. Early indications are that results are positive: In Denver, an African American owned taxi company became the first new entrant into the market in nearly 50 years. In Cincinnati, after deregulation, 209 new taxis (mostly driven by driver/owners) have begun providing the city with additional service.3o In Indianapolis, after only six months of deregulation, there was 'a nearly 7 percent increase in the number of cabs. Seventy-five percent of the new companies are female- or minority-owned. Nearly all the new taxi owners are former drivers who had long wanted a chance to own their own business. Fares were reduced: pick-up charges dropped 12 percent; the average mileage rate dropped 3 percent; and the average first-mile rate dropped 7 percent. Cabs are safer with all companies passing police background checks, enhanced safety inspections, and verification of at least $100,000 in insurance coverage. The program has been so successful that since taxi deregulation, the city did not receive one written complaint, whereas they used to receive hundreds of complaints annually.31 Earlier efforts at deregulation also proved successful at getting new driver/owners on the street: .....the number of taxi rides per capita in Washington, D.C., where entry is not restricted and fares are low, is over four times as high as in San Francisco, a comparable size city where entry is restricted and fares are higher. ..32 Despite these victories, the need for additional, strategic replication of taxicab industry deregulation is great. Cabs remain heavily regulated in cities such as Los Angeles, New York, Miami, Buffalo, Houston, and San Francisco, where market entry is tightly restricted. Such reform is also badly needed elsewhere in Massachusetts, including the cities of Springfield, Worcester, and New Bedford. MODEL LEGISLATION C 6) place of birth; 7) length of residence in the city of Boston; 8) last previous employment; 9) whether the applicant is a citizen of the United States; 10) the date of judgment, court and description of each conviction for violation oflaw by the applicant; II) the date of filing, court and description of each charge pending against the applicant alleging a violation oflaw; 12) all government entities from which the applicant has been previously licensed to operate any type of public vehicle for hire, and each date and cause for which any such license was ever revoked or suspended; and 13) such additional information as the controller deems necessary. Section _' Attachments to the application. c Each application shall be accompanied by: 1) two (2) recent photographs of the applicant in a format prescribed by the controller, designed to be easily attachable to the license; 2) a complete set of the applicant's fingerprints in a format prescribed by the controller; 3) a copy of the applicant's Massachusetts driving record certified within ten (10) days prior to submission of the application; and 4) such additional items as the controller deems necessary. Section . Fee The biannual fee for license to operate a public vehicle for hire shall be [some token amount, e.g. $40.] Section _' Investigation of application. The controller shall investigate an applicant for license to operate a public vehicle for hire. The investigation shall include: c c c c Upon completion of the investigation and any examination of the applicant, and a determination by the controller that the applicant is eligible for a license to operate a public vehicle for hire, the controller shall issue to the applicant a license to operate a public vehicle for hire, in a format prescribed by the controller, which license shall contain the photograph and signature of the licensee, the date of issuance and expiration of the license, and such additional information as the controller deems necessary. Section _' License ,period. A license to operate a public vehicle for hire shall be valid until the renewal date for that license occurring more than one year, but not more than two years, after the date of Issuance. Section _' Renewal date. The renewal date for license to operate a public vehicle for hire shall be the last day of the month of the birthday of the licensee. Section . Renewal. The renewal of the license to operate a public vehicle for hire shall be granted upon the same terms and conditions as the original license. Pending action by the controller on the application for renewal, the applicant shall be permitted to operate a public vehicle for hire under the license issued for the previous licensing period, unless the controller enters an order to the contrary. Article _' General Licensure Requirements for Public Vehicles for Hire. Section _' Separate license. A separate license shall be required for each public vehicle for hire. Each public vehicle for hire shall have one license: either a limousine license or a taxicab license. In order to be licensed, every limousine and every taxicab must satisfY both: I) the general licensure requirements for public vehicles for hire;' and 2) the additional specific requirements imposed by the article for either limousine licenses or taxicab licenses, whichever is applicable. Section _' Eligibility. To be eligible for licensure as a public vehicle for hire, a motor vehicle must I) be a passenger vehicle; c 1) A public liability insurance policy or certificate of self-insurance for the vehicle; safety inspection of vehicles shal1 be conducted annually or every 25,000 miles, which ever comes first, to ensure the public's safety. 2) A certificate of inspection verifying the safe condition of any public vehicle for hire. Such an inspection shal1 be made twelve months after the award of a license. ABOUT THE AUTHORS John E. Kramer is director of communications for the Washington, D.C.-based Institute for Justice, and William H. "Chip" Mellor serves as the Institute's president. The Institute for Justice exists to advance a rule oflaw under which individuals control their destinies as free and responsible members of society. End Notes I Thomas Palmer, "Taxi Turmoil: Limousines' increase worries cabbies," Boston Globe, January 17, 1995, p. 1. 2 Telephone surveys conducted August 18, 1995 with the Indianapolis mayor's office, the Cincinnati Public Vehicles Department, and the Colorado Public Utilities Commission. Survey reflects raw percentages without adjustments for cost ofliving. C 3 Kennedy School of Government Case Study, "Boston's Taxicab Problems, 1970," 1982, p. 3. 4 Original figures from A. Webster, E. Weiner, and J. Wel1s, "The Role ofthe Taxicab in Urban Transportation," u.S. Department of Transportation, December 1974. Dol1ar figure converted to 1992 dol1ars using the Implicit Price Deflator for the second quarter of 1992. "Chal1enging Denver's Taxicab Monopoly," Institute for Justice, January 1993. 5 See Palmer. 6 Janet Novack, "Regulation at its Worst," Forbes, July 11, 1988, p. 48. 7 "Improving the Local Transportation Market," City oflndianapolis, publication in support of Proposal 72,1994. 8 "Chal1enging Denver's Taxicab Monopoly." 9 "Gypsy cabs fil1 a need in neighborhood," Boston Globe, January 10, 1993, p. 1. c 10 Gorman Gilbert and Robert E. Samuels, The Taxicab: An Urban Transportation Survivor (The University ofNortb Carolina Press, 1982), p. 149. c c c 24 Walter Williams, The State Against Blacks (McGraw-Hili Book Company, 1982), p. 25. 25 "Hailing cabs: City regulation blocks the road to slice ofthe American dream," Cincinnati Enquirer, January 18, 1995. 26 Roxanne Qualls, Cincinnati Enquirer, May 31, 1994, p. A7. 27 Novack, p. 48. 28 As demonstrated elsewhere in this report, although entry and service typically improve as the result of opening a city's taxi market, some cities experience a decline in the cost of fares, such as in Indianapolis where fares were deregulated, while other cities experience a rise in fares. 29 "Slaying the Taxi Monopoly," Rocky Mountain News, February 2, 1993. 30 Telephone interview with Cincinnati Public Vehicles Department. 31 "The Fruits of Indianapolis Taxi De-Regulation," Indianapolis Economic Development Committee, January 19, 1995. 32 R.F. Kirby, "Innovations in the Regulation and Operation of Taxicabs," in Taxicab Innovations: Services and Regulations, U.S. Department of Transportation, May 1980.?? 88 Invitation to Change830pening Boston's Taxi Market890pening Boston's Taxicab / Market For further information or copies of this report, contact: Institute for Justice 1717 Pennsylvania Avenue, N.W. Suite 200 Washington, D.C. 20006 Phone: (202) 955-1300 Fax: (202) 955-1329 E-Mail: instituteforjustice.org Pioneer Institute 85 Devonshire Street Boston, MA 02109 Phone: (617) 723-2277 Fax: (617) 723-1880 E-Mail: 75374.643@compuserve.com o o o c c c Cascade Policy Institute A "crsioll orihc lollowing cohllnn .was published ill the Portland (JreKolllall ncv..-spapcr on Fcbmm) J 7. J 997 undcr thc hcadlinc Tatis "clfert f,)., cntr,.-Ic\'cl cnl''CI,,'cncurs. It rcspondcd to a Fcb. 5 cditoriaL "Rethink taxi mles. " whieh staled that "P0I11alld should be accol1lodaling airport shuttles. nol cnlcking down on door-lo-door service.." Open the Door To Portland's Taxi Entrepreneurs by WilIiam H. MelIor and John E. Kramer Serious problems exist within Portland's taxi market, as highlighted by this week's airport shuttle service controversy. Current city regulations have created a cab cartel that restricts entrepreneurs from creating job opportunities and providing better service. Portland should dissolve its onerous regulations and open the taxi market to entrepreneurs. For decades, like nearly 90 percent of cities across the nation, Portland has blocked a primary avenue of opportunity ideally suited to low-income entrepreneurs: taxicab driving. Driving a cab, like street vending, barbering and a host of other occupations, is a perfect entry-level business for the poor because it requires minimal training or capital investment, and the more you work the more your earn. But, the economically disenfranchised are st)mied from entering such occupations by government restrictions. Current city taxi regulations also harm the vel)' individuals most likely to rely on such transportation: the poor, elderly, and others with fixed or low-incomes. These individuals, and other taxi customers, are harmed in at least two ways. First, a low level of competition leads to higher fares; second, less competition decreases service; for example, fewer taxis means waiting longer to get a ride. Several cities recently opened their taxi markets. The results are positive; increased competition has produced more options, better service, lower fares, and job opportunities. In 1994, Freedom Cabs became Denver's first new cab company in 50 years. Today, it employs nearly 100 people and provides service to the historically under-served minority community. In Indianapolis, six months after opening entl)' into its taxi market, there was a nearly seven percent increase in the number of cabs. Seventy-five percent of the new companies are female- or minority-owned. Nearly all the new taxi owners are former drivers who had long wanted a chance to own their own business. Fares were reduced: pick-up charges dropped 12 percent; the average mileage rate dropped three percent; and the average first-mile rate dropped seven percent. Cabs are safer with all companies passing police background checks and enhanced safety inspections. c c c' After deregulation in Cincinnati, 209 new taxis (mostly driven by driver/owners) began providing additional service in the city. Since 1979, through its Bureau of Licenses, Taxicab Supervisor and Taxicab Review Board, Portland has imposed an unofficial moratorium on taxicab permits (licenses required to operate a taxicab). Under the "public convenience and necessity" standard imposed that year, the city gives existing companies an unfair advantage--in fact a veto on entry--over would-be competitors. Though control appears to be in the hands of government, it really rests in the hands of existing cartel companies. The "public convenience and necessity" standard creates yet another nearly insurmountable presumption in favor of established businesses. The entrenched companies can examine an aspiring entrepreneur's application, which identity new market niches. Thus, an old business can that idea and provide the very service the applicant was using to gain market entry. With the standard filled, there is no need for a new company. It should come as no surprise that since the public convenience and necessity standard was enacted, not a single new cab company has entered Portland's taxicab market. The last new entry into the market was in 1976. In a five-year period, from 1985 through 1990, not a single one of the five applications to begin a new cab company was accepted. The four taxicab companies currently doing business in Portland (Radio Cab, Broadway Cab, New Rose City Cab, and Portland Cab) have all been around since 1979. No applications for new cab companies are currently pending. The effect of the de facto ban on new taxicab businesses and, more importantly, on the lives of would-be cab owners and drivers, is devastating. It impairs their ability to earn a decent living for themselves and for their families. It limits their opportunity to work for themselves, instead off or others. It destroys their dream of a brighter future. These aspiring entrepreneurs realize there is no guarantee of success in a competitive economy, but only upon encountering this ban did they realize that they would not even have a chance to compete. Until Portland's oppressive ban is removed, they will be denied one of the most basic civil rights: the right to earn an honest living. The argument for opening taxicab markets rests on the principle that government should not protect for-profit cab companies from competition to the detriment of the riding public and would-be entrepreneurs. Rather, government's proper role should be to protect the public's health and safety. Insurance and vehicle inspection requirements, as well as background checks for drivers, are reasonable. A prohibition on competition is not. Common sense says such decisions can best be decided by individuals in the marketplace, not government bureaucracies. ~"-_._~.~~.,>._~------~_.~~~.~..~--------~-'-'-'----'."'"--~~--~._~---------~- William H. Mellor is the president and general counsel, and John E. Kramer the director of communications for the Washington, DC-based Institute for Justice. This article is c c c adapted from Opening Portland's Taxi Market. one often winning reports from the 1996 Oregon Better Government Competitio!l, organized by Cascade Policy Institute in Portland. _..._-....~..._.--=---._.~..~_"',.._.,.,_.,.".....~'...~_~~...,~~;~._.".~,___,.,_.,._,.,.~.,L.'~ '.__~A '-'<-"_'~"~'''_''~' .. "~__,....q.'.~..~_. Cascade Policy Institute 813 S. W. Alder, Suite 450 Portland. OR 97205 Phone: (503) 242-0900 send mail to info(iiJ.CascadePolicV.ol'1l Rehlm to Cascade home valle o o o c c c 1 This page has been accessed 182 times since 27 May 1997. ----.--- from Regulation which is published four times a year by the Cato Institute. Editorial and business offices are located at 1000 Massachusetts Avenue, N.W., Washington, D.C., 20001. For subscription information, please write to Circulation Department, Cato Institute, same address, or call (202) 842-0200. Send email inquiries to cato@cato.org, or subscribe online via the World Wide Web at: http://www.cato.orglpubs/regulation/reg- ordr.html ..__.,..__...----_._,-,--~._._-~._----- Regulation and the Urban Marketplace Stephen Goldsmith January 1997 Stephen Goldsmith has been mayor of Indianapolis since I 99 I. Contents Introduction RetlUIatorv Study Commission RSC Goals RSC Princinles Chantrlnl! the Permit System A VictorY For Taxis Asbestos: When A City is More Harmful than the Feds SavinI! our Neil!hborhoods throul!h Derel!Ulation How to Identify Beneficiaries of Rel!ulatorv Reform Conclusion Introduction c c r '- 2 My most important job as mayor of Indianapolis is to ensure the continued economic success of America's twelfth largest city. While many mayors rely on one- time tax breaks and attractive incentive packages to lure business to their cities, these are not my primary tools for ensuring Indianapolis's long-term economic bealth. My administration intends to serve Indianapolis by restoring regulatory sanity to the municipal marketplace. Estimates of the costs imposed on the national economy by federal regulation reach $500 billion a year. In Indianapolis, that means more than $1 billion a year is sapped from our local economy just to comply with federal regulations. When it comes to mandates from Washington, we in Indianapolis have no choice but to carry the burden. Federal regulations are but one part ofthe crushing regulatory onus inflicted on America's cities. After meeting the regulatory demands imposed from afar, we are forced to bear the burden of state-imposed mandates, over which we have limited control at best. But the most unacceptable portion of the regulatory load is that which we choose to carry. Indianapolis has only recently begun to confront the problem presented by 2,800 pages of local regulations. Upon taking office, I sought to tackle our regulatory problems by first preparing a full inventory of all the areas we regulate. Then we surveyed local businesses to gauge their sense of the regulatory impact on doing business in Indianapolis. The top three responses listed as "Impacts on Profits" were: taxes, environmental regulations, and "all other regulations." Community leaders had often complained about local regulation, but this survey gave us our first hard data about the degree of public discontent with the local regulatory climate. Governments have a hard time comprehending the reality of these complaints. Governments do not pay taxes, they collect them. While the cost of regulation reduces the size of employers' payrolls, enforcing new regulations expands government's payroll. Because bureaucrats do not pay the costs associated with meeting the mandates of a regulation, they are often the least suited to make decisions balancing regulatory costs and benefits to the local economy. The Regulatory Study Commission In order to help remedy this problem, I created the Regulatory Study Commission (RSC) in July 1992. The RSC's fundamental operating principle is a regulatory version of the ancient injunction to doctors: first, do no harm. Of all the RSC could achieve, its most important contribution will be hardest to quantify; not what it has positively accomplished, but what it has prevented. c c c 3 While the RSC's performance has not been flawless, it is being cited nationally as the most comprehensive and successful local regulatory reform effort of any city in the United States. I believe that the success we have had stems from our operating goals and principles: RSC Goals: . To lighten the regulatory burdens imposed on the citizens and businesses of Indianapolis. . To use the local regulatory code as a tool to encourage new business opportunities. . To eliminate regulatory barriers to the creation of affordable, resident-owned housing. . To eliminate regulatory impediments to easier citizen access to municipal services. RSC Principles: . Regulations should be used as a tool to achieve a policy objective only as a last resort. The use of regulations indicates a failure of all other means to achieve a policy objective. . The cost of a regulation should be no greater than the benefit it creates for the community: . Regulations must be simple, fair, and enforceable. . Regulations must be written to insure the imposition of the minimum possible constraints upon businesses and individuals. . Regulations must never exceed existing federal or state standards unless there is an overwhelming, compelling, and uniquely local reason for them to do so. In its two-year existence, the RSC has pinpointed many areas where regulatory policy conflicts with these principles. Changing the Permit System There are few areas in which the problems of regulation are more evident than the disincentives in the building and development permitting process. The more permits we require, the more hassles and expenses we load on our builders, which gives them even more incentive to build and grow elsewhere. A RSC subcommittee charged with re-engineering our development permission process spent the better part of a year designing the Indianapolis Homeowner 4 c Freedom Act (IHFA). This initiative, which received a "do-pass" recommendation from the City Council's metropolitan Development Commission on November 22, represents a giant step toward making building and living in Indianapolis more competitive with our lower-taxed and less-regulated neighbors in adjacent counties. The IHF A will drastically reduce the number of annual transactions our citizens and developers will have to conduct with city bureaucrats, while greatly relieving the city's workload. If adopted as submitted to the Council, IHFA will eliminate an entire category of permits currently required for "low-impact" home repair. Currently, we require permits for embarrassingly minute tasks. A citizen who wants to do something as routine as replacing a door or installing a bathroom fan must first come downtown, find a place to park (a task neither easy nor cheap), make his or her way up to the 21st floor ofthe City-County Building, only to stand in what can easily be an hour-long line, fiU out a series of forms, and submit to an interview by a "permit specialist," at which point the homeowner must pay the city a permitting fee for the privilege of improving his or her property. c This re-categorization of low-impact permitting will eliminate more than 7,200 permits a year and the litany of hassles listed above. But the IHF A goes much further. In addition to eliminating permit requirements for low-impact work, we plan to tie a permit employee to a particular project in much the same fashion that a case worker stays with a family. Once adopted, our plan will redirect the entire focus of our internal operation away from self-perpetuating bureaucracy and towards meeting the needs of our customers. The IHF A will allow builders and contractors to obtain a single master building permit for an entire project rather than demanding that each subcontractor be individually permitted, as is presently required. This reform will dramaticaUy reduce the time and resources that our builders and contractors are forced to devote to bureaucratic compliance, thereby increasing the time and resources they can dedicate to the much more important task of building homes. Another example of over-regulation imposing unnecessarily large costs on private enterprise is the arcane system our city uses to issue encroachment permits- permits needed most commonly for landscaping, awning, or signs. Under our old system, a citizen submitting an application to improve his business or residence had to wait up to eight weeks while the site plan was reviewed by as many as four city agencies. The president of a local bank recently told me about the ordeal he had to undergo in order to obtain permission to put on an awning at his new downtown branch. He spent more than twice as much money on professional help in navigating the permit bureaucracy than he did on the awning itself. Unfortunately, what seemed remarkable to our local bank president is far too routine for many of our citizens C and businesspeople. 5 C A Victory For Taxis The RSC begins with the premise that regulatory restrictions must be justified, not simply assumed. From that starting point, we search for the least burdensome level of regulation that meets our objective. Not surprisingly, we learned upon assuming office that very little of our regulatory code had ever been subject to such a test. The taxi industry is a good example of an area where regulations had completely displaced the economic principles of demand and competition. The number of licenses was fixed and so were the fares. At a series of public meetings designed to develop community consensus on the need for dramatic regulatory reform in ground transportation, nearly everyone who testified confirmed our worst fears. Complaints about service were rampant. Because the local industry was protected from competition, the near universal judgment was that service was poor, expensive, and highly selective. If you happened to live in a neighborhood that the dominant providers did not want to serve, namely, low income and high crime areas, you were out of luck. c Drivers who wanted to go into business for themselves argued that local regulations made it virtually impossible for them to own their own taxis. Denying business opportunities is bad enough, but to do it to the very people who need entrepreneurial opportunity most is downright shameful. Entry into the Indianapolis taxi market was tightly controlled; the city government had set the ceiling on taxi permits at 392. The taxi market was a de facto monopoly controlled by a single large operator who owned or controlled, either directly or indirectly, nearly two-thirds of the 392 taxis. The RSC determined that local taxi service was so poor in large part because the regulations that governed them were so bad. Taxis and ground transportation became a major test of our administration's credibility to deliver city-wide regulatory reform that could lead to real enterprise creation. If we were to do anything to reform the local regulatory marketplace, ground transportation was the arena in which we had to deliver. c But after a nearly two-year battle, the City County Council fmally voted 21-7 to adopt Proposal 72 into law in May of 1994. On July 1, the artificial cap on the number of taxi licenses was lifted, offering the first significant prospect of new market entrants into the ground transportation industry since shortly after the end of the Second World War. For the first time in just as long, the new law lifted the prohibition against "cruising," or hailing a cab. This anti-competitive provision was cunningly designed to prevent new market entrants from getting into the business by cruising the streets. Since the only practical way to get a cab was to call one, only those cabs with city-approved radio dispatch systems could compete, and since the only companies that could afford the city-approved dispatch system were the few c c c 6 dominant, well-heeled, and legally protected providers, their position in our market was secure. The impact of the new Indianapolis ground transportation ordinance, which also abolished the official minimum fare, allowing taxis to charge as little as they like for a ride, even surpassed our own expectations. In the first month, the number of licensed taxi operators rose an amazing 60 percent, from twenty-eight licensed companies to forty-fIVe. In addition, the new competition dropped fares among the new licensees almost 7 percent. But perhaps even more impressive than reduced fares and increased competition is the effect that the new market system has had upon the drivers themselves. Nearly overnight, the dress code for taxi drivers went from ripped T-shirts to collars and ties. Cabs are noticeably cleaner, cabbies are friendlier and their vehicles are more visible on our streets. In all, there have been twenty-nine new taxi companies licensed since deregulation, which means that the numher has more than doubled since the proposal was adopted. Today there are fifty-nine licensed taxi companies in Indianapolis, and an entirely new industry in jitneys and minivans. Asbestos: When A City is More Harmful than the Feds Upon assuming office, I was surprised to learn of the degree to which many local regulations, particularly environmental regulations, actually exceed existing federal and state standards. Operating on what I thought was a safe assumption that the federal government is not known for its regulatory lenieney, I instructed the RSC to insure that local regulations must not exceed federal or state standards unless there is an overwhelming and compelling local reason for them to do so. Indianapolis, like many other cities across the country, has obtained from the Environmental Protection Ageney (EP A) the right to enforce local, national, and state clean air laws through an independent Air Pollution Control Board. In 1992, the longstanding memhers of that board, previously appointed by the mayor and City-County Council, adopted one of the most stringent asbestos abatement regulations in the country. While I would be the last one to argue against the toughest reasonable safeguards to protect citizens against a dangerous substance, I asked the RSC to determine what, if any, unique conditions existed in Indianapolis that justified such regulatory maximalism. Needless to say, the RSC didn't find much in the way of justification. But what it did find was enough to alarm me and much of the community. Our analysis determined that local adoption of this proposed asbestos regulation could cost Indianapolis residences and businesses anywhere from $8 to $20 million a year. c c c 7 This proposed asbestos regulation would have done much more than cost local industry and citizens millions of dollars. It would have sacrificed jobs by creating yet more economic burdens for businesses wishing to locate or expand in Indianapolis. In addition, the proposed asbestos regulation would have adversely affided compliance incentives. If adopted, the additional burdens of the proposed asbestos regulation might well have increased the risk to asbestos workers by raising the already substantial costs of legal operation. By raising the threshold necessary for abatement, these new regulations might have resulted in just the opposite of what the sponsors intended. Some of our health experts feared that a new, underground "rip-and-run" asbestos abatement industry could pop up in Indianapolis that would obey none of the existing laws, let alone the new ones. Under such a scenario, asbestos workers would be subjected to much more danger than are they now. Fortunately, the RSC's constant scrutiny of new regulations prevented the well- intentioned but misguided Regulation XUI from becoming law. By first performing an evaluation of the pros and cons of additional asbestos regulation and then making the results known to both the Air pollution Control Board and the general community, enough pressure was brought to bear by interested parties to insure effective and independent legislative action to defeat the proposal. The costly measure's rejection by a unanimous vote of a normally pro-Air Board City-County Council was an important legislative victory for the RSC. Saving our Neighborhoods through Deregulation Restoring regulatory sanity is a critical component of rescuing our inner city neighborhoods from decay and lack of opportunity. I have charged the RSC with reducing the regulatory impediments to expanded residential and commercial development in our neighborhoods. In government's misguided efforts we sometimes place much too much emphasis on process and not enough on results. While I am concerned about how many citations we write, how many inspectors we employ and how much a departmental budget may rise or fall relative to the previous year, I am even more concerned about how much we achieve relative to a policy goal-i.e., how many abandoned buildings did we convert to habitable use, and how many neighborhoods have safer and healthier environments? These are the types of measurements that matter in the private sector, and in the end, they are the only kind of measurements that should matter to us. Measuring what we pay housing inspectors from year-to-year tells us nothing about the condition of residential housing. The Health and Hospital Corporation of Marion County, an independent government entity that in many ways overlaps with our own city bureaucracy, employs more than fifty full-time inspectors to enforce a remarkably detailed housing ordinance that regulates everything from how thick 8 c countertops must be to how many inches off the ground one is allowed to store firewood. This emphasis on process at the expense of outcomes creates results that run counter to the intent of the regulations. After a recent wind storm, for example, one local property owner was threatened with citations and fines for transporting downed limbs from her rental properties to an approved burning facility without a proper permit. As a consequence, this rental property owner will think twice before again attempting to haul debris from her property or similarly trying to provide for the needs of her property and her tenants. A similar story involved a citizen renovating a recently purchased distressed property. She placed the debris under a tarp on the back porch before transporting it off to the dump. Instead of being praised for improving our local housing stock, or even being left alone to continue a commendable project, she was cited for having debris on her property. She was forced to call a trash hauler, which added unneeded expense and delayed the rehabilitation project by several weeks. c Seeking alternatives to the traditional but ineffective bureaucratic approach, I have asked the RSC to investigate the possibility of relaxing housing and development regulations and creating a "Regulatory Enterprise Zone." Instead of thinking in the traditional manner about a designated geographic section of our city I have asked the RSC staff to think more broadly about how to apply the Regulatory Enterprise Zone concept to demographic and economic thresholds. Instead of defining our concept geographically, why not define it through the very people we are trying to help? Since our goal is to spur private development, why not ask those doing the developing to identify the specific non-health-and-safety barriers that prevent an idea from becoming a reality? What would happen to development if we allowed people who fall below certain pre-determined thresholds of income, age or regions, to take advantage of our Regulatory Enterprise Zone development incentives? Such an approach might be more likely to succeed politically because we could identify specific people who stood to gain from the initiative, while minimizing the impact of thrusting the totality of dramatic experimentation, the consequences of which we can not know in advance, upon a single, already distressed neighborhood. Ideally, the Regulatory Enterprise Zone participants would document their successes and failures to help us amend local development regulations by removing burdensome restrictions that add no health or safety value to our community. We are hoping that the data we collect will enable us to employ performance-based standards. If a builder can document areas where more efficient techniques can achieve comparable outcomes, we will gladly amend our city code to encourage such use. By focusing on the result, we believe we will increase the affordable housing C stock available to the people of Indianapolis. 9 C How to Identify Beneficiaries of Regulatory Reform While the RSC has done wonders for the regulatory climate in Indianapolis by preventing destructive new regulations as well as eliminating existing ones, its efforts have also revealed an important impediment to restoring regulatory sanity to our municipal marketplace. I believe that one of the reasons regulatory reform has been overlooked for so long at the municipal level derives from Tip O'Neill's famous aphorism that all politics is local. If local considerations dictate the conduct of public policy at the state and national level, then those concerns will certainly dominate at the local level. c In battling for regulatory reform, the RSC has run up against the classic problem of concentrated benefits and diffuse costs. Identifying constituencies for regulatory reform is difficult, since the costs of regulation are spread over so many people in so many different walks of life. The individual taxicab passenger or home buyer might not realize the extent to which misguided regulation adds to his expenses. To bureaucrats and rent-seekers, however, the benefits ofthe status quo are more readily apparent. Any regulatory reform is a direct threat to their established interests; thus, they are willing to fight for the regulatory policies of the past. Once a regulation is promulgated, the onus for any sort of change is placed on the regulated parties and the community. Perversely, instead of local government having to justify why people should continued to be burdened, we expect citizens to justify why they should be free. The benefits of our more broadly publicized competitiveness agenda have resulted in a clearly definable number of tax dollars saved and an improvement of service that can be felt by all. In addition, those benefits are spread over a fixed class of people who are more conscious ofthe process and able to determine the benefits to them in concrete terms. But the more diffuse the benefits, the more difficult it is to mobilize those people and forces that stand to gain the most. Perhaps our single greatest political challenge is to identify those stakeholders who stand to gain from our reforms and help them work to encourage our effort to reduce the impact of local regulations. In an attempt to build broader support for local regulatory reform, the RSC recently proposed an initiative called Fair Fees for Small Business. This initiative will eliminate licensing requirements for five types of local businesses, saving 426 small businesses more than $85,000 a year in fees and countless wasted hours of annual reporting. Not only does Fair Fees reduce burdens to businesses, it also helps build political support for deregulation. c While $85,000 is a statistically insignificant component of a $471 million annual budget, public reaction has been remarkably positive. Needless to say, the 426 businesses who will no longer have to be licensed by the city nor pay fees for the privilege are universally delighted, if not bewildered by the notion of a government c c c 10 shrinking of its own accord. The proposal has been formally endorsed by both of our mass circulation daily newspapers and the highly respected Indianapolis Business Journal. Conclusion The problems of big cities in America are well known. But what we do not know is how to isolate and concentrate on what aggravates those problems. Municipalities must become more competitive and restore the principles of the marketplace. It is imperative that we hold the line on taxes and restore a sensible regulatory environment. Regulations have smothered the entrepreneurial spirit for so long, that the inefficiencies they create in the marketplace are now a part of doing business. For new entrants to the market, these regulations are at best discouraging. At worst, they are morally reprehensible. We cannot afford to wait for citizens and businesspeople to mount organized campaigns for regulatory reform. Such uprisings often come too late. By the time regulated parties are fed up enough to mobilize against the regulatory bureaucracy, many of them will have been fed up enough to have left Indianapolis. This is the cycle that big city mayors must break. I believe that by restoring market principles to our regulatory environment the RSC will do just that. Founded in 1977, the Cato Institute is a nonpartisan public policy research foundation headquartered in Washington, D.C. The Institute is named for Cato's Letters, libertarian pamphlets that helped lay the philosophical foundation for the American Revolution. The Cato Institute seeks to broaden the parameters of public policy debate to allow consideration of more options that are consistent with the traditional American principles of limited government, individual liberty, and peace. Toward that goal, the Institute strives to achieve greater involvement of the inteUigent, concerned lay public in questions of policy and the proper role of government. The Cato Institute undertakes an extensive publications program dealing with the complete spectrum of policy issues. Books, monographs, and shorter studies are commissioned to examine the federal budget, Social Security, monetary policy, natural resource policy, military spending, regulation, NATO, international trade, and myriad other issues. Major policy conferences are held throughout the year, from which papers are published thrice yearly in the Cato Journal. The Institute also publishes the quarterly magazine Regulation. """ \...t c c II In order to maintain an independent posture, the Cato Institute accepts no government funding. Contributions are received from foundations, corporations, and individuals, and other revenue is generated from the sale of publications. The Institute is a nonprofit, tax-exempt educational foundation under Section SOI(c)3 of the Internal Revenue Code. This essay by Mayor Stephen Goldsmith is from Regulation which is published four times a year by the Cato Institute. Editorial and business offices are located at 1000 Massachusetts Avenue, N.W., Washington, D.C., 20001. For subscription information, please write to Circulation Department, Cato Institute, same address, or call (202) 842-0200. Send email inquiries to cato@cato.org, or subscribe online via the World Wide Web at: http://www.cato.org/pubs/regulationlreg-ordr.html o o c C Baltimore: No Harbor For Entrepreneurs By Scott G. Bullock [Economic Liberty] Institute for Justice 1717 Pennsylvania Ave., NW, Suite 200, Washington, D.C. 20006 Tel (202) 955-1300 Fax (202) 955-1329 http://www .institutefOljustice.org Contents c Introduction Vendin!!: Baltimore's Grand Tradition of Arabbin!!: Newsstands Vehicles for Hire Cosmetolol!:V and Hairbraidin!!: Trash Removal Child Care FamiIv Child Care Child Care Centers Home Based Businesses Conclusion Endnotes Introduction Baltimore is a city-to use a popular catch phrase of urban planners-"in transition." Many of Baltimore's once mighty industries are gone. The city itself has struggled with unemployment and a declining population. More than 21 percent of city residents live below the poverty line, while 16.4 percent of the population receives some type of public assistance. An astounding 46.1 percent of Baltimore households are headed by one parent, the fifth highest ranking among American cities. 1 Despite these depressing statistics, Baltimore during the early 1980s witnessed somewhat of a renaissance, spurred by the development of the Inner Harbor area into a major tourist attraction with shopping and a world-class aquarium. Furthermore, in 1992, the City opened the much-praised, "old-style" Camden Yards baseball park, home of the Baltimore Orioles. c In the City's and State's zeal to promote tourism, attract sports franchises, and revitalize business through public/private partnerships, Baltimore's proud history () of local entrepreneurship and small enterprise has, for the most part, been overlooked. This report addresses the state of entry-level entrepreneurship in the City of Baltimore. The report focuses primarily on the following entry-level areas: vending (including Baltimore's threatened tradition of "arabbing"); newsstand operation; hairbraiding and cosmetology; vehicle-for-hire services (taxis, limousines and vans); child-care centers; trash-removal services; and home-based businesses. Many small enterprises-in such areas as vending, newsstand operation, taxicab service, and garbage collection-face oppressive government regulation or even outright prohibition. This report calls on the City not to lose sight of these industrious, small-scale entrepreneurs struggling to survive in a changing Baltimore. Vending Entrepreneurs who wish to sell food, T-shirts and other goods face an array of regulations, fees and, in certain instances, outright prohibitions. The good news for Baltimore vendors is that the City, unlike numerous other metropolitan areas, does not place a cap on the number of vending permits. This lack of an artificial, and, in many instances, arbitrary limit on permits should open an avenue of entry into the vending business. o Although vendors do not face a numerical restriction on entry, they nevertheless face heavy fees and numerous regulations. All vendors face at least two levels of fees and regulations: those imposed by the State of Maryland and those imposed by the City of Baltimore. Any person wishing to sell non-edible goods such as T-shirts or incense from a stationary stand must obtain a trader's permit from the State. The fee is reasonable- $20. If the stand is mobile, however, the vendor must receive a foot peddler's permit, which costs $202 per year. The great disparity between these permits is unjustified and represents a bias against traditional mobile vendors. The State should equalize the fees for peddlers and traders by reducing the peddler's fee. Even better, the State should remove itself entirely from the regulation and registration of vendors and allow localities to regulate vending on their streets in reasonable fashion. In addition to the categories of vending established by the State, the City classifies vendors into three geographic categories: non-downtown areas, downtown, and city parks. The City requires vendors to acquire one of two tags to affIX to the cart: a pushcart permit, which costs $14 per year, or a wagonlhuckster permit (for wagons, vans, etc.), which costs $20 per year. While these fees seem reasonable, the City does not stop at licensing just the carts used by vendors. To vend in non-downtown areas, a 0 c c c vendor must receive a "minor privilege" permit from the Department of Housing. These permits are issued only to vendors selling food. The Department gives minor privilege permits to "primary users" (store owners who wish to extend their property rights on the sidewalk) and "second porters" (pushcart vendors). A minor privilege permit for pushcarts is currently $324. In downtown areas, pushcart vendors, in addition to getting the pushcart permit, also must obtain a special permit from Baltimore's Board of Licensing for Hucksters, Hawkers, and Peddlers. The application fee is $25, and the permit costs $75 for vendors selling merchandise and $375 for food vendors. Food vendors are hit with additional fees from the City. On top of the special permits for downtown areas and minor privilege permits in non-downtown areas, food vendors also must obtain a retail food permit from the City's Bureau of Food ControL A permit for potentially "hazardous" food (such as hot dogs) is $250 per year; a permit for prepackaged or non-hazardous food is $160 per year. Tom Dambrosky of the Department of Building and Construction estimates that a pushcart vendor who seUs food pays close to $1,000 in permits and fees just to set up. Even if a vendor can afford the rather exorbitant fees charged by the City, he or she also faces a number of regulatory hurdles. To receive a permit to sell downtown, a vendor must submit an application to the Board of Licensing for Hucksters, Hawkers and Peddlers. The application must include a photograph of the location at which the vendor plans to do business and a photograph of the pushcart the vendor plans to use. From there, the application must be reviewed by three City agencies (Traffic, Police, and Community Development). Review by each of these agencies (any of which can recommend that the permit be denied) culminates in a hearing, at which time a decision is made on the application. The hearing board meets only once every other month and requires applicants to submit their materials at least two weeks before board meeting dates. If a property owner objects to a vending station in a particular downtown location, he or she can request a hearing before the Board of Licensing. In non-downtown areas, a competing property owner has a much more powerful weapon against vendors. To obtain a minor privilege permit in non-downtown areas, a vendor must obtain the permission of the property owner on whose sidewalk they plan to operate. This requirement gives effective veto power to store owners, thus insulating them from vendor competition and essentially transferring regulatory power over public property to private entities. The licensing fees coupled with the regulatory process impose significant burdens on vendors throughout the Baltimore area, and limit the ability of would-be vendors to enter the market. For instance, although there is no cap on the number of vending permits, only about 60 vendors currently operate in downtown Baltimore. In addition to imposing stiff licensing fees and a burdensome regulatory process on would-be vendors, the City also prohibits vendors from operating in the most potentially lucrative market in downtown Baltimore-the Inner Harbor area. As mentioned in the introduction to this report, the Inner Harbor is the revitalized J center of the city, and has become a nationally renowned tourist attraction. The City, however, prohibits all vending south of Lombard Street, the street two blocks north of the Inner Harbor. Apparently, the City buckled under to pressure from the Rouse Company (the developer and owner of most Inner Harbor shops) to prohibit vending in the area, undoubtedly to limit competition with their tenants. Admittedly, if vendors could operate in the Inner Harbor area, they would have to be tightly controlled due to the heavy pedestrian traffic. However, the City should not block out a whole area from those who wish to vend. Baltimore's prohibitory attitude toward vending in tourist areas extends to vending within city parks. Prior to 1994, the City issued bids for the opportunity to vend in the parks. One company, Baltimore Sports and Recreation, dominated the bidding process and focused primarily on the adult softball leagues that frequented city parks during the summer. In 1994, the City abolished the bidding process that led to domination by one company and began issuing permits to vendors to operate in the city's larger parks. The permits cost 5250. According to Geri Donnerman of the City's Department of Parks and Recreation, the process and the vending itself became disorganized and the City found itself unable to control unauthorized vending. Donnerman cites examples of unlicensed vendors pulling up onto the grass and selling rugs from the backs of their cars. Because of these and similar problems, in 1995 the City abolished all vending in city 0 parks. The only exception to this prohibition is in Druid Hill Park. In that park, the City runs two concession stands. The City's attempt to deal with vending problems in city parks was both unnecessary and extreme. Rather than prohibiting vending outright, it could have relied on more stringent enforcement of vending rules and regulations to prohibit unauthorized or chaotic vending. While the City certainly has an interest in maintaining order and preserving the aesthetic qualities of its parks, it should reconsider its ban and allow vendors once again to sell snacks, beverages, and other items in a safe, orderly, and aesthetically pleasing manner throughout Baltimore parks. Baltimore's Grand Tradition of Arabbing In addition to these more modem vendors, a slice of history exists amid the narrow streets of West Baltimore. Although practically everyone is familiar with the sights and sounds of modem city life-horns, loud music, chatter, truck engines-a trip to this side of town on a summer day reveals a tradition not familiar to most city explorers: the c1ippity-clop of horses pulling wagons filled with fruits and vegetables and the unmistakable bellow ofthe "arabbers" (pronounced "AY-rabbers") hawking their wares. These few surviving arabbers-the name supposedly derives from a nineteenth century London slang term for homeless urchins and street 0 c c c peddlers2 -are the "only working reminders of a vanished era of horse-and-wagon commerce dating back more than 200 years. They recall a time when deliveries of wood, coal, ice, milk, food and almost everything else were made by horsecart."3 The arabbing tradition is under attack not only from the encroachment of modem life, such as supermarkets and pickup trucks, but also from the stifling effects of government regulation. The decline of arabbing began in 1966 when the City made it virtually impossible to construct any new stables within its limits. Around the same time, government urban renewal projects closed some of the remaining stables as well as the City's wholesale produce market in the Inner Harbor, which made it much more difficult for arabbers to conveniently obtain their stock. The arabbing tradition struggled along, however, until the arabbers faced a larger and far more politically powerful adversary: animal-rights activists from the suburbs who are philosophically opposed to the use of horses for trade, especially in a city environment. To fight efforts that would heavily regulate and eventually prohibit arabbing, the Arabber Preservation Society (APS) was formed in January 1994. The Society- which had restored some older stables and raised funds to preserve arabbing-swung into action against Bill 753, which, among other things, would have sharply limited the number of arabber licenses issued each year. Most members of the community, while acknowledging problems with how the animals were cared for in some of the stables, recognized that arabbing is a vital entrepreneurial tradition worthy of preservation. As Richard Kurin, director of the Smithsonian Institution's folk-life program has recognized: "In the end, when we lose the arabbers. . . I think a bit of the city's soul is lost."4 Because ofthe efforts of APS and others, Bill 753 eventually went down in defeat. The regulations and harassment of the arabbers have taken their toIL Only about 40 arabher licenses are currently issued. Meanwhile, pressure from the animal-rights activists continues. According to Steven Blake, a carpenter by trade and president of APS, new regulations have been pending for more than a year. The regnlations, pushed by the animal-rights activists, would not need City Council approval and instead could be implemented by the City's Health Commissioner. Among other things, the regulations would establish a detailed and stringent temperature/humidity index that would curtail the ability of arabbers to work. For instance, according to Blake, the temperature could be 75 degrees with light rain (but high humidity) and the horses could not be taken out. The racial dimensions to this struggle have not been lost on the community- especially the arabbers. While almost all of the arabbers are older, African- American men from the inner-city trying to eke out a living, the animal-rights activists are uniformly well-educated, white suburbanites on an ideological crusade. Moreover, what the activists ignore is that the arabbers themselves are "horse- crazy" and often choose arabbing as an occupation or do it in their spare time so that they can be around horses. ~ For the grand tradition of arab bing to be preserved, regulations that go beyond reasonably protecting the safety of the horses must be defeated. Indeed, the City should encourage the expansion ofthis dynamic remnant of Baltimore's splendid history of neighborhood enterprise. Unlike most historic preservation efforts, the arabbers do not rely on government subsidies or regulation to preserve their tradition. Rather, the arabbers only ask that the government limit its role to reasonable regulation of the horses and stables and allow them to continue in the occupation many of them learned from their fathers or grandfathers. The arabbing tradition also is important as a rich African-American cultural tradition. In areas of the city plagued by drugs and urban decay, arabbing represents a historical link to an era of more sound communities and to a strong entrepreneurial ethic. Reflecting on the diminished opportunities for arabbing, Dante, the son of arabber John Gladney said: "This is a simple lifestyle. My generation was misguided on how to survive. It was all big-screen TVs and gang [fights). We lost reality within ourselves. But with arabbing, you can be your own boss, work your pace. "5 As controversy continues to swirl, older arabbers like Pistol, Man-Boy, and Nubby (arabbers rarely go by their given names) will watch over the stable near Hollins Market and swap stories as the few remaining arabbers load up their wagons and 0 hit the streets. Despite the challenges faced by arabbers, these resolute entrepreneurs will doubtlessly kecp going unless extinguished by overzealous government regulation. As arabber Keith Brooks explained to the Philadelphia Inquirer: 'They try to push the arabber out of business. But I love this job. Becn doing it 28 years. Sometimes I get in fights with my girlfriend over it. She said I care more about my horse. And I said, 'Girl, don't talk about my horse.' By early evening, Brooks and Roy were clopping through the honey-combed streets near Camden Yards, the arabbers voice still strong: 'Fruit man. Strawberrrrries. . . .'6 We recommend several reforms to open up opportunities for those who wish to vend. First, the fees charged for permits, especially food-vending permits, should be substantially reduced. Second, the regulatory process for Baltimore vendors should be streamlined to make it less burdensome and bureaucratic for would-be vendors to obtain licenses. Third, the abutting property owner's veto should be eliminated in non-downtown areas. If an adjoining property owner has a problem with a vendor, then he or she can present those problems to the board, but the property owner should not be granted an automatic-veto right. Fourth, the City should open up the area south of Lombard Street and allow limited vending in the Inner Harbor area. Fifth, the City should open the city-owned parks once again to limited vending. o 'C c Finally, the City should allow arahbers to continue in this venerable tradition by limiting its role to reasonable regulation of the horses and stables. Newsstands How ironic that Baltimore-the home of one of America's most famous newspapermen, B.L. Mencken, and whose City logo proudly proclaims it to be, "The City That Reads"-prohibits newsstands entirely within its bounds. Although one can buy newspapers from boxes (which, incidentally, are tightly regulated), newsstands are simply forbidden. This ban is unreasonable and may even raise First Amendment concerns, as it prohibits a common means of access to information.7 Newsstands are a common feature of life in most American cities, a place where pedestrians can browse through magazines or quickly buy a paper. Newsstands come in various shapes and sizes depending on the foot traffic and potential congestion in a particular area. Although limiting congestion and potential hazards on city streets are legitimate governmental objectives, such interests can be furthered through regulation of the size and location of newsstands, rather than prohibiting them outright. It would be a boon to entrepreneurship and a fitting tribute to Mencken's legacy for Baltimore to lift its prohibition on newsstands. Vehicles for Hire The State of Maryland's Public Service Commission regulates taxicabs and passenger-carrier services in Baltimore. Indeed, the City really has no say in the "vehicle-for-hire" industry, and the Baltimore City Code contains only two sections relating to taxicabs. 8 In contrast, the State's Public Service Commission has extensive regulations governing vehicle-for-hire service in each county and city in the state. Maryland classifies "vehicle-for-hire" services in two categories: taxicabs and passenger carriers (charters, limousines, coaches, shuttles, etc.). The State issues permits for operating both a taxicab and a passenger-carrier service. Although the commission issues permits to either individuals or corporations that wish to operate taxis, permits for passenger carriers are issued only to companies. The bright side for individuals or companies who wish to start these services is that the State does not charge for the permits and there are no mandatory courses for those who wish to go into the business. The sharpest contrast between passenger-carrier services and taxicabs in Baltimore is that while no cap exists on the number of permits issued for passenger carriers, the number oftaxi permits is strictly limited. Only 1,151 taxi permits have been issued for Baltimore, and that numher has not changed for approximately 20 years. Because the City has reached its limit and the Commission will not issue more r permits, permit owners must trade among themselves. As a result, even though the ' '- City imposes no fee for a permit from tbe Commission, obtaining a permit tbrougb trade costs between $12,000 and $20,000. :>' Given tbe cap on taxi permits witbin Baltimore, it is not surprising tbat tbere are only eigbt "approved associations" or companies operating witbin tbe city. Wbile some cabbies own tbeir own permits, most cannot afford tbe permits and must tberefore work for a company. Some cab drivers cboose to work for companies even if tbey own a permit because of bigh insurance rates and tbe ability to take advantage of dispatcb service. However, it costs drivers (or "independent contractors") approximately $80 to $85 per day to rent from tbe company (or, in tbe words of tbe taxicab industry, to become "members" of a particular cab association). Witb gasoline costs averaging $20 to $30 a day, many cabbies must work very long days to turn a profit-sometimes as bigb as 17-bour sbifts, even tbougb tbe legal limit is 12 bours. In addition to tbe insurance costs and dispatcb services, many drivers cite anotber less savory reason to work for a company despite bolding a permit-tbe favoritism sbown by many downtown businesses and tbe City government toward large companies, especially Yellow Cab. Cabbies complain tbat downtown botels will only allow certain cab companies to pick up at tbeir location. Tbis practice even extends to city-owned facilities sucb as tbe convention center, wbere police officers and City employees bave been known to bassle non-Yellow cabs waiting for fares. Baltimore's restrictive system of taxicab regulation bas deteriorated working 0 conditions for tbe drivers and bas produced poor results for consumers. A recent article in tbe Baltimore Sun concerning Royal Cab Company's purcbase of permits from otber companies concluded tbat tbe "deal doesn't mean pedestrians will sudden~ be awasb in cabs, tbe scaree number ofwbicb tend to orbit around local botels." Moreover, leaders in tbe minority communities of Baltimore underscore tbe Sun's report. Many cite inadequate taxicab service to tbe city's poorer areas and long waits before a cab will arrive for a pick-up, if tbe cab arrives at all. Anotber result of tbe cap on permits is tbe rise of gypsy cabs or "backers," illegal, unlicensed cabs tbat try to fill in tbe gaps in service. Not surprisingly, backers cause mucb consternation among licensed cabbies trying to make it on tbeir own or witb a cab company. Tbe State of Maryland sbould open entry into Baltimore's taxicab market by lifting / tbe cap on tbe number of taxis permitted on tbe streets, providing greater entrepreneurial opportunities for drivers and better service for consumers. Anyone witb a safe driving record, a safe vebicle, and tbe proper insurance sbould be allowed to enter tbe taxicab market. In advocating opening tbe taxi industry in ber city in 1994, Cincinnati Mayor Roxanne Qualls described a situation quite similar to Baltimore's, and eloquently stated the case for reform. By capping tbe number of permits, tbe State: o c c c interjects its judgment in determining need rather than allowing the marketplace to do so... . One of the major problems within the industry has been the hoarding of licenses by companies and individuals. An increase in demand has created a black market on cab licenses so that a commodity that can be purchased from the city for $161 is sold on the street for $3,000 or more [up to $20,000 in Baltimore]. City policy should not facilitate the creation of black markets. The second problem with the city's current policy as it relates to taxicabs is that cab companies that control the limited supply of licenses turn around and lease those for a profit. Drivers pay as much as $100 to $200 per week [usually at least three times that in Baltimore] for the privilege of using a city-issued cab license. City policies should not create a system where individuals or companies are making a profit by leasing city property.IO In addition to adopting the reforms referenced previously, Baltimore officials should also refrain from favoritism toward any cab company, thereby placing all cabbies, whether independent or company-employed, on equal footing. Cosmetology and Hairbraiding The practice of African haircare has been a growth industry throughout the nation. African hairstyling consists primarily of braiding or "cornrowing" hair. The practice differs from traditional cosmetology in that African or natural haircare eschews the use of chemicals, relaxants, and other trappings of traditional cosmetology. Despite the significant differences between African hairstyling and traditional cosmetology, many state boards of cosmetology seek to impose the entire regulatory apparatus on those who wish to practice hairbraiding and cornrowing, often with destructive consequences for entrepreneurship. Until recently, hairbraiders in the State of Maryland faced a similar situation. (Regulati()n of cosmetology in Maryland occurs at the state level by the State Board of Cosmetologists, a division of Maryland's Department of Labor, Licensing and Regnlation). Consider the case of Bikane Diop, an immigrant from Senegal. Noting the growing popularity of braiding and the lack of an established braiding shop in the Baltimore area, Diop in 1994 opened the African Braiding House on Charles Street on the north end of Baltimore. He applied for and received a business owner's license from the City, hired several skilled braiders, trained others, and began what in only a year's time turned into a successful small business. In August 1995, inspectors from the State Board of Cosmetology visited Diop's shop and discovered that Diop and his braiders did not have cosmetology licenses. He was told that he and the braiders must obtain cosmetology licenses for the braiders to continue and for the shop to remain open. If he did not abide by the cosmetology law, he would face fines and even jail time. A cosmetology license in the State of 'J Maryland requires 1,500 hours oftraining in an approved school. The examination for a cosmetology license includes demonstrating knowledge of pin curls, fingerwaves, and other hairstyles that have not been popular for close to half a century and are never used in hairbraiding. Diop and several other braiders from other parts of Maryland were summoned before the State's Cosmetology Board. At the hearing, Diop met Taalib-Din Uqdah, a national advocate for the reform of cosmetology laws and a champion of the rights of hairbraiders. Both Uqdah and Diop spoke at the hearing of the inapplicability of traditional cosmetology laws to the art of African hairbraiding. They urged the Board to either explicitly exempt hairbraiding from the cosmetology laws, or, at a minimum, to create limited licensure for hairbraiding. Although the Board initially seemed reluctant to accept any changes in the law, the hairbraiders were informed after the hearing that the board supported the concept of a "new limited practice license for hairbraiding."ll Uqdah, working with sympathetic legislators in the Maryland General Assembly, drafted legislation for limited licensure for hairbraiders. The legislation was introduced and a hearing was conducted on February 29,1996. Testifying before the Senate Committee on Economic and Environmental Affairs was Harry Loleas, Deputy Commissioner for the Maryland Department of 0 Occupational and Professional Licensing, the umbrella ageney of which the cosmetology board is a part. To the surprise of virtually everyone, the Department took a position different from the initial position of the cosmetology board: it now favors exempting hairbraiding entirely from any type of cosmetology regulation. Loleas' testimony before the committee, which reveals a keen understanding of the problems faced by hairbraiders, merits quotation: [T]he current cosmetology law does in fact cause a significant problem to hairbraiders. They are in fact either illegal or forced to take a cosmetology curriculum that does not reflect their true curriculum and the knowledge they need to practice their profession. But our reaction in how to deal with this has evolved over the last few months or so. Our initial reaction to this was in fact to look at the idea of having a limited license for hairbraiders; but as the department has considered this more fully, we have come to the conclusion that.. .the definition of cosmetology be changed to deregulate; to take out of any regulatory mode, hairbraiding. That the issues of health and safety and other issues which normally drive regulation are not there in a significant extent for this profession to require the intervention of government. . . . We commend the department's change of heart. Hairbraiding and hairbraiding salons could still be inspected to ensure that health and safety concerns are o c c c addressed, but the irrelevant cosmetology regulations need not be applied to this craft to satisfy legitimate governmental objectives. Although the department's 180-degree turn diminished the need for separate licensure, the Department should still make official its determination that hairbraiding is exempt from cosmetology regulation through the issuance of an opinion letter or a formal rulemaking procedure. Contrary to the Loleas' testimony, the statutory definition of cosmetology need not be changed to exempt hairbraiding, since the practice of braiding and cornrowing is not explicitly included in the current definition of cosmetology under Maryland law. Again, the Department should, at the very least, issue some type of official opinion letter or rule to make its position absolutely clear, so that other braiders will not be subject to harassment or threats simply for practicing their craft. Moreover, the Department should apply its insights onhairbraiding to the entire cosmetology profession. The Department should re-examine the extensive and antiquated training it requires for cosmetology licensing. It should question whether the l,500-hour requirement really protects public health and safety or if it rather serves as an anti-competitive impediment to entry into the cosmetology profession. Trash Removal Trash collection in the City of Baltimore is a public monopoly. The 508 employees of the Collections Division of the City's Solid Waste Department do all of the trash pickup within city limits. The monopoly extends to both residential and commercial trash removal and to the collection of recyclables. Moreover, it is illegal to "scavenge" (pick up recycled materials that are left for City collection). The fine is $500. In addition to collecting trash, some of the City's collection employees are actually "beautification police." That is, supervisors from the Collections division patrol city streets looking for unkempt lawns that may violate the City Code, regardless of whether a complaint has been made. As a result ofthis monopoly, private businesses are excluded from the marketplace. The Superintendent of Collections for the City of Baltimore, while admitting that privatization has been discussed in the past, defends the monopoly primarily on the grounds that the City performs non-recyclable collections twice a week, while most private companies only pick up once a week. Contrast the City of Baltimore's trash removal system to the one in Baltimore County. The county has almost entirely privatized its collections system. It employs 49 collection companies to pick up the trash of its more than 320,000 residents. Each company has a specific area in which to perform trash collection. If for some reason a hauler cannot pick up, the county makes sure that the trash is removed. Accordingly, it keeps a limited number of county employees on hand. Compared with the more than 500 employees of Baltimore, the county collection department has fIVe employees. According to Bill Horn, Superintendent of Baltimore County Department of Collections, the collectors make their rounds once a week, with alternating pickups () for bottles and paper. Apartment complexes receive service twice a week, because, according to Horn, they do not yet have proper reeycling programs in place. Horn said the county's collection system provides efficient, cost effective service to its customers, and he has never received complaints that the trash is not picked up more frequently than once a week. When asked why places like Baltimore City have collections two times a week without any corresponding benefit to the public, Horn responded: "People do not like to change." In comparing Baltimore County's system oftrash collection to the City's public monopoly, it seems hard to justity keeping competitors out. of the marketplace on the grounds that the public monopoly provides pickup twice a week-as opposed to once a week-especially when there does not seem to be any corresponding benefit to the public. Moreover, the county's privatized system creates a public benefit: business opportunities for 49 companies and their employees to enter the market. In fact, Bill Horn of the county's collection department believes that one of the reasons for the success ofthe county's system is that the contractors are either locally owned or the employees live in the communities in which they work. Although initial capital costs can be quite significant for entrepreneurs, Baltimore County's system allows smaller companies into the marketplace and provides entrepreneurial opportunities for dozens of companies and their employees. The City eviscerates these opportunities through maintenance ofits monopoly. The City 0 should reconsider its monopoly on trash collection and follow the lead of Baltimore County in opening up its trash collection service to private companies. Child Care In Baltimore, child care is divided into two categories: care provided by licensed child-care centers and family child care provided in the home. The regulation of both types of child care comes from the State of Maryland, not City of Baltimore officials. Given Baltimore's alarmingly high rate of nearly 50 percent of households headed by a single parent, it is essential to maintain low-cost and easily available child-care services. Thankfully, Maryland seems to have adopted a fairly reasonable regulatory regime for child care, with some exceptions. Child-care centers in Maryland must be licensed, while family child-care centers need only be "registered" with the State. Baltimore allows a home to care for up to eight children (the maximum permitted by the State) without obtaining a variance from Baltimore's Zoning Board of Appeals. 12 A use permit required by the Zoning Board to operate a family child-care center is $14. One of the most admir,able aspects of Maryland's system is that the State charges no 0 fee for the license application, the licenses or registrations, or the orientation classes . c c c it requires for those who wish to provide child care. This eliminates at least one potential hurdle for those who wish to enter this burgeoning field. Family Child Care In regard to family child care, the application for registration is rather extensive, but most of the requirements focus on ensuring the health and safety of the children (such as emergency escape plans for the home, notarized permission forms to examine records of child abuse, etc.).13 However, some of the requirements, such as submitting a statement of the outdoor areas, playgrounds, parks, and pools near the home, seem directed not at protecting health and safety, but at guaranteeing a certain level of recreational opportunities outside the home. Such factors should not be a basis for denying registration to a family child-eare center that may be fully capable of providing care and enjoyment to children within the home or backyard without resort to outside activities. Another troublesome regulation of family child-eare providers is the built-in bias against issuing any waivers or variances to the regulations. The regulations provide that the State may not waive a particular regulation or grant a variance unless a child-care provider "presents clear and compelling evidence that a regulation is met by an alternative which complies with the intent of the regulation... ."14 Although it is certainly important to not vest too much discretion in State officials to waive important health and safety requirements, the State should take a more flexible approach to individuals who wish to provide safe, low-cost care to satisfy ever- expanding child-care needs. The presumption against waivers and the inflexibility of the regulations make it difficult to grant entirely reasonable waivers to those who safely provide child care, but who may not be able to meet every minute facet of the regulations. In contrast to such jurisdictions as New York, Maryland has rather reasonable educational requirements for directors and employees of child-care centers and for those who wish to run family child-care centers out of their homes. To establish a family child-care center, one must attend a three-hour orientation class. The classes are offered twice a month in each ofthe state's regions, usually in local libraries. The family providers must be at least 18 years old. They are not required to have a college degree or any advanced training in child care. The family provider need only complete six hours of health-related classes and three hours of approved training on child development or child-care business classes. For a provider's registration to be renewed (registrations must be renewed every two years), the provider must complete six hours of approved training on child health issues and six additional hours on business-related issues. Child-care Centers As mentioned previously, child-care centers outside the home must be licensed by the State. To be licensed, centers must meet detailed regulations governing everything from food storage to the disposal of refuse.IS Many of the regulations are aimed at protecting children's health and safety. However, some ofthe regulations are so detailed and onerous that they may serve as a barrier to the establishment ilf a child-care center. ~ For instance, the State sets forth in extensive detail, complete with mathematical equations, the space requirements for child-care centen, supposedly to ensure a specific amount of "useable floor space." One must wonder, however, whether such complexity actually serves the needs of children or whether a more flexible standard could be developed that would allow adequate space for children to learn and play without seemingly arbitrary requirements. All directon of a licensed child-care center for preschool children must be at least 21 yean old and have a high school diploma or its equivalent. In contrast to New York's requirement that child-care center directon receive a master's degree or be enrolled in a master's program, Maryland requires that all directon have completed at least six college semester houn or 90 houn of approved training in addition to one year of experience in child care. Perhaps in an effort to lift the credentialing requirements for smaller child-eare providen, Maryland has a three- tiered approach for credentialing directon of small, medium, and large child-care centeno For instance, a director of a large institution (more than 40 children) must have attained at least an associate's degree in early childhood development and have two yean of experience in child care. In contrast, directon of small centen (fewer than 20 children) need only have one year of work experience under supervision or ~ two yean of experience caring for preschoolen as a registered family child-care provider. A director of any center caring for infants needs an additional 4S houn of training in infant care. Maryland's effort to loosen credentialing requirements for smaller centen is commendable. The approach creates a fairly reasonable regulatory environment. Home-based Businesses As throughout the country, home-based businesses are growing rapidly in Baltimore. Unfortunately, zoning regulations that govern businesses operating in the home have not kept up with this important sector of the economy. According to Don Grauel, who handles legislative matten for the Maryland Home-Based Business Association, zoning regulations in Baltimore and many other cities are outdated and create a climate of fear and uncertainty for those starting a business in the home. For instance, many zoning ordinances prohibit business equipment in the home. When these ordinances were drafted, they were obviously aimed at banning industrial-like equipment, such as a printing press, from a residential setting. However, given the breadth ofthe ordinances, they conceivably could be applied to such innocuous modern business equipment as fax machines and computen. o c c c Grauel claims that while the City of Baltimore and Baltimore County have not aggressively enforced their outmoded zoning ordinances, the laws nevertheless make those who wish to start home-based businesses reluctant to contact any government official with questions or concerns, for fear of running afoul of the law. Of coune, this atmosphere hinden the growth of home-based businesses and gives an air of illegitimacy to a vital and growing part ofthe economy. Last year the Home-based Business Association pushed House Bill 158 in the Maryland Legislature, a bill that would have standardized local ordinances throughout the state to make them conducive to operating businesses in the home. Concerns about the displacement of local authority and controlled to the bill's defeat. The Association has now turned its efforts to reform of local laws. Grough points to Montgomery and Prince George's counties as examples ofzoning laws in Maryland conducive to starting up and maintaining a home-based business. Baltimore should likewise revamp its zoning ordinance and lift the veil of uncertainty and fear surrounding businesses in the home. Conclusion In its transformation to a tourism center, Baltimore must not fonake its robust tradition of entrepreneunhip. Too many entry-level opportunities in Baltimore- whether in vending, newsstand operation, taxicab-driving, or trash removal-have been shut down by a combination of state and local regulations. Although sports teams and tourism certainly bring jobs and dollan into the downtown area, Baltimore's small shops and entry-level entrepreneun are also a vital, year-round source of employment and opportunity for those struggling to gain a foothold on the economic ladder. Removal ofthe barrien and regulation documented in this study will go a long way toward making Baltimore once again a center of commercial activity-whether the enterprise be large or small. Endnotes I u.s. Department of Commerce, County and City Data Book, at xxix-xxx (12th edition 1994) (census data). 2 Mary Pemberton, "If The Arabbers Go, A Bit of the City's Romance Will be Lost, Too," Capper's, June 6, 1995. 3 John Sherwood, America's Vanishing Lives 209 (1994). 4 Mary Pemberton, "If The Arabbers Go, A Bit of the City's Romance Will be Lost, Too," Capper's, June 6, 1995. 5 Jeffrey Fleishman, "Vanishing Breed," The Philadelphia Inquirer, May 28, 1996. 61d. 7 See City of Lakewood v. Plain Dealer Publishing Co., 486 U.S. 750 (1988) (leaving open question of t""I\. whether it would be constitutional for a city to ban newsracks entirely). .~ 8 BaiL City Code, Art. 19, **187, 187A (criminalizing refusal to pay fare and making it illegal for eabs outside of the City to pick up passengers within City limits). 9 Alec Matthew Klein, "Royal Cab Buys Two County Taxi Services," The Baltimore Sun, June 3, 1996. to Roxanne Qualls, Cincinnati Enquirer, May 31,1994. II Letter of Kathleen A. Harryman, Administrator, State Board of Cosmetologists to Taalib-Din Uqdah, November 22,1995. 12 Ifthe family child-care center has more than eight children, it must be licensed as a child-care center. If such a facility was operated out of the home, a provider needs a variance from the City's Zoning Board. The variance requires a hearing before the Board and the application Is $175. However, the City's Building and Construction Department reviews plans without charge to determine whether a center needs a variance or not. I3 See Md. Reg. 07.04.01.04. 14 See Md. Reg. 07.04.01.12. 15 See Md. Reg. 07.04.02.35 et seq. ~ Copyright @ 1997 Institute for Justice 1717 Pennsylvania Ave., NW, Suite 200, Washington, D.C. 20006 Tel (202) 955-1300 Fax (202) 955-1329 http://www.instituteforjustice.org __ ',_ "W__.'___._'_~'~_~..__~~H_ ___. _'------....--~_ __.____.~___.._.__~_.~._+..+_..._.._ ..___~._______~_. Back to T AXI-L Home Pa2e o o E ( i ! o o c c c This page has been accessed 194 times since 7 May 1997. PUTTING CUSTOMERS FIRST Taxicab Reform in the Greater Toronto Area (GTA) by Consumer Policy Institute Toronto, Canada April 1997 PART ONE Analysis of the Problems I. Introduction Urban transportation is one of the last transport monopolies to confront the customer-driven challenges of a competitive marketplace. In most cities, the public's flexibility to move freely on a competitive urban transit system has been compromised by the inefficiencies of the local government's monopoly service provider, and by a complex regulatory framework that discourages innovation and prevents safe private sector alternatives. Freedom of movement, and the freedom to pursue a respectable living in a chosen field, should be the right of every individual, yet these freedoms have been limited by self-interest and obliging government bureaucracies since the turn of the century. Authorized jitney transport, for example, has been all but banned in North America since the mid- to late I 920s. Jitneys are taxicabs that run on fixed routes and can be hailed by passengers. They often accommodate up to 10 people as opposed to the six that regular taxicabs are allowed to carry. Jitneys are so named because the fare was at one time a "jitney," which was slang for a 5-cent piece. Jitneys operate today in at least one Canadian city, several small American cities and a number of European cities.ill Unfortunately, the regulatory process is gradually taking the freedom of movement and the right to pursue a respectable living away from society's most vulnerable people, through restrictions in their choice and opportunity. W.T. Stanbury, an economist specializing in the impact of co- redistribution through regulation, estimates that approximately 20 per cent J o o c of Canada's economic output, including taxicabs, is subject to some form of direct economic regulation.ill For the United States, Inc. magazine points out that approximately 10 per cent of all jobs requires some form of licence, and that many of those jobs are low-skill, entry-level occupations such as taxicab driving, working as a street vendor, cosmetology, trash hauling, and recycling.ill A similar analysis has not been done in Canada, but given our tendency to regulate coupled with the fact that all of the industries in Canada listed in the Inc. article are either regulated or government owned, it is reasonable to conclude that the number of regulations that are a barrier to low- income and unemployed Canadians is equal to, if not greater than, the number in the U.S. Nothing illustrates that point more than the taxicab business. in Metropolitan Toronto and surrounding communities that, together, make up the Greater Toronto Area (GTA). c In most Canadian cities, a competitive taxicab industry remains a local or provincial government sanctioned illusion. The business, whose customers are disproportionately those less well off (because limited financial resources often prevent the ownership and operation of a motor vehicle), is one of the last transportation industries to be opened up to a deregulated environment. Tight control on taxicab supply and government-set tariffs have resulted in consumers paying an exaggerated price for a stale and uninspired service. In his 1982 paper, The Taxi Industry and Its Regulation in Canada, Benoit-Mario Papillon points out that most regulations governing the taxicab industry "pushes up the cost of taxi service in Canadian cities [studied] by 30 to 50 per cent. "ill By 1987, in Metropolitan Toronto specifically, taxicab regulation (which includes tight controls on supply and price) had resulted in a price for service approximately 25 per cent higher than if the market was unregulated. ill Taxicab regulation discriminates against single mothers, low- and fixed- income wage earners and the physically disadvantaged by reducing supply in their neighbourhoods and making the product uncompetitive and unaffordable. Taxi regulation also acts as a barrier for displaced workers, recently arrived immigrants, and people on welfare who would prefer a hand-up rather than a handout to become economically self-sufficient in an easy-entry, low-cost business. Although government is cutting back on the handout in the form of reduced unemployment insurance and welfare pay-outs, it is hindering the hand-up by retaining urmecessary regulations that only serve to absorb tax dollars and act as a barrier to individual c entrepreneurship. ~, Finally, current restrictions on vehicle supply is limiting the number of opportunities that postsecondary students have in order to pay for rising tuition fees during a period of high youth unemployment and tighter control and eligibility requirements for student loans. A truly competitive taxicab industry that promoted the use of jitneys and other alternative transportation services would give all members of society greater public transportation options and business opportunities in an age of slashed government budgets, urban transit service cuts, and congested city roads. This study, while commenting on the economic effects of regulation on the taxicab industry in general, primarily focuses on the Greater Toronto Area (GTA), with particular emphasis being placed on the Corporation of Metropolitan Toronto and the proposed amalgamation of the five cities and one borough that will make up the new City of Toronto. II. Evolution of taxi regnlation o The taxicab is the most immediate and flexible of the so-called paratransit vehicles. Paratransit is a term given to small passenger transport vehicles that operate informally on a fare-paying basis. Paratransit vehicles represent the median between the personal convenience of the private automobile and the d&licated route structure of public transit. In most cities, taxicabs cruised the streets in an unregulated, free market until the I 930s, when car prices and wages tumbled, and transit systems and established taxicab companies were confronted by cutthroat competition from struggling, unemployed workers who saw the low capital, easy-entry characteristics of taxicab driving as a way of maintaining a livelihood. According to a report by the U.S. Federal Trade Commission, pressure to regulate the taxicab industry was not stimulated by the public interest, but by limited self-interests. "Pressure for restrictions on the taxi industry came from the American Transit Association, public transit firms, established taxi fleets, and the National Association of Taxicab Owners o f c (which passed a resolution favouring entry and minimum fare controls)."ID According to figures released by the Federal Trade Commission, an estimated 43 out of 93 U.S. cities with a population of more than 100,000 had restricted entry into the taxi industry by 1934. Taxicab regulation in Toronto and other Canadian cities In major Canadian centres, taxicab regulation has evolved much as in the United States. In the I 920s, privately owned streetcar companies, fearful of increased competition, successfully pressured Toronto city council to ban jitneys, arguing that such form of transportation would worsen congestion on already inadequate roads. Existing taxicab owners were also successful in eliminating competition from new entrants by convincing council to regulate the supply of taxicabs on city streets. Council said that regulation was necessary because taxicabs were a public service. c A proliferation of regulation took place in the 1930s and was based on the same economic and anticompetitive arguments. The Manitoba Legislature argued that taxi transport was a public service similar to electricity, telephone, and mass transit monopolies when it limited the supply of taxicabs in Winnipeg in 1935.rn In 1937, Montreal city council based the need for taxi regulation on congestion caused by an unnecessarily high number of taxis. Regulation would also address the low incomes of taxi operators, which city council believed was caused by excessive competition. But Montreal relaxed its restriction on supply in 1946, following complaints by taxi users "tired of being unable to obtain a taxi by telephone," and a subsequent report by 1.0. Asselin, chairman of the city's executive committee, that disputed the earlier rationale. Asselin reported that complaints about an excessive number of taxis came "primarily from those worki~ in the industry," while low wages were a product of the Depression. Immediately after council relaxed regulations on supply, the number of Montreal taxicab licences exploded from 765 to 4,280. Council restored limits on taxicabs in 1952, and taxi regulation in Quebec became a provincial government responsibility in 1973. Creation of the Metropolitan Licensing Commission c In 1956, the recently created Metropolitan Toronto regional govemment set up the Metropolitan Licensing Commission. The Commission has licensing authority over a wide range oflocal businesses, including local taxicab supply and tariffs. "'J The taxicab industry is a public service insofar as its function is to pick up members of the public at the customers' point of convenience and transport them to their destination of choice in exchange for payment. Therefore, a limited amount of regulation is necessary to ensure the safety of the passenger, and to protect surrounding vehicular and pedestrian traffic. Such regulation should cover driver qualifications, vehicle insurance requirements, and vehicle maintenance standards (including compulsory equipment for the purpose of safety). A licensing commission must have the power to revoke a licence if a driver or taxi company is in violation of basic regulations. But most municipal and provincial (or U.S. state) licensing commissions have extended their authority by imposing . regulations on taxicab supply, boundaries of operation, driver behaviour, and price. Excessive regulation has benefitted existing participants in Canada's taxicab industry. Fixed pricing, jurisdictional restrictions, and closed entry have resulted in a transfer of wealth from the customer to the producers in the industry. o III. Protecting a stale industry The shape, size, and mechanics of the Toronto taxicab have altered significantly since the early 1900s when established taxi companies used a willing city council to discourage competition. Market potential -- although weakened by the economic downturn of the early 1900s -- has flourished over the last 10 years. Public awareness and tougher enforcement of drinking and driving legislation, higher automobile operating costs (including insurance), congestion, increased tourism (who, along with business travellers, make up the so-called "floating population"), and greater use of the taxicab as an intercity courier service by the business community have increased demand and created new opportunities for entrepreneurial cabbies prepared to seize the initiative. Little else, except for the fortunes of established taxi companies, has changed since the Metropolitan Licensing Commission took control of the industry in 1956. As a result, consumers are overpaying for an underperforming industry characterized by lengthy waits for unclean o c vehicles, operated by substandard drivers. Commandeering a taxicab is a universal practice, where the customer is given three basic choices: 1. To telephone an order; 2. To secure a taxicab at a nearby taxi stand; or, 3 . To hail a cruising taxicab on the street. The following describes the three options for securing a taxicab in the GT A, and how excessive regulation has severely compromised the distinct competitive advantages of each practice. Telephone orders c The telephone gives a customer the greatest advantage in terms of convenience, flexibility and competition. The vehicle is requested to show up at a precise location 24 hours a day. The customer has exclusive control over the company he will patronize. The percentage of on-time arrivals will vary according to the time of day, weather conditions, and location, but the option of cancelling an order and contacting a rival taxicab service rests with the customer. The telephone order already gives a customer the convenience to preselect a taxicab based on personal criteria and past experience (on-time performance, knowledgeable drivers, cleanliness of vehicle), although service even among operators driving for a specific cab company is not consistent. Because of price controls, the telephone user is denied the added value of shopping the market on the basis of price. Taxi stands Taxi stands originated in 17th-century London as spots where customers could fmd horse-drawn hansom cabs bidding for their business based on price and service. If competition at the stand was too fierce, the cabbie would patrol the streets of London for custom. c Properly managed, a taxi stand should be a model of efficiency in the taxicab business, resulting in fast turnarounds, with clean vehicles and price competitive rates attracting customers, and, to a certain extent, helping to set spot-market rates for nearby cruising cabs (see Cruising taxicabs). Instead, most taxi stands are a subsidized haven for the most inefficient taxicab operators. .~ There are three key reasons taxi stands in an overregulated and protected environment such as Metropolitan Toronto do not work: Lack of incentive: Metropolitan Toronto provides arterial roadway to the taxi industry free of charge for the purpose of maintaining taxi stands. Unlike a private car owner who must pay a meter in advance of parking time estimated (and risks a fine if the time parked exceeds time available on the meter), the taxicab operator pays nothing for taxi stand space, thus eliminating the incentive for fast fare turnarounds. The City of Toronto has reserved three prime taxi stand locations (including the stand in front of Union Station, the city's VIA and commute rail hub), for drivers who are veterans of the Second World War. These spots are now being used by drivers who did not serve in the Second World War, but maintain ownership of those spots through informal arrangements with veterans. o Industry intimidation and unwritten rules: Most customers approach a taxi stand under the misconception that they must take the first vehicle in line. In reality, customers may select any taxicab they chose, although the linear design and apprqach to the stand makes vehicle exiting difficult, and too many drivers are more interested in preserving an unwritten rule of first in, first out, through intimidation and outright refusal to transport a customer. Neither the industry nor the Metropolitan Licensing Commission that regulates it have shown much interest in protecting the customer's right of choice through information and enforcement. System weighted to promote inefficiency: The first two reasons have conspired to create a third; a network of inefficient taxicab operators who use the taxi stand as an opportunity to sit in their vehicles and wait for business to come to them. By encouraging such abuse, the current system of no charge taxi stands permits an oversupply of poor drivers, thus forcing more ambitious drivers, who would likely use a taxi stand as a competitive tool of business, out of the industry. o c Cruising taxicabs The cruising taxicab participates in a fluctuating market, in which the customer's decision to take a cab is often impulsive, and in which the main concern (particularly when weather or time is a factor) is availability of supply rather than price, age, or cleanliness of the vehicle. Price regulation that enforces a flat fee fails to recognize the full asset value of a service at certain times of the day. Regulatory authorities such as the Metropolitan Licensing Commission claim that unregulated tariffs will lead to price gouging, and to congested city streets cluttered with taxicabs and customers bartering and arguing over fares. The criticism is reminiscent of earlier claims that city streets were not wide enough to support jitney traffic. c Cruising, which has been banned in several North American cities, has also become something of a red herring by opponents of taxicab deregulation in general, and unregulated pricing in particular. Many economists who specialize in price regulation dismiss the prospect of fare reductions, since customers who hail taxicabs tend to take the first available vehicle, meaning that drivers who discount fares are cutting into the revenues unnecessarily.OO Both criticisms reflect conventional thinking on the part of the taxicab industry and its regulators. There are, however, innovative methods to introducing price competition while giving customers upfront pricing information and guaranteed discounts. Such voluntary innovations could include posting a standard rate on the side of the door (compulsory in cities such as Washington, New York, and others), using a system of roof lights to indicate when standard, discounted, or premium pricing are in effect, and upgrading the taxi meter to allow the driver to enter an agreed upon per kilometre tariff or flat fare. In a deregulated market, such suggestions should be implemented at the discretion of the taxicab or fleet owner to attract new business. IV. Licences c For two legitimate reasons, the bulk of the taxicab industry (fleet owners and independent taxicab operators) opposed open entry and increased competition; price controls have artificially shrunk the market below its full potential and inflated the value of the licence (referred to in this study as the plate) that authorize a holder to provide a taxicab service. J The Metropolitan Licensing Commission charges $4,500 for a plate, which has a current open market value of approximately $85,000. The open market value of the plate reflects the conditions of the market compared with the number of licensed taxicabs on the road. In 1979, for example, the market value for a Metro plate was $30,000, compared with a market value for that same plate in 1987 (the height of I 980s mass consumption and consumerism) of $105,000. For a first time applicant and potential entrepreneur who wants to invest time and money in the Metropolitan Toronto taxi industry, the average waiting period for a plate is approximately nine years. A successful applicant must purchase any additional plates on the open market. Taxicabs, as previously noted, should be a low-cost, easy-entry business. But because of control on supply and the resulting waiting list, the potential entrepreneur is left with two immediate options: I. To rent a vehicle, thereby increasing the capital value of a plate for the cartel of current owners; or, 2. To purchase a plate on the open market. o The rental of a vehicle further demonstrates the inconsistency of price regulation, and how fleet owners and lessees stand to benefit from regulation. While Metro sets tariffs, it has no corresponding regulation on what an owner may charge an operator to rent his vehicle, thereby ensuring that what limited deregulation exists in the industry benefits the taxicab owner at the expense of both the vehicle contractor and the customer. (Although this study identified Metropolitan Toronto's uneven pricing structure of regulated pricing versus unregulated vehicle leasing charges as a problem for both the customer and the lessee under current market conditions, it does not recommend that the Metropolitan Licensing Commission should attempt to adjust the imbalance by introducing price caps on what a lessor may charge for his vehicle.) Drivers who purchase a plate on the open market do so with the approval of the Metropolitan Licensing Commission (which makes an additional $4,500 per transfer). These drivers are investing in an artificial market where a capital gain (in addition to the estimated annual return of 15 per o c cent on the value of a plate) relies on the issuance of new plates not keeping pace with increases in the fixed and floating population (tourists, business travellers, and so on), and other changes in the marketplace. Price and supply restrictions mean that prosperity in the industry can only come from substandard and costly service to the customer. If Metro were to switch to an open-entry system, the open lI\Wket value of the plate would disappear almost overnight, resulting in financial hardship for those who had purchased a plate on the open market as a consequence to the licensing commission's control over supply. In any attempt to change the status of the GT A from a closed market to an open-entry system, the plate and the compensation for owners will be the biggest obstacle. The issue must be discussed thoroughly and handled appropriately to ensure a smooth overnight transition. c The plate is, in fact, the property of Metropolitan Toronto, and the Metropolitan Licensing Commission reserves the right to revoke it. Those who purchase a plate on the open market, do so with the knowledge that possession does not equal ownership in this instance. But because of controlled entry, the plate has evolved into a necessary business investment for many taxicab owners, sirnilar to capital assets in a fixed business location. By controlling supply while allowing for an open market resale of existing plates, the Metropolitan Licensing Commission has developed an uneven playing field among plate holders that greatly benefits owners who purchase their plate from the commission, while exposing those purchasing plates on the open market to great risk. Based on a $4,500 licence fee and a current open market value of $85,000, a taxicab owner who purchases a plate from the commission has a no-risk opportunity to realize a 1,800 per cent return on his asset ifhe sells the plate at market value after an obligatory three-year holding period. The owner who purchases that same plate on the open market, assumes all the risk since control of the market and ownership of the plate rests exclusively in the hands of the Metropolitan Licensing Commission. c In a normal business environment, risk would often be assumed by the investor. But regulation has made the taxicab industry anything but normal, and control over supply has created an environment where exposure to high risk over the plate is unavoidable if the owner wants to be in business or expand his business to include more vehicles. The commission can decide to increase vehicle supply, introduce an open-entry policy (as is being recommended in this study), or ban the practice of open market resale without compensating the investment made by the open market plate holder. .~ Most Toronto plate owners bought their plates in good faith based on rules established by the Metropolitan Licensing Commission, and with the confidence that the current system would at least protect the value of their investment. For many owners, the value of the plate is security for retirement. It would be unfair for the City of Toronto to implement any new system that would significantly devalue the worth of a plate without offering appropriate compensation. V. Discrimination through regulation Canada's overregulated taxicab system discriminates against women (who are frequent users of taxicabs as a safety precaution when travelling alone), the poor, and entry-level entrepreneurs who lack investment capital or a formal education. The regulations favour those with the most influence, in this case the taxi fleet owners and brokers. In his paper, The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto, Professor D. Wayne Taylor describes Metro's regulated environment as a "producer protection hypothesis." o. "The producer protection hypothesis," Professor Taylor wrote, "calls for regulation to be provided either to offset or prevent the effects of a competitive market situation, or to redistribute income from consumers to producers. The expected effects of this hypothesis are controlled or closed entry, inflated prices above marginal cost, price discrimination, lower quantities of goods produced, production inefficiencies and economic profits. "illU Because the Metropolitan Licensing Commission artificially limits the supply of taxicabs through a controlled-entry policy, consumers paid an estimated 13.5 per cent more for services in 1977 than they should have in an open-entry market. That represents a transfer of $8.1 million from the consumer to the producer. Ten years later, the situation worsened for the consumer. Metro taxicab users were paying 24.8 per cent, or $39.1 million, more than was necessary because of controlled entry. Had Metropolitan Toronto not controlled entry in 1987, a standard trip would o. c have cost $4.90 instead of $6.52, and an additional 730 taxicabs would have been competing for business.ill} Because low-income households often lack the resources to support a private automobile, they spend a larger proportion of their disposable income on taxis than high-income households, thereby bearing the brunt of the inflated price and the lower availability of vehicles. The underprivileged in Canada's urban population are becoming increasingly dependent on taxicabs as cities sprawl and urban transit systems such as the Toronto Transit Commission (TIC) scale back operations in the downtown core to spread limited resources across a broader area.ml The traditional taxicab fare meter has been designed primarily for price- regulated markets where the tariff is set by the distance travelled. In Metropolitan Toronto, as with most jurisdictions, drivers are only permitted to negotiate a flat fare on trips that take them where the vehicle is licensed outside the Metro area, or to the airport. Once outside the licensed jurisdiction, drivers cannot legally pick up fares. The meter is a licensing authority's preferred method of securing a price for service, and enforcing pre-set pricing regulations. c Metropolitan Toronto cannot have a competitive cruising market because !here are not enough taxicabs to hail. Three thousand four hundred taxicabs, or approximately 1.6 vehicles per 1,000 residents, ply Metro streets. U .8. experiences in taxicab deregulation show that cities with open entry have more than three times the number of cabs per capital than regulated cities.Wi And supply helps to control cost to the customer. For example, in New York City the number of so-called medallion cabs is limited to approximately 1.7 vehicles per 1,000 residents. The medallion refers to the metal numbered shield that is attached to the outside of each of New York City's landmark, the yellow taxicab. (In Canada, the medallion is referred to as the licence.) An average four-mile fare in a licensed New York City cab costs approximately U8$5.70. In Washington, D.C., where there is unrestricted market entry and approximately 13 taxicabs per 1,000 residents (the highest ratio in the country), the average four-mile fare costs approximately U8$3.30. c New York City restricted open entry in 1937, but did not increase the original supply of 11,737 medallioned cabs for another 59 years. New York's Taxi and Limousine Commission auctioned off 400 new medallions in 1996 as part of regulatory reforms that included a fare increase of 20 per cent (the first since 1990), and the banning of second- hand vehicles (wiping out the benefit of the increase for many New York City cabbies). As a result of demand greatly outstripping supply, a thriving, underground gypsy cab industry developed in the 1940s. The commission was forced to officially recognize gypsy cabs in 1987, as legitimate vehicles for hire. In theory, vehicles for hire cannot cruise for hailers, must rely solely on the radio dispatch, and cannot place taxi signs on the car roof except in Staten Island. But as writer Thomas G. Donland observes in Barron's, rules governing vehicles for hire are observed mostly in the breach. (ill .~ Drivers of vehicles for hire can negotiate fares with the passenger, which makes them a favourite source of transportation for the telephone market and street smart, frequent cab users searching for the lowest price. Ignoring the environment Taxicab regulation too often works at cross-purposes from the environmental and conservation interests that various governments claim to support and promote. While governments encourage the use of car pools to reduce vehicle emissions and relieve pressure on crowded roads and highways, they refuse to re-introduce the car pool concept to taxicabs by allowing for shared-ride services. A shared ride allows a driver to realize greater efficiencies in his vehicle by picking up and dropping off passengers along a loosely defmed route. Passengers willing to share a taxicab and accommodate a slight deviation from their route to drop off customers would benefit from a lower fare than if they used a taxicab exclusively. During the Second World War, drivers in Washington, D.C., created a hybrid between the exclusive cab and the jitney by displaying destination signs in their front window for passengers to hail a cab that was going in their direction. o In Metropolitan Toronto, the shared-ride concept is available for the disabled and seniors who qualify through the Toronto Transit Commission's (TIC) Wheel-Trans service. But the curb to curb Wheel- Trans service, with its high labour and capital costs, is being reduced through government budget cuts at the same time that demand is increasing. Experiments in the U.S. have demonstrated that shared-ride taxicab service with vouchers for the disabled and low-income users (including seniors) will result in more people being transported at a lower o c cost. ill] A shared-ride policy would also promote local transit and intercity commuter systems by feeding passengers into railway and subway stations and main bus lines -- ironic, given that in the 1 930s, private streetcar operators and public transit commissions pressured city councils to ban jitneys and shared-ride services. The shared-ride service also relieves peak demand on local transit systems. Not surprisingly, neither the TIC nor GO Transit have conducted studies into how their monopoly approach to service cutbacks could be softened by encouraging a more efficient and competitive taxicab industry in the GT A. A second regulatory cause of vehicle inefficiency with an urmecessary consequence to the environment are jurisdictional boundaries that only permit a driver to transport a passenger from one city to another. The driver is prevented from picking up passengers while making the return trip, resulting in an empty vehicle releasing emissions into the environment, occupying road space, and resulting in a personal cost to the driver. c In Metropolitan Toronto, the biggest promoter of waste through jurisdictional restriction has been Lester B. Pearson International Airport, which is located in the City of Mississauga, but whose licences for fare pickups at Terminals One, Two, and Three (privately operated) have traditionally been issued by Transport Canada. Metro's taxicabs can take fares into the airport, but cannot bring fares back into the city without risking a $100 fme. There are, however, no restrictions on airport licensed taxicabs (which are limousines) that transport passengers in and out of the airport. The airport system, which encourages inefficiency through its taxi stand approach to business, serves neither the non-Transport Canada licensed taxicab operator, nor the airline passenger. The increase in licensed vehicles at Canada's busiest airport has not kept pace with the increase in passenger volume. In cases where airport ground transportation managers (commissionaires) are confronted by a shortage of airport licensed vehicles, calls for non-airport licensed cabs are largely ignored because those vehicles must join the taxi stand queue and are forced to yield their place in line to any airport licensed cab that shows up.lli.l VI. The impact of proposed Metro amalgamation and the GT A c The January 1996 Report of the GTA Task Force (Golden Report) and the Ontario government's proposal to amalgamate the five cities and one borough that form the Metropolitan Toronto Corporation will negatively affect urban transportation if reform is not a part of the amalgamation package. J The Report of the GTA Task Force has failed in areas such as urban transportation to recommend a market-driven model to break the supply and price barriers that presently separate the customer from competitive local transportation options. For example, the report recommends the consolidation of taxicab licensing by recommending that licensing for taxicabs, limousines, and tow trucks be assigned to a Greater Toronto Area council representing 29 cities and regions in the GTA. If, as appears likely, the provincial government follows the recommendation of the Golden Report and appoints an unelected Greater Toronto Area council to coordinate services across the broader Greater Toronto Area, and that the council becomes responsible for taxicab licensing without the deregulation of entry and price, three things will occur: I. The inefficient jurisdictional barriers outlined in this study will have been eliminated, except for cities and regions outside of the GTA; 2. Consumers in cities that neighbour Metro will start to see a decline in taxicab service levels; and, 3. Approximately 3,400 Metropolitan Toronto taxicab plate holders will see a combined $170 million investment in plates (based on all available plates realizing full value at current market prices) diluted almost overnight by the increase in supply from neighbour- ing GT A vehicles. Open entry would wipe out the market value of the plate entirely. ~ Jurisdictional barriers Without an increase in vehicle supply, a Greater Toronto Area council would try to meet the public transportation requirements of 4.5 million people with a single pool of GT A taxicabs. From a driver-customer standpoint, the benefits are apparent. A Burlington taxicab driver transporting a fare to Scarborough (which is expected to become part of the amalgamated City of Toronto as of January I, 1998) will not have to o c make the return trip empty. Instead, the operators can pick up and drop off fares over a wider territory. Unfortunately, without reforms that end jurisdictional territory altogether, the same Burlington operator who transports a fare to neighbouring Hamilton will have to either continue to make the return trip with an empty vehicle or break the law to cover the extra cost of transporting a passenger across jurisdictional lines. Increase in taxicab vehicles within the amalgamated City of Toronto Because communities in the GTA outside of Metro are both low density and heavy users of personal motor vehicles, taxicab drivers in cities such as Mississauga, Brampton, Markham, and so on, will be inclined to desert their home market for high density areas such as downtown Toronto. c While the segment of the Toronto market that hails taxicabs would immediately benefit from an increased supply of vehicles, the overall benefit will be limited if price deregulation is not part of a reform package. (Taxicabs in the GTA, but outside of the Metropolitan Toronto boundaries, are unlikely to join a Metro-based dispatch service. What is more likely, is that existing dispatch services in Metro and surrounding communities will be expanded to cover the entire GT A area.) Immediate devaluation of taxicab licences c Even without free entry, the elimination of jurisdictional boundaries will result in a substantial depreciation of the $170 million in plate value of Metropolitan Toronto licence holders. As previously noted, the open market value of a taxicab plate in Metropolitan Toronto is approximately $85,000 (20 times the administrative cost for the region to have issued the original plate). By comparison, the open market value of a taxicab plate in neighbouring Mississauga is approximately $12,000 and will likely see the market value of the plate increase to reflect market and supply. The increase in a Mississauga plate, however, will be limited by the downward pressure coming from increased competition by taxicab owners in smaller communities. In its final report, the GTA Task Force entirely ignored the financial hardship that a recommendation to amalgamate taxicab and limousine licensing would have on the owners of vehicles. J, PUTTING CUSTOMERS FIRST Taxicab Reform in the Greater Toronto Area (GTA) PART TWO Solutions I. Introduction The current laws regulating the taxicab industry have overtaken the delivery of a convenient cost-efficient service to the public. Metropolitan Toronto's city mayors, elected representatives, and the Metropolitan Licensing Commission only appear interested in finding solutions to the region's transportation challenges within the existing regulatory and bureaucratic framework and, in accordance to the interests of public funded services, within the monopoly of urban transit and intercity commuter service providers. Governments and government agencies are not prepared to improve transportation service to the public at large, or increase the quality oflife for low-income households, recipients of government programs, and other dependents on taxicabs if those improvements will result in the reduction or removal of government influence in certain areas of the urban transportation industry. .~ A province-wide, deregulated taxicab industry would transfer the cost advantage from the producer to the customer where it belongs, by increasing supply, reducing fares, and improving service. A truly competitive industry would also create new opportunities, particularly in niche markets such as low-income users and intercity commuters who could take advantage of shared-ride' services across previously restricted jurisdictions. Deregulation, a U.S. experience o c Taxicab competition creates new inner-city jobs. A study by the U.S. Department of Transportation has found that taxicab restrictions cost consumers nearly US$800 million a year. Also, removing those restrictions would also create 38,000 new jobs in the taxi industry.ill) Unlike the recent Canadian practice of using publicly funded infrastructure projects for short-term job creation, taxi jobs would likely be permanent additions to the labour force, offering the independent owners or drivers new opportunities in a previously depressed and underserviced industry. In U.S. cities that have deregulated the taxicab industry to allow open entry, the size of the industry has grown between 18 and 33 per cent with substantial industry turnover among small companies and independent drivers, slight turnover among medium and large companies and no detectable turnover inside the largest taxicab firms.ill) c The City of Indianapolis deregulated its taxicab industry in May 1994 as part of the city's comprehensive deregulation effort. "Bad local regulations hinder job creation, stifle healthy neighbourhood development, and chill business expansion," said Mayor Stephen Goldsmith after announcing a Regulatory Study Commission to eliminate unnecessary and bad local regulation. "In nearly every survey of local businesses, regulation appears at the top of the list of barriers to growth. "iJ2l Prior to deregulation, it was illegal for a cab driver to cruise the streets or for a customer' to hail a cab, resulting in waits of up to 90 minutes for telephone orders. The Indianapolis Department of Metropolitan Development benefitted established taxicab owners by allowing only 392 taxi licences in this city, the 12th largest in the U.S. By eliminating most taxicab regulations (a driver still requires a licence, a US$100,OOO insurance policy, a photograph, and a US$I02licence fee), the number of Indianapolis taxi companies has almost doubled from 28 to 52. Fares have dropped nearly 7 per cent and waiting times have fallen dramatically. All of the new companies are owned either by minorities or women, and an industry that was legendary for its poor service and large volume of customer complaints has not had a single customer complaint regilltered since deregulation.lW c Where open entry has not resulted in improved service and lower fares (or increases no greater than the Consumer Price Index), the culprit is often a dependence on first in, first out taxi stands and airport queues by new drivers and owners without radios. As long as a municipality or airport operator does not seek time-based compensation for taxi stands, and measures are not introduced to free the customer from the industry imposed first in, first out rule, those features of the taxicab industry will preserve inefficiency, poor service, and artificially high prices. ~ II. Benefits of taxicab deregulation As noted in the previous section, if deregulation had been in place in Metropolitan Toronto in 1987, the fare, at the time, on a standard trip would have been $1.62 lower (resulting in a $39.1-million transfer of wealth from the producer to the customer), and there would have been an additional 730 taxicabs on the streets. Telephone orders The telephone gives a customer the greatest advantage in terms of convenience and flexibility. Because of price regulation, however, the telephone user is denied an opportunity to shop the market on the basis of price. If the Metropolitan Licensing Commission did not control price, operators would likely stimulate the market and provide the customer with added information through promotions such as printing tariff schedules (including discount periods), or by taking out ads in newspapers and on billboards. o Customers could telephone in advance and get the best price on a specific trip. Dispatchers could relay the price over the radio network and return to the customer with a confirmation number from the driver who was willing to accept the business. The convenience that computers and management systems have brought to the service industry (guaranteed delivery times by Pizza Pizza and Swiss Chalet or frequent flyer points or customer rewards by Air Canada and Zellers) are missing in the taxicab industry because the Metropolitan Licensing Commission has built protective barriers around the suppliers that exclude benefits to the customers. There are concerns, for example, based on interviews with the Metropolitan Licensing Commission that the City of Toronto (which o c would become the geographic core of the proposed amalgamated city) is evolving into a hail or taxi stand industry because of changing demographics and customer attitude, and a growing realization among drivers that "a live customer on the sidewalk is a bird in hand (while a dispatch order may turn into a wild goose chase). ,,{W The current trend to a dedicated hail or taxi stand approach to the marketplace would result in inconvenience and hardship for seniors, and the physically disabled, who are less capable of going onto the street to commandeer a vehicle. In contrast, increased competition through open entry would preserve and enhance the telephone market as a niche service. Taxi stands The taxicab industry would become more efficient and offer customers a higher level of service at a competitive price if cities such as Toronto were to organize taxi stands on a user-pay basis, either by sellmg existing and new taxi stands to private operators (the preferred option), or by having municipal parking authorities install parking meters. User-pay taxi stands would encourage drivers to attract business while increasing revenue to the city from a direct sale <if taxi stands or revenue from the meter. c Cruising taxicabs The advantages of a price-deregulated taxicab industry are best illustrated by the cruising segment of the market. As with long distance telephone services, a driver's rates should reflect demand. For example, drivers could charge premium fares during times of shortages such as periods of inclement weather, peak rush hour, and the late evening, and lower fares at other times. Cruising in a price-deregulated market requires trust between the driver and the passenger. Both are obligated to honour the fare already negotiated (much the same way that the customer is obligated to pay the amount that appears on the meter at the end of a trip). Taxi meters c Deregulation of the taxicab industry will result in new investment in additional vehicles to increase supply and to lower the price, and in improvement to industry staples such as the taxi meter. For example, in a deregulated industry, tariffs negotiated on the spot between a driver and a customer could be secured through an upgrade in meter technology. A driver would either program an agreed upon per kilometre rate into the meter, or set a fixed rate and issue a receipt that the passenger would pay in full upon arrival at his destination. ~ III. Conclusion and reeommendations Abolition of all restrictions on the taxicab industry, except for those that govern public safety and environmental standards, will result in an immediate increase in taxicab supply, an overall reduction in taxi fares, and improved service, while reducing pressure on urban transit systems, and creating new business and employment opportunities in a low-cost, easy-entry industry. With an increased market for taxi services, the use of private automobiles would decrease, alleviating traffic congestion and air pollution while contributing to a smoother functioning economy. While almost all citizens would benefit from these reforms, they would especially benefit those less well off (low-skilled entrants and consumers who cannot afford an automobile), students looking for employment, and women who use taxi services the most. o But the road to revitalizing urban and intercity transportation through taxicab reform is an all-or-nothing proposition. Metropolitan Toronto cannot afford to do nothing. Open entry will not work without price deregulation. And price deregulation (and other customer service benefits) would be ineffective if the existing inadequate supply of taxicabs in Metropolitan Toronto and the surrounding area was preserved. It is therefore recommended that the province and local govemments take immediate steps to develop a safe, competitive, cost-efficient, and environmentally responsible urban and intercity transportation policy by: 1. Creating an open market for taxieab operators The government of Ontario should immediately create a province-wide open market for the taxi industry by ending price controls, restrictions on taxicab supply and on shared-ride services, and jurisdictional boundaries. Open jurisdiction would include airports owned either by local airport authorities such as the Greater Toronto Airport Authority or Transport Canada. o c 2. The return of competitive jitney services The amalgamated City of Toronto and surrounding GTA communities should end restrictions on shared rides and jitney services. Owners of multipassenger vans and minibuses with safety certificates should be able to provide local and intercity transportation services in competition with transit companies (TAC) and GO Transit. 3. Taxicab driver re-testing To ensure the safety of the passenger, and to protect surrounding vehicular and pedestrian traffic, the Ministry of Transportation should require that a driver must hold a chauffeur's licence to operate a taxicab. The ministry should also make regular driver re-testing compulsory. c 4. Ensuring safety and environmental standards through vehicle certification Each taxicab or multipassenger van used for taxi purposes should be subject to an annual inspection by a certified agent of the Ministry of Transportation. The cost of vehicle certification would be paid for by the vehicle owners. 5. Greater efficieney through user-pay taxi stands Municipalities should set up taxi stands on a user-pay basis either by selling stands to private operators or setting up meters. Transit companies and hoteliers would be able to sell or lease space in front of subway stations, bus stops, and hotels. Airports could charge for space allotted to the taxi pool. 6. Compensation for plate holders Municipalities should develop criteria to compensate plate holders. c References ~, 1. The Economic Effects of the Direct Regulations of the Taxicab Industry (Logistics and Transportation Review, Vol. 25, No.2, September 1989), p. 181. ~ 2. Studies on Regulation in Canada, Executive Summary (Logistics and Transportation Review, Vol. 15, No.1), p. 2. 3. Inc., May 1994. 4. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, March 1982), p. 85. 5. The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto (D. Wayne Taylor, Logistics and Transportation Review, Vol. 25, September 1989), p. 169. 6. An Economic Analysis of Taxicab Regulation (Federal Trade Commission Bureau of Economics Staff Report, May 1984), p. 75. 7. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, Working Paper No. 30, March 1982), p. 21. o 8. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, Working Paper No. 30, March 1982), p. 22. 9. Call a Taxi: Cab Drivers in Pursuit of Liberty and Profit (Barron's, July 12,1993). 10. Logistics and Transportation Review, (Vol. 25, September 1989), p. 173. 11. The Economic Effects of the Direct Regulation of the Taxicab Industry (Logistics and Transportation Review, Vol. 25, No.2, September 1989) p. 179. 12. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, March 1982), p. 31. 13. Private Innovations in Public Transit (John C. Weicher, American Enterprise Institute for Public Policy Research, Washington, D.C., 1988), p.73. 14. Call a Taxi. Cab Drivers in Pursuit of Liberty and Profit (Barron's, July 12, 1993). o c IS. Revitalizing Urban Transit (Robert Cervero, American Enterprise Institute for Public Policy Research, Washington, D.C., 1988), p. 75. 16. Okay, You're a Taxi (Metropolitan Toronto Business Journal, July/August 1989), p. 22. 17. Wall Street Journal, February I, 1993. 18. Impact of Taxicab Deregulation in the USA (R.F. Teal and M. Berglund), p. 40. 19. Proposal 72 Would Free the Cabs, Help the City (Indianapolis Business Journal, April 18-24, 1994). 20. Revolution at the Roots: Making Our Government Smaller, Better, and Closer to Home (William D. Eggers and John O'Leary, Free Press, New York, New York, 1995). 21. Okay, You're a Taxi (Metropolitan Toronto Business Journal, July/August 1989), p. 21. c Updated: 4/8/97 c ~ o o -- \,., c c I -------....--.-.----..-------.--..-------- ---_.,-_._-_.__._-~-----_.__..._.....__.,-_._--- .-,.,..- ..----.. TAKEN FOR A $1 BILLION TAXI RIDE by Terence Corcoran Columnist Toronto Globe and Mail 5 April 1997 No city in Canada is exempt from the shambles created by the ancient regulatory regimes that govem our taxi industries. In the name of levelling the playing field and making taxis safe and cheap for everyone, our licencing agencies have created a bumpy road patrolled by overpriced taxis operated by undertrained drivers of unsafe vehicles. Any lessons learned? Apparently not. Parts of the national taxi mess explode locally from time to time, sending city officials scrambling to clean things up. In this routine, everbody works up a pet theory about the cause of the problem - too many taxis, not enough regulations, incompetent licencing boards, gret;dy owners, immigrant drivers, whatever - but nobody ever seems to land on the real solution: deregulation. Economists have been working over the taxi industry for decades, finding the obvious economic problem. David Carr, a transport analyst for the Consumer Policy Institute, cites two studies that point to the high cost and distortions of taxi regulation. An Economic Council of Canada study from 1982 concluded that the licencing and price controls imposed by governments push up "the cost of taxi service in Canadian cities by 30 to 50 per cent." Another study of the economic effects ofThronto taxi regulation concluded that consumers pay the price for regulation wbile producers are protected. The policies limit the supply of taxis, inflate prices, lower the quality of service, and cause inefficiencies and higher profits. Despite powerful economic analysis, the push for more regulation still dominates debate. A taxi uproar is under way in Metro Toronto, stirred by the Board of Trade, based on the fact that an inordinate proportion of the area's taxi fleet is made up of ancient, unsafe and unclean vehicles. Drivers don't appear to be in much better shape than the cars. All of this is bad for Toronto's image and tourism. The solutions offered in Toronto, however, appear to be limited to mandatory hosing down of both cars and drivers, removing old cars from the road and tightening some of the licencing rules. None of which win work, because these regulatory solutions merely avoid the core problem. Like most cities across Canada, Metro Toronto controls the supply of taxis by limiting the number of medallions. These medallions, or plates, are government-created pieces of paper that nominally represent the right to operate a taxi. In practice, however, o o o c c c 2 they become like share certificates or bonds, putting a capital value on the shortage of taxis. At current market rates, according to my sources, a Toronto taxi plate is worth maybe $80,000 on the market. The total current market value of Toronto's 3,400 plates, therefore, is about $270-million. In other cities, apparently, the value of each plate can be even higher: $110,000 in Vancouver, $95,000 in Ottawa. A national tally of the total market value of taxi plates could approach $ I-billion. All taxi passengers are therefore being taken for a $I-billion ride by the taxi licencing agencies. A significant portion of each fare goes to pay the owner of the taxi plate a decent return on investment. Indeed, the value of the plates fluctuates with market conditions and interest rates, much like a bond. When interest rates were high a few years ago, and business slow, Toronto's plates were much cheaper, apparently as low as $40,000. These market values are for an artificial shortage of taxis created by a government that restricts supply. Private sector executives can go to jail for doing this. Instead of fares paying for better cars or better wages to drivers, the money is going to owners of taxi plates. If a plate owner controls 60 plates, his investment is worth $5-million at current market prices. Plate .owners do not typically own the cars themselves; the actual taxis are usually owned by somebody else. At current rates, obviously, the $80,000 plate is worth three, four or five times the value of the taxi. The cars and plates are then rented aut on a shift basis to itinerant drivers, who must hustle for long hours to make up the cost of the regulatory apparatus before they get paid themselves. The longer these regimes are in place, the deeper the rot and the more difficult deregulation becomes. Easy though it may be to dismiss the plate owners as greedy absentee landlords, the system is not their creation. The owners were actually fulfilling a useful and logical service under the circumstances. One solution in Toronto, treating the owners fairly, is to buy them out. But at $270- million current market value, that option is clearly out of the question. A better solution would be to phase out the transferable plate system. In many U.S. cities, plates cannot be sold or controlled by anyone other than a driver. When the driver dies or quits, the plate returns to the city and a new driver gets the licence. But that's a makeshift plan that doesn't solve the problem. The best solution of all is deregulation of supply and fares. As with restaurants, governments could licence for safety and driver knowledge, leaving the number of taxis and the prices to market forces. The result, would be lower fares and better service. o o o o j ........- o o I C Taxicab Regulation in Ohio's Largest Cities A Policy Report prepared by The Buckeye Institute for Public Policy Solutions 131 N. Ludlow Street, Suite 317 Dayton, OH, USA 45402 (937) 224-8352 (937) 224-8457 (fax) email: buckeyeins@ao1.com --~-,--~-----'--"_._-~-'-- ..,..--..-.--..-.---------- Taxicab Regulation in Ohio's Largest Cities c c c c c 2 Executive Summary Ohio's largest cities impose numerous regulatory burdens on the start up and operation of taxicab busine: regulations often prohibit small, independent operators from starting a taxi business. This limits econorn opportunities in Ohio's major cities. Additionally, the regulations severely limit service and price compel among taxi companies. Meanwhile, other U.S. cities have found success in deregulating their taxi markets, Within the first six IT deregulation, Indianapolis had 32 new companies start up. In Denver, four entrepreneurs sued the State c Colorado in order to start their own company. "Freedom Cabs" became the first cab company in 48 Yelm up in Denver and now employs 100 drivers. Taxi Regulations . Minimum Number of Cabs: Cleveland will not issue a taxi license to any company with fewer th; cabs, effectively prohibiting independent operators from starting. Cleveland has issued fewer taxi than either Cincinnati or Columbus. . Mandated 24 Hour Service: Akron, Canton, and Dayton require full-time taxi service, 24-hour, 7 week, effectively prohibiting part-time cab services. . Separate Dispatching Office Required: Cleveland and Dayton require cab companies to have a se dispatching office. This drives up costs and ignores the possibility of independent operators usin~ phones. . Proof of Public Need: Toledo and Cincinnati require cab companies to prove their business i! public need. This provides the opportunity to existing cab companies to use their political power new competition. Cincinnati, Columbus, and Toledo also require a public hearing on new license burdening new companies. . Price Competition Restricted: Toledo and Youngstown effectively set rates for all cab companies eliminating price competition. Other cities restrict price competition by prohibiting flat rates and prices to be submitted to city officials before going into effect. . Cab Stands Regulated: Canton, Cincinnati, Cleveland, Dayton, and Youngstown require cabs to , officially designated cab stands. This limits cab owners' ability to negotiate individually with rest bars, and theaters, and respond more quickly to customer traffic patterns. . Cap on New Taxis: Columbus imposed a moratorium on new cab compantes in May 1990. Cleve Toledo put caps on the number of taxis legally allowed to operate (although the cap has not been Case Study: Dayton A review of taxi regulations in Dayton found that the regulations increase the cost of starting a cab comp least $67,000. Dayton requires 24-hour, seven day a week service from all cab companies. It also require hour, seven day a week dispatching office. This effecttvely prohibits an independent owner-operator fror a cab business. This may explain why there are 100 cabs licensed in Dayton, but only four taxi companie operation. _._._.-._-_.._--,._-,._._-_._-_..~_._----~--~-_.._~------_.._-~-_._-----~-------- c c c 3 --,--.'--_._,-_._-------~, -_.._,._~~-----_.--~-_._,-_._.'..,...- .._,-----_..._._..._._~----- ::11..1 The Buckeye Institute for Public Policy Solutions is a public policy research and ~UCKe e education Institute, or think tank. As an independent, nonprofit, nonpartisan . organization, its purpose is to provide Ohio's leaders and citizens with new ways of . thinking about problems facing our state and local communtties. By widely :OLUTIO. LlCY distributing and publicizing its ideas and research, the Institute encourages more policymakers and opinion leaders to embrace new approaches to solving problems. The Institute's work focuses 0 n five primary areas: education, taxes and spending, privatization, regulatory issues and economic development, and health care. To maintain the highest level of integrity, the Institute accepts no requests to conduct contract research or programs for businesses. All research projects and programs are determined by the staff and Board of Research Advisors. The Institute receives no govemment funding for its activities. All funding comes from the generous contributions of many individuals and foundations, along with limited general support from businesses. The Buckeye Institute gratefully acknowledges the following people for their contributions to this report. Project Supervisor: Samuel Staley, Vice Presidentfor Research, The Buckeye Institute, and Adjunct Professor of Economics, Wright State University Research Coordinator: Amy Kirlin Research Assistants: Derrick Johnson, Melissa Seckora, Doug Hyne, and Brandon Lynaugh Editorial Assistance: Andrew Little Board of Research Advisors: Dr. Douglas K. Adie, Department of Economics, Ohio University Dr. Mark Altieri, Department of Accounting, Kent State University Dr. Robert Baird, Department of Economics, Case Western Reserve University Mr. Tom Bell, School of Law, University of Dayton, Dr. William Bogart, Department of Economics, Case Western Reserve University Dr. Michael Bond, Department of Finance, Cleveland State University Mr. Jim Coons, Huntington National Bank, Columbus, OH Dr. Gregory Delemeester, Department of Economics, Marietta College Dr. James Child, Department of Philosophy, Bowling green State University Dr. Gina Dow, Department of Psychology, Denison University Dr. Michael Ellis, Department of Economics, Kent State University Dr. David Forte, Marshall School of Law, Cleveland State University Dr. Ralph Frasca, Department of Economics, University of Dayton Dr. Janice Gabbert, Department of Classics, Wright State University Dr. Lowell Gallaway, Department of Economics, Ohio University Dr. James Gaston, Department of History, Franciscan University ofSteubenville Dr. Melvin Greenball, Department of Accounting, The Ohio State University Dr. William Irvine, Department of Philosophy, Wright State University Dr. John Kelley, Department of History, Shawnee State University Dr. Robert A. Kohl, Department of Economics, Defiance College c c c Dr. Robert Lawson, Department of Economics, Capital University Dr. Brad Martin, Department of Criminal Justice, University of Findlay Dr. David Mayer, Law and Graduate Center, Capital University Dr. Abraham Miller, Department of Political Science, University of Cincinnati Dr. Dennis Miller, Department of Economics, Baldwin Wallace College Dr. Henry Moon, Department of Geography and Planning, University of Toledo Dr. Andrew Morriss, School of Law, Case Western Reserve University Mr. Dorien Nunez, Management Advantage Corp., Cincinnati, Ohio Ms. Deborah Owens, College of Business Administration, University of Akron Dr. William Peirce, Department of Economics, Case Western Reserve University Dr. Robert Premus, Department of Economics, Wright State University Dr. Henry Rennie, Department of Economics, Heidelberg College Dr. John Rapp, Department of Economics, University of Dayton Mr. Bradley Smith, Law & Graduate Center, Capital University Mr. Michael Solimine, College of Law, University of Cincinnati Dr. John Soper, Department of Economics, John Carroll University Dr. Anthony Stocks, Department of Economics, Youngstown State University Mr. David Swindell, Department of Urban Affairs, Wright State University Dr. Bradley Thompson, Department of Political Science, Ashland University Dr. Richard Vedder, Department of Economics, Ohio University Dr. David Zimov, Department of Political Science, Northern Kentucky University Mr. Joseph Zoric, Department of Business Administration, Franciscan University of Steubenville For more information on the Buckeye Institute, please contact: The Buckeye Institute for Public Policy Solutions 131 N. Ludlow Street, Suite317 Dayton, OH 45402 (937) 224-8352 . Fax: (937) 224-8457 BUCKEYElNS@AOL.COM 4 Table of Contents I. Introduction II. Taxicab Rel!Ulation: An Overview III. The Taxicab Market in Ohio Cities IV. Taxicab Rel!:ulations in Ohio V. Rel!:ulatorv Burden of Re2ulation:The Case of Davton VI. Increasin2 Economic Opportunity Throu2h Taxicab Re2ulatorv Reform Appendix: Benefits of Taxicab Re2ulation End Notes I. Introduction c c c 5 A taxicab business could be one of the easiest businesses to start up, The only requirements would be a clean, safe automobile; a driver in good physical condition without a recent criminal record; a driver's license; a simple, low-cost business permit; and the proper insurance. In practice, this is a business where local regulatory barriers impose powerful obstacles to start-up companies, either by establishing unnecessary financial burdens and bureaucratic rules, or outright restrictions on new businesses. I When regulations become too onerous, would-be entrepreneurs, like other businesses, sometimes go underground and provide their services iIlegally.2 Most importantly, many will never start at all. . But everyone loses out in the long run when businesses do not get started or remain underground. The health and vibrancy of cities depends on entrepreneurs creating new businesses and growing successful enterprises. When regulations stifle business start-ups, city residents are dependent on existing jobs in the area. Often these jobs are in established businesses which are not growing rapidly. Thus, without entrepreneurial outlets, job opportunities in cities are limited. When businesses remain underground, this also limits economic growth in a city. The mere fact they are illegal or unregistered means growth jeopardizes their existence. As soon as a company grows, it becomes more visible. High visibility means underground businesses run higher risks of being closed down by local authorities.3 Thus, when city regulations keep businesses underground, it creates a perverse incentive for them to limit their growth and contribute less to a city's economy. So, creating opportunities for entrepreneurs to easily start new businesses and bringing underground businesses above ground should be objectives of any city's economic development strategy. This means keeping regulatory costs and burdens to a minimum. II. Taxicabs Regulation: An Overview Cities in the U.S. have regulated taxicabs for at least 75 years (see box below), In most cases, regulations are developed on the local level, usually by a city. Taxicab regulations are some of the most common in city ordinances, and may also be some of the most restrictive. This is ironic because a taxicab service may be one of the easiest business to start up. Car ownership is widespread, even in poor and inner city areas. Start-up entrepreneurs face some financial barriers -- a good, clean, used car may cost up to $4,000 or more and insurance runs about $3,000 per car.4 But, local ordinances and regulations can significantly increase the difficulty of starting up a new taxicab business. 6 c Origins of Taxicab Regulations Taxicab regulations can be traced to England, when Charles I restricted the number of horse-drawn carriages for hire in London in 1635. The first comprehensive taxicab regulation was the London Hackney Carriage Act of 1831, The first significant regulations imposed on the American taxicab industry emerged during the 1920s and 1930s. Philadelphia placed its first restrictions on taxicabs in 1920. Milwaukee began regulating taxicabs in 1924, followed by Los Angeles (1925), San Diego (1928), and Phoenix (1928). Taxicab regulation became significantly more restrictive when New York City passed the Haas Act in 1937. This Act restricted the number oflicenses, or medallions, to 13,566. Attrition reduced the number to less than 11,800 after World War II. This cap on taxis significantly restricted the supply of new taxis well below demand. As many as 30,000 illegal taxis exist in New York, and the purchase price of a license, or medallion, runs $175,000 or higher. Taxicab deregulation began to pick up steam when Indianapolis, Denver and Cincinnati deregulated their markets in 1994 and 1995. Source: Historical background on taxicab regulation provided by the Washington, D.C.-based Institute for Justice. See "Challenging Denver's Taxicab Monopoly," Litigation Backgrounder, and Is New York City Killing Entrepreneurship?, pp. 5-8. c Types of Taxi Regulations Taxicab regulations generally take on 4 different' types. While cities will impose many other types of regulations - advertising restrictions, language requirements, uniforms, etc. - the following general categories are the most common. Types of Taxicab Regulations . Caps on the number of taxis or firms . Health and safety . Price regulation . Types and levels of services Caps on Taxis First, cities limit entrepreneurial access to taxicab markets. Many ordinances limit the number of companies that can legally provide taxi services at any given time. In some cases, the city places a cap on the number of companies. In a survey of regulations in 25 cities, Price Waterhouse found that 10 cities placed limits on the number of taxis that could operate within their cities.5 Cities can also restrict entry by simply not approving additional licenses or placing a moratorium on issuing new licenses. This is the current case in Columbus. c Other cities may limit entry by creating onerous application processes. This is often done by requiring an applicant to "prove" his or her company will serve a public purpose, or that existing service is inadequate. 7 C Health and Safety A second type of taxi regulation revolves around health and safety. A taxicab driver is usually required to have adequate insurance and an acceptable driving record. Most ordinances also deny driver's licenses to people convicted of serious offenses, such as fraud, assault, burglary, or robbery. Rules about vehicle inspections also fall under safety regulation. Price Regulation A third type of regulation is price regulation. Some cities legislate the amount a taxi can charge. Before its market was deregulated, for example, Indianapolis's ordinance set taxi prices at 95 cents for the first 1/5 mile and 30 cents for each additional 1/5 of a mile. In other cases, local regulations simply place a maximum on the amount that could be charged, leaving other rates to market activity. Service Level Regulation The fourth type of regulation sets standards for the quality of service. These regulations require proper conduct, regulate vehicle appearance and cleanliness, and specify the types of services provided by taxicab drivers and companies. c These regulations can create significant barriers to start-up taxi companies in Ohio cities. The result, in most cases, is fewer companies, less competition 'and fewer entrepreneurial opportunities. With less competition, service levels often decline,6 forcing customers to bear the burden of longer wait times for taxis or loss of service as existing companies fail to serve some areas of a city. By setting a cap on the number of new taxis, starting a new cab company is difficult - if not impossibl e - regardless of individual effort, how well one knows the city, or how prompt service will be. Those who want to drive a cab must work for someone else, often paying thousands of dollars to a cab company to lease its cars.7 The Push to Deregulate Taxis Recognition of the beneficial impacts of a competitive taxicab market and increased economic opportunities led some cities to deregulate local markets in the 1990s. Indianapolis, Cincinnati, and Denver have made significant strides toward opening up the industry to entrepreneurs and limiting government intervention. c In Denver, for example, no new cab companies entered the market between 1947 and 1995.8 A cartel of 3 cab companies operated in a tightly regulated market. Local regulations required would-be entrepreneurs to prove inadequate service by the existing cab companies.9 Thus, would-be entrepreneurs were forced to prove to a government agency that the demand existed for their service before they could begin. More importantly, start-up companies also had to show that the existing companies would be unable to provide adequate service.1o c c c 8 These rules effectively deprived Denver residents of an ability to pursue a trade or business and "earn an honest living," II according to the Institute for Justice, a Washington, D.C.-based public interest law firm. The Institute sued the State of Colorado on behalf of four entrepreneurs turned down by the Colorado Public Utilities Commission. The entrepreneurs won. On August I, 1995, Freedom Cabs became the first new cab company in 48 years to open up in Denver as a result of the law suit and related legislative activities.12 Freedom Cabs now employs 100 drivers that serve many of the markets underserved by the cartel. 13 Cincinnati also opened up its market to entrepreneurs by eliminating an effective cap on new companies, I and by clarifying the requirements for obtaining a license and "providing" public need. IS While the cap was in place, more than 100 applications for new licenses were pending before the city. 16 More than 237 new cabs started up in Cincinnati in the wake of local deregulatory efforts.l? Indianapolis's deregulation plan may be the most comprehensive and successful to date (see Indianapolis). Its success in creating new opportunities for minority entrepreneurs, increasing the number of cab companies, and using competition to reduce average rates is quickly becoming a model for other cities. As of July, 1996, 158 new taxicabs have entered the market. 18 Criticisms of Deregulation , Some argue that deregulation will actually result in a deterioration of quality and service. Gene Stalians, former President of the International Taxicab Association, believes that "open entry is not the answer to a community's legitimate desire to improve its taxicab service. ,,19 In 1993, Price Waterhouse, in a study commissioned by the International Taxicab Foundation, concluded "the effects of taxicab deregulation have ranged from benign to adverse, depending on local conditions and markets." 20 Objections to deregulation range from broad concerns over the quality of service to fears that wages will fall for current drivers (see Appendix). In a study of San Diego taxicab deregula- tion, for example, driver eamings fell by 30% after deregulation.21 Drivers in Cincinnati also complained about the r,::ssibility that new companies would reduce the profitability of exist- ing companies.2 Of course, average driver incomes may fall if more com- petitors are allowed in the market place. - Taxicab companies often operate in 'a regulated environment, protecting them from market competition. Instead of deregulation, Stalians proposes that entry into a taxicab market be controlled according to a mathematical formula that determines the "optimal" number of cabs in a particular city. Stalians believes rates should also be regulated, although not as strictly as d . d' 23 un er many CIty or mances. Responses to Criticisms 9 c Unfortunately, little work has been done to evaluate changes in quality before and after deregulation (see Annendix). Most evidence relies on case studies and anecdotal evidence. Service Quality Deregulation, however, can lead to service quality increases. "The primary benefits of deregulation have been to increase service availability, to reduce telephone order response times by a modest amount, and to give consumers a greater choice among companies, some of which have different rates," observes Roger Teal after his study of the impacts of San Diego's deregulation efforts.24 More importantly, deregulated cities typically have significant increases in the number of independent cab companies and taxicabs. Deregulated cities in the Price Waterhouse study, for example experienced a 23% tncrease in the number of taxis from 1985 to 1992.25 These increases were much larger than in cities that either remained regulated or that re-regulated.26 Thus, cities interested in promoting economic opportunities for residents can consider taxicab deregulation as tool for promoting this form of entre- preneurship. Demand for Taxis o The dramatic increase in the number of cabs operating in deregulated cities also addresses another concern of regulators. Some argue that the demand does not exist for higher levels of taxicab service. In fact, this is implied by regulations that require potential applicants to "prove" a need exists for their services. Those, such as Stalians, that argue for a formula-based approach to determining the number of cabs also suggest that existing cab service is sufficient. Yet, if this were true, cities that deregulate would not experience a significant increase in the number of cabs operating in their cities. The demand would be insufficient to sustain a larger number of cabs and cab companies. They would quickly go out of business. The fact that almost all cities that deregulate their local taxicab market experience an increase in the number of taxis in operation suggests that substantial unmet demand exists for these services. More importantly, this unmet demand can expand economic opportunities for central city residents. Increased competition from new taxicab drivers and companies obviously prompts renewed calls from existing drivers and companies to restrict entry. Deregulation may result in lower wages and eamings for existing drivers and companies protected by the closed entry system. As more firms enter the market, they will engage in price competition. This means lower average fares and/or an increase in quality, both of which occurred in San Diego. r Driver Income '-' c c c 10 In fact, one of the primary arguments for deregulation is that existing companies keef fares and wages higher by taking advantage of their monopoly over the taxi market.2 An analysis of taxicab regulation in Toronto found that prices were 25% higher than if the market were left unprotected by local regulations.28 Moreover, wages may fall as new jobs are created and entrepreneurial opportunities are expanded in the taxicab market. Even though wages for existing drivers might fall, the benefits of putting more people to work as taxicab entrepreneurs, increasing the availability of taxicabs, and increasing the variety of taxicab services may more than outweigh the income losses experienced by existing companies (see box on Indianaoolis).29 More importantly, the mere fact new taxicab operators enter the market, providing new levels of service, suggests that economic opportunities are better driving taxis than other jobs. Many cab operators may be willing to accept lower wages for the opportunity to be their own boss and give themselves a shot at even greater wealth as their business expands. Otherwise, they would invest their time, money, and experience pursuing other opportunities. c c c 11 Indianapolis Taxicab Deregulation Creates Jobs Indianapolis's deregulation of its taxicab market was subjected to fierce debate. Opponents consisted ma: established taxicab companies. Richard Hunt, the owner of Yellow Cab, Inc., argued that deregulation w , price wars, forcing some taxicab companies out of business. "You've got to have a level playin~ field," h "[Deregulation] drives it down to where nobody makes any money and everybody goes broke." Supporters argued that deregulation would increase service and provide economic opportunities. James ( an Indianapolis cab driver who wanted to start his own company, appealed to local government officials his dreams of owning and operating his own cab company a reality. "All I'm asking from the City-Count: Council," he wrote in a letter-to-the editor of the Indianapolis News, "is the right to succeed or fail based my decisions, my service, my prices, and my hard work. ,,2 . After extensive debate, the city's economic development committee presented Proposal 76, a comprehen taxicab deregulation ordinance. The local city-county council approved the deregulation proposal in Ma) The proposal made three major changes to the local taxicab ordinance. It . eliminated the cap of393 taxicab licenses imposed by the controller,3 . replaced a set rate with a maximum rate, although all rates must be posted outside the taxi and wi local govemment,4 . dropped a 24-hour dispatch service requirement, allowing companies to operate part-time.s Within the first six months of deregulation, the city reports 32 companies started Up.6 Three quarters oft companies were owned by minorities or women. Pick up rates were 12% lower for new companies com~ existing companies.' Average mileage rates were 3% lower, and the average rate for the first mile was 7~ As of July, 1996, 158 new taxis have entered the market.9 I. Greta Shankle, "Draft of Taxi Ordinance would Deregulate Industry," Indianapolis Business Journal, January 10-16, 1994. 2. James Chatman, "Cabbie Appeals to City," /ndianapolis News, April 16, 1996. 3. This was eliminated because the new chapter (Chapter 996) regulating taxi services repealed the earlier regulations. The ne regulations do not permit a cap on the number of taxicabs. 4. Revised Code of the Consolidated City and County, Chapter 996, Section 996.81 5. See note 3. 6. Ordinance 76 Update, Regulated Competition in the Indianapolis Ground Transportation Marketplace, Economic Develop. Committee, January 19, 1995. 7. Ibid. 8./bid. 9. Data compiled and provided by Institute for Justice, Washington, D.C., July, 1996. c c c 12 III. The Taxicab Market in Ohio Cities A more complete understanding of the complexity oflocal regulations and their impact on economic opportunities is important before developing recommendations for local policy makers. The Buckeye Institute collected taxicab ordinances from Ohio's largest cities and analyzed them to determine the extent local taxicab markets were regulated.30 The Institute also used a case study of Dayton to illustrate the extent local regulations can impose sub-stantial financial burdens on start-up businesses. The cities included in the analysis are the eight lar~est central cities in Ohio (Table 1). 1 Their populations' range from 84,788 (Canton) to City 642,987 (Columbus). Similarly, the number of taxicabs operating in each city ranges from 40 in Youngstown to 587 in Cincinnati. The number of cab companies varies even more. Only one company services Canton, while more than 114 service customers in Columbus. Taxicab Availability Akron Canton Cincinnati Cleveland Columbus Dayton Toledo Youngstown Table 1 Taxicabs in Ohio's Largest Cities Population (1992 ) Companies Licenses (Taxis) 223,621 84,788 364,278 502,539 642,987 183,789 329,325 94,387 85 72 587 293 433 100 130 40 3 1 45 3 114 4 9 3 Source: Population data from U.S. Bureau oflbe Census, taxi data from survey of individual cities. One way to gauge taxicab service and availability is to look at the number of taxicabs per 1,000 population (Figure 1). Cincinnati has the largest number: 1.61 cabs for every 1,000 persons. Its closest competitor is Canton, which has fewer than one cab per 1,000 persons living in the city. The most "underserved" city based on this criteria is Akron, with a cab per 1 ,000 ratio of only 0.38. Figure 1 Taxis Per 1,000 Residents Taxis licenced per 1 ,000 population 13 c t' "'~I~----~ .t-T;,rl r:"1 I !::i i I.,.~.o--- 1.5 .ld :/1: 1:1 1 ti; r-. I I I !. T---'-""'~--'.- 1.61 ~J., i I -- .~ (,:.... I I' ! .i I 0.67 ('! I',:.U,~, : (,11;'1.1(. 'f =.'Jt1lj;.1,)wn D:n'k., C!r-'c'~!Plld (.;") llr-,bu::; COIlL'11 '~;In;,,;!nnf!" Source: City taxicab licensing agencies and departments C Taxicab Company Size The average nwnber of taxis per company may be an indicator of the degree each city's market is dominated by large or small fIrms. Cities with fewer taxicab companies will have higher average fleet sizes, This suggests that the nwnber of independent operators would be smaller in cities with larger average fleets. ' Many cities are dominated by established companies (e.g., Yellow Cab, Checker Cab, etc.) with large fleets. In some cases, these fleets nwnber in the dozens or even hundreds of cabs. Colwnbus is on one extreme with the lowest nwnber of taxis per company on average (3.8 per company). Cleveland is on the other extreme. Three taxicab companies (see Cleveland) control the entire market in that city. The average size of a taxicab company in terms of available cabs in Cleveland is 97.7. Figure 2 Taxis Per Company Average Nwnber of Taxis Per Company c 14 c . " ...:.L f" l- ! , ::!~,~-,,~_._~--~---~-_..}----,---+--.._-- ----t,.. .'. i S7~7 4 , p;,,-,~' " " ,-, -1 r I . -.-.---.-r--.. .r,~.:'_~';I.' I ;",'<" I l . ~,; '- if; j , l;;~::t '::- , :--~-+-:~~~'+--~.,-..,- .~ . ...j ------.-~-"~~~.- L::] , i. ':' r,-;-,'): ._ ~_._~._.~ _~_:,,,~~,......._._,)._~,...___~__+_-:-----1_~________. , I ,[ t 11 ! . ;";.0 .~ ., I _ ,'. f: ",~~-"f"'~~;{/-,+-~:~.~~~~ 'i4/.~,-.J/~<~~j/ "'~," f'_~ ".1-1 l.-.f ,~--- 1 .',' -f---:.: _ .j:~ "',v :.'.:;<. ~ ,I: . i .--------c' '~'1 . ~"'~ ' I ~, . r~~i~i:~ .:. ;~tl.~~~~~ .~"~ b '-;-Rn~~:~:~~k~~~lll;t:'~W~~incL'~_~~,,,, ,,,,,~Lt.:;;:.'.; ..~----.,.--.--..-----.._._-----~-_._.__.~~--' . , , - . .."'.... -..~ t ~.-~ i ; ,. i r' , i--' i I ,~(-:; ,-,.," :,<," Source: City taxicab licensing agencies and departments IV. Taxicab Regulations in Ohio C Taxicab regulations in Ohio's largest cities can be grouped into three general categories:32 . Licenses and fees or charges levied on businesses unrelated to their level of service. These licenses are necessary to operate legally within the city. . Non1Jnancial mandates such as restrictions, limitations, and regulations on how and when a business may operate or who qualifies to operate the business. . Rate regulations that determine the extent of price competition allowed within the city. Some cities set rates in their taxicab ordinances. Others adopt maximum rates. Still others allow market-determined rates. Licenses and Fees Most cities charge fees for new taxicab companies and drivers. The fees range widely among Ohio cities. Fees for Drivers For drivers, Dayton is the most expensive city to operate a taxicab in, charging $33 per driver each year (Figure 3). The least expensive is Cleveland, which charges only $3 per driver. In most Ohio cities, the fees are relatively modest, comparable to the cost of C obtaining a driver's license. c c c 15 Figure 3 Licence and Registration Fees for Drivers D 5'~5 /f~----r---' '"'...---.---- . ---.--...--.----. -.---.--r------~----.---.-~-~-~T T 1- ! I. 3Q 11 1 [ 1 I S25 25 J"C- i -! l i---- 1..-. L-+ 20 11 II I . i ': I' SHi 1 S i~~--t---.-..-~~.-.-.. . .{1'$10 i .' t..~.... ."..,....."-..~... ..t ,r-\ 1 _' '0: .5w - ~< ./;. I U ) . -----::'I' I. _$ . : / /,. 54" './----..~A ,-- .. fl. ~ "", , Ar."a'1 "~lU'!.-':o.I)''''f\ CUiLIn:'US Sir'C'''''ii.:I:anrO!l ~~V!17' ('j.::o",.<cil"'p(: '.'I-i~ Il Source: Individual city ordinances and interviews Fees for Companies Cities, however, also charge fees to license and register taxicabs (vehicles) and companieq. These fees are much larger. The cheapest place to begin a taxicab company is Youngstown which charges only $25 (Figure 4). The most expensive cities are Dayton and Akron, which each charge $250 per company. Dayton also charges $250 for each additional vehicle while Akron adds a surcharge of only $10 per vehicle operated by the company (Figure 5). Thus, for the sole proprietor of a company with one driver/owner, the cost oflicensing and registering his company and car ranges from $25 in Youngstown to $260 in Akron. Some cities may not allow single operators to start new companies, even if they can afford the licensing fees. This would occur if the city has a cap or has implemented a moratorium on new taxis. Figure 4 Licence and Registration for I-Car Cab Companies c c c ..' 300- 25D 200 .'i :~n 16 , ,....,.., : ~ i... I I I , i I ! . I ----------_._--~_._------------- . I. I T $161 . I I ---.------~---,- ~-'--f' , I I i'--- 1 I !. ..... i ...$5;; ! $60 I' ",,<; :..~.!/- . ~-~'''.''~7 ~,:,,-.--' __~ !. 11 ,.- 1 ., , ~C~::)' ( ,. . , $2.5C: $25V ! ..~._, .' . j- .._- - .._~. .------.. . .........----.,..._..~ ~" J: i i .~ I. "1 J ;::;. ......... l_ ! r----- i . i- i I , ___L~ -'.".;:'-:"1- f: ~J Source: Individual city ordinances and interviews f 3CU Figure 5 Cost of Licensing One Additional Car 2SG /'1 i., f j- , I i__ I ! , , , ......~~.... .._-'~. '1 S250 _.~_I r,'-"-'l ~;'-, I i i --r:.~..r"-.. .....-:.. 2DC i i , ! \ , ..~. " I GO $75 S7S !'-5-'3 Sfi-J ..----.-------.......-,.--.')...---. : i ~>2:., '? 50 ; ,.....n I "':t:J l~'~ .-,..'.-' .- I ~: 1/~~~2 " '..,-j'.'! .... ,,;,_~... ;.1' ,'"_j T:., ...:," !, >;.-.~ ;.1i,; ..., ,-' lI'l:- Source: Individual city ordinances and interviews 17 C Non-financial Mandates Licenses and fees are only one element of the regulatory system overseeing taxicab drivers and companies in Ohio cities. City councils have erected numerous other barriers, from requirements specifYing the hours the business can operate to caps on the number of taxicabs operating in the city. A survey of Ohio's big city taxicab ordinances found fifteen regulations that impact taxicab companies and drivers (Table 2). Regulations of Taxis All cities placed limits and restrictions on the taxis that operate within their city limit,-. Cleveland, Columbus, and Toledo put caps on the numbev of taxis legally allowed to operate in their cities. Cleveland has a cap of700 cabs.33 (see box on page 16). Toledo has a cap of 300 cabs.34 (The number of taxicabs operating in each city, however, is lower than the legal cap.) Colwubus imposed a moratorium on new cab companies in May 1990, creating an effective cap of 433 taxis (see box on Columbus).35 Examples of Regulatory Mandates c Caps and moratoria on new taxicabs are potentially. insurmountable barriers. New taxicab drivers and companies are allowed to enter the market only if other companies fail or existing drivers stop driving.36 . 24-hour service availability Separate dispatching office Caps and moratoria on taxicabs Physician's certificate required Prove public need . . . Four cities - Canton, Cincinnati, Columbus, and Toledo - required city approval of color schemes and insignia.37 Cleveland's ordinance imposes a minimum size on cab companies (25 cabsi8 and maximum age for nev cars (3 years old or newer).39 . Regulations of Drivers Most cities also regulate drivers. Four cities - Cleveland, Columbus, Dayton, and Toledo - require a physician's certificate to operate a taxi. While this regulation seems reasonable, it further increases the costs of obtaining a license. Even healthy drivers with no history of serious illness have to palc for a physical exam and the doctor's office visit. Canton imposes a minimum age of 21 0 and a maximum vork day ( 12 hours) for drivers.41 c c 18 Table 2 Non-Financial Mandates on Taxicab Companies ^, . . j , ... V I ! , , " '" , "'r'- .:.:r "," :i:.J7-::': e- t-':i~~': ..... .'\: '"A-ii.1"':'; ',~'~'. .~,,:,::n;::,3 7;;' r..:;:'r_' ?" , , , ':,:; > '.:-~' .." -'.;'};':i"'';.,:;. ",,':' . .. . ;~ : .,.-",.. t :,;l~rr:L ;~:,; '" '\f ,. r,:.:."., n:;--:J.lJ":;\",,,"1 't' 'Ii' 'F( ,. f I 'j . i. i i. , , I \ ,- --- .-.- '':.a~:;~;,,; :"~;:"'"'(\Y ~ ~- "'" , ,V,:":- \1-~: :-'!:>1.:, ~r ftn,"j1Y:::i~i'r~f:W"tf (! ~.:~. j.~ . C..."", .,.......~;r."~"^ - ~;; .:" ~..."_;..d...,..11ol j::f '-'l!i _.'''' . : -:;',':- ,: ~',. ....'::Xr~;;;;\: , I . -"~ 'j ,,-t.,::,;"" " [ I F ,. ,. .j "'1 ... 'f' ~ 1 I "f' 'C"I "",[ --~ '. .'V' "'j' 'j ..HJ ... H ,j I 'r;'" "'" ,., .-., i II"',':'! ;'-h"hrl'-.~i t~'..,)'o:i",.~: I CGI:Jn;::jJ: i I ..,..," "'''I' + ! ! D.~'--::(''''' ! -'-)(1: H, I ! ,::.~ '::.' '_..",~,'-;',:; . ;.".~, : ?f' S1.", 'Y!:': r"'';;U~~):~1', ,: i .\ '\J~~ :',~' lr. mi-"';::! R r:.....~T/ --1 T_Y: 11 i Iv , I , ..,. I ,. "'. ... .' .\ 1 ! .., ....,.,. i I I I T t ", J.. 'Itl"'- ~ ~ j - ! , 1 _'J I I _1 Regulations of Company Operations Local ordinances regulate aspects of the company's day-to-day operations as well, influencing the technology used to run the business as well as facilities and earnings. Akron, Canton, Cincinnati, and Toledo require companies to file annual financial reports. r '- c c c 19 Other restrictions also make part-time and owner-operator taxicab companies almost impossible to start-up. Two - Cleveland and Dayton - require cab companies to have a separate dispatching office to handle dispatching. This requires companies to hire dispatchers and rent office space, increasing overhead and start-up costs. Of course, to cover the overhead, most companies need to have more drivers and cars under contract. As the next section of this report details, this requirement can impose a substantial financial burden on a start-up company. The advent of paging devices, cellular phones, and voice messaging systems means that taxicabs could operate completely free from within a cab. City regulations often do not reflect these technological breakthroughs, The use of modem low- cost technology is even further restricted in cities such as Akron, Canton and Cleveland. These cities mandate the technology used to handle dispatching: Two-wiry radios. Cleveland Shuts Out Independent Owner-Operators _ Cleveland's taxicab ordinance has a unique entry restriction compared to other cities in Ohio: It legislates a minimum company size. Sections 443.021 and 443.022 of Cleveland's taxicab , ordinance prohibit the Commissioner of Assessments and Licenses from issuing a license to any company with fewer than 25 cars. The ordinance further prohibits the Cincinnati and Toledo limit' commissioner from issuing a license to an independent advertising: Their operator unless he or she is a member, and will operate as ordinances prohibit cab , part of, an association approved by the Commissioner. An compantes from generating , association is defined as a society organized for the purpose additional revenues by of benefiting a group of hot less than 25 owners of "public selling advertising space on hacks" (or taxis). No associations currently operate in or in taxicabs. Cleveland. City taxi services are provided by only 3 large taxicab companies - Cleveland Yellow Cab, Zone Cab, and Americab. Service Regulations All Ohio cities in the survey also regulated the level and quality of service. Five of the eight city ordinances prohibited -- ____H' , --- taxicabs from waiting for potential customers except at officially designated taxicab stands. This may explain why Cleveland's cap on taxicab licenses is set at 700, but only 293 licenses have been issued, a lower number than either Cincinnati or Columbus. Akron, Canton, and Dayton require full-time service, 24-hours, 7-days per week, effectively prohibiting part-time cab services. This ordinance effectively prevents an independent, single-operator entrepreneur from entering the market. One person cannot operate a business non-stop, 7 days a week, 24-hours a day without help. Thus, any start- 20 c up company will immediately have to cover the overhead of additional employees, either more drivers or administrative support, Columbus Places Moratorium on New Cab Licenses c The City of Columbus imposed a moratorium on new taxicab licenses in May, 1990. The moratorium on new licenses effectively capped the number of taxicabs at 433. The City's Vehicle for Hire Board declared that the number of taxicabs in the city was excessive after conducting a need and necessity study. More cabs, they believe, will harm the public and compromise "the public health, peace, property, safety, and welfare" of the citizens of Columbus. The result has been an increase in the black market price of taxicab licenses. While, officially, a taxicab operator's license would cost only $75, prospective cab operators have reportedly paid thousands of dollars for the privilege of operating a taxi in the City. Many inner-city neighborhoods and low-in-come residents might benefit from companies that service only high volume times (e.g., Friday or Saturday nights) or serve customers only on an on-call basis. This is one of the primary reasons Indianapolis dropped its regulation .requiring 24-hour availability for taxicab operators. In Washington, D.C., entry is relatively unrestricted. Ninety percent of the taxicabs are owner operated, and half are part_time.42 Proof of public need is almost always an onerous regulatory barrier because the presumption is against new :entrants. This standard arose because taxicabs were originally regulated as a public utility.43 Criteria for .determining public need are often ambiguous and subject to wide interpretation by regulatory authorities. The :burden of proof is also almost always shifted to the new 'entrants who must "prove" a "need," or unmet demand, exists for new taxicab companies and operators. Often, exi .sting companies have an opportunity to show local authorities how they will meet the need discovered or identified by the applicant for a new taxicab company license. Denver's requirement created a burden impossible to overcome without expensive litigation. These restrictions allowed existing companies in Philadelphia in :the 1970s and 1980s to keep the number of operating cabs . . 44 to a mlrumum. Toledo requires applicants to prove their company wtIl .serve a public need. Cincinnati has a similar provision, but criteria approved with the deregulation ordinance in 1995 significantly reduced the burden of proof for applicants.45 In fact, a critical component of Cincinnati's deregulatory ---efforts was defining public need clearly to reduce the burden on new taxicab companies. By reducing uncertainty over whether new applications would be approved, this reform was partly responsible for a significant incre ase in the number of cab companies starting up after deregulation (see cincinnati). Rate Regulations The final area of regulation concerns rate regulations. All the ordinances examined in C Ohio cities regulate how and when taxicab companies can set rates or fares. c c c 21 In Toledo, the taxicab ordinance sets a maximum and minimum rate, effectively requiring a set price for all taxis.46 A similar restriction exists in Youngstown, where the local ordinance specifies that the rate must be $1.50 for the first 1/10 of a mile and 10 cents for each additiona11/1 0 mile.47 Thus, in both cities, negotiating for a lower fare would be illegal. Four cities - Cincinnati, Cleveland, Columbus, and Dayton - set a maximum fare. Taximeter Rate Setting Policies Akron.. ....... market determined Canton ........ market determined Cincinnati ......... maximum rate O I .. Akr d C Cleveland .......... maximum rate n y two cItIes, on an anton, . Columbus ....."...... maximum rate alIowed market-determined fares. Each of Dayton.... . . . . . . . .. maximum rate these cities, however, requires cab Toledo ......... set by ordinance companies to submit fares and rate changes' Youngstown ..... set by ordinance to city officials before they go into effect.48 - . .,. '--- In Canton, rate changes must also be advertised three times in "a publication of general circulation. ,,49 These procedures are administrative, however, and less likely to distort markets. Rates can also be regulated by specif'ying how the fare will be caclulated. Most taxi fares are calculated using taximeters, devices that track the distance traveled and time sitting idle (e.g., in traffic, at traffic lights, or waiting for customers). Fares are determined by multiplying the rate by the distance traveled plus waiting fees. Six of Ohio's largest cities require that fares be calculated using a taxi-meter. Cleveland and Columbus set maximum rates, but also officially allow alternative forms of charging hfl ti ..50 customers suc as at rates or certam trIps. In most cities, charging or negotiating fares other than the amount registered on a taximeter would be illegal. Taxicab owners or drivers could not legally charge a flat fee for specific trips, or set different fee levels for peak times or special hours. Rate regulation can mean higher overall rates for consumers. Average fares for a I-mile trip in the two cities (Akron and Canton) that allow the market to determine rates have fares 11.8% lower than cities that regulate rates. 51 The average fare in the cities that use markets to determine taximeter prices for cab services was $2.59 for the first mile (Figure 6). The average fare for the cities with a maximum rate ceiling was $2.85, and $3.1-0 for the two cities that have rates set by ordinance. Figure 6 Taxicab Fares for I-Mile Trip in Ohio's Largest Cities Average Fares ($) c c c r--' /i , i ';--. _.._..._---,~-.~~~.._~---_.._~~--_...-.. .--. S 3.5 [ , 3 :.j i j , r, 5 J i ... I.. iS3~ lu ~-~.._-S~-._--- ....-.-----;>'.. r, L.. $2..59 ./ t--- I ~. ~---,.' i.5 ., t I i, J I r _ ! ! ~; .;:, -- ~"l<::i- x ....'"I,..J:i,;I~.J.,: H:..I.:'-; :-,l~ < '",;,_ ...ir-'.;lr""" r :r, "f'!.., R?-",.' ,',..,! b~ {h .' ;1:'> Source: See end notes 22 ,/!--, -j I 1'---. ! I f- I I ! i f---" . I I I .iff),:,,:.' }'" Cab company fares are also competitive for longer distance trips in cities using markets to determine trip prices (Figure 7). The average fare in Akron and Canton was $7.53 for a 5 mile trip, higher thim the average of $7.49 for the cities with rate ceilings. These rates were still lower than in cities with rates set by local ordinance ($8.00). Overall, the average market-determined fare was 3.4% lower than the average fares in regulated cities. Many factors will determine taxicab fares, including the level of demand and the number of suppliers. Nevertheless, these data suggest that legal restrictions on prices do not necessarily translate into lower average fares. Figure 7 Taxicab Fares for 5-Mile Trip in Ohio's Largest Cities Average Fares ($) c ~. 1 (j ,. f I f I , I EO Ii " c.. ~, '.' .--_..._._..~---_._.._._-. '''S;7;5'J ,.I" '. , ~', ,.. II _, .: i...,; - "':" Source: See end notes 23 5&.00 S';".~$ ). ,.'''0 " I , i-. I ~ I I ~. , ..' U 1',-.,_;....' -i"~,': ;'.;--C::,:',:";..-:_:I;,1';'''101 Summary of Local Taxicab Regulatory Policies C The most common regulations effect price and fares.52 Six cities set a maximum price and allow only metered fares. In most cases, alternate fares and prices, cannot be set based on the type of trip or the time of day. Half of Ohio's largest central cities require physician's certificates for drivers, mandate financial reports for cab companies, and regulate colors and insignias; table 3 Most Common Taxicab Regulations in Ohio's Largest Central Cities c 24 .';: lCn c { ;:~:::~~J~i:ri'('" 1 /'/:..'i~'i'.f:";:../!:; Vfj::.~;;;.' rES'i...:'iated ! ",':,-;'-"'!O!C'TC:' ;:.,n.:'c ;'~'-::',"1~DttCC1 C"'\I'" ~t.""'l-i+~ ...- ....,/~t,Zld ':"'4..1 .~~;::.: ~"',.., '!"":'~<,li,n.~,_ :-"! '::;:::)C_..'~L"~- (~c.r7/;':'.r::.;,JiC IE':;Urre::;-" r-~:::,'-'.r"::'::-'''lrv -r(n~-->"":"; ''"''~ rt.. i~, ....'_.~"'" -J i',.j.:...'~VJU, '(;.,1'0,0,.0 ~-:.:': CQ{C/::,: 'i.i::.iP.:i'.:] :::~:3p C.'D nUP~bt!r r~,d iaxJS .:".: ~(C\.J :Jcr,.-'}('::-:, rtJ:).'jirA(/ ..:: " f:1. . ",' rl:'I.:::,',-' tC-,:rtteS ,'e h~;fvirj.C1 ).":: ni:~i'(/ i)~cen$2S ;""l\"!ti<:Y th:~.:'"1 r~~gai e9(::' reaulre;} :::":-:\"'.0. " !/;,'!C n~'i:'?'d 8: '1eC,t,.::?SS',':tl .....")."""0 d'c:~~'-"';n'" o"JC' e -~ci' .:::,. _~_- l""&.<-'dL.....' II ~.""1 UJ'- c .',,~~},~J'l:rTI 0,"",1(.[.: :'caulr(Jtc j t --I"~-","i~~~.., C'" 'p-' ..:;.,/..~..J ",-.\<!~J~I..."ff':;:: .....r" 0; 1;...IHJJ..J ~.{,;.tJ' \''';',,'':(.)'1' ~'d~_1 c:)nl.~;U:'~~" size .:}t"'f!1':i- "'J~ nt'",ru,"'""!_~ ~.rurl."'H''''d .~~-("'.....: _.y~' t..:i,.,...; ,;...~-l"lIU-..t...: r ,r f-:'CJU"-S repLljfi!ed ~-, I J Nu~~'}.~~~' 0'; C~t~f-:"::, , , i I , I 6 i I r I 1 I i t I I i i t ! I < n ~~ '... ..~ fj . .' .~, ,- !\ c - " .' " ., j - - '.' ~ i ,- , I ''', - r, '- - -, I ,--\ " " ! r - ~ 0:..'::' I I ~ .., 'i , , . . , c- o I . ,.,,, , L.-.1 ! i lC - .' 4 ,j "' ~' .: n :::. " ~ .., "" 1 v. The Regulatory Burden of Regulation: The Case of Dayton This section estimates the costs imposed by local regulations on start-up taxicab coinpanies and drivers in Dayton. By estimating the financial burden of complying with the city's taxicab regulations, a more complete understanding of the role these regulations play in limiting entry becomes possible. Drivers in Dayton, like their counter-parts in other Ohio cities, are not entrepreneurs. In fact, while 100 cars are licensed to operate as taxis, the city has only 4 licensed taxicab companies. Drivers usually do not own their cars. They usually work as independent contractors for large cab companies_ c 25 C The following analysis helps explain why. Cost Impacts of Regulations In Dayton, an important barrier to sole proprietorship is a regulation requiring a separate business office open at all times to receive and dispatch calls.53 This regulation adds at least two additional cost items. First, the taxicab company must now rent commercial office space since local zoning laws do not allow a taxicab company to operate as a home-based business.54 Renting office space will cost the firm about $1,750 annually.55 Additional Employees Second, the firm will need to hire employees to cover the 24-hour dispatching service. At least four additional people would be needed to run the business/dispatching office on a full-time basis.56 Since dispatching will require some skill, wages will probably be above minimum wage. Combined with social security, workers compensation and unemployment insurance, labor costs from this regulation could approach $50,000 for four employees. 57 Cost Impacts of Restrictions on Hours c Other elements of Dayton's ordinance virtually eliminate the single owner/operator from the local taxicab market. The ordinance also requires all companies to provide taxicab services 24 hours a day, 7- days per week. 58 Thus, any new company will need more than one driver, since one driver is unlikely to be available at all the times required by law. In Dayton, this means each company will have to add cars to accommodate a larger number of drivers. More cars are necessary to ensure at least one operates at all times. If one car breaks down, or needs to be serviced, the company would violate the local ordinance since its services would not be accessible at all times. If the company needs 3 cars to ensure 24-hours, 7-day a week service, it would have to purchase and maintain at least two cars in addition to the one the entrepreneur uses ifhe or she were a sole proprietor owner/operator. Combined with insurance, this would add $14,570 on to the first year costs ofa start-up a business if the company owned the cars and insured them.59 Costs of Licensing and Fees c The taxicab company is charged $250 per cab annually to operate.60 Thus, licensing the 3 cabs will cost $750. Each driver incurs an additional cost of$33 annually, $25 for the license and $8 for ID processing. This means expenses could run as high as $915 each c c c 26 year just to license 5 drivers that would cover the days and hours of operation required by law. Restrictions on Fares Another local regulation requires taximeters, approved by the Police Department, in every taxi to calculate fares.61 A taximeter is a device that records the distance traveled and the total cost of the trip. A taximeter costs between $150 and $450, according to local cab companies and public officials, and must be placed in every operating taxicab. This would be a onetime expense. In addition to the maximum price regulation, however, the taximeter imposes another type of price control. Taxicabs are required to set their fares based solely on distance traveled. Since the fare is regulated by the City, price competition is discouraged. It would be illegal, for example, for a company to offer downtown taxicab transportation for a flat fee of $3.00 as an established service. The total cost of the trip is based on the published fare (not to exceed $1.60 for the first 1/6 of a mile and 20 cents for each additional 1/6 mile) multiplied by the distance traveled. This policy discourages efficient pricing policies and price competition. By prohibiting other forms of pricing (e,g., flat rates, reduced rates on certain routes, etc.), local cabbies cannot price according to peak times, special trips, or other criteria other than distance. Restrictions on Service Availability Table 4 Regu1atory Costs of Startinq a Cab Company in Dayton Cost Taxi cab operators Clerical/support (4) Base salary Social Security Workers Comp Unemployment Insurance Additional Cars (2) Insurance for Cars Separate office space Licensing Vehicle Licenses (3) Taxi driver's Licenses Taximeters (3) Taxicab operators are also not allowed to solicit passengers except at "lawfully designated 'b d ,,62 Th' taxlca stan S. IS Source: The restricts the demand for cab 'indicates a services and, as a result, opportunities for taxicab entrepreneurs. Total estimated Burden Estimated Burden Contract work $ 42,000 $ 3,150 $ 3,069 $ 1,080 $ 8,570 $ 6,000 $ 1,750 $ 750 (5) $ 165 $ 450' $ 66,984 Buckeye Institute, see end notes. one-time expense. c c c 27 This restriction makes it illegal for cabs to wait outside bars, restaurants, and other establishments without approved taxicab stands, further restricting their use as an everyday means of transportation. Thus, consumers also experience a lower level of service than would exist of taxi drivers were allowed to tailor their services to the needs of individual consumers and peak demand locations and times. Summary of Regulatory Burden in Dayton What is the cumulative impact of these regulations in Dayton? The fiscal impact alone of these regulations arnounts to $66,984 in additional costs during the first year of operation (Table 4, Figure 8). This means that for a new company to start up, it must generate almost $67,000 to cover the costs imposed by the loca I ordinance, irrespective of the compensation to the entrepreneur, More than 95% of these costs, are in added personnel, cars, and equipment as a result of the effective prohibition on part-time operators. The impact oflocal regulations on entrepreneurship can be seen when the burden is compared to the earnings from operating the business. The average annual income of a taxicab operator in Ohio is about $20,000.63 This means, for a taxicab company, local regulations create operating costs in the start-up year that exceed 3 times the average annual earnings of a taxicab driver. Figure 8 Cost of Regulatory Burden on New Taxi Companies in Dayton ~!~erlse:::, "1 ~:~) // Oi"~ic{:' SPBCC :i(~~. -""....-..-... A.c1c18C; C;ns 22~.t: ..~- Ta~.imete,,: jC" .,...-.,:....- . "". . " ,~.:~:'J',"i~,:,:'::.2~;,.>l _,' .,....,;j:...m.\~;3}'~~;~.'fti'>:;;V "'-..... . ,,-;- - . ,,'.' ". . -.~ . ~' ~:::;:"~;::~ :~-r:~;?r' Additional Personnet '7 ~r;"t) , . >,'~,--.:. 28 c Source: The Buckeye Institute. Percentages do not add to 100 due to rounding. Thus, the taxicab company is no longer a low-cost business accessible to the semi-skilled, low-skilled, or start-up entrepreneur. A cab company requires a substantial financial investment. This means the start-up company will need third party financing from a bank, development corporation, or private individual, substantially reducing economic opportunities for neighborhood residents. In Dayton, most taxicab drivers work for someone else. Only 4 cab companies operate 100 taxicabs (legally) in the city. Given the costs of starting up a new company under local law, the reasons for the low number of independent companies are even more Regulation Mandates Inefficiency lded impact of these regulations is to force entrepreneurs to invest money inefficiently. he analysis of the Dayton ordinance shows, regulations require entrepreneurs to spend money in areas lay not be most productive. For example, companies in Dayton, Cleveland, and Toledo are required to ley to staff a dispatching office, even though modern technology would allow a company to operate d efficiently without one (e.g., paging, voice-mail,cellularphones, etc.). This is money that could be '(:, the quality of cars or increasing the number of drivers t 0 service other areas of their respective : regulations, taxicab services are more costly to operate than in a market-driven industry, In fact, while does not calculate the impact on the rate of return for investors and entrepreneurs, the regulatory burden ,dates an inefficiently large cab company. ! Smaller, more efficient, and potentially more profitable companies cannot operate effectively. These s give established, large companies an even greater advantage in the market place, __.______________ _n___'_ _._ __ __..n __ ._. ....__..____'___' __"U _'_ _.___ __ _,__._____ _...____.____.__._..._..___~________._._ -- .-.-..------.~ evident. VI. Increasing Economic Opportunity Through Taxicab Regulatory Reform c The impact oflocal regulations on start-up businesses are significant and important. In Dayton, Ohio, for example, entrepreneurs face burdens that effectively require them to 29 c begin a business with almost $70,000 in start-up capital just to satisfY the regulations, Burdens this high clearly constrain economic opportunities for local residents. Similar burdens have led several cities, including Cincinnati (see below), to deregulate large parts of their taxicab markets. Specifically, what can city officials do to break down regulatory barriers and increase economic opportunities in the taxicab market? This research and the experience of other cities with deregulation suggest several "principles" for regulatory reform: Adopt Streamlined Licensing and Registration Procedures. Cities should depoliticize the licensing process, reducing the role of licensing boards in granting taxicab licenses. This can be accomplished by making licensing an administrative process. Cities should avoid broad, politically driven criteria such as "public need" or "improve service quality." This means using concrete, identifiable criteria for granting licenses, such as ensuring the taxicab operators: c . have a good safety and driving record. . are of legal age, . have a legal driver's license. . have no recent criminal record. .....------.----.--.----------..--.---..---.-.-- .._-----_._---_._-_.__...__.~. -.--- ---.- ---.--.----.---" Cincinnati Pushes Forward on Taxicab Deregulation ) deregulate the taxicab industry in Cincinnati built up over several years. ) to 1994, the city imposed an unofficial cap of 348 licenses issued. In 1994, in the first step toward In, the city lifted the cap and distributed 170 new licenses. By late 1994, in the wake of Indianapolis's Llblic officials in Cincinnati were again holding hearings on taxicab deregulation. of 1995, the taxicab industry was deregulated further by the city council. The council would not place limit on the number of licenses issued, but it retained the provision that applicants prove "public ce and necessity" in order to obtain a license. The revised ordinance however prohibits local authorities .ding the economic impact on existing taxicab companies in granting the licenses. Criteria such as Ie new company will serve underserved areas, whether t he quality of service will be enhanced, the :ord of the applicant, and any past criminal activity are considered in determining whether a new license mted. HCH- --------------------.-------..-------------- ---- -----_._---,_.._._--~--- . have a clean and safe car. c c c Preserve Open Entry 30 Consumers are served when new competitors enter the market to challenge existing companies with lower fares or better quality. Open entry can be ensured by: . removing caps on numbers of taxis and licenses. . streamlined licensing process. . automatic renewal oflicenses. . lowering fees. . removing minimum cab company size Maximize Flexibility Customers have varied needs and wants, and the taxicab market should reflect this. Taxicab companies should be allowed to: . operate on a part-time basis. . serve specific needs and peak demand times. . serve particular routes. . provide niche services (e.g., after hours transportation for bars). . determine acceptable pick-up and drop-off sites. Minimize Fees Key Features of a Pro-Entrepreneur Taxicab Ordinance . Streamlined licensing process . Open entry. . Maximum flexibility . Minimal fees . Restructured zoning laws Taxicab licensing fees should reflect the administrative costs of processing the application and running criminal background checks on the applicants. . limit taxicab operator fee to $25 or less. . exempt start-up businesses from licensing fees in the early years of their operations. Restructure Zoning Laws Classify taxicab companies as home-based businesses for zoning purposes unless they: . create a perceptible and quantifiable burden on their neighbors and neighborhood. . out-grow their existing space within the home. 31 c Adopting these principles, and translating them into legislative action, will help create economic opportunities for urban residents while providing a higher level and quality of service to everyone. Appendix: Benefits of Taxicab Deregulation Despite widespread regulation of taxicabs, relatively little research has been published on the subject. An electronic search of more than 300,000 articles, books, and dissertations generated only 9 "citations relating to the taxicab industry and taxicab regulation. One of the more recent studies was commissioned by the International Taxicab Foundation, an organization servicing the interests of the taxicab industry. The study, performed by Price Waterhouse, analyzed taxicab deregulation, re-regulation, and regulation in 29 cities. Generally, the study concluded that deregulation I) did not reduce prices, 2) did not significantly improve service quality, and 3) did not lower administrative costs. The study then concluded that all but four of the 21 cities that deregul ated have moved to re-regulate their taxi industries as a result of dissatisfaction with the effects of deregulation. c The study's findings and conclusions, however, are questionable. First, the analysis relies to a significant degree on case studies, some of which have conflicting results. For example, Price Waterhouse uses data from San Diego to show that service quality declined, while other data found that service quality may have increased (see discussion). The study also uses Indianapolis as an example of a city that deregulated and then re- regulated as a response to poor market performance. Indianapolis, howe ver, is now used as an example of comprehensive deregulation as a result of its 1994 deregulation efforts (see box on p. 7). More importantly, the Price Waterhouse report ignores the role politics may have played in pushing cities to re-regulate. Existing taxicab owners are often the most vocal opponents to deregulation. In many cases, they stand to lose significant amounts of money if the market were opened up. In Indianapolis, for example, the cap on taxicabs created a black market for licenses. The only way someone could operate a taxi was if they purchased a license from an existint company. The going black market rate for a I icense before deregulation was $5,000. Once the market was opened up, the price of a taxicab license fell to just $100. One of the city's principal taxicab owners owned 300 licenses. Thus, the cab company owner effectively lost $1.5 million as the value of his licenses fell as a result of deregulation! c Many of the cities that remained deregulated were growing cities, where an expanding economic pie could satisfY existing and new entrants. Many of the cities that re-regulated, or remained regulated, were slow growth or declining cities. These cities would experience the most intensive lobbying by existing taxicab owners to restrict entry and increase regulation,Existing cab company owners could lose substantial amounts of their investment if the market were opened up. c c c Another problem with the Price Waterhouse report is its imprecise definition and use of "re-regulation." While many cities re-instituted caps on taxicabs, others went from allowing fares to be set in a free-market to instituting maximum fares. In many cases, the price system was still more mar-ket-oriented than when the city was fully regulated. In addition, while median fares increased faster in deregulated cities compared to regulated cities, average fares increased more slowly. The median would be the price charged by the taxicab company halfway down the list if each company were listed from slowest to fastest growth in fares. The average fare would measure how fares in the entire market responded. The average incorporates fare changes of all companies operating in the market. On average, fares between 1985 and 1992 increased by 17 .4% in deregulated cities and by 17.3% in regulated cities. (The Price Waterhouse study only reports median data.) The Price Waterhouse study also ignores the important public policy goal of increasing the number of jobs for local residents. The study observes that the increase in the number of taxicabs following deregulation resulted from a substantial increase in the number of small and independent cab companies, Thus, even if deregulation were not accompanied by clear improvements in quality, deregulation could be justified for the widely acknowledged impact of increasing economic opportunity for local residents, par ticularly those in poor inner-city areas. End Notes I. For an overview of the potential barriers, see Walter E. Williams, The State Against Blacks (New York: McGraw-Hill, 1982),75-88. For a more recent analysis of the impact oflocal policy on taxicabs, see Bill Styring, "Taxicab Licensing In Indianapolis: The Situation and Economics," paper prepared for Regulatory Study Commission, City of Indianapolis, January, 1993. 2. Also called Gypsy cabs, these illegal operations already exist in many of Ohio's neighborhoods, particularly underserved and poor areas. The ways red tape and laws drive businesses underground has been explored extensively in the academic literature. See Hernando De Soto, The Other Path (New York: Harper R Row), 1989; Saskia Sassen-Koob, "New York City's Informal Economy," in The Informal Economy: Studies in Advanced and Less Developed Countries. ed. Alejandro Portes, Manuel Castells and La uren A. Benton (Baltimore, Md: Johns Hopkins University Press, 1989), pp. 60-77; and Sam Staley, Drug Policy and tbe Decline of Ameril.:an Cities (New Brunswick, N,J.: Transaction Books, 1992), pp. 18-26. Drug Policy and the Decline of American Cities, and Peter Reuter, Robert MacCoun, and Patrick Murphy, Money from Crime: A Study of the Economics of Drug Dealing in Washington, D. C. (Santa Monica, Calif.: RAND Corporation) 1990. 4. Estimates based on the used car market in Dayton, Ohio (see Section V) and interviews with representatives of companies that insure taxicabs and taxicab operators, 32 ~ . c c c 33 5. Cities limited the number of taxi-cabs, froze the number at the existing level, or used population ratios to regulate the number of taxis. Only 6 cities in their study allowed open entry without inquiry into "public convenience," number of taxicabs, etc. Price Waterhouse, Analysis of Taxicab Deregulation and Re-Regulation (Kensington, Maryland: International Taxicab Foundation, 1993), Appendix A. Indianapolis had an ordinance imposed cap of 600 taxis before it deregulated its taxicab industry in 19 94. The controller, however, was required to determine the number of taxis that could operate within the city within the 600 limit imposed in the ordinance, The effective cap, then, at the time of deregulation was 393. 6. See Williams, Tbe State Against Blacks. 7. In New York City, cab drivers pay between $75 and $100 per 12-hour shift to a legal cab company to drive a cab. See William H. Mellor, Is New York Killing Entrepreneurship? (Washington, D.C.: Institute for Justice, 1996) p. 6. 8. See Dwight Filley, "Taken for a Ride: How the Taxi Cartel and the State Are Disserving Denver's Economy," Issue Paper #6-93 (Golden, CO: Independence Institute, April), 1993; "Challenging Denver's Taxicab Monopoly," Litigation Backgrounder, Institute for Justice, Washington, D,C., n.d., n.p. 9. Institute for Justice, "Challenging Denver's Taxicab Monopoly. " 10. Ibid. 11. The Fourteenth Amendment protects "privileges or immunities of citizenship," which include the right to contract and engage in trade, by guaranteeing equal protection under the laws. 12. Media Advisory, Institute for Justice, August 1, 1995. The taxi market was opened up through legislative activity prompted by the law suit. 13. Data as of July, 1996, provided by the Institute for Justice, Washington, D.C., September 3, 1996. 14, See Jeff Simmons, "Compromise Means City Still Regulates Taxicabs," Cincinnati Business Courier, February 3,1995. 15. The ordinance retained language requiring proof of public convenience and necessity, against city staff recommendations to eliminate this language, but explicitly prevents the city from considering "the impact an applicant's business may have on the business of existing license holders."(Section 407-8(i)). The ordinance further specifies that the city "shall consider" criteria such as whether the applicant will service underserved areas of the Cincinnati or whether the new company will result in service improvements. These criteria will not necessarily determine whether the applicant's license will be approved or denied. See Ordinance 33, Section 407-8, paragraphs (a) through 0). For administration c c c 34 comments, see the memorandum from William M. Gustavson, Director of Safety for the City of Cincinnati on Taxi Regulation Ordinance Proposal, January 10, 1995. 16. Memorandum from Gustavson, January 10, 1995. 17. Data as of July, 1996, provided by the Institute for Justice, Washington, D.C., September 3, 1996. 18. Data as of July, 1996, provided by the Institute for Justice, Washington, D.C., September 3, 1996. 19. Gene Stalians, "Regulatory Revision and the Taxicab Industry: What We have Leamed," paper presented to the 50th Annual Convection, The New Zealand Taxi Proprietors' Federation, Wellington, New Zealand, August 30, 1988. 20. Price Waterhouse, Analysis of Taxicab Regulation and Deregulation, p. iii. 21. Roger F, Teal, "Taxicab Regulatory Change in San Diego," Taxicab Management (Fall 1986), p. 32. 22. Simmons, "Compromise Means City Still Regulates Taxicabs." 23. Specifically, Stalians argued for a "zone of reasonableness" standard to govern rate changes. See Stalians, "Regulatory Revision and the Taxicab Industry," pp. 10-1. Many cities have moved toward this standard anyway by setting rate maximums rather than specifYing precise fares in ordinances. 24. Teal, "Taxicab Regulatory change in San Diego," p.32 25. Price Waterhouse, Analysis of Taxicab Deregulation and Re-regulation, p. II. 26. Ibid. See R.F. Teal and M. Berglund, "The Impacts of Taxicab Deregulation in the USA," Journal of Transport Economics and Policy, January, 1987, p.41. 27. See Williams, The State Against Blacks. 28. D. Wayne Tailor, "The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto," Logistics and Transportation Review 25, no. 2 (June 1989), pp. 169-82. 29. Importantly, new drivers will enter the market because they expect their earnings as taxicab operators to be greater than their current wages. In many inner-city areas, this could mean unemployment or unskilled minimum wage jobs. Thus, for these employees, owning and operating a taxicab company will be a significant step upward, economically. The increased wages to new entrants into the taxicab market is rarely considered in assessments of the benefits/costs of deregulation. c c c 35 30. The Buckeye Institute used] 992 population data to identify cities with populations over 80,000 people. 3]. Central cities excluded from the analysis are Lima, Mansfield, Zanesville, and Springfield. Central cities are defined by the Census bureau as cities with at least 50,000 in population that serve as the employment center within a metropolitan area of at least 100,000. Since each of these cities has a population below 80,000, we excluded them from our analysis. 32. Follow up telephone calls were made to each of the cities to verify our interpretation of the ordinance and to gather additional information about how regulations were implemented, the size of the taxicab market, and the number of applicants for new licenses. 33. Cleveland taxicab ordinance, Chapter 443, Section 443.03. 34. To]edo taxicab ordinance, Chapter 77], Section 77] .0]. 35. City of Columbus, Ordinance No. 1385-90, approved May 22, ]990. 36. This is why the black market cost of taxicab licenses is higher than the legal rate. Licenses in New York City, or medallions, can cost $] 75,000 or more. Banks will even loan money for entrepreneurs to purchase the medal-lions. See Mellor, Is New York Killing Entrepreneurship? 37. Most cities require companies to register color schemes, names, and inisgnia. This was counted as a "regulation" only if the ordinance required city officials to approve them. 38. Cleveland city taxicab ordinance, Chapter 443, Sections 443.0]],443.02], and 443.022. 39. Ibid., Section 443.05. 40. Canton city taxicab ordinance, Chapter 763, Section 763.05(b)(]). 41. Ibid., Section 763.12(e). 42. Williams, The State Against Blacks, pp, 82-3. 43. Interview with William H. Mellor, attorney, Institute for Justice, Washington, D.C. Mellor was the lead counsel in the court case that led to opening up the Denver taxicab market. 44. See the discussion in Williams, The State Against Blacks, pp. 80- I. c c c 36 45. See the discussion in note 15. 46. Toledo City Ordinances, Chapter 781.05. 47. Youngstown city ordinances, Section 785.06. 48. Akron city ordinances, Section 111..544(B), Canton city ordinances, Chapter 763.04 (E). 49. Canton, Ibid. 50. Some city ordinance allow flat fares for special events (e.g., concerts or other major public gatherings at a specific location). These alternative fares are allowed only at the discretion of city officials, and are not market driven. Cleveland and Columbus were the only cities that appear to allow taxis to set different fares from the standard taxi-meter rate independently of specific events authorized by public officials or otherwise sanctioned by the city. 51. Average fares determined by telephone interviews with taxicab companies in each of the cities in this report. The fares are unadjusted averages, and do not account for fleet size. Price Waterhouse found that independent drivers and companies tended to have higher fares than large fleets. See Price Waterhouse, Analysis Taxicab Deregulation and Deregulation. Using an unadjusted average, then, might distort the citywide averages in cities with a larger number of independent drivers. 52. This index excludes insurance and bonding requirements. All cities require cab companies and drivers to be insured and bonded. These requirements help prevent "fly- by-night" companies that operate risky operations. 53. Dayton city ordinances, Section 115.44(B). 54. A taxicab company would not qualify as a home business because it would require a full-time paid employee, or someone who is not an occupant of the residence, and require daily services and traffic not normally found in the adjacent residential area. See Dayton Zoning Code, Section 150.342, paragraphs G and J, 55. Based on 250 square feet of office space, rented at $7.00 per square foot. This is a conservative estimate because commercial office space is not readily available in many low-income areas. Thus, the rent could be much higher. Data on office rent and lease rates were compiled from 1995 greater Dayton Office Market Study (Dayton: The GEM Real Estate Group), submarket surveys by Leasetrends, Inc., and interviews with real estate agents and brokers. 56. A 24-hour' a day operation means that a workers would have to cover 168 hours each week. This means at least 4.2 people would be required to cover the dispatching office on a full-time equivalent (FTE) basis (4.2 people x 40 hours per week = 168 hours). c c c 37 57. Assuming 4.2 (FTE) positions averaging $5 per hour. The entrepreneur is assumed to be a cab driver, and does not work in the dispatching office. The Ohio Bureau of Employment Services estimates that workers in transportation services and utilities averaged $15.24 per hour in June, 1994. Many of these workers have specialized skills that are not necessary for dispatching services. Retail wage rates averaged $7.76 per hour in the same month, which is probably closer to the skill level needed for this busi ness. Nevertheless, interviews with cab company operators in the Dayton area indicated that most dispatchers eam substantially less. See Ohio Bureau of Employment Services, Labor Market Reviece, June 1994, p. 37. 58, Dayton Taxicab Ordinance, Section 115.44 (A). 59. The price of a used car was estimated using the N.A.D.A. Official Wholesale Used Care Trade-In guide, July 22, 1996. Case studies of taxicab deregulation in San Diego and Seattle suggest that smaller, independent companies have older cars, averaging about 6 years old (Price Waterhouse, Analysis of Taxicab Deregulation and Re-regulation, p. 15). We used the average price of a 1990, basic, 4 door sedan for the following makes and models: Buick Skylark, Cheverolet Caprice, Chrysler leBaron, Ford Tau rus, and Oldsmobile Cutlass. Foreign makes (e.g., Honda, Toyota) typically run $2,000 to $3,000 higher. The average cost of the Domestic models for 1992 models (only 4 years old) was $6,475. Insurance agents indicated insurance would cost about $3,000 per car. Thus, adding two cars (1990 model average), and insurance for each, would add costs of about $14,570. The cost of acquiring the cars would be a one-time expense while insurance would be an annual expense. 60, Section 115.39(B). 61. Section 115.47. 62. Section 115.56(A). 63. This is the estimated average annual wage of an employee in the transportation industry in Ohio according to the Ohio Bureau of Employment Services. This estimate is consistent with the experience of cab company operators interviewed for this report. 64. This information and example were drawn from an interview with an economist involved in the Indianapolis deregulation effort. o o o 'C SCARED YELLOW: AN ANALYSIS OF TAXICAB COMPETITION IN ALLEGHENY COUNTY Eric Montarti, Research Associate Allegheny Institute for Public Policy Allegheny Institute Report #00-03 January 2000 c @ by Allegheny Institute for Public Policy. All rights reserved. Note. Nothing written here is to be construed as an attempt to aid or to hinder the passage of any bill before the Pennsylvania General c 1 c TABLE OF CONTENTS KEY FINDINGS 2 INTRODUCTION 3 TAXICAB REGULATIONS 4 PROCESS OF COMPETITIVE ENTRY 7 MARKET CONCENTRATION IN THE PITTSBURGH AREA 8 ECONOMIC EFFECTS OF CONCENTRATION 10 THE INFORMAL ECONOMY 12 C ACHIEVING COMPETITION IN CAB SERVICE 14 REFERENCES 15 c 2 c KEY FINDINGS · Pittsburgh and the surrounding communities in Allegheny County are, by and large, not referred to or thought of as "cab towns". There are several reasons for this characterization, one of which may be regulations that stifle competition and thus inhibit new entrants into the taxicab business. · Taxis are regulated by the Public Utility Commission (Puq. The PUC inspects cabs on both a random and an annual basis to ensure that they are in proper working order, meet safety standards, and that the meters conform to stipulations in the company's tariff. · The process of competitive entry into the legal taxicab market is overly slanted toward protecting incumbent companies. Competitors must show a "proof of need" in order to commence operations. c · Regulations keep cab companies from competing head-to-head on the more lucrative routes. These regulations produce similarities in the fares that cab companies charge regardless of the area of operation, and economic disparities between the large and small incumbent companies in the legal cab market. · The barriers to legal entry has proliferated the "jitney" market in certain areas around Pittsburgh. This market, albeit highly dangerous and illegal, is the free- market response to a strong demand for transportation in an underserved area. . The PUC and the Pennsylvania General Assembly should amend the regulation of the taxicab industry so that entrepreneurs that want to start a cab company can do so with minimal government restrictions. c 3 c INTRODUCTION The recent flap over New York City taxicab drivers refusing to pick up actor Danny Glover as he waited for a ride highlighted an important fact that most citizens in the Pittsburgh area know all too well: taxis are not responsive for some groups. I Although the issue with Glover delves deeper into race issues, almost anyone who has tried to call a cab--regardless ofrace--has a horror story. Whether calling for a cab from home only to have the request ignored, relying on a cab when the patron has automobile trouble, or being bypassed when hailing one on a busy street, the tales often reach mythical proportions. Pittsburgh and the surrounding communities in Allegheny County, by and large, are not "cab towns". Typical explanations ofthis characterization include the fact that downtown is relatively easy to transit by walking and many neighborhoods are close enough to town that a cab is not required. Another line of reasoning is that cabs stay around the downtown hotels and at the airport and are not around the spots where populations and potential patrons congregate. c On the other hand, there is a significant population that relies on passenger service to get them from home to the store and back. This population, usually low-income and heavily African-American, has come to rely on a Pittsburgh institution; the jitney. This mode of transportation is quick, inexpensive but often dangerous and always illegal. It is the rational response of the free-market to a need that is not being served by regnlated companies that grab the most profitable routes, most notably the one that runs from Pittsburgh International Airport to downtown and back. The purpose of this paper is to illustrate the fact that regulatory guidelines and a burdensome approval process are hindering taxicab competition in the Pittsburgh area, perpetuating a lack of cab usage and the growth of an "underground" network of jitney drivers. Eliminating the current regulations that shield incumbent companies and prevent new entrepreneurs from entering the cab business will bring benefits to consumers in the Pittsburgh area in the way of improved service, lower rates, and the potential for greater usage of this often overlooked service. I Lou Ransom "Taxicab Redlining a City Tradition". Pittsburgh Tribune-Review, November 20, 1999. c 4 c TAXI REGULATIONS Taxicab operations are governed by two main sources. One source is rather general and describes the role of the taxicab as a regulated carrier of passengers. The second source is more specific as it prescribes the day-to-day operations and regulations a cab company and its drivers must follow. First, Title 66 ofthe Pennsylvania consolidated statutes, the Public Utilities Code, defines the term "common carrier". 2 In essence, a common carrier provides "transportation services to the general public in return for compensation, and are required to serve everyone who is able to pay. Common carriers are often held to service standards and are accorded protection from competition through restrictive licensing criteria". This restrictive licensing criteria shields established companies from new entrants and allows cabs to operate as regulated monopolies.) Second, taxicab operations are governed by regulatory guidelines established in Title 52, Chapter 29 of the Pennsylvania Code. These guidelines involve record-keeping responsibilities, inspection requirements, and general rules of operation. Taxicabs provide what is classified as "call or demand" service. This type of service is defined as c "Local common carrier service for passengers, rendered on either an exclusive or non-exclusive basis, where the service is characterized by the fact that passengers normally hire the vehicle and its driver either by telephone call or by hail, or both" .4 Continuity of Service Regulations governing the continuity of service and any deviation from such continuity are outlined in Sections 61 and 62 of Chapter 29. Taxicab companies have a rather short period (thirty days) from the time the franchise is granted to the time service must commence. If the company does not begin service with this period, the franchise is terminated unless the PUC rules otherwise. Any interruption of service must be reported to the commission; if service is discontinued for five consecutive days within prior notice, the franchise is terminated.s Cabs cannot travel the route of a fixed time passenger carrier, such as a bus, when looking to pick up a fare on a non-exclusive basis when the route is in operation. In other words, call and demand service cannot interfere with scheduled time service.6 , Pennsylvania Consolidated Statutes, Title 66. (1993 Edition). Conunonwealth of Pennsylvania, Legislative Reference Bureau, Harrisburg, P A. 3 Boroski, John W. and Gerard C.S. Mildner: "An Economic Analysis of Taxicab Regulation in Portland, Oregon". Cascade Policy Institute, Policy Perspective 1007. (,,,,,v.cascadeoolicv.org). 4 Pennsylvania Code, Title 52, Chapter 29, Section 13. 'Pennsylvania Code, Title 52, Chapter 29, Sections 61 and 62. 6 Pennsylvania Code, Title 52, Chapter 29, Section 312. c 5 c Inspections The regulations entail inspections by the Public Utility Commission (PUC) of the cab on both random and annual instances, the investigation of complaints against taxi companies and their drivers, and ensuring that meter rates (flag-drops and mile intervals) are in line with the company's tariff. The PUC must monitor the cab company to make sure that the driver of the cab is an employee of the company, that drivers maintain daily log sheets that detail times and places of origin, number of passengers, readings of meters, and the like, unless this requirement is substituted by some other method approved by the PUC. The cab company must also report gross operating revenue from service provided under their certified authority. 7 Items to be Contained in the Daily Log Sheet of a Cab Driver . The date . Time the shift commenced and ceased . Vehicle ID Number . Times and places of origin and destination of each trip including the ntileage at both points . Number of passengers and the fare collected on each trip . Each trip on which packages were delivered and the charge . Meter readings at beginning and end of shift . Name and number of the driver . Silmllture of the driver attestin2to the accuracv of the data' c Vehicular Requirements Vehicle and equipment requirements are quite restrictive as well. Only vehicles with seating capacities of eight passengers or less, excluding the driver, can qualify for call or demand service. Meters are required for vehicles operating in a municipality with over 20,000 residents. The meter must be installed in the front of the vehicle so that it is in clear view of the passenger and the cost for installing the meter is borne by the company. Vehicles must comply with standards set forth by the Department of Transportation: all door hinges and latches must be in working order; all advertisements must be clearly fastened and not obstruct the view ofthe driver; clean and sanitary condition must be maintained in the seats and in the trunk of the car; and vehicles must have snow tires or all-weather tires from October I to April I of the following year.9 These regulations take a great degree of flexibility away from the companies that do enter into the legal taxicab market while at the same time drive prospective competitors away. The safety requirements are perfectly understandable. Cabs should meet the same level of standards as other vehicles in the Commonwealth. Since passengers are involved, a higher degree of cleanliness for the vehicle should also be achieved. However, the meticulous record keeping and continuity of service requirements place significant stipulations on the freelancing entrepreneur that may want to target call or demand service to particular times or events. A vehicle that holds more than seven 7 Pennsylvania Code, Title 52, Chapter 29, Section 101 , Pennsylvania Code, Title 52, Chapter 29, Section 313 9 Pennsylvania Code, Title 52, Chapter 29, Section 314, 402-3 c 6 .c passengers is disqualified from entering into call or demand service. This distinguishes call or demand service from group or party service, but it also removes the flexibility of cab service from large events or groups of people who do not pre-arrange the service. These regulations curtail innovations that can lead to new and improved services from the taxi companies. .c c 7 c PROCESS OF COMPETITIVE ENTRY!O If the PUC regulations appear to leave the back door open for abuse (or mistakes), the process by which a prospective cab company establishes itself slams that door shut. This process places competition into the hands of fate and is a major reason for the current state of taxi service. A prospective cab company applies for a franchise by filing a $350 fee along with an application that describes the territory the company wishes to serve and a commitment to serve the stated area. The company must demonstrate that there is a need for service in the area, thus placing it in the position of determining that the incumbent cab company or companies are not responsive. In short, the burden of proof lies with the newcomer. The application is published in the Pennsvlvania Bulletin (a PUC publication) and is subject to a IS-working day period in which the application can be contested. When the application is contested, it is often an incumbent cab company challenging the new company's "fitness" or ability to serve the area and will argue that they, the incumbent, will adjust and commence service there. The contesting parties are sent to a mediator within the office of the Administrative Law Judge (AU) in order to solve the dispute without litigation. If mediation does not work, the Judge will hear the case. c The end result of the AU proceedings is an opinion and order that may resolve the dispute. If there is a disagreement by either party, an exception to the order is filed. The opinion and order is then delivered to the Public Utility Commissioners who deliver a commission order that adopts, slightly modifies, or changes entirely the ALJ opinion and order. It is plain to see that the process of competitive entry is slanted toward the incumbent providers because the competitor and the incumbent engage in a game of "one- upmanship" in which the new company must prove that there is a service failure on the part of the established company. Obviously, the cab companies that were franchised first have no quarrel with this process for the fact that when they were franchised, more areas "needed" service. Now the process has become twisted: instead of the new company responding to a market demand and commencing cab service, they are forced to "accuse" the company that has "failed". Since this regulated monopoly model favors incumbents, they are given the benefit of the doubt that they can serve "neglected" areas. 10 Interviews with Denise Cohen and Tim Ziegler, Pennsylvania Puhlic Utility Commission, Bureau of Transportation and Safety. c 8 c MARKET CONCENTRATION IN THE PITTSBURGH AREA Imagine a private business limiting the size of the pool from which it could draw customers in exchange for shutting similar businesses out of competing with them. This business would experience significant economic hardship should that pool of customers ever dissipate. This is exactly how the taxicab industry operates: in return for providing service in a specific geographic area, the company is shielded from competition. II The difference is that the territorial reach of most cab companies is large enough to prevent its demise. Territorial Assignment Regulations specifY geographic areas of service and, as a result, head-to-head taxicab competition in the Pittsburgh area is largely non-existent. Companies may overlap the communities they serve in some instances, but that is the exception rather than the norm. In these instances, the competitive effect is nullified because of the differences in size of the carriers. Take the example of Pittsburgh: the three cab companies with the oldest franchises all serve within the city limits. One of these three, People's Cab, has operating authority for a lO-mile radius outside the city limits. Yellow Cab enjoys this range as well; the difference here is that Yellow Cab has 248 more cabs than this competitor. The operating authority similarity is quickly dissipated when one considers the lopsided market share of the franchised companies. 12 c Keeping New Companies Out Entrance into the cab business by new companies has been stifled as well: the last time a cab company received a franchise from the PUC was in 1995 for a carrier with three cabs in its fleet. This carrier, Legg Transportation, along with S&S Taxi, which was franchised in 1982, have been shut out from competing within the city limits. Instead, they cover portions of eastern and southern Allegheny County, respectively. 13 The entrenchment of the established companies allows for expansion while discouraging new entrants into the business. For example, in November of 1998 an amendment was made to Yellow Cab's operating authority to include several communities in the northeast comer of the county, where their service had not previously extended. The company's authority was also extended to Findlay Township, the present site of Pittsburgh International Airport. This type of regulated expansion demonstrates the fact that regulations ensure that service needs normally are solved by extension of established authority rather than encouraging new business start-ups as in private industry .14 \I Sam Slaley "How Cities Put the Breaks on Taxicabs". The Freeman, March, 1998. 12 Public Utility Connnission, Bureau of Transportation and Safety "Ibid " Ibid c 9 c TAXICAB COMPANIES IN THE PITTSBURGH AREA1S c Cab Company # of Cabs in Fleet % Concentration Operating (Year Franchised) Authority Includes.. . Yellow Cab (1946) 260 91% City of Pittsburgh, and 10 mile outward radius, including Pittsburgh International Airport, and T arenturn, Brackenridge, Fawn, Harrison, Springdale People's Cab (1951) ]2 4% City of Pittsburgh, 10 mile outward radius Eag]e Taxi (1981) 10 3% City of Pittsburgh limits Legg Transportation 3 1% Chalfant, Churchill, (1995) East McKeesport, East Pittsburgh, Forest Hills, Monroeville, Oakmont, Pitcarin, Plum, Turtle Creek, Penn Hills S&S Taxi (1982) 2 .6% McKeesport, Duquesne, Glassport, Versailles, Clairton, Elizabeth " Ibid c 10 c ECONOMIC EFFECTS OF CONCENTRATION Since taxicabs are a regulated industry, the PUC oversees rate applications and increase requests upon existing rates. A taxicab's fare is based upon operating expenses of the company and the need to derive a profit from the operations. The profit, also known as a "rate of return", is taken into consideration when the company seeks PUC approval for a rate increase. Given the fact that direct taxicab competition is non-existent, either because of fleet size or separate territories, the cab companies that do pass through the process of approval essentially operate as an effective monopoly. As a result, fares do not vary as they would under an open-entry system with multiple cab companies. FARES FOR CAB COMPANIES IN THE PITTSBURGH AREAl6 c COMPANY FLAG DROP ADDITIONAL WAIT FEE MILE Yellow Cab $ I. 80 for first 117 $.20 per additional $.20 per minute mile or less 117 mile People's Cab $1.40 for first 117 $.20 per additional $.20 per minute mile or less 117 mile Eagle Taxi $1.80 for first 117 $.20 per additional $.20 per minute mile or less 117 mile Legg Transportation $ 1.50 for first 1/8 N/A N/A mile or less S&S Taxi $ 1.50 for first 1/6 $.25 per additional $.25 per minute mile or less 1/6 mile The similarity in rates for each of these cab companies demonstrate the fact that there is no real competitive effect on rates because regulations have kept the legal cab companies out of direct competition. Since the process of entry puts the burden of proof on the incoming cab company, any head-to-head competition would be discouraged because the incumbent will prevent the competition under the proof of need criterion. In other words, the established company will assume the responsibility for serving customers in an "under-served" area before they would allow a new company to take on such an opportunity. The similarity is set apart when compared in relation to the reported revenue of these companies. It goes without saying that the more cabs a company owns and the more profitable routes the company possesses, the greater the profits. However, the disparity should send a signal to public officials that regulations are skewing profits for large incumbents at the expense of smaller incumbents in this industry and that arc-evaluation of competition is required. "Ibid c II c 1999 REPORTED REVENUES FOR COMPANIES IN THE PITTSBURGH AREAI7 COMPANY 1999 REPORTED REVENUE Yellow Cab Comnanv $8,627,244 PeoDle's Cab $192,566 Eallle Taxi $0 Lellll TransDortation N/A S&S Taxi $491,492 The assignment of cab companies into distinct territories in which those companies have a market concentration has two revenue effects. One is a "non-effect" on fares in which consumers in each area of operation pay the same amount they would pay in another area. This situation would change if regulations promoted head-to-head competition by new companies in areas of service rather than guaranteeing territories of monopoly control to the established cab companies. c The other is an effect on the gross revenues of entrenched companies. Of the five cab companies, the dominant carrier accumulated revenues nearly 17 times its next closest legal competitor this year. In other words, the cab company with the longest history of service, the most cabs, and the most profitable routes made the most money. Nothing is shocking in this revelation other than the fact that protective regulations have not only kept prospective entrepreneurs out of the cab business, those regulations serve to protect the large companies at the expense of their closest legal competitors. 17 Ibid c 12 c THE INFORMAL ECONOMY Since tariffs dictate the areas in which the cab companies operate, a double bind occurs: incumbent cab companies take the most profitable routes at the expense of competition, and the tariffs eliminate the need for responsive service at a competitive price. The attention to profitable routes comes at the expense of the prospective fare that may want to go a few blocks downtown, the broken-down motorist that needs help on Route 51, or the elderly citizen in the Hill District that wants to shop at the grocery store in South Side and return home. With the exception of the first two cases, the last example is increasingly served by a jitney driver. The regulatory process also may hinder those who may want to explore new business opportunities for transporting customers to and from certain events as well as routine occasions. Jitneys The jitney driver is an illegal and often dangerous occupation. It is also the free-market solution to a need for transportation service for certain citizens in certain communities. At present, Pittsburgh reportedly has over 1,000 independent jitneys. c Encouraging the operation of jitneys in the legal cab market would bring legitimate competition to the established companies, forcing established companies to improve service and possibly lower their fares. It would also bring a revenue stream into the public coffers that had been avoided by these underground operations. Given the fact that even the most efficient of monopolies will become better through competition, this option should be explored. However, not all jitney drivers would seek to enter the legitimate market, nor would their regular customers want them to. Entering the legal market may require significant alterations in the way jitneys conduct business, including, but not limited to the purchase of two-way radios, renting or leasing dispatch office space, or operating a 24 hour service. This option may not be conducive for all cab companies because of the large up front capital investment they require and the fares that would inevitably rise as costs were passed on to the consumer. Creating Niche Markets Allowing more cab companies to compete does not end the regulatory and oversight duties of the Public Utility Commission. All vehicles will still have to meet health and safety standards. All drivers will have to possess insurance and a valid driver's license. Perhaps all vehicles would have to be outfitted with a PUC identification number or a complaint hotline. c I3 c This deregulation could lead to the creation of new niche markets that could be served by entrepreneurs. Perhaps a small company would utilize three or four minivans to pick up senior citizens at the grocery store after they had completed a day of shopping and could return the shoppers home. Or maybe a fleet of cars would exclusively serve sporting events or entertainment venues. The possibilities of specialization are limitless, and are made possible by simply changing the standard of competition that presently governs taxicab service. , c c 14 c ACHIEVING COMPETITION IN CAB SERVICE Pittsburgh and the communities in Allegheny County may not utilize taxicabs for a multitude of reasons, some of which were discussed at the outset of this piece. The point here is to suggest an alternative explanation, namely that regulations and the process of competitive entry may be driving prospective competitors away from entering the cab business. The legal obstacles have been supplemented by a rational marketplace response of an illegal network of jitney drivers. . If regulations are relaxed and the process is made neutral, Pittsburgh's taxicab industry may become an entrepreneurial success. Needless to say, the time has come for a thorough review of the regulations pertaining to the taxicab industry in this area. Change may come from the General Assembly to amend sections of Title 66 that pertain to common carrier designations. Or there could be an extension of the Medallion Act, which authorizes the sale of 1,600 taxi medallions in Philadelphia, to Allegheny County. The legislative change is the necessary first step in de-regulating the cab industry. c The Public Utility Commission itself needs to either build upon a legislative recommendation or initiate changes to the regulations themselves. Commission action needs to streamline taxicab operations and bring flexibility to the system. There are essentially three actions for the commission to take: I. Alter the process so that the proof of need requirement is no longer in place 2. End the restrictions on territorial assignment 3. End size restrictions (number of people in a vehicle under call or demand service) and continuity of service stipulations Regardless of the type of action that occurs, the end purpose is to make the process of starting a cab company easier. Whether the prospective entrepreneur has two cars in a fleet or two hundred, and as long as the cars pass inspections, conform to relevant health and or safety regulations (similar to a restaurant), and have an identifiable PUC number or a complaint hotline on the side of the car, the entrepreneur should be able to commence operations. This change will lead to tremendous innovations in taxicab service. c 15 c REFERENCES Boroski, John W. and Gerard C.S. Mildner: "An Economic Analysis of Taxicab Regulation in Portland, Oregon". Cascade Policy Institute, Policy Perspective 1007. (www.cascadcpoJ icy.org). Pennsylvania Code, Title 52, Chapter 29 "Motor Carriers of Passengers". Pennsylvania Consolidated Statutes, Title 66. (1993 Edition). Commonwealth of Pennsylvania, Legislative Reference Bureau, Harrisburg, PA. Public Utility Commission, Bureau of Transportation and Safety, Selected Documents and Tariffs on Motor Carriers in Allegheny County. Lou Ransom "Taxicab Redlining a City Tradition". Pittsburgh Tribune-Review, November 20,1999. Sam Staley "How Cities Put the Breaks on Taxicabs". The Freeman, March, 1998. c c 16 o o c c c c 1998 Public Convenience and Necessity Hearing Report for Taxicab Medallions to the Police Commission City and County of San Francisco Submitted by Captain John Ehrlich Table of Contents Introduction History Current Industry Operation Theories of Regwation Summary of Testimony Analysis of Evidence Alternatives Recommendations Introduction The Police Commission is mandated to hold Public Convenience and Necessity (PC&N) Hearings to determine if there are a sufficient number of permits or medallions (metal plates that must be carried by all operating taxicabs) issued to assure adequate service to the public. As the Hearing Officer for the Police Commission I have held PC&N hearings on May 19, 1997 and April 27, 1998. I read the transcript of the November 14,1996 PC&N hearing held by Captain Dave Maron. As the Captain of Support Services I was a member of the Mayor's Taxicab Task Force which met from August of 1997 until April of 1998. The transcripts of the PC&N hearings, the final report of the Taxicab Task Force c c r '- and all the written submissions are included with the exhibits. Given all the input I have received I shall try and analyze the situation to give you the tools to make an informed decision. I realize that most of the police Commissioners have not studied the industry so I will cover some important background information. First I will give a short history of the taxicab industry. Next I will cover the current operation of the industry. Then I will explain theories of regulating taxicabs. The fourth section will outline the major points raised bearing on issuing more medallion and I will analyze economic and policy factors on the issues. Alternatives have been raised to issuing more taxi medallions and these issues will be examined. Finally I will make my recommendations. History The history of the taxicab industry starts with the hackney coaches of 16" century Europe (Gilbert &. Samuels, 1982). Taxicab regulation started in 1635 in London when King Charles I restricted horse drawn carriages because of congested streets (LaGasse 1986). With the advent of the automobile at the turn of the 20'" century, the taxi industry flourished. Taxi fleets owned by large organizations had high driver standards. John Hertz owned both a cab manufacturing plant and several large fleets. He was the first to paint taxis yellow and start telephone dispatch (Gilbert L Samuels, 1982). Even in these eras regulations existed in some jurisdictions in the following areas: maximum fares, posted fares or meters, insurance, drivers' licenses and limiting jitney operation (Kertz, 1986). The start of the Great Depression led to large numbers of drivers entering the market. New car dealers would let people rent unsold cars. Many people lost their jobs and used their cars as taxis. The demand went down as the supply went up. This led to rates falling to levels that could not produce a return on investment. The public called for more regulation after severe problems with service surfaced: drivers with no insurance, fare gouging, unsafe driving and unsafe vehicles. Laws were passed in most cities controlling entry, fares, financial responsibility, condition of vehicles, and standards of service (Gilbert & Samuels, 1982). Some laws dealt with livable wages, setting fares to provide adequate return on investment and prohibiting leasing the cabs (Kertz, 1986). The World War II years saw an expansion of the industry. After the war the economy initially contracted. Returning servicemen got the first chance at buying new automobiles. Many having no civilian jobs went into the taxi industry. Politicians could not order a crack down without suffering at the ballot box. This led to another period of disruption in the industry leading to more regulation. After the post-war regulation the industry stayed the same through most of the 1970's. In the late 1970's and early 1980's following airline and trucking deregulation a number of cities and the state of Arizona deregulated the cab industry. In Arizona there were no regulations except for insurance. Teal found that except for some contract service price c c c reductions there was no decrease in price or increase in service in Arizona (1986). The results of deregulation were disappointing and many of the cities reregulated. Existing alongside the official industry is a shadow system. Peter Suzuki did a study in 1995 of illegal taxicab operations in various cities in the United States. He found that most of these operated by and for minorities. They might operate out of a gathering place for members of that community like a barbershop, supermarket or via telephone. They would handle runs the official companies would refuse either because they were in undesirable areas or because the short hails were not profitable. With their lower costs and standards the illegal. operators were able to operate and make a profit. San Francisco In San Francisco medallions were legally bought and sold. People could own more than one permit. The industry was dominated by the Yellow Cab Company that had 503 of the 711 permits to operate taxis. Yellow Cab of San Francisco was owned by a holding company, Yellow Cab of California, which was purchased in 1962 by the Westgate Corporation ofC. Arnholt Smith. When in 1976 the Westgate Corporation went bankrupt the taxicab industry in San Francisco was sent into a crisis as two thirds of the service stopped. The Yellow Cab Cooperative of drivers purchased 185 of the permits and sold the rest to various other organizations and people. This crisis led to two competing propositions on the November 1978 ballot. Proposition J, which was defeated, would have limited prices of medallions to $7500 unless the seller had paid more. Prop. J also required new permits going to drivers. Proposition J was defeated. Proposition K passed and continues to control the industry. All medallion permits owners had to turn them in to be replaced by permits owned by the City. The new permits could be held the same way as the old permits except that they could not be bought, sold or transferred. Corporate ownership of medallions would be allowed until more than 10% of the ownership changed at which point the permits would be revoked. New permittees could only hold one permit. They would have to drive the taxicabs at least four hours a day for 75% of the days in the year oftbe cab's operation. People who held the old permits would not have to comply with the driving requirement. The Police Commission would issue more permits when the Public Convenience and Necessity (PC&N) mandated it. In 1968 there were 849 authorized medallions. In 1976 the number fell to 711 after the former Yellow Cab Company was ordered to surrender 138 medallions by the bankruptcy court. Fifty more medallions were issued in both 1984 and 1987 bringing the number to 811. In 1994 forty-five more medallions were issued and an additional five Ramp taxi medallions. Ramp taxis are vehicles that have ramps that allow for wheelchair access. In late 1996 the Police Commission created 100 more standard medallions and 20 mote ramp taxi medallions. The decision was made just before the 1996 PC&N hearing in c c c November of 1996. It was decided to delay any decisions on more permits until the per: 's had been issued. I h. . PC&N hearing on May 19, 1997. Before I made recommendations to the Police Commission Mayor Brown held a town hall meeting, which I attended, on taxis. As a result he asked that no decision be made until the entire industry could be studied. He created the Mayor's Taxicab Task Force that was actively chaired by Supervisor Newsom. I was one of the members who met weekly from August 1997 until April 1998. I held a PC&N hearing on April 27, 1998 that lasted from 6:30 P.M till almost midnight. Over 60 people spoke at the hearing and there were over 90 written submissions on this year's hearing. Current Industry Operation There are currently 981 medallions issued in San Francisco. There are 35 companies ranging in size from 314 permits at Yellow Cab to several companies with one permit. A company is also called a color scheme as all cabs are required to have distinctive markings indicating their company. Each cab has a number on it that indicates the number of the permit. Every company is required to have a 24-hour dispatch service. There are ten dispatch services, half serving more than one company. Most of the latter five dispatch companies are dominated by one color scheme. City Wide is an independent dispatch service serving 14 companies and 149 medaltions. All drivers must have a Driver Public Vehicle permit issued by the Taxi Detail of the Police Department. The drivers must take an independent class and then pass a class offered by the Police Department. Drivers are tested on geography, rules of the road, and the regulations pertaining to the taxi industry. Drivers in San Francisco may not refuse a fare unless the person is too intoxicated or too obnoxious. While drivers were once employees of the companies most now have independent contractor status. The companies have limited control over independent contractor- drivers and the companies do not have to pay social security or benefits. Drivers lease the cabs for period of time usually a shift, a week or a month depending on the terms of their contract with the company. Drivers pay a "gate" fee ranging from $65 to $110 a shift depending on the company and shift. The drivers pay for gas and keep all money they collect during the shift. Most medallion holders lease the operation of their medallions to companies or individuals. The price is set on the open market and ranges from around $1800 a month to above $3,000 a month. The leases vary greatly in the terms. A company will usually provide the car, its maintenance, drivers, administration and the dispatch service. Several individuals might lease directly from a medallion holder and split the driving between them. They will pay some amount to associate with a color scheme and dispatch service. A medallion holder who drives usually will get a higher quality vehicle and priority on shift assignments. Some companies will not charge them as high a gate fee but will figure c c c that into the monthly lease fee. Medallion holders may also be allowed to own part of the company. In San Francisco many different government agencies affect the taxicab industry. The Board of Supervisors sets fares and passes legislation controlling the industry within the guidelines of the voter approved Charter Amendment of Proposition K. The Chief of Police issues rules on the conduct of the industry, directs the Taxicab Detail and makes decisions on permits except for the medallions. The Police Commission decides who holds the medallions and how many there should be. Any permit decision may be appealed to the Board of Appeals. The Airport Commission decides on rules for taxis at the airport. The Bureau of Weights and Measures checks the taximeters. The Mayor appoints the Board of Appeals, the Airport Commission and the Police Commission. The California Public Utilities Commission has exclusive jurisdiction over the limousines that are competition for the taxi industry. The Taxicab Detail of the Police Department has the most day to day regulation of the industry. They investigate complaints by the public, handle the administrative duties of issuing the various permits, go out on the streets and check to see if the cabs are in fact being operated correctly. They check that drivers have completed their waybills and that vehicles are in good working order. They enforce traffic violations. They train other police officers to enforce regulations. Theories of Regulation ODen Markets In economic theory a free market is in general preferred over regulation. The law of supply and demand will determine the cost and number of the goods and services in the market. If the demand for a good or service increases the price will go up. If the price goes up more people will be willing to supply the good or service at that higher price. In a perfect market buyers have enough information to choose to buy goods and services from those sellers who give them the best value. There should be government regulation only when there are imperfections in the market (Frankena & Paulter, 1986). Those imperfections might be the result of a monopoly, collusion, or the consumer not having enough information (Gilbert, 1992). Pumose of Rel!ulation Gorman Gilbert is a University of North Carolina professor, the former Chairman of the New York City Taxi and Limousine Commission, and the past President of a large Los Angeles taxi company. In 1992 he talked about the goals of regulation. First, minimize the public expense of determining the regulatory levels and the cost of enforcing the regulations. Second, protect the customers from market imperfections so that they are safe and not cheated. Third, improve the city's public image with special attention paid to visitors. Next, give a fair rate of return to both drivers and companies or owners. Finally, allow it to be a way for disadvantaged people to join the mainstream. He goes on to say c c c that good regulation enhances competition and encourages self-enforcement of good service (1992). Dr. Jeremy Toner writes about the purposes of regulation as being the "optimal economic performance of the industry alongside public safely, consumer protection and congestion management" (1993,p I). Public safety includes vehicle standards and driver licensing. Congestion concerns might limit the number of taxis or manner of service at an airport. Consumer protection looks at the relationship between a cab driver in a strong bargaining position versus a consumer who might be exploited (Toner & Mackie 1992). There may be several different price/service levels available in the open market. By controlling fares and the numbers of taxis the government might obtain the optimal price/service level for the public (Toner, 1993). Tvpes of Service Before looking at the particular issues it is important to realize that there are five different kinds of taxi service: radio dispatch, cruising, taxi stands, airport, and contract service. Contract service means an individual or company contracts with an individual or corporate customer to provide a certain kind of service according to contract terms. This might be a senior citizen center for shopping, a convention for rides to a party, an airport for a franchise, or a government agency providing subsidized rides for the disabled. In theory there is little need for the government to regulate this type of service because the buyer is free to seek out another vendor. This service may still be regulated by other codes governing the transportation such as school children. Radio dispatch is where a customer telephones in a request for a taxicab to respond to a particular place at a certain time and a taxicab is dispatched. What this means in San Francisco is that a run or order will be broadcast either by voice or computer and a taxi will volunteer for the order. Drivers are supposed to monitor the radio and handle an assignment; they are not in practice made to respond. In theory this portion of the industry does not need to be heavily regulated. A customer is free to bargain over the phone and call another service. In New York City lightly regulated "For Hire Vehicles" which can only respond to customers through dispatch exists along side heavily regulated taxis with no dispatch capability (Schaller & Gorman, 1995). Cruising or hailing means that a taxicab drives around looking for fares and a customer hails them. In New York City they took radios out of cabs in the 1980's to increase cruising (Schaller & Gilbert, 1995). Cruising taxis are most often in a strong bargaining position as the customer has no idea how long it will be until another cab shows up (Cairns, 1996). This leads to the regulation of cruising taxi fares (Amott, 1996). A taxi stand is a location for cabs to park as they wait for customers. These are typically hotels, auditoriums, train or bus stations, or anywhere a large number of people might need taxi service. The general rule is the first one in line gets the first fare. A hotel doorman may control which cab the customer gets in leaving them little choice. A c c c customer may not know that they can choose which cab to take. There are significant constraints on making an informed choice, which leads to regulation. Airports generally own the land around the airport and so can manage taxi service in many ways. At SFO only San Francisco taxis can pick up fares though cabs from any jurisdiction can drop off fares. Airport service can be identical to taxi stands in the lack of consumer choice. Large airports need to be regulated because traffic flow problems prohibit the time needed for customers to shop or bargain for fares (Lupro, 1993). When a visitor arrives at an airport shelhe is in no position to bargain. There may be confusion with currency, which leads to the newspaper stories about hundred-dollar overcharges on rides in from airports. Fare Reeulation There is ample theory on whether fares should be regulated. In general it boils down to whether a customer has enough information and opportunity to make a choice between various competing cabs. Contract services are not regulated per se as taxicab regulation as they are private contracts. The radio dispatch market is only partially regulated in some places. In San Francisco taxi fares are regulated while limousine fares are not regulated. As mentioned above with the FIFO systems at stands and airports and with the nature of the cruising market consumer choices are restricted and so fares should be regulated (Arnott, 1996, Cairns, 1996). Frankena and Paulter would only set maximum fares and let the free market allow fares to go lower (1986). In San Francisco only maximum fares are set and companies may file to operate at lower fares although no company has done so. Medallion Reeulation The number of taxi permits allowed in a jurisdiction or entry regulation has been highly debated. There are traditionally two ways the number of medallions has been set; Public Convenience and Necessity or a formula. The first way is by Public Convenience and Necessity (PC&N) hearings as in San Francisco. A public hearing is held on the issue of whether more permits are needed to serve the public. The second way is through a formula that takes various factors into account: population, airport activity, tourists and conventions (laGasse, 1986). Taxi industry consultant Dan Hara presented a formula to determine whether a city had enough taxis at a taxi convention in 1997. He found that there were six key variables: population, fare levels, commuters, proportion of low income people, number of frost free days, and cost of running a private vehicle. The most interesting variable is that he found that low- income people are more likely to use taxis, as they may not have other options. Unfortunately hotel rooms are not part of his formula so it is of little use in San Francisco. In the late 1970's and early 1980's after the airline industry and trucking industry were deregulated several cities tried deregulation of the taxi industry. This led to problems. c c c According to Cairns the number of no- shows to radio dispatch increased along with complaints that drivers were refusing to convey fares (1996). He also said that decentralized markets are difficult to monitor especially with tourists who are in a poor position to bargain. The taxi industry differs from other industries in that entry barriers are low for individuals (Teal, 1993). To buy or lease a car does not require a lot of money. The skills needed to be a driver are barely more than those needed for a driver's license. It does not require organization or management skills to be an owner-driver. The FIFO system at airports and stands means there is a guaranteed market (Teal, 1993). This led to the new entrants providing more low quality service in places such as the airport that didn't need more service. In order to achieve full public service, certain segments of the market may have to subsidize other market segments (Toner, 1993). Radio dispatch services require substantial costs for office staff, equipment, and marketing (Hackner & Nyberg, 1995). Firms may have to be a certain size to be able to cover the radio dispatch area (Teal & Berglund, 1987). Teal argues that entry policies should aim at increasing the number of 24-hour, full-service organizations to compete on price and service as opposed to two independent owner-drivers sitting in line at an airport (J 993). Driver Oualitv A study of New York City cab drivers citations found an inverse correlation between the number of citations and the years of experience Schaller & Gorman, 1995). Hara found a direct relationship between driver quality and driver income (1995). Low wages lead to higher turnover lead to bad service as measured by complaints (Schaller & Gorman, 1996b). The barriers to be a taxi driver are very low so there is a ready pool of replacements (Teal, 1993). The method of employment of drivers from employee to independent contractor has caused drivers to lose benefits and their overall income to go down (Schaller & Gorman, 1996a). There is a benefit to the consumer to have experienced taxi drivers. Summary of Testimony In Favor Representatives from the senior and disabled community spoke eloquently about trying to get cabs to respond. They are dependent on taxi service, as they may be unable to ride the MUNI or drive a car due to their physical condition. They said that getting rides from their homes could be difficult. Getting taxis to take them home could be a nightmare. Several seniors related stories <if waiting at doctor's offices for hours painting for a ride. Similarly getting rides back home from the market could be an exhausting experience. They felt that drivers knew that certain locations like markets would be a short ride for a small fare. Drivers would avoid these places in favor of the airport or hotels where the likelihood of a big fare was greater. Locations where seniors were known to live were sometimes ignored again because of the probability of a short trip. c c c Hotel managers and doormen said that their guests' main complaint was that they could not get a taxi. The problem was particularly severe going out to dinner or wanting to return from dinner. They noticed the problem from the late afternoon until the early evening. Some hotels had resorted to contracting with limousine services in order to meet their guests' needs. They said that if taxi service were available they would drop the cost of the limousine contracts. Convention managers have indicated that the lack of taxi service will diminish the chance of conventions returning. Restauranteurs spoke about the lack of service. They talked about the difficulty customers had getting a taxi to take them from a bar or restaurant. Managers said they made calls and no cab would show up. Service was worse for restaurants or bars located away from the downtown area. Employees said they sometimes had trouble getting taxis home after work. The owners felt that the unavailability of taxi service caused their business to drop. Community groups from the neighborhoods said that service was slow and sporadic in the residential neighborhoods away from the downtown. The low-income neighborhoods said that they had a hard time getting taxis to take them there much less pick them up from their homes. There was a general feeling that the airport and the downtown had too many taxis while the neighborhoods were ignored. They felt that drivers would rather wait for hours at the airport than serve the neighborhoods. Suggestions were made to discourage taxis from serving the airport. The managers of some of the largest taxicab companies said that they thought there was a need for more taxis. They said that they had drivers waiting to work shifts. They said they were overwhelmed with the number of telephone calls into their dispatch centers. They said that half of the taxicabs are providing the vast majority of the radio dispatch service. Whitehurst Campaigns submitted a study in May of 1997 comparing San Francisco to eight other major cities. It compared the ratios of taxis to residents where San Francisco ranked next to last and to overnight visitors where San Francisco ranked last. It also looked at commuters and lifestyle and concluded that 500 more taxis would be needed. In December of 1997 the Golden Gate Restaurant Association evaluated the Whitehurst report and other factors and asked for 600 more taxis. Paul Gillespie compared San Francisco to 36 other cities and ranked San Francisco 10'" in the ratio of cabs to the population. A2ainst more full-time cabs The United Taxi Workers (UTW), the drivers' union, presented a study. The study looked at the same ratios as the above studies but compared them to West Coast cities. That study showed that San Francisco had the highest ratios of taxicabs. People speaking against more medallions were either taxi drivers or medallion holders or both. They had several main arguments; inefficient dispatch, peak time need, and low drivers' wages. c c c Many drivers criticized the dispatch system. Companies have little incentive to invest in dispatch system because once the drivers have paid the gate fees and left for their shift the companies make the same amount of money whether it is a busy or slow night. They also said that dispatchers had to be tipped or they would not get the good runs. Not enough dispatchers or call takers are hired. Some customers call several dispatch systems and then take the first cab that shows up cleaving several drivers with a wasted trip. They also complained about no-goes,where customers call, but then are not there when the cab arrives. Many drivers felt that a centralized dispatch system would solve most of the problems. Most drivers agreed that there were not enough taxis during the peak times but said that there were more than enough during other times. The drivers called for peak time permits to cover the rise in demand in the afternoon rush hour early evening period weekdays and during Friday and Saturday night. They said that to base the number of permits on the peak time demand was false. They said that restaurants and hotels fill up sometimes but staff isn't hired for just for those periods. Drivers were mainly concerned that their income would fall 30% if the number of medallions were increased 30%. They said that the gate fees have gone from around $65 in 1990 to around $95 in 1998. Upward costs and stagnant income have squeezed their standard ofIiving. They are required to pay gate fees for shifts where they may not break even. They pointed with pride to the good reputation of San Francisco cab drivers. If more medallions are added then the good drivers will have to leave the industry to be replaced by lower wage drivers. Those drivers will not have the experience or knowledge. The service level will fall, as there are more poor drivers. Drivers also complained about less qualified drivers hanging out at the airport or going out to the airport without a fare to get the fare back. There were suggestions that this be banned. Many complaints were voiced about illegal taxis and limousines. They felt that the Taxicab Detail should crack down on them. They cited various places where limousines poached on their customers. Many drivers and medallion holders were concerned about the effects of a sudden 30% increase in medallions. Many called for a partial increase followed by more study. There was a fear that if the most skilled drivers left for other jobs because of plummeting income they would not return. Taxi Detail Studies The Taxi Detail conducted three surveys bearing on taxi availability. The first survey was on dispatch systems. The second survey looked at the taxi stands at hotels and the third survey examined the airport. All three surveys covered roughly the same three week period between March II, 1998 and April 3, 1998. c c c For the dispatch study the Taxi Detail made 154 calls to dispatch systems requesting a cab. The dispatch systems were called in rough proportion to the number of cabs in their system. The overall chance ofa taxi arriving after' telephone call was under 57%. Betweep 8 P.M. and lOAM. there was above a 70% chance of the taxi arriving. Between 10 A.M. and 4 P.M. a cab would show up on between 52% and 64% of the runs. Between 4 P.M. and 8 P.M. a cab would arrive around 30% of the time. The arrivals per days of the week varied between 38% on a Thursday and 69% on a Friday. The average arrival time was 13 minutes. The hotel taxi stand survey looked at the number of waiting cabs versus the number of waiting patrons. It showed that cabs were readily available for patrons between 6 AM. and Noon. Between 4 P.M. and 10 P.M. hotel patrons were waiting for cabs. This essentially validated what the hotel people had said during testimony. The study of the airport looked at how many cabs were staged at the airport and how many cabs departed with fares from the airport and at what hours and days of the week. The are a total of2l2 spaces for taxicabs to wait at the airport. The Ground Transportation Unit of the Police Department check the staging area 84 times and at no time found the lots full and found the lots empty on three occasions all at 4 P.M. on weekdays. The airport averaged 157 cabs an hour leaving with fares. The busiest times were weekdays 2 P.M. to 10 P.M. and Sunday from 2 P.M. to Midnight. The idea that taxicabs would go out to the airport and sit for hours is largely untrue between 8AM. and Midnight a cab going to the airport would not wait two hours and there were many hours that average over 300 trips. In reviewing the Monthly Taxicab Pick-ups since April of 1996 there is an increasing number trips from the airport. The average looks to be increasing from the mid 80,000 level in 1996 to the low 90,000 level in the first half of 1997 to the upper 90,000 level. Analysis of the Evidence Almost all groups want more taxicabs including some of the taxi drivers. The general public will not participate in hearings such as these as they have a vague generalized interest. The people who have a large economic stake are likely to be over-represented. At these hearings I saw largely the same group of200 people most of who were taxi drivers. The hotel, restaurant, taxicab company and medallion holders were well represented. The drivers have good reason to be concerned. Driving a taxicab is one of the most dangerous professions. They have seen their real wages fall over the last few years while other segments of the economy have progressed. As San Francisco is a port of entry, immigrants continually arrive from countries with lower wages. The drivers bargaining power is limited by the availability of unskilled labor to get into their profession. Taxicab drivers do effect a visitor's view of the City. Studies have shown that full time experienced drivers have fewer accidents and complaints and generally give better servIce. c c c There have been studies of the effects of deregulation on taxicabs. Deregulation put no limit on the number of taxicabs operating in a jurisdiction which led to sudden increases in the number of cabs operating. Paul Dempsey wrote about an average increase of 23% in deregulated cities. The effects of deregulation were falling levels of service, increasing complaints about taxi drivers, reports of fighting over fares and little increase in service to those most needing it. The new workers did not have the skills to serve the neighborhoods or disadvantaged and some of the skilled drivers left the profession to find work that would pay better. The driver's fear of a 30% drop in income is overstated. Everyone agrees that during peak times there is more than enough business. Even with a 30% increase their income during peak hours would remain the same. During their non-peak hours their income might drop. The drivers assume that the demand for taxis is fixed. Economists who have studied the industry share that assumption. I believe that is incorrect for San Francisco. Everyone agrees that San Francisco is unique. This City has a combination of characteristics that do not appear other places. The City is one of the most densely populated in both people and vehicles in the United States. Finding places to park cars is not only a science but also an art. This would stimulate demand for taxis. It has a mass transit system that despite its faults carries a large number of people to all areas of the City. Vast numbers of commuters use mass transit which might again stimulate the use of taxis from terminals to job sites. Large numbers of people come into the City to shop, eat, attend cultural events, and nightclubs. These people form a natural market for taxis. San Francisco is a top destination for tourists from around the world. They are also heavy users of taxis. That is why studies showing what other cities do and their ratios may not be applicable here. I believe that if number of taxis is increased the demand will also increase. In San Francisco there are tremendous disincentives to drive. The traffic is bad particularly in the downtown area. Parking can be expensive and time consuming. It is difficult to find convenient parking in many places in San Francisco outside the downtown. San Francisco has many residents whom because of difficulty parking by their home are discouraged from going out. One bad experience in finding a taxicab to take a person home will outweigh many good experiences. The taxicab industry has not attempted to market itself. There is very little advertising. This is a sign that the demand has yet to be reached. Once the public gets the idea that taxi transportation can be relied upon demand should jump. Driver's complaints about the unjustified rise in the gates are valid. The rise in gate fees can be directly tied to the taxi company competition for medallions. Taxi companies profit by the difference in the marginal cost of running an additional medallion versus the gate fees they collect. There are economies of scale to the companies of spreading their fixed costs over more medallions. The medallion holders have expressed some feelings that their lease rates should not be controlled. The medallions have value only because the City has restricted the number of medallions and made them a scarce commodity. The City has yet to restrict the number of restaurant permits and so while the restaurants c businesses may be bought or leased the permits themselves are not traded. The Task Force has recommended lease controls for the Board of Supervisors to implement. This will help restrict future gate increases. Driver's complaints about limousines taking fares from taxis are not significant. It is a sign that if the demand is there entrepreneurs will find a way to fill the need. If taxis were plentiful then the problem would largely disappear. Taxis are well marked and obviously available to transport customers. Limousines are generally thought to be already in use. It is much easier for a consumer to spot and take a taxi. Alternatives Centralized Dispatch c A continuing subcommittee of the Taxicab Task Force is currently investigating this. There are several advantages to this. There would be one number for consumers to remember. The whole fleet could be efficiently used. Customers would not have the frustrating experience of calling one company for a cab only to see an available taxi from another service drive past. Waiting time could drop there would be more potential customers for a cab driver who did want to service a neighborhood. Customers with special need could draw on the whole fleet. A customer who wanted a driver who spoke their language would have more drivers to draw upon. All of the above would stimulate demand. . There are disadvantages as well. There would be less differentiation between companies. While a customer could specify a company how many would take the first available taxi. This trend would lessen the company's incentives to maintain and improve their fleet. Who would run the dispatch center? Who would staff it? Who would control it? Who would pay for it? With the current system if a dispatch system went down there are nine other dispatch systems available. Would all cabs have to use it? What rules would they have to follow? It will take a long time to work out all the problems. Aimort c Several different groups have complained about the service the airport receives. They feel that the airport drains the City and that untrained drivers gravitate there. The Taxicl!b Detail study of the airport indicates that this is not the case for large periods of time. The demand for taxis at the airport is rising. This is before the new terminal opens. The study shows that there are times when the airport is underserved. The airport has had problems with drivers refusing to take passengers to places nearby the airport because the fare will not be high enough for the driver. Many airports have taxis that are exclusively run to take passengers from the airport. This would allow the airport to more closely supervise the operation of the taxicabs and the drivers. As the airport expands in the near future there are likely to be times when there will be surges of demand as more flights come in to new gates. Each surge in demand will adversely effect the service in the City. The current logistics of issuing more medallions is time consuming. ,,-... \....- c r '- There are several models that could be followed if it was decided to have a separate taxicab system for the airport. The first model would offer the current medallion holders the chance to exchange their current medallion for airport medallions. It could be done by seniority. The system would otherwise stay the same. A second model could have companies bid for the opportunity to run an exclusive franchise. Each time the contract came up for renewal it would go up for bid. It could be a non-exclusive franchise where companies would have to meet specifications to operate at the airport similar to what now happens with shuttle vans. They could be required to pay benefits to drivers. These altematives would offer the airport more flexibility in meeting uncertain conditions in the foreseeable future. Peak Time Permits The Mayors Taxicab Task Force recommended peak time permits. This is advocated most strongly by drivers and medallion holders but has been endorsed by other groups as well. The idea is that demand goes up at certain times on certain days. Permits should be issued which would meet this need. Taxi companies maximize their profits by collecting as many gate fees as possible. Drivers say that the companies will give them a couple good shifts along with a couple bad shifts where it is difficult to make any money after paying gates and gas. If more medallions are issued there will be more competition during off-hours. Companies usually split the peak period between the day and swing watch. The peak demand period covers the afternoon rush hour on weekdays. Tourists and conventioneers want to get back to their hotel. Workers want to get home and people want to go out to dinner. This is the time when vehicles are turned over to a new shift. At the time the demand goes up the actual supply goes down. In addition because of the traffic congestion the taxis can't serve the same number of customers because each trip takes longer. The Taxi Detail studies confirm peak demand. The hotel taxi stand survey showed a peak time of 4 P.M. to 10 P.M. The Airport survey showed an increase in demand from 2 P.M. to 10 P.M. on weekdays and 2 P.M. to Midnight on Sunday. The dispatch survey showed higher demand from demand starting at 10 A.M. and peaking from 4 P.M. to 8 P.M. The surveys were not targeted to determine peak time issues and so do not have all the issues covered. There are many questions that remain to be answered. How would peak time permits be regulated? What days of the week would they function and during what hours? Who would decide when a special event warranted the mobilization of those medallions outside their normal hours? Would they be economically feasible? How would the rules on the age of the vehicles apply? Ramo Taxis The disabled community has not been pleased with the service provided by the ramp taxis. They still have long waits for a ramp taxi to respond. While the new Chief's Rules can handle some of these issues the demand is larger than expected. The Ramp Taxis can seat four passengers beside the wheelchair. So they can provide regular service as well. c Recommendations The most reliable instruments on which to base the recommendations are the Taxi Detail Studies. They are objective and relevant. I agree with the Mayor's Taxicab Task Force. Three hundred to four hundred more medallions should be issued. The types of medallions, and the issuance schedule, will be determined by appropriate decision makers. peN EXHffiIT LIST Exhibits # I thru 3 (1996 Submissions) . Letter from Paratransit Broker . Letter from Michael Hutton . Letter Rom Faribors Golshan c Exhibit #4 - Letter &am John A Marks Exhibit #5 - Report from Strategy Campaigns (Whitehurst Group) Exhibit #6 - 1997 Letters (in favor for additional taxis] . . . . . . . . . . . . . . . . . . C . . John Satre - SF Marriott Fisherman's Wharf Cecilia Metz - Golden Gate Restaurant Association James Chappell - SF Planning and Urban Research Association Mark Mcleod - Enrico's Restaurant Marsha Garland - North Beach Chamber of Commerce AlIesandro Baccari - Fishermans Wharf Merchants Association Thomas W. Creedon - SF Restaurant Industry Jean H. Gabriel Lara Karakasevic - San Remo Hotel Jonathan Gould - Holiday Inn Select Union Square Wolfgang Hultner - Mandarin Oriental Eloise Walton - Rosa Parks Apartment Carolyn Baulsier - North Beach Neighbors Chris Stevri - Stanford Court Hotel-Renaissance Kathleen Harrington - Harrington's Bar & Grill Kathleen Mayeda - SF Senior Center John Simonich - Holiday Inn Harris Chan - Sheratons @ Fisherman's Wharf Obaid Afredi - Ana Hotel San Francisco Leonard Brant c . Mikhail Shubov . Charles Speidel . Sergio Alvarez - Andale Taqueria . Mark J. Romeo - North Beach Chamber of Commerce . J.A. Lew - Bret Harte & S.F. S1. Neighborhood Association . Ken Cleaveland - Bldg. Owners & Mgras Association of S.F. . Jonathan Gould - Holiday Inn Select Union Union . Thomas B. Mysknowski . Holiday Inn Golden Gateway . Eloise Walton - Rosa Parks Apartment . Jean H. Gabriel - Cafe de la Presse-Restaurant International . Jason Mohney - Deja Vu Centerfolds . August J.P. Longo . Affordable Housing Alliance . Burne Roche - Roaring 20's Love Boutique . Kevin Piediscalzi - Lesbian & Gay Democratic Club . Alessandro Baccari - Fisherman's Wharf Merchants Association . Lu Van Chan - S.A.W. Entertainment Limited . John Rincione - Garden of Eden . John Liebenguth - Condor . Danielle Ortega . Steve Ecks - Palladium Dance Club . Steve Kass - Casbah Cabaret . Dean Alaric Von Boerner C . John M. Hutar - Hotel Nikko S.F. . John M Hutar - Hotel Nikko . Robert Migdal . Wondewossen Mefbib Exhibit #7-A - 1997 Letters (Opposed to additional taxis) . Jerome Higgins . Felix Jerry Droz . Russell W. Williams . Robert Henriquez . Wayne L Swisher . Brian Hoyt . Christopher Allen Paul Fulkerson . Adam . Lawrence J. Kelley . Lawrence J. Kelley . Vladimir Zhubokrug . Anonymous Report . James Maddox . Olivio Dallagiacoma . Umar Randhawa C . Anonymous c . Richard Koehlz . Mark Gruberg . Carlene Jensen . Charles Speidel . John D. Kiernan . Rich Powell . Ed. Burke . Keith Raskin Exhibit #8 1998 Letters in favor of additional taxis) c . Kathleen Harrington - Golden Gate Restaurant Association . A, Rahman . John M. Hutar - Hotel Nikko . John A Marks - S.F. Convention & Visitors Bureau . Walter B. Derby . Anonymous . Abdul Rahman . Amao Seknov . Emad Shehdeh . RAJ Sanwal . Jamal Hassoun . John A. Marks . Ron Wolter . Ramona Albright . Julie Van Dam . Olivo Dallagiacoma . Helen Hobbs - Golden Gate Restaurant Association . Ramona Albright - Twin Peaks Council . James Nakamura . William D. Peck . Robert F. Begley . Nathan Dwiri Exhibit #9 1998 Letters (Opposed to additional taxis) . Thomas Ferris . Bernard Dethiers . Mike Iverson . The Night Cabbie . David Fine . Robert Allen . Yellow Cab #7195 . Thomas Stanghilleni C . Russell Williams . Anonymous c c c . David A Benfell . Julian M Homwitz . Alod W. Riggs . Carl MacMurdo . Brad Newsham . Anonymous Cab Driver . Carl MacMurdo . Charles Korbel . Matthew Jeziorski . Marian L. Zaouk . Howard A Williams . Joseph Fleischman . Barry Taranto . Lovie Abdelia . Joe Mirabile . Al Hall . Ruagh Graffis . MID . Peter H.G. Witt . ean-Michael Normand . Matthew Teziorski . Marian L. Zauve . Marian L. Zauve . Rolph Jacobson . Charles Korbel . Lawrence I. Kelley . Joe Mirabile . Dennis J Korkos . Charles Wadebaxter . Keith Raskin . Brently Pusser . Ronald L Fishman Exhibit #10 Golden Gate Restaurant Association Membership Survey of San Francisco's Taxi Service Exhibit #11 Petition for More Taxicabs 1997 Exhibit #12 Petition for More Taxicabs...continues 1997 Exhibit #13 Signatures for More Taxicabs 1998 Exhibit # 14 Continuation of More Signatures 1998 Exhibit # 15 Letter from Ron W olter- Veterans Cab 1997 c c c Exhibit #16 Letter from the Golden Gate Association 1998, Helen Hobbs, Chair, Public Affairs Committee Exhibit #17 Letter &om United Taxicab Workers 1998 Exhibit #18 Signatures to Hon. Supervisor Gavin Newsom Exhibit #19 San Francisco Taxi Permitholders and Drivers Association, Inc. (K Owners' Association) Joseph Fleischman Exhibit #20 Mayor's Taxi Task Force Final Report April 1998 Exhibit #21 Letter from Brian A. Foster June 1998 Exhibit #22 1996 Hearing transcript Exhibit #23 1997 Hearing transcript Exhibit #24 1998 Hearing transcript Exhibit #25 Letter from Paratransit broker July 1998 Exhibit #26 Letter from MUNI Railway July 1998 Exhibit #27 Taxicab Detail PCN Survey Report o 1 o o I Tnl Online C Reforming Taxicab Regulations: Focus on the Passenger Taxicabs are an oft-forgotten part of the Los Angeles transportation infrastructure. But they do provide important services to many pf the region's visitors, business travelers and seniors. As L.A. City Councilman Rudy Svorinich points out here, their importance will only grow when the Staples Center opens and the DNC arrives. Combine that with the impending expiration of all taxicab franchises on the same day, and, as Rudy S1'or;nich Svorinich argues, the time is ripe jor rethinking taxi regulation in L.A. for the first time in over two decades. By Rudy Svorinich, Jr. Los Angeles City Councilman Member, Transportation Committee The City of Los Angeles is at a crossroads in its regulation of taxicabs. For the first time since the present regulatory structure was enacted in the 1970s, all of the City's taxicab franchises will end on the same day. The City thus has its first opportunity to improve taxicab service through a complete overhaul of its regulations. c Couple this opportunity with the coming series of important events in our city, including the opening of the Staples Center, the National League of Cities convention and the Democratic National Convention, and the importance of ensuring the quality of taxicab service increases further. Clearly, several ofL.A.'s licensed taxicab companies already run fine operations, providing good service to the taxi-riding public. On the other hand, we have other licensed companies whose service needs improvement. We should overhaul taxicab regulations to reward well- managed companies by encouraging their continued good performance, while implementing measures which will either bring poor performers up to standard or allow the City to look to other providers. To begin its regulatory overhaul, the City hired a consulting firm to survey taxicab regulations nationwide to see which regulatory schemes were working and which were not. Department of Transportation staff and the consultants have prepared proposals for public discussion and presentation to the Taxicab Commission. Certainly, many groups have a vested interest in the outcome of these discussions, including, of course, the taxicab companies themselves, their drivers and their regulators. And, although these constituents are represented in discussions of proposed regulations, the most important constituent--the riding public--may not be represented at all. c The question thus arises, how do we ensure that a discussion among all but one of the important constituents places the interests of the missing constituent above the interests of those present? There can be only one obvious answer: by promoting competition among the licensed taxicab companies. Let Customers Choose Their Taxicab Company c c c The concept of competition can be used to support more than one side of an argument. However, competition cannot mean denying customers the right to choose the licensed taxicab company that best serves their needs. No customer should be forced to take a particular taxicab simply because that taxicab was the next in line waiting for a passenger. The vast majority of passengers, from the average L.A. resident who uses taxicabs infrequently to the traveler from out of town who uses taxicabs for several days then leaves the City, do not have the means to distinguish between taxicab operators. However, in certain situations, there are surrogates who stand in the place of such passengers to ensure quality. Hotels, private bus and train terminals, and other venues with a high number of taxicab trips know that the quality of taxicab service can reflect positively or negatively on their businesses. Such businesses must retain the right to select among taxicab companies the operator most responsive to their needs. The altemative--forcing businesses to use whatever taxicab is next in line--is simply a welfare program for abusive, dishonest or incompetent drivers. Because such an idea is anti- competitive, it will discouragesometimes-costly improvements in quality, rather than encourage them. With a competitive scheme in place, companies that are left without business will be forced to improve their service in order to attract customers. c c c Give Our Vaney Residents A Choice Competition must be brought to the San Fernando Valley. At the present time, the Valley's 1.5 million residents are served by 200 taxicabs from two companies. The rest of the City, with approximately 2 million residents is served by more than 1,800 taxicabs from eight companies. The City is doing the Valley a disservice by keeping the doors closed to the rest of the City's licensed taxicabs. More competition will bring improved service to the Valley, which desperately needs better taxicab service. Some have said that opening the door between the Valley and the rest of the City will result in a flight of taxicabs out of the Valley. I do not believe this is so. In their efforts to earn a living, taxicab drivers will go where the passengers are, and the Valley can support more than the 200 taxis licensed there. Question Assumptions Made Over Twenty Years Ago Perhaps the single biggest opportunity afforded us during this period is the opportunity to take a zero-based look at all taxicab regulations. The City should not squander this opportunity. For example, under the current regulatory scheme, the City is divided into five service areas, A through E, with area A covering the Valley, area B, the Westside, area C, Hollywood and the Central City, area D, South Central Los Angeles, and area E, Harbor City, Wilmington and San Pedro. It would appear that the lines drawn some 25 years ago are arbitrary. "Competition by unregulated taxicabs ... undercuts the entire industry and puts the public at risk. Enforcement against bandits and poachers must be stepped up if we are to improve overall service, safeguard the public from uninsured drivers and those with criminal backgrounds, and ensure that licensed taxicabs enjoy the benefit of their franchises." A quality analysis should call into question these lines. For instance, the dividing line between areas B' and C runs for the most part down La Cienega Boulevard. This division, it would appear, runs counter to taxicab trip patterns and general traffic flows in Los Angeles west of downtown, which run East-West across La Cienega, not North-South. We should question whether this dividing line and others result in inefficiency in the form ofwasted time, fuel and unnecessary enforcement, and whether the benefits of having these lines drawn as they are outweigh their costs. C Clean Up The Bandits Competition by unregulated taxicabs, not forced to maintain City standards, undercuts the entire industry and puts the public at risk. Enforcement against bandits and poachers must be stepped up if we are to improve overall service, safeguard the public from uninsured drivers and those with criminal backgrounds, and ensure that licensed taxicabs enjoy the benefit of their franchises. Other cities similar to Los Angeles, including San Francisco, have accomplished this task. Bandit taxicabs are not a significant problem in those cities. L.A. should be no different. The solution to this problem is more a matter of will and commitment than one of resources. Give The Drivers A Raise c Finally, although much lip service is paid to the correctly held belief that taxicab service quality is a very important to the City's image-- and therefore the City's taxicab drivers must be courteous, well- informed and professional--the City's taxicab drivers have not been treated by the City as such. In fact, we have treated our taxicab drivers poorly. City goverrunent has rejected repeated requests by taxicab drivers and companies to increase taxicab rates. The last rate increase took place in 1986. Since that time, according to the Consumer Price Index, the cost ofliving has increased by 54%. "City government has rejected...requests to increase taxicab rates. The last rate Increase took place in 1986. Since that tlme...the cost of living has increased by 54%. For anyone to expect taxicab drivers to prOVide premium ... service when they have not had a raise In 13 years is unreasorrable... Our taxicab drivers deserve an overdue raise." For anyone to expect taxicab drivers to provide premium level service when they have not had a raise in 13 years is unreasonable to say the least. Our taxicab drivers deserve an overdue raise. The City must use the opportunity to revise L.A.'s taxicab regulations to eliminate outdated, inefficient and anti-competitive rules and enact rules containing incentives to companies to provide superior service. Should we fail to seize this unique opportunity for real change, we will be doing the City a terrible disservice. Current Issue I Subscribe I Free Issue I News bv Emaill Web Archive I Feedback I Submit News I Mastbead CODVTight 1998 Metro Investment Report httD:llwww.ablinc.net/tDrl editor@,ablinc.net c David Abel, Publisher ABL, Inc. 811 West Seventh Street, Suite 900 c Los Angeles, CA 90017 Telephone (213) 629-9019 Facsimile (213) 623-9207 c c o 1 o o c Taxi Regulation in Wisconsin-Law and Policy Presentation to the Madison Parking and Transit Commission Peter Carstensen Professor of Law University of Wisconsin Law School 3 April 2000 The following outline presents the basic points that I wish to make in discussing the question of taxi regulation with the subcommittee. I have not, except for key state statutes and one state Supreme Court decision, cited to specific legal materials. If the subcommittee would find it helpful, I can provide such citations. I. Basic Polley: Competition is socially and economically desirable A. Benefits of competition c o 1. In general, competition is both economically and socially desirable. It adjusts the supply of services to the demand. It allows entry and exit from the market without cumbersome and costly hearings. It encourages innovation and experimentation that leads to new services and new ways of providing existing services. Repeated experience in a wide range of businesses shows that removing the regulatory barriers to entry and competition has served the public well. o 2. A central tenant in this nation is a commitment to the maximum freedom of opportunity. The right to decide what business or profession to pursue is a central element of our democracy and a core value in preserving and promoting our social order. As a nation, we have demanded as much freedom of opportunity as is possible. Individuals flourish when they have the opportunity to decide what they want to do without having to overcome unnecessary government regulation. As much as possible it is important to expand the scope of economic activity where such freedom is possible. o 3. The taxi business is particularly unsuited for entry regulation or control over basic competition. It involves relatively modest costs; there are few, if any economies of scale or scope beyond a very modest level. Hence, this business has none of the economic characteristics associated with the monopoly or other market failures usually used to justify regulation on entry or competition exists. o 4. There are some specific needs that require government oversight: safety, security, full disclosure of the service being offered including price, and accountability for any failure to satisfy the foregoing requirements. o 5. Experience with open entry in other cities has produced the expected results: more services, even some price competition. It has also proven to be an important route for individuals seeking to advance themselves economically. Moreover, legitimate public interest concerns have been adequately protected. c B. Excessive fears of competition c · 1. Those who exist under the shelter of entry regulation are likely to claim that serious problems will result if more competition is allowed. Their economic self- interest may motivate in part these claims, but there is also an understandable fear of the unknown. . 2. In actual experience, most fears of competition prove groundless. Entry does not occur as quickly or massively as opponents claim. New entrants often face significant hurdles in establishing their own creditability in the market especially if the incumbent firms have provided high quality, reliable service. . 3. Multi-car incumbents have a number of advantages over either single car operators or even new, multi-car operations. Many customers are repeat users and will reward high quality service and reliability including service at off-hours. This is also true of thOse who are in a position to recommend choice of service such as hotels, restaurants and bars. . 4. The major competitive risk to established firms comes when those firms have excessive prices or fail to provide good service. The market is in general a better means to discipline such failures than is any administrative agency procedure. . 5. If specific problems arise for which the market is not a workable source of discipline, the law can respond with focused changes. c C. Not all regulation is impermissible-focus on public safety and other authorized areas of legitimate concem It is clear that there are important roles for regulation in the field of taxi service. Moreover, to some degree any such regulation will increase the costs of entry and competing in the market. However, all such constraints need to be focused on legitimate goals: public safety. insurance, as well as the definition of the territory, hours, and price of service. Moreover, these are the only goals that the state laws allow Madison to seek through its regulation of taxis. II. Legal Constraints on Local Regulation A. Competition is the fundamental policy of the state of Wisconsin in general and with respect to public transportation. c . 1. State law requires that regulatory agencies promote competition both in general and specifically in the transportation industries. o a. Wisconsin's antitrust law, section 133.01: "It is the intent of the legislature to make competition the fundamental economic policy of this state and, to that end. state regulatory agencies shall regard the public interest as requiring the preservation and promotion of the maximum level of competition in any regulated industry consistent with the other public interest goals established by the legislature." (Emphasis added.) o b. Wisconsin's motor vehicle transportation law is to the same effect; section 194.02: "The legislature intends to let the market promote competitive and efficient transportation services, while maintaining the safety regulations necessary to protect the welfare of the traveling and shipping public. It is the intent of the legislature that this chapter be interpreted in a manner which gives the most liberal construction to achieve the aim of a safe, competitive transportation industry." (Emphasis added.) . 2. The City of Madison's authority to regulation the taxi business depends on an explicit grant of legal power from the legislature and so the city acts as a c delegated state regulatory authority and is subject to the commands of 133.01 and 194.02. Although 194.01 (1) exempts taxicab service from the definition of "common motor carrier" which means that most state regulation does not apply, taxicabs are not excluded from the broad policy governing "motor carrier operations" expressed in 194.02 (quoted above), and are subject to some specific state imposed requirements; for example, 194.41(6)(b)(2) sets minimum insurance requirements. . 3. The Madison's regulatory authority is conferred and defined in section 349.24 of the Wisconsin statutes: "The council of any city. . . may: (a) Regulate and license. . .operators of taxicabs used for hire; (b) Regulate an license the taxicab business by licensing each taxicab used for hire; . . . (d) Revoke any license mentioned in this section when in its judgment the public safety so requires." In addition, each taxicab must be insured at level set by local ordinance provided that the level equals or exceeds the minimum required by state law: 194.41 (6)(b)(2) and 344.15(1). . 4. Hence, in drafting and enforcing its taxi ordinance, Madison can only implement legislatively defined goals and must seek the most pro-competitive means of accomplishing those goals. The legislature has identified expliciUy only two goals beyond the potential to collect license fees: o a. public safety: presumably the ordinance can impose reasonable safety standards on taxis and their drivers. Thus, unsafe cars or drivers might be reasonably excluded from this business. o b. insurance: the city may impose a higher level of liability insurance than the minimum required under state law (25/50). . 5. The city can make a creditable argument that the grant of authority reasonably includes an implied right to define essential aspects of the taxi business: o a. scope of seNice-territory: the city can most easily defend requiring disclosure of any limits to the area of service; moreover, given its obligation to enforce other legal requirements against discrimination, the city may well have a plausible argument for setting minimum service areas especially if those areas include low income or minority populations. On the other hand, a requirement that all cab operators must provide service across the entire city is much harder to defend in the absence of a clear showing of the need for such a requirement and the careful assessment of its impact on the potential for new entrants to compete. After all. the market will discioline those who fail to provide service in areas where there is demand iust as it will reward those who provide service in areas of real need. o b. hours of service: the city should be able to require disclosure of and adherence to posted hours of service. It is much more questionable whether there is any justification for requiring all operators to provide 24 hour service, seven days a week. Clearly, demand varies over the day and through the week. Hence, it inflates the operating costs and entry costs of firms if they must serve low demand times as well as high demand periods. A policy of requiring such service implies "cross- subsidization" of low volume times by excessive charges on users in high demand times. Public policy generally holds such a random tax to be undesirable. If more service is needed at low demand times than the market will supply on its own, the city can explicitly subsidize such service. This ensures public awareness and acceptance of any tax as c c c well as a clear recognition of who is paying for the service and benefiting from it. o c. disclosure of prices: nothing in state law would seem to authorize the city to set rates for this service. However, it does seem that the city should be able to require disclosure of and strict adherence to posted prices. o d. alternative forms of service: if an individual proposes an altemative form of service-for example, a jitney type service or a local van service, the city should on the one hand be open to considering such a proposal on its merits, but would also have the authority to impose reasonable requirements to ensure that such an enterprise provided the service it promised. . 6. Any anticompetitive city regulations have very limited immunity from federal antitrust law because the state law does not seek to pre-empt competition in this business. Under federal antitrust law, if the state has not explicitly pre-empted competition, the city is not authorized to do so on its own. This raises concems for city liability (discussed below) and for existing operators of taxi services who might seek to use city regulation to frustrate new entry. Two cases decided in federal circuit courts upholding substantial city regulation of the taxi business that foreclosed competition rested on statutes in Texas and Illinois that explicitly authorized the regulations at issue. In the case of Wisconsin, no such statutory authorization exists. c B. This Subcommittee and the Transportation and Parking Commission have an institutional conflict of interest in recommending or enforcing restrictions on competition from an alternative, non-city owned mode of transportation. c . 1. Institutional obligations of transit commission: state law authorizes the city to operate a bus system through the establishment of a transit commission that is explicitly charged with the efficient management of that system. Bus service competes with other forms of public and private transportation. Hence, the city through its ownership and operation of the bus system is a competitor in the local passenger transportation market. In addition, through its operation of a parking ramp system it has a further stake in the operation of this market. Basically, the city reduces its costs or eams a profit as the combination of parking and bus revenue increase. One way to increase revenue is to suppress the competition of altemative forms of transportation. . 2. Because of its statutory obligations the Parking and Transit Commission has an institutional conflict of interest whenever it regulates the taxi business. . 3. The legal implications of this conflict are not resolved, but could be significant. The Wisconsin Supreme Court overturned Milwaukee's efforts to regulate competition in the ambulance market because the control of competition was not authorized (American Medical Transport v. Curtis-Universal, 154 W.2d 135 (1990). In the case of anticompetitive taxi regulation, the following potential judicial reactions could occur: o a. strict scrutiny of any anti competitive aspect of the ordinance as well as of any adverse decisions with respect to entry: recognizing that regulatory authority has in fact been delegated, the courts would not void the ordinance because of the conflict, but would give it very critical review. The same kind of strict scrutiny would occur if the city denied operating authority to any taxi operator. c o b. voiding the ordinance: a court might simply void the ordinance given the role of the Parking and Transit Commission. The city's obligation was promote competition. Involving the agency responsible for competition with taxi's to play any role would be evidence that the city had failed in its basic obligation. The merits of the ordinance would not be in issue. o c. potential antitrust liability under state or federal law because of competition with taxi business: a recent U. S. Supreme Court decision arguably reaffirms the view taken in an older case that a city which is engaged in business activities and then uses its municipal power to advance its economic interest may be subject to antitrust liability. Because of the general policy of state law, the city has no claim that it has any state authorization to restrict competition in the taxi business. This fact strips the city of its "state action" immunity in federal law. Given its status as an economic competitor and its continuing contractual relationship with existing taxi operators, it is possible to imagine a case charging a conspiracy to restraint new competition for which all might be liable. C. Conclusion: Failure to adhere to the legal constraints may result in loss of all city control over the taxi business and could result in a damage award against the city for foreclosing competition c The city has no legal authority to impose anticompetitive regulation on the taxi business. Hence, if it does, it runs the risk of having its entire regulatory scheme voided and leaving this business unregulated. III. What should be done? o A. Identify legitimate public interest concerns-safety, insurance, definition of scope of business o B. Draft an ordinance that defines standards o C. Create an open entry process for new firms, which satisfy the standards o D. Identify an administrative agency without a serious conflict to oversee the enforcement of standards. Madison Regulation - Application for Initial License Sec. 11.06(4)(b) PUBLIC UTILITIES (b) Application for Initial License c Any person wishing to obtain a license to engage in the business of transportation passengers for hire, whose rides originate within the City of c Madison, shall present to the City Clerk a written application accompanied by proof of payment of the fee or fees established in Subdivision (a) above and by proof of liability Insurance coverage as required In Subsection (8)(a) of this ordinance. The application shall state the name and address of the applicant, the number and type of vehicles proposed to be operated, the method of charging, the schedule of rates of fare to be adopted, and such other pertinent information as the City Traffic Engineer may require. All such applications shall be received by the City Clerk and shall be referred to the City Traffic Engineer. The Transit and Parking Commission shall hold public hearings on the applications. The hearings shall begin no later than sixty (60) days after the applications are referred by the City Clerk. The City Traffic Engineer shall notify the applicants of the time and place of the hearings. The Transit and Parking Commission shall hear all persons desiring to be heard, shall make such investigations as it deems necessary and shall establish standards to determine whether or not a company should receive a license to engage in the business of transporting passengers for hire. Such standards shall include, but are not limited to the following: c 8. The financial capability and responsibility of the applicant. 9. The applicant's prior experience in operating public passenger services. 10. The level and quality of service provided by the applicant in the past in areas in which it has operated. 11. The experience and competence of the applicant's drivers. 12. The applicant's prior record of compliance with applicable regulatory laws, ordinances and rules. This includes records of complaints an - enforcement actions against drivers and vehicle owners. 13. The applicant's prior record of service complaints. 14. The age and condition of the vehicles proposed to be licensed. by the applicant. 15. The applicant's safely record, including records of accident experience and record of employee safely training. (Am. by Ord. 11,848, Adopted 4-15-97; Effective 5-21-97) c o c o c Toward A 2111 Century Taxicab Regulatory Framework: The Case of Madison Samuel R. Staley, Ph.D. Director of Urban Futures Program Reason Public Policy Institute 3415 S. Sepulveda Blvd., Suite 400 Los Angeles, CA 90034-6064 Tel. 310.391.2245 Fax. 310.391.4395 e-mail: sstaley@reason.org web site: http://www.urbanfutures.org June 5, 2000 Samuel R. Staley directs the Urban Futures Program for the Reason Public Policy Institute, a nonprofit, nonpartisan education and research organization based in Los Angeles. Introduction c The taxi industry is one of the most highly regulated industries on the local level. While many taxicab regulations were instituted as an attempt to improve service quality, the historical legacy has been lower service quality and industry competitiveness. This occurs because local regulations create substantial barriers to entry that protect a small number of established firms (creating an "oligopoly"). Many of these barriers have little impact on service quality and create inefficiencies in the taxicab industry, reducing profitability and competitiveness. Furthermore, regulations that prevent new firms from entering a market severely limit business ownership opportunities in the industry, particularly for low income and minority populations. Deregulation Impacts and Directions for Reform Since taxi entrepreneurs need little formal education to be effective and productive, the taxicab business is well suited to the skills and income needs of many in the lower tiers of the economic system. Once Indianapolis deregulated its taxi industry, for example, 32 new companies emerged within the first six months. Three fourths of these companies were owned by minorities and women. Now, seven years after deregulation, Indianapolis remains committed to its deregulation strategy. In Denver, the start-up company Freedom Cab now employs more than 100 drivers that cater to underserved and largely minority markets ignored by a cartel protected by the state public utilities commission for more than 45 years. Thus, in many cases, taxicab regulations have a double negative effect: consumers suffer because regulations stifle competition to protect existing cab companies, and potential entrepreneurs are prevented from opening their business to create new wealth in the community. c Historically, the relaxation of taxicab regulations results in the following industry and service impacts: c The number of taxicab companies, cars, and drivers increased by 23 percent on average. Poorer, mainiy minority areas received more frequent and often higher quality services. Minority and women taxicab drivers became empowered by starting their own businesses. The negative impact of local regulations on economic opportunity is often an artifact of the way local (and state) ordinances are designed and implemented. Taxicab ordinances were written when regulators considered taxicabs (and other transportation services) utilities. As a result, taxicab regulations followed traditional regulatory schemes, often limiting competition and access for new companies, tightly regulating fares and rates, and defining key elements of business operations such as hours of operations and location. Shifting the regulatory focus from protecting existing companies to monitoring taxicab performance could improve services to consumers as well as create economic opportunities among less educated, poor, and minority populations. Taxicab regulation in Madison c Taxicab regulations in Madison, Wisconsin are detailed in Section 11.06 of the city code, "Licensing and Regulating Public Passenger Vehicles, for Hire." Several features of this ordinance stand out as unnecessary regulatory burdens on start-up entrepreneurs. If stringent enough, regulations effectively impose a "cap" on the number of taxis and companies by creating significant financial, political, bureaucratic, and administrative barriers that add costs to starting a new business. Economic opportunities are most severely limited for poor and minority groups that typically have the few resources to devote to the maze of red tape, hearings, and approvals. These regulations may be partially responsible for the decline in the number of legal taxicab companies in Madison from seven in 1979 to just three in 2000. In addition, and perhaps more importantly, these regulations limit the ability of the taxi industry to adapt to a dynamic transportation market. Among the more important regulatory obstacles to creating a taxicab company in Madison are: c Company licensing fees [Sec. 11.06(4)(a)]. The City of Madison has dramatically increased the financial barriers to starting up a new taxicab company in Madison by imposing a $1,500 licensing fee for new companies. Prior to July 1, 1998, city fees of $125 per company were in line with many other cities. A survey of eight Ohio cities, for example, found that the cost of licensing a new company ranged from $25 in Youngstown to $75 in Columbus to $250 in Akron (with a $10 surcharge for each additional vehicle). Only the city of Day10n charged fees that exceeded Madison's current level ($250 per car). Moreover, Madison has instituted a renewal fee of $500. These fees compound the effects of other regulatory barriers and obstacles. c Public hearings on new cab company applications [Sec. 11.06(4)(b)]. Public hearings should be reserved for deliberating regulatory policy rather than performing routine, administrative functions and micromanaging an industry. Madison's ordinance is unduly open on publiC hearings, allowing virtually anyone to object to a new applicant irrespective of conflicts of interest and tangible impacts by the proposed business. Criteria granting licenses should be clear and objective, enabling taxicab licenses to be processed administratively. Criteria for approval should be limited to performance issues directly tied to the quality of service provided. This minimizes the likelihood licenses will be approved or rejected for political reasons. Public convenience and necessity [Sec. 11.06(4)(e)]. This provision has been used in numerous cities to prevent entry into the taxicab industry, from Cincinnati to Atlanta to Denver. For example, in Denver, Colorado, a cartel of three taxicab businesses shut out new competition for more than 45 years by convincing the state utility commission existing companies had the capacity to serve any public need for taxi service. c In Madison, the presumption is against new taxicab businesses since the Transit and Parking Commission must make a positive affirmation that the new business serves the "public welfare, convenience and necessity." This makes entrepreneurship - defined as the discovery of new market opportunities - difficult and in some cases impossible. Small businesses are conceived and started on innate knowledge of the market and expectations about what kinds of services consumers want and are not provided by current providers. Subjecting new business start-ups to political approval means entrepreneurs must a) reveal the nature of their market opportunity to their competitors and b) articulate a compelling case for their business. These principles operate contrary to the nature of entrepreneurship and the realities of market-based innovation. In market economies, consumers determine what services will be provided, not politically appointed commissions. c Twenty-four hour service requirement [Sec. 11.06(7)(a)]. This proviSion is neither efficient nor appropriate in a modem era driven by technology. This regulatory obstacle presumes that part-time operations are neither viable nor desirable. In fact, specialized and part-time operations are particularly well suited to meet consumer needs in the personal transportation market. With pagers and mobile cell phones, drivers can be dispatched anywhere in the city conveniently and cost effectively. Owner operators can respond to calls and service requests personally at anytime of the day or night. Some services that specialize in serving bar or student-centered activities might only be viable on a part-time basis or during specific times of the year. Part-time operations have the advantage of filling unmet demand for transportation services while also providing competition to existing services. c Twenty-four hour service requirements also Impose substantial up-front costs on new companies, requiring investments in additional cers, drivers, and equipment before a market Is well established. A case study of similar regulations in Dayton, Ohio found that a start-up cab company would incur additional costs of at least $15,935 to purchase cars and insurance, and meet licensing requirements as a direct result of a 24-hour service provision. These costs did not include operating costs such as vehicle maintenance and fuel. A full-time service regulation, in effect, requires new companies to "overcapitalize," making their ventures riskier and more difficult to start. Entrepreneurs with low income and education levels but substantial industry experience are particularly hard hit by these regulations. Citywide service requirement [Sec. 11.06(7)(a)]. This provision limits the ability of the taxicab market to meet targeted, specific needs. More specifically, minority and low-income neighborhoods of traditional cities tend to be the most underserved areas. Taxicab companies can emerge to fill specialized niche services: handicapped transportation, neighborhood transportation, or even business specific transportation services (e.g., contract transportation with local bars or restaurants). Freedom Cab in Denver is a case in point. Requiring citywide service reduces the likelihood these kinds of niche taxi services can evolve. c Driver hours of operation [Sec. 11.06(7)(b)). This provision also limits the flexibility and adaptability of the local taxi industry. For instance, an owner-operator of a part-time taxi service would technically violate this provision of the ordinance if she had a 24-hour pager but only received a few calls a day. Similarly, other seemingly less intrusive regulations may negatively impact economic opportunities in the taxicab market. Current regulations, for example, require drivers and companies (Sec. 11.06(9)) to have a interior and exterior markings that permanently identify a car as a cab. The intent of this regulation is to ensure consumers are fully informed about the cab and the fare charged, a laudable and important goal. On the other hand, this regulation inhibits the ability of cab drivers to use personal vehicles as part-time cabs. This regulation could be modified to require exterior markings only when . the cab is in service as a taxi, allowing drivers to take their car out of service and use them for non-taxi purposes. Toward performance-based regulations c Policymakers should seriously consider the negative impact local regulations have on innovation and flexibility. Specialized, niche markets (e.g., for students, the elderly, or the disabled) may benefit from having companies enter the market that focus exclusively on their needs, whether on a full- or part-time basis. By limiting entry, local regulations may have the unintended consequence of stifling innovation, encouraging existing firms to focus on the overall market (the "average" consumer) rather than the needs of specific individuals that make up a smaller, potentially less lucrative sector of the market (the "marginal" consumer). Thus, in an attempt to improve the average quality of service, c local regulations may in fact discourage the provision of high quality services to specific segments of the market and weaken market accountability. The col)1bined effect of Madison's local regulations creates a hostile regulatory climate for taxicab entrepreneurs. Economic opportunities are reduced while the dynamic elements of a market economy that ensure consumer needs are met are compromised. Madison's taxicab ordinance can be reformed to ensure quality services are provided while also expanding economic opportunities for residents. This requires a paradigmatic shift in thinking about taxicab regulation toward a performance-based approach. Rather than focusing on micromanaging the structure of the industry - service requirements, hours of operations, etc. - the city should focus on whether taxicab companies provide the type and quality of service they advertise to consumers. In essence, this requires the city of Madison to focus on the following aspects of taxicab regulation: Limiting hearings to complaints from consumers (not competitors) and broad policy questions; Ensuring accurate and complete consumer information about rates and the past performance of drivers and companies; c Implementing administrative licensing to streamline permit processing and minimize the politicization of business development; Inspecting cabs for health and safety violations to protect consumers from fraud and unscrupulous fly-by night operations; and Ensuring cab companies are bonded and insured against liability. The city of Madison can eliminate unnecessary barriers to entry into the industry by: Reducing the cab company license fee from $1,500 to a range closer to the industry standard (e.g., $150); Repealing 24-hour and citywide service requirements; Transforming licensing into an administrative process with clear, objective criteria; Explicitly eliminating economic impact on current operators as a justification for denying a license to a new operator; Eliminating the public convenience and necessity criteria for granting a new license, allowing consumers and markets to determine the number, type, and quality of taxi service provided; c c Eliminating mandatory breaks in driver hours to enable part-time, owner-operator companies; and Eliminating the requirement for permanent exterior markings and require markings only during times when the car is in service as a taxicab. Taken together, these reforms provide a more entrepreneur friendly regulatory climate for the local taxi industry. They also create a regulatory framework more consistent with the dynamic, technology driven transportation sector that focuses on consumer needs. The experience of other cities suggests that consumers - particularly poor and minority neighborhoods - will benefit from increased access to transportation, and the city will benefit from greater economic opportunity for all citizens. References Staley, Sam. "How Cities Put the Brakes on Taxicabs," The Freeman (March, 1998), pp. 147-50. Styrlng, Bill. "Taxicab Licensing in Indianapolis: The Situation and Economics," paper prepared for Regulatory Study Commission, City of Indianapolis, January, 1993. Taxicab Regulation in Ohio's Largest Cities (Dayton, Ohio: The Buckeye Institute for Public Policy Solutions, October, 1996) c Williams, Walter. The State Against Blacks (New York: McGraw-Hili, 1982), pp. 75-88. c o \ c 1 ( o c An Economic Anaiysls of Taxicab Regulation In Portland, Oregon John W. Boroski and Gerard C.S. Mildner, Portland State University Aprll,1998 Executive Summary c Recent changes to Portland's taxicab regulations and the City's apparent willingness to allow two new taxicab companies to enter the market unfortunately do not address more structural problems within the industry. An analysis of the City Code reveals a host of other measures which are laden with anti-competitive intent. This study finds that Portland's taxicab regulations and administration do not actually support the overall goal of the regulations, which is to promote competition within the industry and to allow the industry to operate without undo restraint. Restrictions on entry, minimum service requirements, and prohibition of independent operators do not increase economic efficiency, and instead are directed to protecting the industry from competition. In addition, tolerance of "first-in, first-out" queues at taxicab stands effectively prohibits competition. In creating a highly concentrated industry with little incentive or opportunity to compete, the City has actually caused the problems that give rise to other regulations. Because of regulations that restrict entry, increase waiting times, and raise fares, the number of taxicab trips taken in Portland is inefficiently low. Because of regulations that inhibit ride sharing, increase trips without return fares (or "deadheading"), and increase the time that drivers spend waiting in queues, the cost of producing taxicab trips is unnecessarily high. Finally, a lack of effective competition has created shortages of certain types of service (e.g. short trips) and stifled innovation. As a result, these regulations have reduced industry employment and have transferred wealth from consumers to entrenched taxicab companies, with a disproportionate impact falling on the poor. This study recommends that regulations that restrict entry, establish minimum service requirements, and prohibit independent operators be removed from the Code. In addition, this study proposes that a system of property rights be established in the taxicab industry to replace first-in first-out taxicab queues. Taxicab companies should be required to lease curb space from the City, which is currently given away for free. Each stand would be reserved for the exclusive use of the controlling company or association. These zones would be auctioned off, allowing firms with knowledge of local market opportunities to bid for sites in those areas, with the highest bidders getting access to the curbspace. In this case, zones might not only include the curb, but might also include some adjoining space on the sidewalk to create a "taxi-stop" for the taxicab company. The holder of the taxi-stop rights would have an incentive to advertise its location and its company service. Independent cab owners would also be allowed to form associations to lease and manage curb space. As taxicab companies in Portland have historically resisted attempts to make them compete as distinct fleets, this system of property rights, combined with an open entry policy, would make industry service more innovative and dynamic. c c Similarly, this study proposes that taxicabs be required to lease curb and counter space at Portland Intemational Airport. To ensure competition, the Port of Portland could establish five or more counter areas and curb areas which would be auctioned off to the highest bidders. Again, independent taxicabs would be allowed to pool their resources to lease space. Depending on logistical constraints, some curb area near the retail counters could be reserved for each company to facilitate quick boarding, or perhaps a shuttle would carry passengers to a secondary boarding area, as is currently done with rental cars. Removing entry barriers and introducing property rights would create a framework whereby price competition becomes workable, eliminating the need to regulate rates. To facilitate fare comparisons, however, taxicab companies should be required to use some uniform measure such as the per-mile rate for distance- based fares. Rates would have to be posted on vehicles, but they would no longer have to be filed with the Taxicab Supervisor. Zonal fares, time of day premiums, and other fare mechanisms would also be permitted. Under the proposed system, one which fosters true competition and self-regulation, the only requirements for market entry might be a valid drivers license, vehicle insurance and registration, and safety certification. Industry competition and self-regulation would avail the City from having to investigate complaints such as drivers having "grungy attire" and ensuring that lost and found items are recorded and handled correctly. Similarly, the City would not have to tell drivers to keep their cars clean, and not to use them to commit crimes. Instead, taxicab companies would have incentives to voluntarily provide information regarding fares, amenities, and accident records to groups like the Oregon Visitors Association, local business groups, senior citizen organizations, and the public in general. This study does not call for more or "better" regulations. Instead, this paper argues that an improved taxicab market can arise by removing regulation and promoting competition. Elements of this proposal have been tested in places such as Indianapolis, Washington D.C., Denver, Phoenix, and other cities, where deregulation has revived local taxicab markets. ================ Boroski is a recent graduate of the Masters in Urban and Regional Planning Program. Mildner is an Assistant Professor of Urban Studies and Planning, and a Cascade Policy Institute Academic Advisor. c This paper analyzes the current regulatory framework goveming paratransit operations in Portland, including regulations pertaining to taxicab and jitney operations. Based upon a review of the economic literature and a survey of taxicab markets and regulations in over 25 major US cities, the paper identifies changes to local regulations which would benefit the general consumer of taxicab services, complement other city planning goals, and enable publicly provided transit to operate more efficiently. The authors wish to gratefully acknowledge the following individuals for their significant contributions to this study: . Tony Rufolo, Professor of Urban Studies and Planning, Portland State University John Hamilton, Taxicab Supervisor, City of Portland Mark McGrath, Library Information Specialist, Tri-Met In addition, a debt of gratitude is owed to the survey respondents listed in the Appendix to this study. c Table of Contents c Introduction Why This StudY is Timely The Portland Taxicab Industrv Why Should Planners Care about Taxicabs? Economic Analysis of Portland's Taxicab Reaulations . Entrv and Franchise Reaulations . Service Reauirements . Quality Standards . Fare Reaulations Recommended Chanaes to Portland's Taxicab Reaulations . Remoyina Barriers to Entrv . Creatina Prooerty Riehts in Taxicab Stands . Creatine Comoetition at the Airoort . Dereaulatine Rates . Review of Dereeulation in Other Cities c Conclusions Exhibit 1: Market Share of Three Lareest Taxicab Comoanies Exhibit 2: Comoarison of Taxicab Rates Sources Aooendix A: Taxicab Industrv Contacts Aooendix B: Samole Survev Aooendix C: Citv of Portland Title 16 Definitions Endnotes <>Introduction c This paper is a general study of taxicab regulation in Portland which looks at how traditional taxicab service may be expanded, and how new and improved services can develop. This paper does not directly evaluate the service that taxicab companies in Portland currently provide, but rather analyzes the effects of regulation upon service levels Cllndeed, most passengers probably find local taxicab rides to be moderately comfortable and not extraordinarily expensive, although not very easy to obtain. Nevertheless, many patrons can also cite experiences of dispatched taxicabs arriving very late or not arriving at all, having to tolerate discourteous drivers, and other problems. This study explores whether or not these are problems that consumers must learn to endure, and the degree to which these problems may be attributable to factors such as the taxicab regulations and restrictions on market entry. This paper is organized into five sections. The opening section summarizes recent regulatory reform proposals to illustrate current paratransit and taxicab issues in Portland. The second section of the paper describes the Portland taxicab industry and the regulations that govern it. The third section identifies the expected economic benefits from regulatory change in light of current planning goals. The fourth section of the paper is an economic analysis of Portland's taxicab regulations. In this section, specific City Code requirements are analyzed to determine whether they support the stated regulatory goals. Finally, the fifth section presents our recommended c changes to the Code, along with a discussion of how taxicab reforms have fared in other cities. In advocating deregulation, this paper argues that previous attempts at deregulation have encouraged destructive competition, and that constructive competition can be encouraged through market forces based on a system of property rights. Readers should notice that this system of property rights could also apply to large public transportation agencies, although total transit deregulation is not addressed specifically. In the short run, however, competition from private taxicabs could stimulate the kinds of efficiency gains and service reforms that would improve the overall financial performance of public transportation (Cervero, 1997). <>Why This Study Is Timely c Several recent events have focused attention on the local paratransit and taxicab industry in particular, beginning with the partial closure this past fall of the Interstate Bridge connecting Vancouver, Washington and Portland, Oregon. While local public transportation agencies spent months devising plans to attract increased ridership, they were criticized for ignoring policies encouraging the participation of the private sector to provide much needed transit services (Solberg, 9/10/97). Critics, for instance, asked why carpools, jitneys, and informal carpools could not utilize the newly installed high occupancy vehicle lanes. In fact, such a market has formed in San Francisco, where commuters meet in formal gathering places to form spontaneous carpools to cross the tolled Golden Gate Bridge at a discount (Webber, 1994). While it may not be reasonable to expect commuters to change their driving habits under relatively short notice, local regulations in fact prohibit such ad-hoc ride sharing where a fare is charged. To some, prohibition of this type of entrepreneurship is troubling enough, assuming that most commuters already on the road logically choose to transport themselves in a safe vehicle and retain a valid drivers license because they are a safe driver. Also missing from the equation, however, were the local taxicab companies who are permitted to perform these ridesharing functions. Admittedly, the bridge closure was short in duration, making it difficult to assess the long run market for such services. Taken together, however, the complete lack of response by the private sector to a transportation emergency exposes a weakness in current transportation policies. Not long after the bridge closure, Portland City Council reaffirmed a previOUS decision, over the objections of Portland's four taxicab companies, allowing shuttle vans and town cars to provide door-to-door shared-ride service to Portland International Airport. In the last two years, the number of town car companies has grown from four to 70, and the number of vehicles has increased from 25 to 167 (Oliver, 12/21/97). Although entry into the airport market is now relatively unrestricted Cl, service standards and vehicle quality, . however, are narrowly prescribed (enforceable by fines up to $500 per violation per day) to make direct competition with the taxicab industry impossible~ Nevert~less, for reasons explained later in this paper, the taxicab industry continues to lose existing and potential markets to these relatively unregulated entrepreneurs. At the behest of the taxicab industry, City Council is now seeking a cooperative effort between the City, which regulates taxicabs, and the Port of Portland, which regulates ground transportation at the airport, to address "economic equity and public safety issues" for non-taxicab operations. In short, the taxicab industry would like to see the playing field leveled between regulated and non-regulated transportation modes. This paper argues that in choosing between more stringent regulation of the shuttle industry and deregulating the taxicab industry, further constraining shuttles and town cars (or luxury transportation) would be poor public policy. Just as the taxicab industry has failed c r' \.- to offer new services that customers obviously value, as demonstrated by the success of these new companies, heavily regulated shuttle and luxury transportation providers will also fail to discover and deliver innovative services. Ironically, any further restrictions imposed on the shuttle and luxury transportation industries will surely be advertised as "self-regulation" (Rose, 1/9/98). Yet as ground transportation regulators are surely outside and not of these industries, codes which heavily prescribe service standards and prices cannot be considered the product of self. regulation. This intentionally obfuscates the fact that self-regulation only occurs in competitive industries, where the goal is to increase the industry's total market by elevating service standards. Establishing uniform prices within a highly concentrated industry, however, will create incentives for companies to increase their profits by cutting service, and nothing resembling self-regulation will result. While the dispute between the taxicab industry and the shuttle industry continues, the local press has announced the triumph of competition in the taxicab industry (Parente, 11/13/97, 12/18/97). City Council has directed the Taxicab Board of Review to amend the Code which requires that new applicants show a "demonstrated need for additional taxicab services in the city that is not, or cannot be, accomplished by existing companies." Thus, after eliminating the italicized three words from the Code, the Taxicab Board was able to recommend admitting two new firms and 65 new taxicabs into the industry, the first new taxicab firms in 22 years. This decision is currently before the City Council. Despite the elimination of this blatantly protectionist language, however, recent "deregulation" is far from complete, as even a casual perusal of the Code reveals a host of other measures which may be subjectively administered, and which are laden with anti-competitive intent. c <>The Portland Taxicab Industry c In a prior attempt at comprehensive taxicab reform, the City designated Mr. James Allen to be the local "taxicab czar" for approximately one year (1978). Allen collected industry operational data (revenues, employment, trip information, etc.), reviewed the economic literature, interviewed industry experts from other cities, and solicited viewpoints from taxicab companies, city officials, taxicab drivers, and airport administrators among others (Allen, 1978). In his report, Allen provides an excellent account of problems in the industry, including: deficient service during peak periods and during inclement weather, limited incentives for competition among firms, poor compensation for drivers, an oversupply of airport service at the expense of inner city service, and a noticeable lack of innovative service generally. Unfortunately, Allen's final recommendation was to adopt a "wait and see" approach, advising that time be allowed to pass to see if conditions would somehow correct themselves. Twenty years later, the same problems continue to plague the industry. The only important result of the Allen report was to simplify the administration of the taxicab regulations. Oversight of the local taxicab industry was previously conducted by the Bureau of Traffic Engineering, the City Attorney, the Chief of Police, and the Bureau of Business Licenses, whereas now the regulations are administered by a single Taxicab Supervisor. The functions of the Supervisor include: 1. Liaison between the industry and City Council; 2. Investigation of industry problems; 3. Investigation of public complaints; 4. Administration of issuing licenses; 5. Investigation of the feasibility of new or revised cab services; 6. Review of company financial and operational data; c 7. Representation of the City regarding transportation policy changes which could affect the industry. Any major revisions to the taxicab regulations must be approved by City Council in the form of an ordinance. In addition, the Taxicab Supervisor and the Taxicab Board of Review may each adopt administrative rules which interpret and apply the general purposes of these ordinances. The Supervisor serves as staff for the Taxicab Board of Review, whose voting members consist of: A. Three members of the general public with no affiliation with any taxicab company; B. The Manager of the Bureau of Licenses or an appropriate designee, the Traffic Engineer or an appropriate designee or alternate designee; and C. Two other persons representing government agencies regulating or involving taxicab services. c Although City Council need not approve administrative rules, a public hearing must be held before any rule changes can be adopted. Taxicabs in Portland provide approximately 2 million rides per year (Hamilton, 1996). In comparison, Tri-Met, the local public transportation agency, provides almost 67 million rides. The Port estimates that taxicabs transport 700 to 900 passengers daily to and from the airport during non-holiday periods and up to 1,200 rides during service peaks, constituting approximately 3.7 percent of ground trips (Cambridge Systematics, 1996; Nelson, 1997). Business travelers represent 63 percent of these taxicab users, whereas non-business, non-residents (e.g. tourists, visitors) constitute just under 15 percent of taxicab users. While non-resident business travelers utilize taxicabs and town cars almost equally, resident business travelers tend to prefer taxicabs (Cambridge Systematics, 1996). This suggests that town cars have captured a large segment of the airport market. Taxicab service in Portland is currently provided by four companies with a combined fleet of 317 vehicles. The two largest fleets, Broadway Cab and Radio Cab, each operate 136 vehicles, while Portland Cab and New Rose City Cab operate 26 and 19 vehicles respectively. Currently, there is a minimum fleet size of 15 vehicles and no provision for independent taxicabs. The total fleet size has not changed since 1994 when 16 additional permits were granted, and City Council has consistently denied applications for new company permits (six denials out of six applications since 1985 (Hamilton, 1997d)). No new company has started operations in Portland since 1976 when Portland Cab was allowed to enter the market. While in the past prospective new companies could apply at any time, recent Code changes will identify a one-month window in which new and existing companies alike must apply for fleet expansions. This window will follow the publication of the Taxicab Supervisor's Biennial Demand Study. Under limited circumstances, a more informal demand study may be undertaken if it is deemed that a "crisis" has occurred which warrants immediate attention. Twenty percent of each fleet must be ADA accessible by July 1998, and fleets are required to provide dispatch service 24 hours a day. Taxicabs in Portland charge $2.50 for the first 1/15th mile (the flag drop), $1.50 for each additional mile, and $20.00 per hour of waiting timen> Only one taxicab company does not charge these rates, the maximum allowable under the Code. Radio Cab charges a $2.00 flag drop, although this fact is not generally advertised. Approximately 70 percent of all taxicab trips originate by telephone dispatch, compared to 30 percent which originate from the airport or downtown taxicab stands (Entler, 1997). Probably less than one percent of all taxicab trips are street hails, the percentage estimated in 1978 by Allen. Finally, taxicabs are prohibited from soliciting passengers on the transit mall during day times, and those caught doing so are fined $165 by the policeEl. c c <>Why Should Planners Care about Taxicabs? c Planners frequently overlook the industry as a legitimate form of transit as taxicabs do not provide many shared rides, utilize vehicles similar to private automobiles (confusing "nonautomobility" with "nonautomobile"; Klein (1997)), and almost never fall within the purview of planning departmentst!. On the supply side, the low utilization rate of taxicabs and their relatively low market share of trips in most cities is largely due to local regulations which effectively prohibit entry of new firms, prohibit competition within the industry, give subsidies to public transit competitors, and limit the ability of transit agencies to contract out services to taxicab companies (Kirby, 1974; Klein, 1997; Cervero, 1997). Despite these obstacles, taxicabs constitute an $8 billion industry employing just over 300,000 people. In comparison, urban and suburban transit agencies collect $18 billionO, and have employment of approximately 840,000 (US Statistical Abstract, 1996; Tables 966 and 1024). In deregulated markets such as Washington D.C., and in markets where illegal participants operate with relative impunity (Philadelphia, Los Angeles, and Miami, for instance), thousands of shared-ride taxis and jitneys provide convenient, low-priced, door-to-door service on a daily basis (Cervero, 1997). Taxicabs, and paratransit more generally, effectively bridge the gap between private, single passenger automobiles - which cause too much congestion, waste travel time, and consume inordinate quantities of fuel - and public transit - which is overcrowded during peak periods, provides limited service during the off-peak, and operates on inflexible routes. The definition of paratransit is "...those forms of intraurban passenger transportation which are available to the public, are distinct from conventional transit (scheduled bus and rail), and can operate over the highway and street system" (Kirby, 1974). That "miniature transit" performs so well where it is allowed to is a function of its most salient features, which include: short trip times, reduced loading and unloading time, increased maneuverability in traffic, freedom from driving, avoidance of transfers and waiting time, door-to-door service, freedom from parking, route/time flexibility, reliability, comfort, seat availability, storage space, and personal security (Kirby, 1974; Klein, 1997, Cervero 1997). Since most studies continue to find that transit patrons value service improvements greater than fare reductions and that this preference is correlated with income (Cervero, 1997), one can assume that a society that continues to grow richer will over time show a preference for modes that offer amenities typically associated with the private automobile['}. Therefore, a transit system which offers bona fide alternatives to scheduled, fixed route service is more likely to attract new transit riders by virtue of simply providing more choice. Taxicabs can and do serve an extremely diverse clientele. The elderly, for instance, are often dependent upon others for their transportation needs and have limited finances, and they particularly value the comfort, door-to-door service, ease of getting in and out, and security offered by taxicabs. Low income residents and students may favor taxicabs and forgo the expense of owning and maintaining a private automobile. Taxicab usage, however, is not limited to those with reduced financial resources. Professional and managerial workers use taxicabs to attend downtown meetings due to their high value of time. Similarly, upper income households may employ taxicabs to provide on-call, door-to-door, chauffeur-driven service on a part-time basis. With appropriate deregulation, economists predict that taxicab service would expand, lower prices would result, differentiated services would be offered, and customer waiting lime would be reduced. If true, planners may question how the benefits attributed to paratransit complement other city planning goals. To begin, taxicab service can mitigate perceived parking shortages in close-in shopping, entertainment, and restaurant c c districts, which are a prime focus for new development in current plans. Surprisingly, while the City continues to study the feasibility of adding parking meters, issuing resident parking permits, and other strategies in response to this issue, it has not seriously considered promoting paratransit and taxicab servica. Secondly, taxicabs are well-suited to provide transit service in fast-growing low-density suburban jurisdictions that traditional transit serves poorly. Retuming to the subject of parking, parking demand in Northwest Portland, Lloyd District, and the Hawthorne District, for instance, is probably highest during the evening and weekend hours, exactly when public fixed-route transit begins to shut down. In other cities, evening and weekend trips to art and entertainment districts are well-served by taxicabs. In Portland, however, most taxicabs choose to serve the milk run between the downtown and airport. At the same time, thousands of new residents are expected in the River District and the North Macadam area under current plans for high density and mixed use development. While these new urbanites will reinforce the 18-hour activity pattern the City wishes to encourage, they will also exacerbate its parking headaches. Given a choice today between walking a half mile, waiting 25 minutes for a phone- dispatched taxicab, or driving, residents of the River District seeking to attend a downtown concert are most likely to drive. The high cost of parking a vehicle, however, and the lack of ready taxicab service will limit the development potential of these districts. Finally, the problem of evening alcohol consumption and auto driving can be mitigated by good taxicab service, as traditional transit is not cost effective during evenings. In fact, one study found that after deregulation, local taxicab utilization did increase due in part to stricter enforcement of drunk-driving laws (Taylor, 1989). Due primarily to its relatively high cost of labor, Tri-Met is currently exploring alternatives to its new product line of agency owned and operated minibuses which serve low- density suburban jurisdictions. Nationally, labor costs as a percent of total transit operating costs have risen from 66% to 75% from 1960-1992, leading to a rise in operating costs per passenger trip of 175% (Klein, 1997). At the local level, Tri-Met has budgeted $35,946 for each regular full-time bus operator for its current fiscal year, a figure which grows to $50,180 after accounting for the value of benefits guaranteed under the union contract~. In comparison, the Oregon Employment Department estimates that taxicab drivers on average net between $6 and $11.50 per hour not including tipseJ. This data is consistent with figures provided by a long-time Radio Cab owner-driver, who estimates that the average owner-driver earns about $14 per hour after expenses including tips (Bussell, 1997). This higher estimate is equivalent to $29,344 per year, assuming that 2,096 hours are worked (the assumption made for Tri- Met full-time operators). Taxicab drivers, however, receive no fringe benefits of any kind, resulting in a total compensation package which is 42% less than that received by Tri- Met operators. Recognizing these differentials, Tri-Met is seriously exploring ways in which new suburban transit service may be contracted to more efficient private paratransit providers. As stipulated in the union contract, Tri-Met is effectively prohibited from taking any actions that will have adverse effects on its pubic transit union employees. Thus the agency is prohibited from contracting out existing service, employing part-time workers for peak-periods, or reducing service in weak markets. One way to avoid these constraints, however, is to shelter revenue for new services in accounts separate from the general operating fund (Arrington, 1997). Can this strategy produce substantial benefits? Various experiments around the country show that long term financial savings depend upon whether the contracted transit providers also become unionized, thereby driving up operating costs, and the nature of the contract and contracting process. Beginning in 1981, Tidewater Regional Transit c c c (Norfolk, VA) began contracting out service along low-density corridors to private demand-responsive vans, despite protests and legal efforts by the local union (Cervero, 1997). Within two years, the agency was able to reduce its subsidy per passenger for these routes by 64 percent, and the union subsequently agree to reduce its guaranteed pay hours and create lower paid minibus driver positions with no work rules and fewer benefits. Effectively, the new paratransit division won back the contract. In another instance, Phoenix' transit authority contracted with a taxicab company to provide Sunday fixed-route bus services in the early 1980's, producing savings of over $700,000 in the first year. Finally, San Diego Transit's DART program has employed private, demand- responsive vans since 1982 to provide nearly 800 rides per day to the general public in five isolated communities, at substantial cost savings. Tri-Met explored this strategy in the 1970's when it solicited bids to contract out its nighttime "Owl" service in Portland (Allen, 1978). When the taxicab companies submitted a joint proposal to provide service at the maximum allowable meter rate, however, the agency elected not to push forward in the face of union opposition, as no cost savings could be realized. Changes to the Code to promote competition, then, could simultaneously expand the taxicab market and help Tri-Met to reduce the cost of low- density suburban service. While this study does not focus on taxicab regulations in force outside of the City of Portland, this section also points to a more proactive role that Tri- Met could play in the evolution of transit, namely, encouraging reciprocal regulation (or deregulation) across jurisdictions so that a greater selection of potential providers exists, and passengers and drivers can take inter-jurisdictional trips without penalty. <>Economic Analysis of Portland's Taxicab Regulations c In this section, the regulations which apply to Portland's taxicab industry are revisited in more detail to determine whether they actually support of the stated goals of the regulations. The Code statesl'.} A. The purpose of this Chapter is to provide for the safe. fair and efficient operation of taxicabs. The taxicab industry should be allowed to operate without unnecessary restraint. However, because taxicabs constitute an essential part of the City's transportation system and because transportation so fundamentally affects the City's well-being and that of its citizens, some regulation is necessary to insure that the public safety is protected, the public need provided, and the public convenience promoted. B. The provisions contained herein should be applied and enforced in such a manner as to require the taxicab industry to: 1. Regulate itself, under City supervision; 2. Promote innovation and adaptation to changing needs; and to allow competition and response to the economic forces of the market place, so long as the public interest is served thereby. This section is organized around the four broad types of regulation in the Code: market entry and franchise restrictions, service requirements, quality standards, and fare levels. For each type of regulation, market conditions and/or information problems which are thought to make regulation necessary are identified and analyzed. Incorporated into each analysis is a description of the actual outcomes of the regulations, including examples from a national survey of taxicab regulators and companies conducted by the authors. This survey was directed to taxicab regulators in the 20 largest US cities ranked by 1994 population in the 1996 Statistical Abstract of the United States. In addition, ten cities with 1994 population closest to that of Portland (ranked 30th) were included for comparison purposesCj. For all deregulated cities, and for many regulated cities too, the largest taxicab companies were also contacted. c c To conclude, transportation and tourism planners need to carefully examine the regulations which apply to their own local taxicab industry. If regulation is often industry- dominated and directed primarily to the industry's benefit as some observers contend (few producers being easily combined into special interest groups), planners can effectively represent the interests of customers who are too diverse and disorganized to speak for themselves. <>Entry and Franchise Regulations c Taxicabs are typically regulated as "common carriers", meaning that they provide transportation services to the general RUbliC in retum for compensation, and are required to serve everyone who is able to payeJ (Cervero, 1997). As such, common carriers are often held to service standards, and in return are accorded some protection from competition through restrictive licensing criteria. Therefore, local taxicab industries are not "natural" monopolies, but may operate as a monopoly or cartel because of regulation. In Portland, prospective and existing taxicab companies have one month following the completion of the Taxicab Supervisor's Biennial Demand Study in which to apply for fleet expansions (permits). Some time later, usually one month, the Supervisor publishes his recommendations regarding these applications based on the following criteria (section 16.40.215.C): 1. The current status of the public transportation system in the City, including but not limited to: a. The current and future ability of the public transportation system to provide the timely and effective movement of persons; and, b. The ratio of population within the City of Portland to the number of taxicabs currently in operation. 2. The demonstrated need for additional taxicab service in the City that is not accomplished by existing companies, as shown by the applicant; 3. The present utilization patterns of taxicabs currently in operation; 4. The interests of the applicant in establishing a local business to legitimately serve the citizens of this City; and, 5. The extent to which granting the application will serve the purposes of this Chapter, as set out in Section 16.40.001. c These criteria collectively represent the "public convenience and necessity" standard by which most cities regulate entry into the taxicab market. The next step in the process requires that the Taxicab Board of Review, informed by the Supervisor's analysis, develop its own recommendation (through a voting process) to forward to City Council. Finally, regardless of the decision rendered by the Board, City Council ultimately decides the outcome based on findings that (Subsection D): 1. The applicant has established both fitness and ability to comply with the requirements of this Chapter; 2. After consideration of the factors listed in Subsection 16.40.215.C, that the interests of the City will be served thereby; and, 3. That the applicant has sufficient financial resources to be able to meet the minimum standards established by Section 16.40.510. 4. The permit may contain such terms or conditions as the Council deems appropriate. In addition, Subsection E allows the Supervisor to "assist the Board and City Council in establishing such further standards as the Board or the Council deems appropriate, in addition to those listed in Subsection C." Of course, any decision to admit a new company can be and is appealed bylhe existing companies, as is the case in most 11 c cities. Finally, Section 16.40.210.B1 prohibits the transfer of licenses to independent operators; all operators must work under the management of one of the existing (approved) dispatch companies. The latest demand study undertaken by the Supervisor analyzed population changes and projections for the city and region, statistics on elderly persons and persons with disabilities, Tri-met ridership figures, airport passenger counts, convention activity data, and current taxicab utilization patterns. Apparent in this study are many methodological problems, only a few of which are discussed here for purpose of illustration. To begin, the population figures considered do not account for changes in age, income, household type or occupation, all of which would affect demand for taxicab services. Ultimately, this analysis only calibrates the current ratio of taxicabs to population to the historical ratio, which is presumed to be "correct", thereby perpetuating the historic low level of taxicab service. Similarly, the transit data considered do not distinguish between where or when service is provided, nor its relationship to total trip-making behavior. Other factors that surely affect the demand for taxicab service, but which are not considered, include: land use patterns generally (i.e. the spatial distribution of economic activity), rates of automobile ownership, prices of alternative forms of transport (e.g. fuel, insurance, fares, etc.), parking availability and charges, and climate and topographyC). Finally, in his analysis of convention activity, the Supervisor concedes that "The percentage of overall taxicab business derived from the Convention Center is unknown. Therefore it is difficult to discern the precise number of taxicabs required for new demand.", in reference to a projected 20% increase in convention activity for 1998. One can only wonder, then, how the initial relationships between taxicab use and population, transit use, and other data were established, upon which adjustments to the total fleet size are currently based. The purpose of describing these methodological problems is to demonstrate the inherent difficulties in estimating the demand for taxicab service. In fact, left to their own devices, private taxicab companies would not try to definitively measure demand due to analytical complexities and inaccurate or incomplete data. Hall (1996; p.45) provides a good summary of this discussion: One problem with trying to hit this target is that it is invisible. This alone would account for some errors in marksmanship, but the target is also moving. It moves across the time of day with changes in the demands to use roads. It moves across the years as the average level of demand changes with changing incomes, fuel prices, and technology. The difficulty of hitting this target means that government will miss it. Has the target been missed in Portland? Anecdotal conversations with many taxicab users and personal experience only confirm the conclusion of the Supervisor that taxicabs frequently cannot keep pre-arranged appointments or arrive late, that waiting time for all customers has increased, that an absolute shortage of taxicabs exists during periods of peak demand, and that downtown close-in neighborhoods and other markets are inadequately served (Hamilton, 1996, 1997d). To a certain extent, these problems may not be due solely to an absolute shortage of taxicabs, but rather may reflect a lack of incentives for taxicab companies to offer new services. Finally, the fact that eight new applicants and two existing companies currently seek to increase the total number of taxicabs, despite the Supervisor's contention that essentially no new demand exists (Hamilton, 1997d), should lead one to look askance at the entire process. Before dismissing the biennial demand study as a fruitless endeavor (instead of insisting that public officials merely sharpen their pencils), it is worthwhile to step back and look at the supposed goals of entry restrictions to see whether they can be promoted through entry regulation. Entry regulations are generally thought to guarantee that all geographic areas and potential customers are served (i.e. unprofitable service is cross-subsidized c c 12 c by profitable operations), reduce traffic congestion, ensure that only "serious. or "responsible" companies provide service, encourage taxicab firms to finance higher quality service with returns that are increased through market protection to levels above which could be earned in other aCtivities, and raise the standard of living for drivers in the industry. Each of these rationales is discussed in turn. As already noted, taxicabs in Portland are often unable to keep pre-arranged appointments and must turn down additional service. In addition, the fact that taxicabs generally avoid serving areas which are perceived to be unsafe is well documented. The fact remains that for areas where the risk to life or limb is very real, no price, in fact, could effectively entice taxicabs to provide service. It is also reasonable to expect that some percentage of requests which are likely to result in an empty return trip are similarly refused, as Allen (1978) confirmed in his study. Finally, from a practical standpoint, universal service requirements are virtually unenforceable. In conclusion, no evidence exists to show that universal service requirements provide levels of service superior to what the market would provide, or that market skimming (or "creaming'1 does not occur. As Frankena and Pautler (1984) note, instead of creating monopolies which are able to selectively withhold service to maximize profits (taxicabs companies in Portland are only required to operate at 66% of capacityCj), probably the most efficient way to ensure universal access to transportation is through explicit subsidies to riders which do not distort the market for taxicab services. Regulators and taxicab companies sometimes argue that without entry restrictions, an endless supply of new taxicabs will bring traffic in city streets to a virtual halt. Unfortunately, because of taxicabs' physical similarity to private automobiles and their relatively small passenger loads, the general public, and many planners, too, are prone to believe this. According to this view, because taxicabs and their users do not pay the full price of the congestion costs they impose, entry restrictions will reduce the number of taxicab trips taken and reduce the amount of cruising to an efficient level. This argument overlooks the fact that unless other road users are made to pay the full costs of the congestion they impose, any restrictions on the number of taxicabs or on cruising are likely to lead to an increase in road use by other road users (i.e. private automobiles) who would find their travel costs reduced~. This argument also does not account for geography or times of day when congestion is not a problem. As Downs (1992) explains, in the absence of rapidly increasing population, congestion levels tend to reach an equilibrium level. At this equilibrium level, some auto users who would like to use congested roads have been diverted to other options, either traveling in off-peak time periods, taking alternate routes, or switching to transit or other modes. Each of these diversions represents a latent demand for the road space. If congested road capacity is then reduced for some reason (e.g. new drivers begin to use the road), some commuters will turn to one of the aforementioned options, thereby mitigating some of the increased congestion. Similarly, if capacity on congested roads is suddenly increased (e.g. a new lane is constructed), some commuters currently traveling in the off-peak, taking transit, or traveling via alternate routes will switch to the once congested facility, tending to bring congestion back towards its equilibrium level. Therefore, any long term increase in the supply of taxicabs who place a high value on road usage relative to other users will displace some existing users (including people who substitute taxicabs for private autos) so that in the long run congestion effects are likely to be negligible. Finally, some service expansion and reduction of waiting times would result, which would also have to be weighed against any increased costs of congestion. In any event, in Portland these impacts would probably be insignificant due to the taxicab market's small absolute size relative to general traffic levels. c c IS c Regulations that increase the profitability of the taxicab Industry are sometimes defended on the grounds that taxicab firms will finance higher quality servicas with excess profits. Assuming for argument's sake that this is true, this still does not provide evidence that the derived service benefits are always worth the cost of the excess profits~. The high price of medallions or licenses in some cities, however, shows that taxicab firms do not invest all their extra profits into enhanced service. Licenses in New York City, Philadelphia, and San Di~o, for instance, currently trade for $285,000, $44,000, and $60,000 respectivelyE]. The market value of a taxicab license represents the present value of the future monopoly rents that accrue to the license holder as a result of restricted entry and inflated prices. In PorUand, we estimate the scarcity value of licenses at roughly $17,000. Currently, a license for a "full" taxicab operable during both day and night shifts can be purchased for a one-time average fee of $20,000 from individual Radio Cab owner-driversE) (Entler, 1997; Bussell, 1998). Subtracting an estimated $3,000 for the price of the car leaves $17,000 for the license itself. Radio Cab owner-drivers also pay $185 per week for dispatch and administrative costs, and about $2,000 per year in vehicle storage fees (gas. and repairs are paid for out of pocket; Bussell, 1998). As these fees only permit an owner-driver to drive seven 12-hour shifts, the vehicle is leased out again so that another driver can drive the remaining 12 hours in any 24-hour period. For hired drivers that do not own their licenses, the license value would be capitalized into the periodic lease or "kitty" fees that are paid to the license holder. At Broadway Cab, the company charges drivers about $400 per week for seven 10-hour shifts, which covers all costs. The difference between $185 and $400 per week represents the value of licenses held by Broadway Cab. Finally, differences in license values between Broadway and Radio could also be attributed to: different discount rates for relatively high and lower income drivers, service quality differentials between companies which are difficult to measure, dissipation of monopoly profits through operating inefficiencies, and the fact that Radio Cab charges slightly lower fares. Table 1 estimates a lower bound on the costs to consumers that result from protection of the local industry. Table 1 Estimated Annual Cost of Regulation to Consumers Annualized Market Value of a License $2,720 (a) Number of Licenses 317 Annual Transfer from Consumers to Producers $862,240 (a) 2 shifts x [($20,000 less vehicle value (estimated at $3,000)] multiplied by an 8% annual interest rate. c c This estimate assumes that all dispatch, administrative, and storage fees are charged at cost. That is, all profits are reflected in the license price, and the dispatcher earns no excess profit. As these assumptions are conservative, this may understate the total income transfer due to a shortage of licenses. Importantly, an estimate of the total cost of regulation should also add the value of the additional time consumers are made to wait for taxicabs, the value of trips and/or services that simply are not provided, and the increased costs that consumers pay as they utilize more expensive substitutes, all of which are difficult to measure, but which are probably substantial. Finally, as taxicab drivers have few specialized skills, the monopoly profits of the taxicab industry are unlikely to affect their earnings (Hall, 1996). Rather, the value of unskilled labor generally determines their earnings. When demand for taxicab service decreases, for example, the biggest change for drivers is the decline in driver employment as opposed to earnings, and some drivers move to other jobs which pay about the same wages. 16 r- '-' To examine the characteristics of taxicab drivers, Schaller and Gorman (1995, 1996b,c) provide a good discussion of factors that influenca taxicab drivers' incentive to provide higher quality service, whether they work in a regulated or deregulated market. Driving their study was a survey of New York City residents that showed, out of four perceived aspects of taxicab service (the fare, availability, vehicle condition, and the driver), most complaints pertained to the level of service provided by drivers. In this case, common complaints included drivers' inability to converse in English, inability to locate destinations, driver discourtesy, and poor driving ability. Among the authors' key findings are that full-time owner-drivers with four or more years of experience received much fewer summonses for serious violations such as reckless driving, overcharging, and service refusals than less experienced drivers (typically lessees). Not surprisingly, the authors conclude that the key to improving driver quality is to increase the number of career owner-drivers who, like homeowners, will protect their investment, and that strict enforcement of traffic regulations (e.g. more fining, or elimination of some bad drivers), while necessary to protect the public safety, will not increase the compensation of other drivers left unto itself. Schaller and Gorman then propose that in New York City all corporately owned licenses (known as medallions) revert to individual ownership when they are sold in the future, acknowledging that this might not be for a very long time. In Portland, however, independent taxicab ownership is stifled through prohibitions on transferring licenses so that lessees can start their own company, even when the new company could do better. Predictably, turnover at Radio Cab, where a large number of drivers are also owners, is approximately 10% to 20% per year, compared to 80% at Broadway Cab where all licenses are owned by the company (Hamilton, 1998c). Particularly telling is the fact that many new self-employed Town Car operators are ex- Broadway drivers. Again, instructing the taxicab companies to treat their employees better will not resolve problems of driver quality and instability within the industry. The solution is to facilitate the process of new company formation. c <>Service Requirements Section 16.40.510 of the Code describes the minimum service standards under which permitted companies must operate: A. An office open and staffed for a minimum of 8 hours a day, 5 days a week. B. A dispatch system in operation 24 hours each day capable of providing reasonably prompt service in response to requests received by telephone. C. Facilities and personnel sufficient to insure that every taxicab operated by the company complies with the requirements of this Chapter. D. Not less than 15 taxicabs, with two thirds of the fleet to be operational at all times, to provide service on a City-wide basis in accordance with the Supervisor's regulations. E. Insurance policies in force sufficient to meet the requirements of Section 16.40.730 and to protect the company to the same limits of liability. F. A taxicab company shall not refuse to respond to any request for taxicab service received from a location within the City. G. Each driver shall maintain a log in which a record of every trip shall be kept, in a form approved by the Supervisor. The taxicab company shall maintain the log for at least 1 year after the last entry therein. c Requirements that companies operate a minimum number of days per week, hours per day, and/or total vehicles can be discussed together. Service standards of this nature 17 c essentially force companies to demonstrated their "seriousness" through substantial capital expenditures. These standards also presume that companies must provide dispatch service to be economically viable, and that 15 vehicles are required to provide adequate coverage. Several problems result from these type of policies. Assuming that firms need to provide dispatch service to survive, firms will have an incentive to form a sufficiently large fleet size to reduce customer wait time and maintain a good reputation. Moreover, not all service needs to be dispatch-based, as demonstrated by the success of New Rose City Cab which had no dispatch system for years. Customer wait time at a taxicab stand is actually determined by the size of the total industry and not by the size of anyone individual company. The fact remains that in a competitive market, incentives exist for independent taxicabs to form fleets to capture scale economies, and to create brand loyalty. This is already beginning to happen in the town car market, which has minimal entry restrictions, as individual operators begin to direct service to each other via cellular telephones (Bussell, 1998). To conclude, however, no conclusive evidence exists to show what might constitute the "optimal" fleet size, and therefore firms should be left to discover this for themselves. Current service standards do not appear to be driven by any economic rationale, but rather serve to protect the larger companies from smaller, potentially lower cost firms. For cities that base fares upon taxicab firms' cost of doing business, regulations that raise costs (e.g. minimum office hours) would lead to higher fares. Service requirements in Portland also prevent the adoption of low cost shared-ride services. For example, all of the cities and taxicab companies surveyed do not allow taxicabs to pick up additional passengers en route, or if not, they require that the first passenger or group give permission to take on additional riders, thereby decreasing taxicab utilization and increasing the cost of rides. In this case, allowing taxicabs to post destination signs and accept all riders, to effectively operate as jitneys, could increase utilization by attracting riders who would seek reduced fares. Jitney service might capture peak rush-hour demand for transit just as licensed part-time coffee and food vendors supply service not handled by restaurants. In this light, there is no economic reason why independent would-be participants should be prohibited from providing peak or niche services that the larger providers selectively withhold or are incapable of serving. Independent taxicabs, for instance, might set their sites on providing shuttle service to sporting events, music events, and festivals. .C <>Quality Standards Safety and quality standards, to be met by each individual taxicab, are described in section 16.40.720. Thus vehicles must be: A. Kept clean; B. Kept in good appearance and good repair; C. Properly maintained; D. Kept in safe condition; and E. Equipped with all pollution control equipment and safety devices originally installed by the manufacturer, and such equipment and devices shall be kept in good working order. c Few studies have criticized regulations concerning vehicle condition and age, safe operation, driver qualifications, or insurance coverage (Frankena and Pautler, 1984). Because it may be difficult or impossible for passengers to judge some aspects of the quality of taxicab service before they ride, it may be efficient for government to regulate these matters to reduce information costs. This is why restaurants are required to submit to periodic visits from the local Health Inspector. Although these various aspects of 18 c safety also affect third parties (e.g. pedestrians and other drivers), these externalities do not warrant that safety standards be different for taxicabs than for all drivers and vehicles. In this regard, the amount of insurance that Portland taxicab companies are required to carry appears to be adequate but not burdensome, and its driver licensing requirements are not unduly stringent. At the same time, however, it might be efficient to have stricter enforcement of standards, as the benefits of enforcement would be increased for vehicles that travel more miles per year (Kirby, 1974). In Portland, permit holders are not actually required to provide proof of inspections for mechanical safety; instead all taxicab companies are to file annual policy statements that describe how they ensure both vehicle and driver safety, and service quality (Hamilton, 1998d). While the Supervisor does personally inspect all wheelchair accessible vehicles and spot checks the remainder of the fleet on an ad-hoc basis, a more regular system of inspections, as occurs in the restaurant industry, might be justified. <>Fare Regulations c The primary reason that regulators establish fixed or maximum fare levels in the taxicab industry is to ensure that prices are "reasonable" in the eyes of consumers, and that producers are ensured a "reasonable" profit (Hackner and Nyberg, 1995). Economists do not define a "reasonable" price but rather have a concept of a market clearing price which under competitive .conditions simultaneously maximizes wealth for both consumers and producers. Cities that regulate fares usually target some revenue-cost ratio or rate of return, and Portland presumably follows suit. While the Code does permit the Supervisor to collect financial data from the taxicab companies, company revenue is not actually divulged due to proprietary confidentiality (Hamilton, 1998d). Instead, the Supervisor estimates the average costs of doing business for these companies and meets with them to get concurrence, and without ever seeing their books, sets the rates accordingly. Finally, these rates are compared to other cities (e.g. Minneapolis, Kansas City, San Jose, and Seattle) for reasonableness. Exhibit 2 shows prevailing rates for 28 large US cities, and estimated costs for a representative city trip and a longer distance trip (the same distance as from downtown Portland to the airport). Of the 28 cities surveyed, only three cities would charge a higher fare for the city trip that is modeled, while for the longer trip, ten cities would charge higher rates. This data reveals that while Portland's meter rate is close to the industry average, its flag drop charge, weighted to reflect the lower fare charged by Radio Cab, is the highest among the cities and companies surveyed. The excessiveness of Portland's taxicab rates is demonstrated, however, not by comparison with other citiesE}, but rather by high (positive) license values. c Hall's earlier observation regarding government's (in)ability to discover the optimum level of industry supply is also true regarding the process of setting efficient fares. Due to informational and analytical problems, government is sure to miss the target. However, to rely upon the market to establish efficient fares, again, we must consider the market imperfections that would justify rate regulation. Factors typically cited as justification for setting fixed or maximum fares include inelastic demand for taxicab services, informational problems in the market for cruising taxicabs, and economies of scale in the telephone dispatch market. Each of these issues is discussed in turn. Most studies of the taxicab industry estimate the fare elasticity of demand to be in the range of -0.5 to -1.0, meaning that the quantity of trips taken is relatively unresponsive to price changes (Frankena and Pautler, 1984). While most of these studies have 19 c methodological problems, as many taxicab users are poor and have no car, or are travelers not wanting to pay high parking charges at airports, it is still plausible to assume that demand is relatively inelastic. Inelastic demand for a product or service by itself, however, does not distort the market if competition exists among multiple suppliers to provide the product or service. A good example of this situation is the market for cigarettes, where demand is inelastic due to the addictive nature of the product consumed, and few substitutes exist. In this case, however, competition among brands drives prices down to an efficient level. Thus inelastic demand only becomes a problem when producers perceive inelastic demand for their brand. That few taxicab companies operate in Portland with little incentive to compete, however, is a problem that local govemment officials have in fact created through regulation, and can rectify. The peculiar nature of the cruising taxicab market, where consumers and producers operate from random locations, creates informational problems which are thought to necessitate rate ceilings. In this case, taxicab users in the cruising market are unlikely to tum away the first taxicab that comes to them, as they do not know when the next taxicab will arrive or what price it will ask (Williams, 1980). Since relatively inexpensive cruising taxicabs cannot signal their whereabouts to consumers, an upward pressure on prices results, as taxicabs that raise their fares above the going rate are unlikely to lose many passengers. Two potential solutions exist to solve informational problems in the cruising taxicab market. One solution is for hailers to call a dispatch company, which does have a fixed location, to have a taxicab sent to them. This, of course, would require multiple dispatch companies serving the market so that price competition is workable. c As a second solution, hailing customers also have the option of heading to the nearest taxicab stand where price competition can occur among the waiting taxicabs. A familiar example illustrates this pOint. Just as food cart vendors typically appear in areas where there is a large customer base, and where other food providers (i.e. restaurants) are located, cruising taxicabs similarly tend to operate where some density of demand already exists. What prevents roaming food vendors from charging exorbitant prices, however, is the fact that customers can readily go to a competing vendor or restaurant. Thus. while a food cart vendor may be able to charge some premium for the . convenience of bringing his or her product to the customer, a competitive marketplace keeps this premium at a reasonable (efficient) level. The problem in Portland, and in most cities, is that price and quality competition at taxicab stands is effectively prohibited, either through regulations or enforced customs which require that passengers employ the first taxicab in the queue. At the Portland airport, passengers are required to accept the first taxicab in the queue. And elsewhere, while customers have the legal right to choose among taxicabs at stands, the drivers themselves will direct passengers to the front of the queue. Moreover, the City does not actively advertise the fact that choice exists, nor does it punish drivers who enforce first- in, first-out customs. In the taxicab stand market, then, taxicabs effectively operate as one company, or fleet, and price and quality competition does not occur. Frankena and Pautler (1984) describe how multiple, distinctively marked fleets can reduce problems of price searching in the cruising taxicab. Fleets would have greater incentive to charge lower fares and provide better service than identically-marked taxicabs for three reasons. Because its vehicles could be identified easily, a fleet would reduce search costs for riders seeking a lower fare or better service. Secondly, the larger the number of taxicabs charging a lower fare, the lower will be the expected cost to riders who tum down higher priced taxicabs. Finally, fleets might attract to the cruising market a group of riders who are unwilling to pay the higher fare charged by other c 20 c taxicabs and who will wait until a fleet vehicle appears. As taxicab companies in Portland have historically resisted attempts to make them compete as distinct fleets or brands eI. however, some mechanism is necessary to force them to do so. Economies of scale exist when the average cost of production declines as a company's output increases. While there do not appear to be economies of scale in the taxicab stand or cruising taxicab markets, scale economies exist in the market for advertising, vehicle management, and vehicle dispatching. Economies of scale can pose problems when the output range over which cost declines is large relative to the absolute size of the market. as the number of firms in the industry is likely to be small, and firms may able to charge prices above marginal cost without causing other firms to enter the market. Thus, for cities that have relatively small fleet sizes (e.g. Virginia Beach with 39 vehicles, Albuquerque with 133, and Long Beach with 105), price ceilings may be warranted to restrain firms from exercising market power. Small market size by itself, however, may not always be the best indicator of scale economies, as some cities that restrict entry (e.g. Albuquerque, Long Beach) may actually restrict supply to levels far below what the market would provide, thereby creating a self-fulfilling prophecy. In fact, cities that have open entry policies, and/or allow independent taxicabs, regardless of market size, also show reduced monopoly power. The largest three companies in Fresno, for instance, which only has 50 total vehicles, only constitute 66% of the market, compared to 94% for Portland. Similarly, Indianapolis and Kansas City, which have 398 and 360 licensed taxicabs respectively, and which also have open entry policies, only have monopoly concentrations of 50% and 66%. These findings are consistent with other studies (Frankena and Pautler. 1984) that show that where open entry is allowed, small firms and independents can coexist with large companies and can potentially reduce market power (i.e. excessive prices). To conclude, arguments that claim that economies of scale in the taxicab industry are so substantial as to make competition impossible are not defensible~. One result of inefficiently high fares is the long queues that taxicab drivers and town car drivers wait in at the airport to take rides. Drivers are willing to wait in long queues because the benefits of a long-haul trip outweigh the cost of waiting. On a per hour basis, these trips generate the most income and highest profit. At the same time, the fact that consumers are increasingly choosing town cars, which offer better service at only a slightly increased cost. to taxicabs, despite the fact that they may not really want a complimentary newspaper or bottled mineral water, shows how the quality of taxicab service is overpriced. The solution to the prOblem of inefficient (excessive) supply, however, is not to restrict entry of town cars and taxicabs into the market, but to reduce fares to the market clearing level. Many cities do this by establishing flat airport rates which are lower than the regulated meter rate on a per mile basis. Retuming to Exhibit 2 then, Portland's rate for a long distance trip (representing an airport trip) is relatively high on a per mile basis~. Another solution might be to require taxicabs at the airport to compete with each other for airport rides rather than using the first-in first-out system. To conclude, there is no economic reason why the most lucrative service should be reserved exclusively for the existing taxicab companies, while new entrants are forced to provide innovative, but marginally profitable service. In this light, policies stating that new airport providers "need not apply" (Hamilton, 1997d), or that "we don't want to create new employment opportunities at the expense of our existing businesses" (Francesconi, 1997) are inequitable. Similarly, policies forcing town cars to raise their own rates effectively puniShes these operators for providing affordable service that consumers value, and only exacerbates the problem of wasteful overspending. The problem at the airport calls for more competition and more service, not less. c c 21 c In order to compete for airport service, new entrants would want to offer long-haul discounts. However, while the Code does not prohibit alternative rate schedules, rates must be filed with the Supervisor. This system tends to preclude other pricing options that might benefit both taxicab providers and consumers. Zonal fare systems, for instance, which charge a set fare in advance for trips entirely within a zone or between each pair of zones, are particularly helpful to tourists who are vulnerable to circuitous route taking, and are used extensively in Washington D.C. Zonal systems reduce customer uncertainty, and would be particularly valued by regular and low income users. They also facilitate shared-ride service, as fares are more easily divided. Taxicab companies, therefore, might implement a zonal fare system to gain a competitive advantage, by creating predictability for customers, and perhaps by eliminating the need to purchase and maintain taximeters. Although the City would like to see more innovation from its taxicab companies, the fact remains that product differentiation does not occur with single regulated prices, and that unregulated prices to offset increased risk would provide more incentive for exploration of new markets and services. Similarly, rigid rate structures work against some "traditional" taxicab services too. The fact that taxicabs are scarce during the rush hour, for instance, is partly attributable to prohibitions against part-time providers, and is also due to a rate structure that does not account for circumstances, in this case congestion, that raise operational costs (which is why telephone companies and airline carriers institute peak period pricing). Thus, as some trips to distant suburbs and late night trips are probably turned down do to the increased risk of returning empty, flexible rate structures could ensure more reliable service by accurately reflecting density of demand. Whereas Schaller and Gorman showed how lessees can be expected to provide worse service than driver-owners, Hall (1996, p.60-62) shows for both groups how driving standards are lowered when a few firms charge similar fares due to a lack of competition: Ironically, by standardizing taxi service government has exacerbated the prOblem of enforcing quality standards for drivers. Avoiding those drivers or companies who provide bad service is more difficult when service is homogenous. Bad drivers take advantage of this heightened opportunity to escape penalties which markets impose...lf fare regulation drives brand name companies out of the trade, their self-policing mechanisms go with them. This exodus, in turn, encourages those drivers with less scruple and/or greater skill at avoiding regulation to join the business. In effect, bad drivers drive out the good. Personal experience, anecdotal conversations with other taxicab users, and Radio Cab drivers' insistence that the company raise its rates to the maximum allowable (Bussell, 1998) suggest that local taxicab users do not perceive much difference between the existing companies. And when one company fails to show, or arrives late, the consumer has few alternatives. Similarly, when taxicabs are deployed on a first-in first-out basis at taxicab stands, drivers have no incentive to increase quality, as customers cannot efficiently seek out those who do. c c Finally. returning to the subject of inelastic demand, one effect of the rate structure that Portland has settled on is its disproportionate impact on the poor. In defense of Portland's relatively high flag drop charge, the highest among the cities surveyed, regulatory staff has offered that high up-front costs should be paid for up-front, and that the high charge is necessary to entice providers to service less lucrative short trips (Hamilton, 1998d). In fact, only two costs are probably attributable to taxicab trips as opposed to trip durations, these being the costs of dispatching and time spent boarding and unloading (Wohl, 1984). Nevertheless, there is no inherent reason why these costs must be allocated on a per trip basis as opposed to on a per mile basis {although the 22 c survey results show that most cities take the latter approach). However, most long- distance trips are by passengers with higher incomes (business travelers and tourists), and most short-haul trips are by lower income riders on shopping trips or health care visits (Frankena and Pautler, 1984; Wohl, 1984). Therefore, Portland's rate structure leads the poor to pay a higher proportion of the industry's fixed costsE]. <>Recommended Changes to Portland's Taxicab Regulations Portland's taxicab regulations do not actually support the overall goal of the regulations, which is to promote competition within the industry, and to allow the industry to operate without undo restraint. As the previous sections have shown, restrictions on entry, minimum service requirements, and prohibition of independent operators do not increase economic efficiency, and instead are directed to protecting the industry from competition. In addition, tolerance of first-in first-out queues at taxicab stands effectively prohibits competition. In creating a highly concentrated industry with little incentive or opportunity to compete, then, the City has actually caused the problems that give rise to other regulations. <>Removing Barriers to Entry c This study recommends that regulations that restrict entry, establish minimum service requirements, and prohibit independent operators be removed from the Code. These regulations reduce service for the consumer, stifle innovation, increase the cost of taxicab trips, reduce industry employment, and constitutes de facto discrimination, as many would-be participants are minorities and/or immigrants. In addition, experience from other cities shows that costly enforcement of entry restrictions achieves little, and that illegal activity will only increase with market size (illegal activity is a persistent problem in New York, Los Angeles, Chicago and Philadelphia). Deregulating entry into the industry does present some difficulties. Many taxicab owners have invested thousands of dollars purchasing licenses or shares in taxicab companies. However, since the high value of the taxicab license is an artificial creation of the regulations, the government has every right to take it back. A more politically palatable solution, however, might warrant a more gradual transition. For instance, the City could increase the supply of permits at monthly auctions for a transitional period, after which time no restrictions would apply. Of course, the cost of a long transition period is a slower pace of innovation. <>Creating Property Rights in Taxicab Stands c A second barrier to competition is the presence of first-in first-out taxicab stands. Downtown curb spaces have several alternative uses, including but not limited to: metered parking, lanes of traffic, loading zones, and bike lanes. Construction companies that use curb space must pay for the privilege. Despite past policies of charging for curb space, however, the City now gives away the space for free, reasoning that taxicabs already pay to use this space (less than $50 per year per vehicle) through permit and business license fees (Allen, 1978; Hamilton, 1997c). Following this reasoning, we would also base the price Starbucks might pay to operate at a prized location such as NW 21 st and Lovejoy upon the value of services provided by the Public Health Inspector who inspects for cleanliness. How many taxicab stands should there be? Of the 23 ~'" L apProximately 80 taxicab stands in the city, many are underutilized, while others face a steady demand. City policy over the years has allowed the number of stands to proliferate without any rational plan for establishing or removing them. This study proposes that taxicab companies be required to lease curb space from the City, and that each stand be reserved for the exclusive use of the controlling company or association. Thus, regulatory staff would identify curb zones, perhaps drawing upon the input of neighborhoods who might desire additional service, and put them up for lease. These zones would be auctioned off in such a way to prevent monopoly power which could result from an initial maldistribution. Firms with knowledge of local market opportunities would bid for sites in those areas, and the one with the highest valuation would get the curbspace. In this case, zones might not only include the curb, but might also include the adjoining space on the sidewalk and road, creating a "complete" stop to effectively be managed by the taxicab company as a private resource. The holder of the curb rights would have an incentive to monitor its "property" and report violations, which would be treated as a private tort and/or a municipal violation. Independent cab owners would also be allowed to form associations to lease and manage curb space. This solution simultaneously addresses the problem of stand proliferation, and provides customers with a method of selecting among taxicab companies that cannot be undone by the companies. <>Creating Competition at the Airport c This study proposes that taxicabs lease curb and counter space at the airport. The rapid rise in commercial door-to-door services among airport users represents a major change in US airport ground access travel during the last two decades, as airport travelers particularly value high quality transportation service. Even in cities where airports are well served by rail and bus transit such as Washington D.C. and Chicago, taxicabs are estimated to account for 36% and 15% of all ground transport trips respectively (Cogan and Cambridge Systematics, 1997). In this light, demand for taxicab, town car, and shuttle van service at Portland International Airport should be expected to grow substantially in the future, reinforcing the need to find a more efficient system of providing these services. In this case, the taxicab companies would be required to lease counter space which could be located within the airport lobby, Eerhaps adjacent to the rental car counters to further encourage comparison shoppingLl. To ensure competition, the Port of Portland as manager of the airport could establish five or more counter areas which would be auctioned off to the highest bidders. Again, independents would be allowed to pool their resources to lease space. Depending on logistical constraints, some curb area near the retail counters could be reserved for each company to facilitate quick boarding, or perhaps a shuttle would carry passengers to a secondary boarding area, as is currently done with rental cars. To encourage more shared rides, which might be facilitated by firms offering flat and/or zonal fares, Port staff could also provide shared ride coordinators to quickly help passengers group together. In fact, a similar solution was recently proposed for San Francisco International Airport, which cited problems similar to those experienced in Portland (Cogan and Cambridge Systematics, 1997). Three separate departure zones, in this case for shuttle services, were established. Two large companies were to be selected by a bidding process, while a third area would have a neutral coordinator to dispatch all the other companies. After the bidding process was conducted, however, the operation was put on hold as the those in charge of administering the program were flooded with complaints from the losing companies. Interestingly, many of these same losers indicated that they would still c 24 c prefer some system whereby which they could compete on the basis of their reputation rather than returning to the prior system. What might Portlanders see as a result of these changes? Some airports already allocate exclusive curb rights to shuttle companies, and according to that industry's largest firm, Supershuttle, the total market has expanded at these airports (Klein, 1997). Competition would be expected to bring the fare level down to an efficient level and solve the problem of oversupply. Initially, this same solution of leasing counter space would also be made to apply to town cars. If market entry were deregulated in the near future, as this study proposes, and a property rights framework to create competition was implemented, one should eventually expect to see individual companies offering multiple, differentiated products, so that taxicab service, town car service, and perhaps even rental car service could all be purchased from the same counter. <>Deregulating Rates Removing entry barriers and introducing property rights would create a framework whereby price competition becomes workable, eliminating the need to regulate rates. To facilitate fare comparisons, however, taxicab companies should be required to use some uniform measure (e.g. one-fifth of a mile) for distance-based fares. Rates would have to be posted on vehicles, but they would no longer have to be filed with the Supervisor. Zonal fares, time of day premiums, and other fare mechanisms would also be permitted. <>Review of Deregulation in Other Cities c Perhaps the most comprehensive studies of prior attempts at market entry and fare deregulation were performed by Frankena and Pautler (1984), Teal and Berglund (1987) and Price Waterhouse (1993). These studies analyzed the effects of taxicab deregulation in 21 cities to determine the extent that benefits predicted by economists in fact materialized. These benefits were thought to include more taxicab service and faster response times, reduced monopoly concentration, lower fares, and improved service. Following are some key findings of these studies: 1. Number of taxicabs All studies note that taxicab supply increased dramatically, and that much of this new supply was directed to already over-served airports where wait times for customers were already short (as is currently happening in Portland). All authors note that potential price and service competition was effectively eliminated by continued enforcement of first-in first-out queues. Frankena and Pautler (1984) report that supply increases caused taxicab insurance rates to decline due to increased group rate discounts. 2. Market concentration Frankena and Pautler (1984) report that market share held by the three largest firms in each city declined substantially. Although Price Waterhouse (1993) does not specifically mention market concentration, its finding that most new entrants were primarily independents (few new companies formed) would logically imply decreased monopoly power. c 3. Response times Whereas Price Waterhouse (1993) reports that response times "were similar to pre- deregulation performance", Frankena and Pautler (1984) and Cervero (1997), report that 25 c response times declined dramatically in the cities they studied (e.g. Seattle, San Diego, and Indianapolis). c 4. Fare levels Price Waterhouse (1993) reports that fares increased in every case, and cite the persistence of mechanisms that work against price shopping (i.e. first-in first-out queues) as the culprit. Frankena and Paulter (1984) note that fare increases were lower than what would have been predicted based on trends over the prior 10-year period. Price Waterhouse (1993) also notes substantial variance in fares among cabs. Frankena and Pautler (1984) suggest that because in most cities taxicabs were required to charge a uniform set of fares, some taxicabs that served markets with more elastic (price- sensitive) demand and airport markets probably established some average rate, which would be lower than that for airport-only providers. 5. Service All studies report of short-haul trip refusals, though this rate is not compared to pre- deregulation. Cervero (1997) reports that redlining or refusing to serve minority neighborhoods was not a noticeable problem. The fact that all the benefits anticipated from competition did not materialize should actually come as no surprise, as in fact, competition was not allowed to happen by design, showing how competition and deregulation are not one and the same, and pointing to the critical importance of establishing property rights at taxicab stands. By continuing to enforce first-in first-out queues at taxicab stands, cities only allowed more taxicabs to jump on a gravy train that had its brakes removed. What is peculiar, however, is that while all the authors identify the taxicab stands as being at the root of problems encountered, none seriously question the value of lumping all the providers together in the first place. <>Conclusions c Because of regulations that restrict entry, increase waiting times, and raise fares, the number of taxicab trips taken in Portland is inefficiently low. Because of regulations that inhibit ride sharing, increase trips without return fares (or "deadheading"), and increase the time that drivers spend waiting in queues, the cost of producing taxicab trips is unnecessarily high. Finally, a lack of effective competition has created shortages of certain types of service (e.g. short trips) and stifled innovation. As a result, these regulations have reduced industry employment and have transferred wealth from consumers to entrenched taxicab companies, with a disproportionate impact falling on the poor. This study does not call for more or "better" regulations. Instead, this paper argues that an improved taxicab market can arise by removing regulation and promoting competition. Elements of this proposal have been tested in places such as Indianapolis, Washington D.C., Denver, Phoenix, and other cities, where deregulation has revived local taxicab markets. Under the proposed system, one which fosters true competition and self-regulation, the only requirements for market entry might be a valid drivers license, vehicle insurance and registration, and safety certification. Industry competition and self-regulation would avail the City from having to investigate complaints such as drivers having "grungy attire" and ensuring that lost and found items are recorded and handled correctly. Similarly, the City would not have to tell drivers to keep their cars clean, and not to use them to commit crimes. Instead, taxicab companies would have incentives to voluntarily provide information regarding fares, amenities, and accident records to groups like the Oregon 26 c Visitors Association, local business groups, senior citizen organizations, and the pUblic in general. ..........................................................................................................................-.......-............................................................................--.......... Exhibit 1 : Market Share of Three Largest Taxicab Companies c c 27 CiliJ . htry Relula.... Exilibit 1 Mullet SlJliJe tl/7Jvee Luge...t Taxicab QI01j1ll1Jie.r # I"" p.._.. ~ : p.,uIatIoa p.,ulalleaper Lecal perTuIaII .lIUpe__ ,nree Celllplly (..........) s...,re MiIll TuIe_ (tlulus....) J\IIawM! Market sUre ..................................................................................................... c . . . . ...................... 412 . ....-..........-...-.............. Albu'lu.r'lu.b 3,116 133. 3.10 N 100,(10% BollUnor. 703 8,700 1,151 0.61 N 78.63% ............. ..-.-....--................... . . .................... ...-............ .........-................................................ .............................. Chorlott. 438 2,.513 4j() 097 N 48.89% ............2,i3:2 .-.......... ~.........-...................,........ ..................... ........................................ Chicago 12,025 5,700 0.48 Y 75.23% Columbu. 636 3,332 500 1.27 Y 54.60% ........................................................................................................................................... DolIu 1,023 2,988 1,848 0055 N 37 .34% Denver 494 3,222 842 0059 N 88.12% D.l:oit 992 7,152 1,310 0.76 Y 69.08% E1 Pa.o 579 2,359 2j() 2.32 N 60.00% F on Worth 452 1,608 170 2.66 N 100.00% Hou.ton 1,702 3,152 2,067 0.82 Y 78.86% Long B.ach 434 8,680 105 4.13 N 100.00% Lo. Ang.I.. 3,449 7,349 2,084 1.65 N <UJ.74% Milwauk.. 617 6,420 321 1.92 Y 79.44% C N.wYork' 7,333 23,739 12,187 0.60 Y 4.10% Philad.lphia 1,524 11,281 1,444 1.06 N 3296% Portland 451 3,617 317 1.42 N 94.01% San Antonio 999 3,000 590 1.69 N 45.59% San Di.go 1,152 3,556 870 1.32 Y 42.76% SeatU. 521 6,210 643 0.81 N 65.47% Opea Extry Fresno 387 3,905 j() 7.74 N 66.00% Indianapoli.d 752 2,079 398 1.89 Y 49.75% Kansas City 444 1,425 360 1.23 y 67.78% Pho.nix' 1,049 2,498 Unknown Unknown Y Unknown San Francisco 735 15,739 995 0.74 y 48.84% San J os. 817 4,769 m 1.56 N 78.10% ruc.oJ 435 2,783 Unknown Unknown Y Unkno Virginia Beach 430 1,732 39 11.03 Y 10000% c 50UlC..: 1996 Statistical Ab.t...,t of the U nit.d Stat..; S1llVOY re.wt. . The.. fJglllOS do hOt account for i1lega1 taxicab., or companies with monopoly power tllatleaw taxicabs idle. · Only two large fums in the IMlkel. < Dispatching prolubited for taxicab.. · One large flrm (111) and one rnedium..iz.dfll1\l (21);lot. ofi1ldepeJldents. . Compo. flIo for a busiJ1es. Iic....; hO recolds kept for total lIumber ofwhicles. 537 whicles for 3lupst fleets. f Compo. file fora buiness Iic....; no recolds kept for total lIumber ofwhicles. 143 whicles fbr21uptt fleets. . ................................. 28 ,-" L <>Exhiblt 2: Comparison of Taxicab Rates c c 29 ........................................................ ................... ........................................................................................................................................................ Exhibit 2 Comparison oJTaxicab &us . FJacDrop : FJacDnp :Me1erRa1e: WoitCllarce e..t.r: e..t.r....JIC Cllarce . Dfstuc:e : ,er Mile : ,er M1m11e : Ci l' .' Dls....e l' . . c ell;)' 'Rate. Recula'" .~1.b.':''l.U!~'l.U.d Baltimore Charlotte Chicago Columbus Dollas Denver c D.l:oit ElPaso Fort Worth Fr.sno Houston Long Beach Lo s Angele s Milw.ut<ee New York Philadelphia PorUand' San Antonio Ra1e T · i~::.n~ .... .Fn.e~ 'Maximum Maximum 'Maximum ....................... Filed Maximum Maximum Maximum 'Maximum Maximum Filed Maximum Maximum Maximum Maximum Filed Maximum Filed San Diego' San Francisco Maximum San Jose Maximum S.atUe Maximum Virginia Beach Maximum Rales Not ReCula.. ..-.....'w;w.... .... ......$i:4O iJ:iooj ........$6.30.: SO:25 'S4:30T $4.81 : ...... .........$00i7.....i~:43.. $0,30 $5.83 $0.20 $4.90 $552 $5.17 $555 $4,90 $6.30 $5.70 $6.95 $6.18 $5.75 $5.85 $6.40 $6.60 $5.25 $5.99 $650 $6.84 $7.10 $4.10 Hsi:ooT $1.40 $1.35 $1.20 $1.40 ...... '$\50 siOiOH ....... ..$I6.fl $1.50 $180 $1.60 $150 $150 $1.80 $1.50 $1.30 $180 $190 $1.80 $100 $0.23 $0.30 $0.20 $0.30 $0.30 $0.38 $0.30 $0.25 $0.20 $0.20 $0.33 $020 $0.30 $0.19 $0.50 $0.15 ...-........................ $20.15 siiOf $16.21 .................................... $17.60 $17.60 $15.30 ..... ................... $18.39 $i7.30 ......................... $18.60 ........ $1:530 $20.20 $18.75 $22.63 $20.08 $18.75 $18.80 $2190 $19.68 $16.50 $20.49 $22.10 $23.18 $22.90 $1225 Indianapolis' Open $6.16 $21.83 Kansas City Open $536 $16.42 Pho .nix Open $5.00 $16.44 T son' Open $559 $18.50 ....$i.6O $2.00 . $1.50 . .............0:143.. 0.111. 0.000 Source: survey results . Filed m:I Open rates are weighted avo,. of 3 ~Sl fums' eJCCept whereilldicated · City trip equal 10 25 miles with 2 minutes of wait time. < Lollg distOllCe trip equal to II miles with 3 minutes of wait time. . Weighted avo,. of only two companies in the morbI. 'Weightedavo,. ofoll fInns on file. f Weighted avo,. ofolle large fum (1 n) aM Olle medillll\-.ized fum(21). · Weighted avo,. oflwo largest fInns c $1.40 . $1.20 . $1.50 . $1.90 . $1.50 . $1.90 $1.90 $1.75 $2.00 $1.80 $2001$250 $1.60 0.143. 0.000 0.000 0.125. 0.100 0.111 0.200 0.167 0.200 0.167 0.067 0.000 $1.70 $1.90 $1.80 $100 0167 0.100 0.111 0.200 30 ,..- L <>Sources c Allen, James J. Regulation of Taxicabs in the City of Portland: Review and Recommendations (Volumes I, II, III). Prepared for the City of Portland, Oregon Bureau of Planning. 1978 Arrington, G.B. Director of Strategic Planning, Tri-Met. Address to Central City Transit Plan Citizens Task Force. February 3, 1998 Bogue, Philip R. "Tri-Met welcomes competition to enhance mobility in the region." The Oregonian. October 14, 1997 Bussell, David. Owner-Driver, Radio Cab Co. Interview with author. February 1, 1998 Cambridge Systematics. 1996 Enplanement Study. Cervero, Robert. Paratransit in America. Praeger Publishers; Westport, CT. 1997 Cogan, Matthew A. and Cambridge Systematics. The Peer Analysis Report Prepared for the Port of Portland. April 1997 Dempsey, Paul Stephen. "Taxi Industry Regulation, Deregulation & Reregulation: the Paradox of Market Failure." Transportation Law JoumaI24(1) Summer 1996: 73-120. Downs, Anthony. Stuck in Traffic: Coping with Peak-Hour Traffic Congestion. Brookings Institute Press; Washington D.C. 1992 Entler, Steve. General Manager, Radio Cab Co. Interview with author. December 19, 1997 Francesconi, Jim. "Francesconi Says Editorial Unfair". The Portland Skanner. December 3, 1997 Frankena, M. and PA Pautler. An Economic Analysis of Taxicab Regulation. Staff Report of the Bureau of Economics of the Federal Trade Commission. Washington D.C. 1984 Gaunt, Clive and Terry Black. "The Unanticipated Effects of the Industry Commission's Recommendations on the Regulation of the Taxicab Industry." Economic Analysis & Policy 24(2) September 1994: 151-170. Hackner, Jonas and Sten Nyberg. "Deregulating Taxi Services: A Word of Caution." Journal of Transport Economics and Policy 29(2) May 1995: 195-207. Hall, Christopher D. The Uncertain Hand: Hong Kong Taxis and Tenders. The Chinese University Press; Hong Kong. 1996 Hamilton, John. City of Portland Taxicab Supervisor. "Taxicabs and Livability." Portland State University. 1996 Hamilton, John. City of Portland Taxicab Supervisor. Personal communication with author. October 23, 1997(a) Hamilton, John. City of Portland Taxicab Supervisor. Smart Cab Application Supplement. November 4, 1997(b) Hamilton, John. City of Portland Taxicab Supervisor. Personal Communication with author. December 29, 1997(c) Hamilton, John. City of Portland Taxicab Supervisor. Biennial Taxicab Demand Study. December 31, 1997(d) Hamilton, John. City of Portland Taxicab Supervisor. Personal Communication with author. January 7, 1998(a) Hamilton, John. City of Portland Taxicab Supervisor. Personal Communication with author. January 16, 1998(b) Hamilton, John. City of Portland Taxicab Supervisor. Personal communication with author. February 7, 1998(c) Hamilton, John. City of Portland Taxicab Supervisor. Personal communication with author. February 18, 1998(d) c 31 c Hamilton, John. City of Portland Taxicab Supervisor. Personal communication with author. March 11, 1998( e) Kirby, Ronald F. and others. Para-Transit: Neglected Options for Urban Mobility. The Urban Institute; Washington D.C. 1974 Klein, Daniel B., Adrian T. Moore and Binyam Reja. Curb Rights. Brookings Institution Press; Washington D.C. 1997 Nelson, Pauline. Port of Portland Ground Transportation Unit. Personal communication with author. February 9, 1998 Oliv,er, Gordon. "Town cars muddy the waters of Portland taxi r~gulation." The Sunday Oregonian. December 21, 1997 Oregon Employment Department. Oregon Wage Information - 1995 Oregonian editorial. "Loosen transit reins." The Sunday Oregonian. September 18, 1997 Parente, Michele. "Portland moves to open taxi market." The Oregonian. November 13, 1997 Parente, Michele. "Portland council edits taxicab rules." The Oregonian. December 18, 1997 Parente, Michele. "More taxis in Portland's future?" The Oregonian. January 8, 1998 Parente, Michele. "Taxicab applications flood city in-box." The Oregonian. February 4, 1998. Parente, Michele. "Board: City will fare better with more cabs." The Oregonian. April 2, 1998. Price Waterhouse Office of Government Services. Analysis of Taxicab Deregulation and Re-Regulation Prepared for the International Taxicab Foundation. Washington D.C. 1993 Rose, Michael. "Hacks ready to attack new cab rival." The Business Journal of Portland. July 25, 1997 Rose, Michael. "Squeeze time for town cars." The Business Journal of Portland. January 9, 1998 Rose, Michael. "Ex-cabbies collide with New Rose City." The Business Journal of Portland. January 30, 1998 Schaller, Bruce and Gorman Gilbert. "Factors of Production in a Regulated Industry: Improving the Proficiency of New York City Taxicab Drivers." Transportation Quarterly 49(4) Fall 1995: 81-91. Schaller, Bruce and Gorman Gilbert. "Villain or Bogeyman? New York's Taxi Medallion System." Transportation Quarterly 50(1) Winter 1996: 91-103. Schaller, Bruce and Gorman Gilbert. "Fixing New York Taxi Service." Transportation Quarterly 50(2) Spring 1996: 85-95. Smart Cab Co., LLC. Application for Taxicab Company Operating Permit. July 1997 Solberg, Bruce. "Bridging the transportation gap." Daily Journal of Commerce. September 10, 1997 Taylor, D. Wayne. "The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto." Logistics and Transportation 25(2) June 1989: 169- 181. Teal, Roger F. and Mary Berglund. "The Impacts of Taxicab Deregulation in the USA." Journal ofTransport Economics and Policy eJ (1) January 1987: 37-55. Tri-Met Operating Budget for Fiscal Year 1997-1998 Tri-Met Working and Wage Agreement. December 1,1994 - November 30,1998 U.S. Bureau of the Census. Statistical Abstract of the United States: 1996 (116th edition). Washington D.C. 1996 Webber, Melvin M. "The Marriage of Autos and Transit: How to Make Transit Popular Again." Access 5 Fall 1994: 27-31. "...... L c 32 c Williams, David J. "Information and Price Determination in Taxi Markets." Quarterly Review of Economics and Business 20(4) Winter 1980: 36-43. WOhl, Martin and Chris Hendrickson. Transportation Investment and Pricing Principles. John Wiley and Sons; New York, NY. 1984 <>Appendix A - Taxicab Industry Contacts c Vivian Allison, City of Detroit Consumer Affairs Paulette Braithwaite, City of Virginia Beach Special Events/Film Office Terry Brown, City of San Jose Police Department Dolores Butcher, City of Tucson Business Licenses Jim Copeland, City of Milwaukee License Division Julia Craig, City of Charlotte Taxicab Inspectors Office Blanton Daniels, City of Houston Transportation Division Anna Deosdade, City of San Antonio Police Department Ceci Flores, City of EI Paso Police Department, Vehicles For Hire Jaunice Floyd, City of Long Beach Business Licenses Department Alan Fromberg, City of New York Taxi and Livery Commission Sharon Gadd, City of Columbus Public Safety Department, License Section Gary Gramlick, Colorado Public Utilities Commission Mary Beth Haley, City of Dallas Transportation Regulation John Hamilton, City of Portland Taxicab Supervisor, Bureau of Licenses Sant R. Harrison, Pennsylvania Public Utilities Commission, Bureau of Transportation and Safety Robin Hunt, Yellow Cab Inc., Indianapolis, Indiana Jeannie Lee, City of Los Angeles Department of Transportation Craig Leisy, City of Seattle Consumer Affairs Unit Barbara Lupro, City of San Diego Metropolitan Transit Development Board Vince Martinez, New Mexico State Corporation Commission Leon Molina, City of Fresno Richard Page, Maryland Public Service Commission Steve Patterson, City of Chicago Department of Consumer Affairs Sandra Ramirez, Strategic Planning, Arizona Department of Motor Vehicles Danny Reed, City of Fort Worth Sg!. Vincent Simpson, City of San Francisco Police Department Floyd Underwood, City of Kansas City Taxicab Permits <>Appendix B - Sample Survey c Hello. My name is John Boroski and I am an Urban and Regional Planning student at Portland State University. As part of my thesis research, I am conducting a national survey of taxicab companies and regulators so that I may gain a better understanding of taxicab regulation, and the general degree of innovation within the paratransit industry . Please take a few minutes to complete the following survey. Questions and completed surveys can be directed to me at: Phone: Fax: E-Mail: Mail: 34 c B. Large, expensive, classic or vintage vehicle commonly recognized by the limousine industry as a limousine or executive vehicle. C. Vehicles impeccably clean and rigorously maintained. D. Passenger amenities, including but not limited to, luxury upholstery, halo lighting, sun roof, telephone, television, or other amenities. E. Except as provided in subparagraph f., below, service by reservation only (for example, not to be hailed on the street) means restricted to requests by prior arrangement. F. Service may be made available on demand for transportation originating at the Portland Intemational Airport, but only if such service is provided pursuant to a written contract between the Port of Portland and the Luxury Transportation provider and such service is in accordance with all of the other criteria contained in paragraphs a., b., c., d., e., and g. G. Premium rates (i.e., rates which are consistently and substantially higher than the prevailing rates charged by licensed taxicab companies within the City of Portland). c Shuttle Transportation: Transportation provided in a motor vehicle: A. Over a fixed route and time schedule; or, B. Other than a fixed route and time schedule for: 1. Transportation originating at Portland International Airport; or, 2. Transportation originating in the City of Portland where the destination is Portland International Airport; and, 3. Only if the transportation provider has a valid Port of Portland Ordinance 351 Permit; and, 4. The shuttle operator provides regular, ongoing transportation service with a vehicle used exclusively for shuttle service where service at a minimum includes: a. Van(s) or bus(es), commonly recognized by the industry as "shuttle" transportation vehicles, capable of carrying multiple passengers and their luggage; and, b. Vehicles maintained in a clean and safe condition; and, c. The full name and telephone number of the service company permanently displayed on the outside of the vehicle, on both sides, and the phrase, "airport shuttle," included either as part of the company name, or as a description of the type of service provided; and, d. A vehicle that is not equipped with a fare meter or top light normally utilized by permitted taxicabs; and, e. Service by prior day reservation only, meaning restricted to requests by prior day arrangement, except that service may be made available on demand when originating at the Portland International Airport; and, f. Established rates, when compared on a single-passenger basis, that are consistently and substantially lower than the maximum meter rate allowed by Taxicab Regulations; and, g. Service is multi-stop, shared-ride service, and does not promise direct non-stop service. <>Endnotes c 1 For the purposes of this paper, taxicab service is defined as service which the "average" consumer might enjoy, and hence does not directly address issues particular to agency requested transportation (ART) or specially attended transportation (SAT). 35 c 2 Vehicles must be less than five years old, and companies must provide proof of insurance and a $1,000 deposit. 3 Legal definitions distinguishing "shuttle service" and "luxury transportation" from taxicab service are included in Appendix C. 4 At low speeds, generally less than 10 mph (the "crossover point"), the meter switches from calculating mileage to calculating time. 5 Taxicabs are permitted to use the bus lanes for through travel from 7:00 p.m. to 6:00 a.m. Monday through Friday, and all day on Saturdays, Sundays, and on holidays. Town cars, however, are currently prohibited from using the bus lanes at any time. 6 See the list of survey respondents in Appendix A. 7 This includes federal, state, and local govemment operating subsidies and capital grants. 8 As evidence, the mode share of work trips in the Portland MSA for mass transit fell in 1980-1990 from 8.4% to 5.4%, while the share for carpool was relatively stable. Metro- wide, the 1990 carpool share was 12.3%. Unfortunately, a separate figure for taxicabs is not available. 9 Most full-time drivers already have three or more years of experience, at which point they are at the top of the pay scale. 10 Tellingly, literature provided by the Department lists bus and taxi drivers together under the same job profile, #6142, as they require the same aptitudes (eye-hand-foot coordination, quick reflexes, ability to judge distances, etc.). 11 Section 16.40.001 (Purpose) of the Code, amended in December 1997. 121n addition to the cities listed in Exhibits 1 and 2, Jacksonville, New Orleans, Memphis, and Washington D.C were also contacted but declined to respond. A sample survey is included in Appendix B. 13 City of Portland regulatory staff sometimes use the term "public utility" to denote "common carrier". 14 Many regulators rely on data from other cities to establish fleet sizes and fare levels. 15 The Taxicab Board of Review has never defined what this means exactly (Hamilton, 1998e). While this requirement could be operationalized, it does point out a complication of the regulatory approach. The fact that this requirement exists at all, however, seems to acknowledge that a monopoly market structure exists. 16 For an excellent review of the causes of congestion and potential solutions, readers are encouraged to read Anthony Downs' Stuck in Traffic. 17 Similarly, the direct and more equitable approach to reducing problems of aggressive driving is strict enforcement of traffic regulations. 18 To a certain extent, then, the goal of creating a market where consumer and producer benefits are maximized is pursued only insofar as it is convenient to do so (which also explains the establishment of uniform rates, which are easier to administer). 19 Pedestrians attempting to signal the attention of a passing taxicab are likely to be greeted with a polite nod of the head, a blank stare, or complete disregard as the empty vehicle passes them by. Local industry representatives reply that residents of west coast cities "are simply not used to hailing cabs", and therefore taxicab drivers "are not used to looking for hailers" (Allen, 1978; Entler, 1997; Hamilton, 1997a). Yet in San Diego, for instance, which has a population density similar to that of Portland but has a much less concentrated industry, actual survey data reports over 8% of total trips are street hails. 20 This is demonstrated by the success of low-cost, no-frills airline service after deregulation in that industry. 21 In comparison, licenses in Indianapolis, which has an open entry policy, cost only $102. c c 36 -^' L 22 This cost will fluctuate to reflect the condition of the vehicle, which is transferred with the license. Other equipment such as taximeters and topl/ghts are supplied by the company for quality control. While Radio Cab does not buy back its licenses, its members must approve any new owner-drivers, who must have driven at least 6 months for the company. 23 As most cities restrict entry and service, most of these fares will be inefficiently high, and market conditions vary too much from city to city to make direct comparison possible. 24 A high concentration of market power, which has not changed significantly in the last 20 years, encouraged Portland's two largest taxicab companies to trade days at high- yield taxicab stands in the past, which had been segregated for exclusive company use presumably to foster competition (Allen, 1978). 25 One only need look to the airline industry, where huge up-front fixed costs were also presumed to be insurmountable, to see how deregulation can entice new entrants to provide traditional and niche services efficiently and profitably. 26 The hypothetical airport trip modeled for Portland also does not include the airport gate fee which customers are required to pay. 27 The current maximum flag drop of $2.50 actually represents a reduction from a suggested drop charge of $5.00 (a Board recommendation; Hamilton, 1998d). 28 One can only imagine the public outcry that would result, for instance, if new policies required rental car customers, upon deplaning, to wait in a line and to accept the first vehicle that approached them (perhaps all vehicles would be Geo Metro's) at some fixed price; yet this is exactly the manner in which taxicabs are deployed. ._.._~-_..-----.._-~--~._-~.-....~_...---.._.~.-._.~_.- c Founded in 1991, Cascade Policy Institute is Oregon's premier policy research center. Cascade's mission is to explore private, voluntary ideas that strengthen Oregon's economy, support personal responsibility, and secure individual freedom. To that end Cascade publishes studies, organizes public forums, and provides speakers. Focusing on local and state issues, Cascade provides practical solutions for concerned citizens, policy-makers and the media. A 501 (c)(3) nonprofit organization, Cascade neither solicits nor accepts government funding, but instead relies entirely on private contributions. Nothing written here should be construed as an attempt to aid or hinder the passage of any legislation or as and endorsement of any candidate or initiative. .------~~-_....._._'......_____....."_._.h........._......h......~__..--...-.------~~-"'"""""'..--.-._._................~.~_._.~......_w~~,,____.... Cascade Policy Institute 813 S. W. Alder, Suite 450 Portland, OR 97205 Phone: (503) 242-0900 send mail to info@CascadePolicv.ofQ Go to Cascade home Daoe Return to Index of TAXI-L Sianificant Documents c o o 1 o c yF~ ( 1312 W Brooks St., Ontario, CA 91762. (909) 391-1434i\ (909) 391-2178 (fax) City of San Dimas City Hall 245 East Bonita Ave. San Dimas, CA 92418 RECEIVED FEB 12 1998 CITy UI" w..u .....,,~ '_ The Honorable Mayor Curtis W. Morris and Members of the San Dimas City Council This application is a formal request to provide quality taxicab service to the City of San Dimas. Bell Cab Company will provide safe reliable and quality taxicab service Three Hundred Sixty-Five Days Q Year and Twenty-Four Hours Q Day. The Senior Management at Bell Cab Company has in excess of 1 00 Years experience in the taxicab business and in managing local community Dial-A-Ride and Senior Transportation programs. Bell Cab Company provides superior taxicab service in three Southern California Counties (Los Angeles, San Dimas, and Riverside) encompassing over fifty cities. c APPLICANT San Gabriel Transit 1312 W. Brooks St. Ontario, Ca. 91762 Corporate Location San Gabriel Transit 2623 River Avenue Rosemead, Ca 91770 818-307-1510 / 818-307-1529 (fax) Federal Tax I.D.: 95-1771822 Place and date of Incorporation: ArcadiaCA. Sept 19,1953 Color Scheme Name and Monogram Bell Cab Company vehicles have a white body with a distinctive cranberry red roof. Our corporate logo is a Cranberry Red decal of the Liberty Bell located on the rear passenger doors. c \ r-' '- YF~ 1312 W Brooks St., Ontario, CA 91762. (909)391-1434.& (909) 391-2178 (fax) Principal OffIcers President Senior Vice-President Timmy Mardirossian 11061 Leolang Ave Sunland, Ca. 91040 DLN: N7591648 D.0.B.3-21-52 S,S. 529 98 0483 Richard "Duke" Perrin 6322 Princeville Circle Huntington Beach, Ca. 92648 DLN. H0545422 . D.0.B.9-1O-42 S.S. 573 54 1702 Metro Access San Gabriel Transit (Bell Cab) is the current Metro Access provider of transportation for the San Gabriel Valley area including San Dimas, San Gabriel Transit provides over 1000 trips a month to disabled residents in San Dimas and received local taxicab licensing will facilitate better response time and higher service levels. c Vehicles Bell Cab Company would request a license for twenty vehicles for local service to the City of San Dimas and Metro Access, This would allow our company to provide outstanding service to the City of San Dimas twenty-four hours a day, three hundred sixty-ftve days a year. There would be no congestion of service or vehicles due to the fact that these vehicles would provide service for the whole Pomona Valley Region. San Dimas Dla/.A-c.b Bell Cab Company would welcome the opportunity to also provide community Dial.A-Cab services through the Pomona Valley Transit Authority. Our drivers receive special training to work with the frail. elderly and handicapped and we believe our company could enhance the quality of service that the seniors critically need. San Dimas Community Hospital The staff of San Dimas Community Hospital has contacted Bell Cab Company in order to provide a variety of critically important transportation services. c . Social Services . Emergency Room . Volunteer Services . Day Surgery . Outpatient Services c y..~ 1312 W Brooks St., Ontario. CA 91762. (909) 391-1434~ (909) 391-2178 (fax) Dispatching All Bell Cab Company vehicles will be computer-dispatched in San Dimas to ensure safe, prompt, and reliable service. Rates Bell Cab Company operates at a meter rate as follows: . $1.90 Flag Drop . $1. 60 per mile Bell Cab Company also provides Senior C/dzen Discounts and low flat rates to common destinations. c Operating Trade Name Bell Cab Company 1312 W. Brooks St. Ontario, Ca. 91762 Office: Dispatch: Fax: 909391 1434 909 808 1111 9093912178 Current Ucens/ng In San Bernadino County . Chino . Chino Hills . Ontario . Upland . Orand Terrace . Highland . Loma Linda . Red1ands . Rialto . Yuciapa . San Bernadino County c c Ya~ 2e23 RIvw A...... R_, ~.81no. Telephone (818) 307-1810. Fox (818) 307.1828 Restaurants A Critical transportation issue is the ability to provide responsible safe and efficient service to all restaurants and establishments that serve alcoholic beverages. Our company has an extensive history of proactive involvement in community based programs which discourage drunk driving. Our management has contacted the agencies listed below and will work proactively with them towards this goal. . San Dimas Sheriff's Department Community Relations Department Deputy Ella Cook . Local Chapters of Students Against Drunk Driving . Local Chapter of Mothers Against Drunk Driving C Our management has visited and spoken to all of the local managers of the following restaurants and without exception an of these businesses support additional taxicab service. . Applebee's Grin and Bar . Bl's Family Restaurant . Casa Del Rey . Cask N Cleaver . Pinnacle Peak Restaurant . Red Robin Restaurant · Mayan Mexican Grin . The Pizza Place . Zendeja's Restaurant . San Dimas Canyon Clubhouse . San Dimas Canyon Golf Course . Via Verde Country Club c Wheelchair Accesslbl.Taxlcabs BELL Cab Company is the largest provider of wheelchair accessible taxicab services in Los Angeles County. BELL Cab Company will provide wheelchair acceSSIble taxicabs for residents and visitors the City of San Dimas for the physically handicapped. c ~ Y1l.~ 2823 RI\w A...... R__, c_ 91770. r..- (818) 307-1810. Fox (818) 307-1829 Non Smoking Taxicabs BELL CAB COMPIlR\' has designated over half of its fleet as smoke free vehicles. This program has been developed in partnership with the American Cancer Society. Infant Seats BELL CAB COMPIlR\' supplies infant car seats upon request Not only is this policy in compliance with the laws of California, it is in keeping with our corporate philosophy of our commitment to safety. Taxicabs have become increasingly utilized as a transportation resource for parents to assist in their transportation requests with the young children. c BELL CAB COMPItIn' has transported Downs Syndrome Infants for the California Regional Centers for the Developmentally Disabled for years. Unifonns: Driver's Appearance BELL CAB COMPIlR\' requires its drivers to maintain a proper appearance at all times. Drivers must be clean shaven and well groomed at all times. Uniform standards are: . Clean White Dress Shirt . Black Necktie . Black Shoes . Black Belt . Dark Trousers Dispatchers and field supervisors monitor compliance with the established dress code on an ongoing basis and have the authority to send a driver home who is not in proper uniform. BELL Cab Company Management is currently reviewing these policies to further upgrade the image of its taxicab drivers to the public at large. c ".-"", v-.;-~ =~. :le23 RhIor A..... R_ c_lI1m. TIlopMw (818) 307-1510. FlIX (818) 307-15211 \- Population/Demographics There are currently only two legally licensed IilXlcabs allowed to provide taxlcab - service In the Qty 01 San DlmDS. Po ulation September 1969 Two Taxicabs 12,100 c Asof Population March 1998 35,100 Two Taxicabs Research from the City of San Dimas Planing Department and the City of San Dimas Public Library and San Dimas Chamber of Commerce confirms a 300% increase in population in the thirty years that Yellow Cab has provided service to the City of San Dimas. Keep in mind these facts: · 300% increase in population · A current stable and growing labor force of 14,470 · One of the lowest unemployment rates in Los Angeles and San Bernadino County areas. (3.1 %) · In the last thirty years, Yellow Cab IuJs not provided OM additional taxicab to seIW the resldenls and businesses 01 San DlINIS 011 a twenty- lOll, IHIsis. · Since 1986 there have been over 30,000 subsidized DIal A Cab trips a . year. · Over 2500 subsidized trips a year are provided in taxicabs for the popular Get About program. c ,...- \.- Ya~ 21123 R'- A_ R--. ~ 81770. T~ (818) 307-1810. Fill (818) 307-1e:z11 Metro Access I have already submitted average monthly ridership statistics which support ~ strong and stable ridership for residents in the City of San Dimas. It is critical to quality service that our company be allowed to locate our taxicab drivers physically in the City of San Dimas to ensure timely and better levels of service for the frail and disabled. Metrollnk Metrolink Rail Service commenced operations in October 1992. The City of San Dimas through this service is provided local commuter rail services from both the Covina Metrolink and the Pomona Metrolink Station that provides connections to practically every major point of commerce in Southern California. It would therefore be essential for both local taxicab companies to develop low cost feeder service lor potential rail rlthrs olthe City 01 StuI D/1tUU. c Bell Cab Company has historically marketed low cost Metrolink shuttle services with taxicabs and vans and will in conjunction with the South Coast Air Quality Management District offer these services to both large and small employers in the City of San Dimas. San Dimas Dial A Cab The City of San Dimas Dial A Cab Program started service in December of 1986. . System ridership in the first few years averaged between 400 to 700 rides per month. . Ridership has increased to 2500 to 3000 rides per month with only two licensed taxicabs. · Ridership has fluctuated because of fee based changes instituted by the Pomona Valley Transit Authority. · Bell Cab Company would also like to provide contract Dial A Cab Services to the City of San Dimas for this important and essential community program. · Our staff research indicated numerous service delays in the program from staff at the San Dimas Senior Citizen Community Center - (909) 394-6290. · Muldple provl4enlor tills DUll A Cab Program would stllltllltW betUr levels 01 service lor the rlthrs and ensure lower 10"1 term costs/or tills program c ,,-. '- c c ya-~ 2Il23 R'- A_ _. ~ 91770. Toiophono (818) 307.1510. Fox (818) 307.1B2ll Bonita Unified School district Our Staffhas been contacted by the Special Education Department of the Bonita Unified School District. Mr. Dave Kempf Ms. Susan Liston Taxicabs are used individually on specific cases to provide specialized transportation to schools in and outside the district. There are 1200 special edllCadon students In Stilt DllIUIS tJult require some lorm 01 nontradJdoltal trtIlISpOrtadon, The transportation department for the Bonita Unified School District has identified the fact that some trips, due to a child's specific disability, are uniquely suited to the individual attention that a taxicab driver can provide. Our drivers receive special training to cope with a variety of disabilities. , Managed Levels of Competition Bell Cab Company is not a supporter of market deregulation but strongly opposes monopolies tIuU result In lower levels 01 sel'l'ice, minimal marketing and lead to hostage pricing by service companies and taxicab operators. Reasonable levels of competition lead to higher levels of service, stable consumer prices better accessibility to taxicabs and availability at all times of the day, /-- yfrrp 2ll2l Ri>w A_ R__. ~ 81770. T%phano (818) 307-1510. Fill (818) 307-1521l \.- Get About The city of San Dimas is also provided local contract transportation services through Pomona Valley Transit Authority using the popular Get Abollt. This service is provided by contract through Mayflower. Due to the constraints and the regional popularity of the Get About system, there are an additionally several hundred trips a month that Mayflower contracts out for overflow service to Yellow Cab Bell Cab Company could provltk critical support se1Vices in tuIdltionlor tM Gel About Program. Hospitals I Medical Clinics Our management has met with the following locations with respect to additional taxicab services for their patients. c . California Prostate Center . San Dimas Community Hospital . Family Medical Clinic . Casa Bonita Convalescent Hospital Hospitals and Clinics utilize taxicabs extensively for a variety of transportation needs . Day Surgety . Therapy Appointments . Emergency Room Services . Volunteer Transportation . Lab Specimen Deliveries Wlthout exception, all olthese lacmties have expressed II desire lor tuIdltional se1Vices. Alzheimer's Care and Assisted Living Center This project initiated by the Community Development Department is a 2.9-acre site near North San Dimas Avenue. I have spoken to city planner Craig Hensley and he believes transportation is a critical cornerstone to this proposed project c c ~~tQ ra~. 2e23 Rtwr A_ _..ood. C_ 81770. r..- (818) 307-1510. Fox (818) 307-162ll Summary Our management, drivers and dispatch personnel look forward to the opportunity to provide quality community taxicab services to the residents, visitors and businesses of the City of San Dimas. I appreciate all of the support that the city staff has afforded me in the research on this issue. On behalf ofBeU Cab Company, I look forward to doing business in the City of San Dimas. Yellow Cab wiD "",Ice statemmts that there Is not addJdo1UJl busilfDl to :support an adJlitio1UJl taxicab operator. . Those statemenlS are clearly not tnu. Sincerely, c ~ Scott Schaffer Executive Vice President Bell Cab Company c ;J'.'-' ~ c c . ..CI.~ ~ ta~ 21123 _ A....... R__, ~ 81no. TIIIphono (818) 307-1810. Fa (818) 307-1828 San Dimas Chamber of Commerce And Community Organizations . Bell Cab Company is the only taxicab operator thst is a member of the LoI181 San Dimas Chamber of Commerce, lilt DUllllpI. of OAr collllllJtmau to 'M CIty of SlUt Di_ This proposal alone demonstrates the importance of outreach and marketing. Education and information will allow the end user to familiarize themselves with the benefits of local taxicab services and competition. Our Firm will also aggressively market our taxicab end ridesharing services to local community organizations including but not limited to the following: . San Dimas Lions Club . San Dimas Merchants Association . San Dimas Rotary . Automobile Club of Southem California . Soroptomist of San Dimas . San Dimas Chamber of Commerce and Community Organizations . American Red Cross . The San Dimas Optimist Club . McKinley Children's Center . These agencies and community groups are essential to informing local residents and businesses oftbe importance and availability of the quality and the diversity of taxicab service. o c 1 """," o FEB~II-2002 MON 05:29 PM LUPE FAX NO, 17603915945 P. 05 2/11/2002 - 17: 17 reporter 07.11.1997 Sun Staff Writer 1- djes ps Cab company will try again for city's OK R ANello Source=Sun_SlafCWriter; Da C djcs ps Cab company will try again for city's OK RANCHO CUCAMONGA SHARON CHING RANCHO CUCAMONOA A taxi gill company plans to return to the City Council soon to try again to offer its services to residents. Bell QIll. Co. wants another shot at convincing the council to let it handle fares in Rancho Cucamonga. The City Council voted 2-1 Wednesday to direct staff to prepare a resolution denying an earlier request. Mayor Bill Alexander and Councilman Paul Biane said there isu't euough demand 10 support both Bell and the Yellow rm Co., wbich already operates in the city. "1 don't think having another cab company in town will generate more taxi trips," Biane said. "1 think in time, a second company will be needed." But Councihnan Jim Curata!o wanted to allow Bell Cab Co. into town for a one-year trial period. "I don't have anything against Y cHow Cab. but we're a growing eity and in a growing region." Qlh companies must receivc permits from the city before picking up fares. Yellow Cab Co. ofticials said an oversupply of taxis would mean a loss of business. c "A cab can do and must do IS to 20 trips per day for the drivcr and us to make a living," said Brian Hunt of Yellow Cab Co. "Another gill company... will only cause more vehicles and drivers to share the same number of trips. " Carol McLean, a Yellow Cab Co. driver, said, "I've seen these guys hijack fares from us. They're trying 10 infiltrate . our territory." Bell Cat> Co. officials said many customers are dissatisfied with Yellow Cab Co. and they want to offer riders a choice. "rfpeople can't depend on taxi l;lll2:! as a sc..'fvice, they're not going to re-use taxi cabs," said Scott Schaffer, BeWs ~:i:ti;:d::~:eneral ~~~:;~;:: Ontario office, said ~::i~e iSCriti~1 for consumers. "To have a ~ ~ monopoly is not right. When there's no competition, the level of service goes down." At Wednesday's council meeting, Councilman Rex Gutierrez excused bimsel om of a conflict of interest. Councilwoman Diane Williams was absent. ssian bet The resolution denying Bell Cab Co. permission to pick up Rancho fares is set for the Nov. 19 council meeting Copyright 1997 The San Bernardino County Sun Year-1997; Month=11; Month..Nov; Day=7: Day=Fr; Book=B; ZonesWest; Byllne=Chln9_Sharon; Company=Bell..Q.@... Clty=Rancho_Cucamonga: Slala-Callfornla: Malnkey=GovernmentlCounly ....9overnment/Transportatlon; PhOIO=No; Graphic-No; CperOSSk (e) Oigital Collections Page 1 c c c 02/11/02 !ION 17:02 FAX 909 890 3565 P-E SB BUREAU 141004 I, " ..JB~ City Council hears testimony concerning the application from Bell Cab to provide> addipage 10f2 Story S of 10 11~~~~t~~:.tUm to Se1lTc~creen~SnRe Uocumen.~ DUIP~ Aceess #: 220194 Headline: Tul company set to pick up slack The Fontana City Council hears testimony concerninf' the application from Bell Cab to provide additional service to the city, but no action is taken. Date: 08/06/98 Credit: The Pres, -Enterprise SeeUon: LOCAL Zone; SAN BERNARDINO COUNTY Pa,e: B02 ByUne; Anne M. Peterson Subject: FONTA."IA; CITY COUNCIL; TRANSPORTATION Ke~:TAJaS;PROPOSAL Leneth: 20 l'OllTANA Bartender Pam Schmidt says when she calla a cab for one of her customers at Cherp's Cocktails. she will wait ~rom One to three hours before a cab driver COmes walkir.g through the d~~r. Schmidt has come to expect that from the city's curcent franchie. taxi provider. Yellow Cab Taxi Co. It's a claim company officials say is inexcusable. III ha.ve no excuse for th03tl it's not acceptable, II Yl!llow C.a.b Ol'ller Brian Hunt .lIai~. 'If they are having tbree-hour '~aits. they need ~not.h.r cab company." H. said average wait8, howel'rer, are leas than 30 minutes in rontaAa . Now, with the prospect chat a new taxi company, Sell Cab Co., ill vying to provide i!Ldditional service for ront:ana .r.elJident.s and busines. ~eople, Schmiat gets excited. "lfe dehnitely need anotber cab .ervice here," saia Schmidt, who ha.Il worked at Cherp'8 for three ye:.rl8~ "It'e &nywhere from 4n hour to tbree-ho~r wait. It doesn't It.ake any ditrer"nc!l if it's day or night.' OntClrio-based Bell cab Co. riled a francbi.. appU"ation with Pent an.. in February. But it aidn't go before the rout""" City Council until Tuesday when council members listened tn more than three hours of testimony from Sell, Yellow Cab and res;.dents. Council members, however. delayed any action on the franchi.e &goreement, pogtponingthe decision from two to four weeks until they hClve more information. Bell vice president Scott Schaffer said his taxi C(lmpany operat... in .ever.l other l.nh.nd Empire citiell. includi.n>r Ontario. Grand Terrace, Redland., Yucaipa, Corona, Moreno Vallel' and Highland, ..nd ther.. ill .nough w.j,n.... to 1<;eep more than one t....1 company busy . , "il~ c",11 ~a a_.~ol: mor..,\t~ll")l. ~hiM":!S,"h"1'{~~}l.d, Riight !il1o "~t~../;" be .IIaic1( ~theFe /~'-<l 1oac} !;l:li iI~vl.t'e w..r t\tl!lir' . a \16t 'QJ. ))Il'l1neQ/ cloet-e." ;/ V y tome council members axen't convinced. th.~X'~ is flnough need to warrant grant~ng another taxi cab franchi.. . City Manager Frank Schuma .aid his office will study other citias where two taxi companies operata and eee if there ara any..roble..... Ir. addition, he said he wants to take an inrol:Ttlal surveyor those r,'sidents moSt likely to u.. taxi gervice and eee if there have been many problems with the exiating service before he makes a recommendation to accept Bell Cab's francbi.. applicCltion, In the fraAebi.. agreement with ~ellow Cab, the con~any pays the city $10 a year per cab to operate in the City. In exchan~e, Yellow Cab is allowed to pick up and drop off fares within thi city http://library.pe.coml 2/1 1/02 c c c 02111/02 !liON 17: 03 FAX 909 890 3~6~ P-B SB BUREAU ~ OO~ ...IB> City COUIlcil hears testimony concerning the application from Bell Cab to provide adcli Page 2 of2 1,>1' .... - -~ limits. Other cab companies are simply allowed to drop off customers in POlltana but can't pick up 1'0111:.... farell unless they a~so haye a fr.nc~L.a agreement with the city_ "What I want is what 10 going to b. best for the citizens of PODtana ," Mayor David Eshleman said. The mayor suggested creacing a joint powers authorjty with some surrounding cities in which one company WOuld be granted a f~.Dohi.e Co operate in five to 10 neighboring citie.. Yellow Cab operates four taxi. in PODtaue 24 hou%s a day. But SOme customers say four cabs i. not enough. Schmidt said ahe tells her customers ahead of time they will have to wait quite awhile for . cab because there are only a few serving :ronlolUl. . The citY'a taxi fr.nchise ordinance specifies one taxi for every 2,000 reaidents 00 that.. maximum of about 54 cab. could operate in POD!:.... _ Bell Cab has applied to operate 36 cabs in the city, bringing the total to 40 cabs in rontan. . "From the testimony I heard, the residents of rontaDa need more service," Councilman Marl<: Nuaimi ~Qid. 'Whether we do it by adding another franchi.. or eliminating the franchi.. altogether, it's clear. If All council members agree that the city'. taxi fr.~ehi.. o~dinance is outdated and flawed and needa to be overhauled. Nuaimi said the cab companies could work with the city to mend th. ordinance so that it's profitable to have mo~e tha~ one company serving PODt~a . But Yellow Cab general manager Steven Carrigan said service decreaaes in any city where more than One taxi companr ie allowed. "If you hsve one service provider, they'll (custome.s) call us," h. said. "If you have cwo, they'll call two. Whoe',er gets there tirst, gets tbe trip. When the service is shared by both companies it makes both companies weaker." Hunt ...id the aver.ge .....it for a Yellow Cab i. abOll': ~4 minutes in J'ont.ana . "If we have an hour wait, that I s: the exceJ~tion, It he said. The council will consider the Bell Cab franeh1.. ~'plication again at the Aug. 16 or Se~t. 1 meeting. Il!rev~~~ijIK~nim to,Hl~~~CtJ.!m to ~e~I1.~~I~gm!C1.!m~lPtijifa.yl1 http~/mbrary.pe.coml 2/11102 FEB-II-2002 MON 05:28 PM LUPE FAX NO. 17603915945 P. 03 ,. \ 2/11/2002 - 17:16 reporter 28:07.1998 San Bernardino County Sun 01 - -b1 w wd Jcs aw Cab company challenges Yellow SoureeooSan_Bernardlno_Counly_Sun; Oat 28.07.1sl8i Sectlon=Local: Page=01; c -bl w wdjes aw Cab company challenges Yellow Qlb Bell9lll Co. plans to ask three West End cities to allow competition. KIlRRI GlNIS ~~""'-"'4~_",..~"."..^,--,,,---- ~o{.:4'H>AJ1'! .,-.-'" 2/3A local' company will bid to bccome"[ second taxi service in three West End cities during August, arguing that the area's growth has raised enough demand to merit competition. 2/3Bell ~ Co. will go before Montclair City Council on Monday, Fontana City Council on Aug. 4 and Rancho Cucamonga City C.ouncll on Aug. 19. Yellow Qll! Co. holds the sole franchise for each of those communities. 2/3 "We believe the lnlalld Empire is fenile for an additional taXi cab company," said SCOtt Schaffer, exccudve vice president for Bell Q!h Co. . 213The company previously bid for service in Rancho Cucamonga and failed Fontana city staff has recommended against approval of a permit. C 2I3The Fontana City Council discussed the issue July 21, but cOllncil members delayed action while directing a I subcommiltfJe on economic development to gather more information. 2/3"Based on the information we had at the time, it didn't appear there was enough of a necessity to have anothe: llllh company," Councilman John Roberts said. 213"We're at the point now where we're just taking testimony and trYing to determine what the facts are." 2/3Schaffer said Fontana's recent growth has produced more business for cab companies. He pointed to the oper of California Speedway and additional traffic at Kaiser Permanente Medical Center. 213Bell O!h serves 10 cities in San Bernardino County including Rialto, Redlands, Upland, Colton and Highland. Yellow ~ provides service from West Covina to Rlalto. The two companies compctc in Upland, Chino, Chino H~sandO~o. 5~tlP4,( dJ< .p~ Ifv.,)) ';4 11nI,.;;, hT~ - 213Ontario spokesman John Freiman said the expansion of Ontario International Airport and the traffic at Ontario Mills pushed the need for a second cah company. 213Yellow Cah officials said IfFonrana and Rancho Cucamonga take on an additional cab company, the quality of service will decline. 2/3"Unwarranted competition in the taxi industry drives up rates the passengers pay," said Steve Carrigan, operations manager for Yellow Cah. "Tfthis happens we will have to reduce our size and thus reduce our ability to provide services." CrDeSk (e) Digital Collections Page 1 FEB-II-2002 MON 05:28 PM LUPE . '. FAX NO. 17603915945 P. 04 2/11/2002 -17:16 reporter -b1 w wd jcs aw Cab company challenges Yellow >. 28:07.1998 San Bernardino County Sun 01- 2/3Bell C.ab applied to opente in Rancho Cucamonga in November, but city c'lUncil members decided there was no ~ need for a second taxi company, said Duane Baker. assistant to the city manager. 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Prepared far the Int;~rnational "raxicab Foundation 38.&9 Farragut Avenue Kensington, Maryland 20895 Prepared by Price Waterhouse Office of Government Services Washington, DC '1ovember 8, 1993 i25 for ITF & ITI.A Members S50 for Non-Members ~ International Taxicab Foundation ('tler/O? fl dJC, waShington: "Dc 20QOL Price PVaterhouse 8 8 November, 1993 Mr. Alfred LaGasse Executive Vice President International Taxicab Foundation 3849 Farragut A venue Kensington, MD 20895 Dear Mr. LaGasse: We are pleased to submit this final report documenting our findings from an analysis of taxicab regulation and re-regulation that we performed on behalf of the International Taxicab Foundation. Our findings rest on research methods described in Section 1 of the report, which rely on three data sources: (i) past case studies of taxi deregulation, sponsored by the U.S. Department of Transportation; (ii) taxi fare and license data for individual cities, made available by the International Taxicab and Livery Association; and (iii) telephone surveys of public officials in cities that implemented taxicab deregulation, conducted by Price Waterhouse. Price Waterhouse has not independently audited data from the first two sources, although we have no reason to believe the data have any . characteristics that would invalidate our findings. Our report concludes that the effects of taxi deregulation have ranged from benign to adverse, depending on local markets and conditions. This is a departure from the experience with deregulation in other industries and is influenced by taxi market imperfections that reduce or remove incentives for price and service quality competition. Consequently, we found that most cities that had fully deregulated taxi service have since reverted to some form of control over market entry. We very much appreciate the assistance provided by you and other members of ITF during this engagement. Very truly yours, ~ ~ c.:.r2- ~o.....-\-es- ~.='^ ~~ fXECUTIVE SUMMARY Taxicab regulation and deregulation refer to opposite ends of a specuum of government control over taxi services. Regulation rypiclly implies government determinacion of service supply (by limiting taxi licenses), or prices:by serring fIxed or maximum fares), or both. l>ercgulation, in contrast, typicallr implies on absence of government conuol. Although regulatory choice is nor limited to these tWO extremes, philosophical support for one or the o:her tends to be the driving force behind changes in public policy. Since the late 1970s, local governments and the taxi industry have engaged in periodic debate regarding the merits of taxi deregulnion. These debates were initially influenced by the deregulation of ocher prominent industries - airlines. trucking. and telecommunicatior1S to name a few. Proponents of taxideregulacion cited several kinds of consumer benefIts that were experienced with these other deregulation efforts. These benefIts were believed to include more r:uci service: :lnci faster response rimes, lowc:r fares, service innovarions. and service expansion [0 under-served neighborhoods. Proponents "f taxi regulation argued, in counterpoint. that deregulation would result in poorer service. less safery, less accountability. and less reliability. Because most taxi services in the US were regulated at the time these debares fIrst occurred. there was little empirical evidence to supp"rr either argument. The International Taxicab Foundo':ion engaged Price Waterhouse to analyze and document the experiences with deregulaticn over the last ten years. Twenry-one cities deregulated taxi services prior to 1983, though no major cities are known to have deregulated since. The shorr-term effects of deregulati,)n were previously documented in a series of case studies I sponsored by the US Departmen. ofT ransporration, published in 1983 and 1984. The purpose of chis report is to add to che :ecord by describing changes in regulatory practices that followed deregulation. and to explore ,he comparative effects of deregulation over che long term. It is imporrant for readers to note that Price Waterhouse does not advocate either deregulation or regulation of taxi services. Rather, our purpose is to clarify and compare the effects of deregulation as experienced in a number of metropolitan areas in the US. We trust that this objective rendering of the available facts will assist public decision-makers in their deliberation of the taxi industry regulatory structure. Short-Term Effects of Deregulation Deregulation ir.trodnced several ir.~mediate changes in taxi supply. price, and service quality in the six cities for wilich derailed case scudy information is available (see citation above). The experience of these cicies generally indicates that the benefIts of deregulation were devalued by unanticipated and \I nattractive side effe~ts: . Although the supply of taxi st!Tflius expanded dramatically, only marginal srrviu improvl!77unrs w~e experi,nud by consum~s. Within a year of deregulation, che supply of taxi services i~creased an average of 23%. Because most new entrants were independen~ operators and small fleet owners with limited I Berkeley. Oakland. Pho. ,ix. Portland. San Die~~. and Seattle. Analy,is ofT lDdraf, Regul ion ,m. . D"egul4tion Final Report page i capabiliry co serve rhc relephone-based marker, n:"sc new service was . concenrrared ar already well-served loc"rions - SU.:l, as airpores and major cabs rands. Cuscomer wair rimes ar rhese locarior." already shore, were reduced fureher. Response rimes in rhe relephone marker were similar ro pre- deregularion performance. Trip refusals and no-,hows, however, increased significandy. . Prices TOU in every insrance. Paradoxically, rhe i"flux of new emranrs did nor invoke rhe price compemion rypically experienccd in orher newly-deregulared indusrries. Prices rose an average of 29% in che y~ar following deregularion. There appear co be cwo sources of chis unexpecreJ evem. Firsr, fare increases prior co deregularion had consisrencly lagged caS[ increases. Vereran operacors chus correcred prices ar che firsr opporeuniry. Second, new enrrams generally charged higher fares chan rhe veceran operarors. The cabsrand markecs on which chese operacors focused rheir services are generally price insensirive and, becausc of rhe firsr-in tim-our nacure of raxi queues, comparison shopping is discouraged. For chese reasons, che new emrams had no incemive co imroducc . .. pnce comperlClon. . Service quality declined. Trip refusals, a decline in vehicle age and condirion, and aggressive passenger soliciracion associared wich an over-supply of caxis arc characceristic of a worsening in service qualiry following deregulacion. The negacivc aspeccs of deregulacion were especially evidenr ac airpores and major courisc accraccions. As a resulr, deregulacion often acquired rhe enmiry of che business communiry and adverse media coverage. These effeces were mosc closely associaced wich cities char implemenced an "open enrry" policy chac enabled an influx of independenr owner-operacors rhar were unaffiliaced wich companies or raxi cooperacives. The shorr-rerm effeces of deregularion were less adverse in smaller ciries which have an insignificam cabsrand marker. The celephone-based marker, which dominares rhe smaller ciries, is difficulr for independem operarors ro serve effeccively. These cicies chus avoided rhe scrucrural changes co rhe indus cry char comribuced ro rhe problems in larger ciries no red above. Post~Deregulation Changes in Regulatory Practices All posc-deregularion changes in regulacory practices were limiced co cities chac had implemenred a "fully deregulaced" sysrem, wherein borh markec enrry and fares were left co che induscry's discrecion2. Ocher cities which had only partially deregulaced - for example, chrough che use of minimum 'scandards for markec enrry or by relaxing govemmem involvemem in fares - reporred no changes in regulacory scruccure. . Nine of rhe chireeen eicies chac had deregulared via "open encry" chose ro reverr CO " regulaced syscem, eicher in whole or in part, by 1992. Six cities returned co a Fully-regulaced scruccure, in which che local governmem limies markec encry and sees a fixed or maximum tare. Two ocher ciries implememed regulacions for airpore-based service. These eighr ciries were [he 2 see Seerion 1 of rhis reporr for a definicion of rhe rui regulatory strucrure. A1UtIysis ofT axicab Regulation ant! Dmgulation Final Report page u largest of those that had initiall}' deregulated, and had the most intensive airporr activiry. One other ciry reverted to a minimum standords approach. Only four of the 21 cities continue to employ a fully-deregulated system. These are among the smallest cities in the group. Related to the size of these cities is the absence of major srructural changes in the indusrry that precipitated re-regulation in the larger cities. Long-Term Effects of Deregulation Long-term pricc performance in deregulated cities is similar to that of regulated cities. based on price information submirred ar.nually by members of the Ir.:ernational Taxicab and Livery Association (ITLA). Between 191:5 and 1992, the median fareJ for a five-mil.,. trip rose by 6.5% ($0.50) in deregulated cities versus 4.S% ($0.33) in a sample of regulated cities (see appendix B for details). Fares in cities which re-regulated their taxi services rose by only 2% ($0.17) during this period. a reaction to -he high rate of fare growth following deregulation. These results indicate that deregulation, over the long term. has contributed to neither higher nor lower fares than experienced by the industry generally. Other long-term effects of deregulation are difficult to discern. Taxi supply (i.e., taxis per 1,000 population) in deregulated citi.,s stabilized after the shorr-term increases noted above, and appears to be lower and more variabi~ than in regulated or re-regulated cities. Very little data is available to supporr long-term eva:uation of service qualiry. These rypes of data are rardy collected even in regulated cities, aCId are especially scarce in deregulated cities. . In retrospect, the effects of taxi deregulation have ranged from benign to adverse, depending on local conditions and mark:rs. There appears to be scam evidence that . detegulation fully achieved the goals on which its implemenration was premised. though some goals clearly were achieved (e.g.. more taxis, less regulatory involvement by government). Market imperfections peculiar to the taxi industry, including unusual product supply (e.g., first- in, first-out queues at cabstands) and poor availabiliry of information on price and qualiry, tend to negate the consumer benefits rypically associated with deregulation in other industries. It is perhaps noteworrhy that no major US cities have deregulated taxi services since the early 1980s. 3 In constam 1992 dollars. Final Repon page Hi An4/.v<is .fTaxkab Regulati"" aNi E=guI4titm 1. FRAMEWORK A wa\'" of der"gulation occurred in the taxicab industry during th" lat" 1970s and early 19805, involving 21 citi"s across the U.s. Sinc" that tim", most d"regulated cities exp"rienc"d unfavorabl" r"sults and opted to :"e-regulate, while the r"mainder hav" for various re",ons remain"d der"gulat"d. The puq::ose (.f this report is to docum"nt the "xperience of each, and to explain th" circumstances which led to these different outcomes. This section of the repon imroduce~ rhe terminology used to'describe ta.xi regulation, and provides an overview of the method, used to compile the record on det"gulation. Regulation, Deregulation, and Re-Regulation Taxicab regulation and deregulation :efet to opposite e"ds of a spectrum of government control ov"r taxi services. R'gul"tion rypieally imp!i"s gov<:cnmem determination of servie" supply (by limiting taxi licenses), Ot prices (by s"tting fixed or ma.ximum fares). or both. Da'gulation, in contrast, rypically imF li"s an absenc" of gov"rnm"nt control. R,- rrgulation r"f"rs to a tight"ning of governmer:t control over s"rvice supply and/or prices, following a period of rdaxation of comrols. . Th" matrix bdow illustrat'" th~ twO basic dim"nsions of th" r"gulatoty structur":" mark"t "ntry m"chanisms and far,,-setting m{'chanisms. Market "mry m"chanisms, shown in the left-most column. rang" from most r"scrictive (predetermined c"iling) to l"ast rescrictive (open entry). Far,,-setting mechanisms, shown in the top-most row, rang" from most testrietive (reguLror defines all far",) to least r"scrictive (individual operators define fares). Full regulation and full d"regulation refer to opposite corners of this matrix, as shown. Berween th"se twO "xtremes lie hybrid approaches by which government may control some aspectS of taxi servic" that are of concern to local interests. i'are-Setting Mechanisms Market Entry Mechanisms Predetermined Ceiling -RegtJI.tMl- ryplc.lly me. Jns that both mark" ..try end'. ,... .r. .p<<:/fltJd by 'ogufs!rJn Regulator Detlnes Minimum or Maximum Individual Operators Define FareJ Regulator De!lnes All Fates Population Rallo Convenience & Nee.laity Franchise System Minimum Standards Open Entry A1J4lysu .fTIlXier.b kguLsriJJn IS"" DmguLstilJr. Final R <port PlSi' / Oefirtirions for rhe rypes of marker emry mechanisrr.s4. in order of decreasing govcrnmem comrol, arc as follows: . Predetermined ceiling. The ciry limits the ;.umber of taxicabs in operdtioll. rypically by issuing a fixed number of taxicaL permirs. If demand for taxicab service exceeds rhe ceiling, this is effectively:. closed entry policy. Popular,on rario. The number of taxicabs in operation is se; as a function of population (e.g., 0.75 cabs per 1,000). The IJtio allows the number of permits to vary with demand. Convenience and necessiry. New permits may be issued under ce((ain conditions. A wide range of criteria fall imo this caregory, usually relevant [Q demand and the need for additional service. . Franchise system. This system involves graming specific companies the right to operate ta:'Cicabs. Its effect may range from closed emry to open emry. depending on the requiremems for emry of new companies and the ability of existing companies to increase the number of cabs. . Minimum standards. Cabs are allowed to operate as long as they satisfy certain minimum standards. Th"5e standanis differ from convenience and necessity in that they are unrelated to demaad. The standards may include one or more of m"5e &octors: a minimum nlimber of vehicb, radio dispatch capabiliry, 24 hour service, or a vehicle age Emit. Th"5e regulations limit supply by raising the cost of market emry. . Open emry. Under open entry, almost anyone who owns an operable vehicle can obtain a taxi permit and provide service. There are still requiremems under open emry, such as insurance or absence of a criminal record, but these are less restrictive than is the case for minirr. um standards. The last "vo mechanisms - minimum standards and open entry - are most closely associated with deregulation. These mechanisms remove the regulatory body from decisions regarding taxicab supply, rdying on market forces to "5tabEsh an equilibrium. Minimum srandards, however, can be used to influence the type of new emrants to the market, and ihus the quality and stabiliry of service. Fare-setting mechanisms form the second dimensi"n of the regulatory matrix. Definitions of th"5e mechanisms are as follows: . Government-set fares. The local governmcm sets the fare that operarors may charge. The rationale is that taxicab service is a public utility, and the public must be protected from unreasonable rates. 4 Definitions were drawn from: Urban Mass Transporcation Administration. T llXicab R~gulation in US eif;';; Va/um' J (Fintz/ R'pa,,): October 1983. Final Report pat,2 Analysis afTllXicab RegubttWn anti Dmgubztiqn 2. TAXI REGULATION Regulations goverr.ing the ta.xieali industry ha\', L.eeL in place sir,:;: the beginning wf taxicab service. The most active period for new taxica~ ,cgL.:.ition in the US occurred du:ing the late 1920s and early 1930s, when the Deptession ",used extremely compctiti\'e conditions. and growing urban centers irwariably expe,ie::cc'; problems \':ith t3xicab service. A \,(/'z.rhingron POIt areicle from 1933, entitled "T :Lxi"d, Ch.."s." effectivelY conveys the i"itial desire for ta.xicab regulations: Taxicabs a..re litcrall)' running wild on \X'.uhingmn streets, ",,-ir.h ;dmosc complw.: IJck of supervision or comrol. Public safety, reasonable: working i"cgul~Hions, and cqui~;~blc ra:cs :lCC almost completely disrcgarded...Hundrcds of incxp::rienc.::i dri...::.rs rem cabs 2.1I~t oflc:r their services {O the public. One dri\'cr who was rc:cendy obscr.'cd prccceding down Pcnnsyi\"ania Avenue like: a dcrdicc confessed that he: had noe driven a af fo~ s::\'~n or eight )'c.:~s. A central feature of ta.xicab service is the potentially iow COSt of market entr}'. A setviceable vehicle and a licensed drivet arc the minimum rCL1uitements to start a ta.xicab . . operation. In an untegulated environment. the low cOS[ of ;::itt}' attracts individuals who have limited employment options. Thus. during periods of high unemployn,ent, independent taxi operators flood the market. Condicions such as these during the Dcpre;;ion led cities to regularc taxi services. Once this practice was established. it tended to spread to other cities as a precedent for protecting the public interest. Accordingly. restriction of market entry is the central feature of the ta.xi regulatorj structure. Three arguments arc traditionally cited by the taxi industry in favor of tegulating market entry5: . "natural monopoly" - onc firm can pro,,'ide services at least cost . "destructive competition" - too many com?critors yield insufficient protlt; and cause declines in safety and service. . "cross subsidy" - profits in lucrative markets arc needed [0 subsidize service in unprofitable markets. fares. page. A 1983 study estimated that 80% of cities limited market entry. and 77% regulated The full disrrib~tion of regulatory practices is shown in the graph on the following Most ta.xi regulations arc effected by local jurisdictions (i.e.. cicies and counties). Only three states completely regularc taxis, and scyen others exert partial control. The remaining states generally specify only minimum standards i'or safery. leaving fare and entry regulation to local governments. 5 From Teal. e[ al, Urban Transportation R<gulation in Arizona. USDOT/UMTA. 190'\. Arurlysis o[Taxicab R<gul.ation and D<Tcgul.acum Final Report p"gc 4 Market Entry Mechanisms Population Ratio 10% Franchise System 7% Minimum Standards 20% Convenience & Necessity 29% FRre-Setting Mechanisms Industry-Set Fares 23% Maximum/Mini mum Fares 27% Pre-set Ceiling 34% Government- set Fare 50% Source: Shaw, Gilbert, et ai, Tl!Xicab Regulations in US Cities, USDOT/UMTA, 1983. . A""'pis ofTllXirab Regulation anJ Dmgulation Final Report page 5 3. TAXI DEREGULATION AND RE-REGULATION Through 1983. rwenty-one US cities opted to deregulate raxi services to various degrees. In rhe past ten years, six of these cities revcreed ro a Fully-regulated sysrem, and anorher rwo ciries regulated raxi services at airpores. The cities which maintained a deregulared structure rended ro have one of the following characteristics: (1) relacively smaller in population than the other cities; (2) less reliant on airpore aeriviry; or (3) had implemented orher measures that raised the hurdles for market entry. Only four of rhe 2 i ciries continue to employ a Fully-deregulared system today. This section of rhe reporr describes why rhese rwenry-one ciries deresulared, rhe effeces of deregulation, and changes in rhe regulato'y strucrure following deregularion. Why Cities Deregulated Twenry-one US cities, principally in Wesrern and Sunbelt states, deregulated taxi services by 1983. Two ciries - Arlanta and Indianapolis - deregulared in 1965 and 1973, respectively. The remaining nineteen cities deregulared between 1979 and 1983. Most of rhese cities moved from rradirional regulatory srrucrures to one of tWO forms of deregulated marker entry: (I) open entry (13 cities); and (2) minimum standards (5 cities). Three other cities deregulated fares, but maintained conrrols over marker entry. Graphics showing the locations and dates of these deregulations, and the changes in regulatory structure. are presented on the following page. In relephone and on-site surveys of these cities, a free-market ideology was cited as the driving force behind deregulation, which held the following expecrarions: . Price. Presuming rhar entry restricrions had enabled incumbent operators to charge higher fares rhan would prevail in a comperirive market, proponents of deregulation expecred new entranrs to force a reducrion in the prevailing races. The positive license values in regulated cities were cired as e\.idence that the incumbent operarors enjoyed some monopoly power. . Level of service. As entry restrictions are lifted. deregulation proponents expecred the nwnber of cabs in service ro increase. In rheory, these additional cabs should reduce the wait times for street-hailed service and response rime~ for telephone orders. . Quality of service. Proponents of deregulation expected that rhe new comperitiveness of the industry should cause operators to compete based on quality as well as price. resulting in improved service qualiry and the availabiliry of new pricing and service oprions. . Administrative costs. Proponents of deregulation expecred that open entry would reduce government costs by eliminating permir processing effortS, and rhar cosrs would also be saved by eliminating rare change review. While some of these benefirs were realized through deregularion, ocher less arrracrive and unanticipated results occurred as well. In mOSt cities, these outweighed the benefits and forced a reconsideration of full-scale deregulation. A1l4iysu ofT a:m:ab Regulation anti Deregulation Final Rcpor< page 6 :3ummary of Taxi Deregulation in the US I Location & Timing of De regulations. Seattle (1979) Spoknne (1980) Tacoma (1981) Portlend (1979) Sacramento (1f'~2) Oakland (1979) Berkeley (1980) Fresno (1979) San Diego (197r1 Phoenix (1982) " Tucson (1982) + Open Entry Madison (1979) Milwaukee (1979) Des Plalnes, IL (1981) Indianapolis (1973) Springfield, OH (1981) Kansas City (1983) Charlotte (1982) At/anta (1965) Jacksonville (1983) Tampa (N/A) .:. Minimum Standards o Fares Only (reslricted entry) Taxi Regulatory Structure:"Pre- and Post-Deregulation Pre-Deregulation Post.Oeregulation 9 9 . 8 . 7 . 7 ~ 6 ~ 6 U U -0 5 -0 5 ! . j . E 3 3 open Entry , , MInimum Standard_ z 2 z 2 Franchi.. System , ConwnWnce .. nee...lty Populltlon ratio PrecSe\ermlned Ceiling Amz/ysis of Taxkab lI<gulation anti Deregulation Final Report pag.7 Effects of Deregulation The effects of deregulation varied by location. Cities which be: a rclatiycly brso population, a high level of airport activit)" and condirions conduci,'e (0 low-cost market uttrr tended to haye a negative experience wirh deregulation. As a result, ~hese cities either fcdi:.. or partially re-regulated taxi services (see "Po;t-Dereguhtion Chang<:s :n Regulatory S[[U([~:"". following this section). Cities which did not possess the above characteristics, mnyCl"'c1y. experienced no dramatic effects - eith<:r positive or negative - and have performed I<1uch l:i.e the rest of the industry over the long-term. A summary of the effects of deregulation is presented below. Price Despite a large incr<:ase in service supply (see "Level of Service" on page I: J. which in other indumies has fostered price competition, prices rose following taxi deregulation in every documented case. The short-term changcs in ptice were quite dramatic. In the long-run, however, ptices in deregalat<:d cities have performed similar to the industry as a whole. Please refer to the graphs on page 9 for a summary of shoft-term and long-term changes in price. In the first year following deregulation, the a,'erag<: 5-mile fare rose by 29% ($1.39) in the six citi<:s documented in the USDOT cas<: studies. This ranged from J. high of 56% ($2.40) in Seatde to a low of 7% ($0.40) in O;lkland. The price increases roughly reflect changes in industry structure, particulady an increase in ind<:pendent and small-fleet operators (see "Level of Service", below). In Seatde and San Diego, these operators were observed to charge high<:r lires - sometimes substantially higher fares - than those charged by the larg<:r, more-<:stablished compani<:s. This can b<: s<:<:n in tr.<: graphs on page 10. A similar effect was noted6 in Phoenix, but price information by company size was not docum<:nt<:d. In all three cities, independent and small-fl<:et operators focus<:d th<:ir service on major cabsunds and th<: airports. These ar<: generally price-insensitive markets with little or no comparison shopping by prosp<:ctive customers. This condition, along with the tier that th<:s<: operators sp<:nt long wait tim<:s in the tax: qu<:ucz, discouraged price eomp<:tition on the part of n<:w entrants. In the long-term (i.<:., 1985-1992), ptice ttends in deregulated cities are similar to those in re-regulat<:d cities and tegulated cities (see bottom graph on page 9). The m<:~ian far<:? for a fiv<:-mile trip rose by 6.5% ($0.50) in deregulated cities v<:rsus 4.8% ($0.33) in r<:gulated cities. Fares in cities which re-r<:gulat<:d th<:ir taxi s<:rviccs ros<: by only 2% ($0.17) during this p<:riod, a r<:action to th<: high rat<: of far<: growth during th<:ir d<:regulated p<:riod. Thes<: r<:sults indicate that d<:regulation, o\'<:r the long term, has had litde impact on fare gtowth rdativ<: to th<: rest of the industry. 6 Teal, C[ al, Urban Transponation Deregulation in Atiron.. USDOT, 1984. page 54. 7 In COOSWl( 1992 dollars. Aruzlysis of TaxicAb &gu},.,.ion Anti Dmgu/4rion final Repon pag' 8 Taxi Prices: Short-Term and Long-Term Trends Chance in 5-Mile Fare. One Year After Derequlaticn I Net Change .:. Average Berkeley ?"c,nl Change I r 50.0% .. E 40.0% -~ .. ~ c n :10.0":". -6 .. ~ !3 c 20.0"10 8 " "- 10.0". 0.0% Oakland 52.50 52.00 e ., ." c S1.50 n' .0 c. ~ S1.00 50_50 SO.OO Seattlo f :'ocnix Portland San Diego Souru: USDOT (~t JrwfitI Dr: I .'t iffu:z of~. rtru!tz:o'] rrviJion. J 983-/984. Median Fare lor a 5-Mile Trip, 1955 VS, 1992 I 58.50 58.00 57.50 " $7.00 '" '" '" 56.50 .; ; "- 56.00 .!! :i 55.50 .;, 55.00 54.50 $4.00 Oeragulated ~;itles o 198,!i III 1992 R"..regulated Cities Regulated Cilles Souru: tirauHlfrom ITLA Tari(,: Faa Eotl. s::::u:ia {UtAppmtlir BJ Analyru of Taxicab R<gul.atin:. and D<r<gUbrtion Final Report page 9 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Fares for a 5-Mife Trip, by Company Size I Seattle, one year aft.;r deregulation ~ ~i~t~ :!::~fij ~~c.~ #" ;';.-;1 ~~ ..').-. !>:J :~~J.! .--....~.t! 1~ ''::~1} ~>:.. 'r~{~_ -~~ 2103 41020 More than 20 Company Size (It of cabs) I lOU~l; cDmpiltti by hie: U.:::urhowt' from t.:.ri:.::: r~:r a::t4 rrporua by Ihr Ciry D/S(:.::~ Dtp.%mrun: ofLi:u:JlllZnd Co1UU1IUT Affii1"1. JUtl( /9S0. I Sa~ Diego, one year after deregulation I $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2103 4 to 32 More than 32 Company aize (I of cabs) Sourrr: U~DOT. Effi~ tlf&~ry Rr-.Vio" in SA" Dirt(J, 1983. o Mini::-.um FnfO 8 Max~-nlJm Fate Ii Avera;c Faro Aruzlysis .[Taxicab &rufation arul Dcrerufation Final Repon pag,10 Level of Service Doregularion producod in most casos an immediate. largo increaso in the numbo: of taxis. Because now enuanrs tendod to congregate at alroady wdl-servod location. this largo increase in supply did not produce ccrrosponding improvemenrs in cusremor servico. In tho lon:-: torm. the 10vd of sorvico appoars ro havo subilizod in deroguhtod cities. Dara are in.<ufficionr. howovcr. to commonr on tho long-tam effocts ,.f taxi supply 011 service improvomonrs. As notod in rho graph (rop) on tho following pago. tho numbor of taxi oporarors immodiatdy after dorogulation increased by 23% on avorago. ranging from a high of 70% (Phoenix) ro a low of 10% (Borkdey). Tho tYpe of now en~rants varied considorably among the:se citios (soe borcom graph on following pago). In Phoenix. San Diego. and Soarclo. tho percenrago of cabs opoIated by independonrs and small- floot owners grow while tho porcenrage of largo fleot operarors declined. These oporarors focused thoir servko on the airporrs and major cabstands. Conscquontly. Phoonix. San Diogo. and Soattl.: exporionced large faro incroasos that woro in parr arcriburablo ro small oporarors serving a price-insensiti\.e market (see "Price", above). In Oakland. on the other hand. now largo floet owners enrorod tho markot. while in Borkdey thore was little: chango. In conrrast ro tho othor ciries above. Oakland and Borkdey exporioncod little chango in faros. Customor-orientod service improvomonrs expocted ro occur with tho large incroas: in sup?ly wore obsorvo(:. ro be marginal. Focus of new ontrants on the cabstand market. as notod earl: ;r. roduced a1roady-short wait timos to almost zoro. Rosponso timos for tho tdepho:.o-basod market woro not consistontly ovaluatod in the case studies. though tho availab!o data suggests that little chango occurrod. In tho only data sot containing beforo-and-aftor data (for San Diogo)8 rosponso timos for all sorviced calls were about the sarno after dorogulation (13.6 minutos) as beforo (13.4 minutes). The rate of no-shows and tfip cancdlations. howevor. incroasod , dramatically - from 2% of all c;;lls to 18.2%. As shown in tho graph on pago 13. trip refusals and no-shows aro most closdy rdatod to small floots and indopondent operators. This was found to l->o truo in both San Diogo and Soattlo. Long-torm data for evaluating taxi supply and service improvomonrs aro sparso. Alrhough taxi supply dara was mado availablo by the ITLA, geographic inconsistencios berwoon taxi supply data and population tend to limit the validity of long-term comparisons to tronds within classos of cities - doregulatod. ro-rogulatod and rogulated (seo graph on par,e 14). It is apparonl toat growth in taxi supply in curronrly-dorogulatod cities has stabilizod. Meanwhilo. taxi supply has doclined rdativo to population in re-regulatod and regulatod cities. In re-rogulatod citios, this roflocrs a conri:1Uing corroction to tho rapid growth in taxi supply that occurrod with dorogularion (no to: for a description ",f changos in rogulatory structuro by city, seo "Posr-Doregulation Rogulatory Changos". bdow). 8 US DOT, Effim of R<r;u!.rrory RcviIion in San Di<go, 1983. Table B-9. Analysis of T axi.ab &gU/&rion and lJ"egula<,on Final Report pag< J J c .2 C O.S :; a. o c.. g 0.6 ". ~ '" 0.4 .D . " Changes in Taxi Supply & Industry Structure Following Deregulation 1.2 0.2 o Soattle Oakland Berkeley Avorage Portland Phoenix San Diego I Before ,,~ Aftar ~ ".Cha,,>~ Souz::c: USOcr/UM'P.. OJC sn:dics on me cfi'ccu of faxigubtol)" revision. 1983.1984 .lCY. .20-/. .30% -400/. .500/. --60% Net Change in Percentage Distribution of Taxis by Company Size 30% 20"10 10% 0% "--~ .",' < -".: ~~ ~~. .:.~ ~~~-' "':1' !;~ Berkeley Oaldand Phoenix San Diego Seattle .1 cat! 02103cab$ 1141030catls o "..ore than 30 cabs Sauce: USOO"lUMlr. ~e INdies on the cffe:::.s of~to~' It:'VlJion. 198.3-198.1 s~.o~ 70.0~~ 60.0~;' ,. 0. a. 5a.O~. , III E . (C.O.,. a c . .c " 30.00". C . ~ . 20.0% c.. 10.0% 0.0% AnAlysis a/Taxicab Regulation 1"'4 Dn--ruJation Final Rcpon page /2 Response 10 Telephone-Based Service Requests After Deregulation I Seatti,cl 60% 50% <10"10 "0 0 . , ;; 30% a: 0 c. ~ 20% 10% 0./. Mini Fleets (1-3) ~ 25% c: ~ o ~ 200/. b ., ;; ~ 15Y. ;; a: c. ~ 10./. Independent Fleets Large Service Companies 25.0 20.0 .. . :; o 15.0 I 10.0 5.0 0.0 c- E i= . o c o c. o ~ Sl1urr",," USDOT. E.ffiruDI Gt'pUfO'7 &visu,n in .ft'.3uk. IN] Trip Refusal Ra:e 1:. Response Time I San Diego I 35% 30"/. l' 12 10 " . :; c 8 I . E 1= 6 ~ c o c. o 4 ~ Tri" Refusal Rate Response lime 5% 0./.. Independent Associations $rr: 'f Fleets Large Service Company .:. 2 Sill,"t': OSDOT. Effias 1I/ /lrpJ4tory/lrvUu,1I in 5411 LJY;p. IN3 o Analysu .[Taxicab RcguLzli.,. and Dc....~ti.n Final Report pat' 13 Taxis per 1,000 Population (median values) 1.10 1.00 , 0.90 O.BO 0.70 0.60 (An:. 0.50 0.40 0.30 0.20 0.10 0.00 Oereculated Ciiies Ae--reguln:od . Citie, Regulated Cities Note: geographic inconsistencies between taxi supply and population data skew the cabs pe; 1,000 figure and thus comparisons across categories rr.ay not be accurate. The 1985-92 trends, however. should be valid. S()"1T:t: tTiA Tu~.:b he' B()(1K IIfltI US Cnuw. Su Affa:dix B far tkuils. 01985 51992 AlUllysu of T ",,;cab &gulation an4 Deregulation Final Repon pag' J4 S,.n,iu Quality The quality of raxi servicc is affecred by several variables, including: (I) responsiveness ro customers; (2) vehicle condirion and cleanliness; and {3l driver behavior. The case srudies of rhe effecrs of deregulation provide limited. b"t consistent, dara on rhe first two of rhese variables. Informarion on driver benavior is rcCerenced in the case studies, bur is less rigorously measured. As nmed above in "Level of Service", the short-term effects of deregulation included a slight improvement in waiting times ar cabsrands, an insignifica;', change in response rimes ro relephone-based se:vice requesrs, and a significant inerec,se in service refusals and no-shows. On bal~nce, ir can be said that deregulation provided marginal improvements in CUstom,,;r responsiveness, bur only for rhose customers thar taxi operators deemed ro be high prioriry (as evidenced from rhe rrip refusal rare). The effect of deregularion on vehicle condirion can be assessed by chlnges in vehicle age and inspecrion resulrs. In San Diego, vehicles owned by new macker entrants - generally independents 2,d ,mall fleer owners - were observed to be 7.1 years old on average, versus 2.9 years for rhe large service company rhat held mosr of the ra."i licenses prior ro deregularion (see graph on following page). Two years following deregulation. all fleers oferatcd with yet older vehicles. In Seartle. rhe median vehicle age increased to 6 )'ears old following deregulation from 4 years old prior to deregulation9, Further, vc;,:c!e inspection failures inereased ro 35% tWO years following deregulation from 20% r:le )'ear prior to deregulation. Both cases suggest thar a large influx of new entranrs caus", all operators [0 defer invesrment until m:lIker condirions allow a greater r.,cu,,, on investment. Information on changes in driver behavior following deregulation is scant. Ar major cabs rands and airporrs, however, over-supply of raxis was consistently reported to result in aggressive solicitarion or passengers and confrontarions among drivers. , There is no evidence, hearsay or orherwise, indicaring rhar deregulation acrec to improve relarions berween drivers and customers, Administrative Cosu . Changes in adminisrrative com as a result of deregularion depend on several variables, including: (1) the volume of new market entrants; (2) license applicarion and vehicle inspection procedures; (3) rhe frequency of rare changes; and (4) rhe fee structure and cost recovery policy of rhe local jurisdicrion, The USDOT case srudies 0:1 the effects of deregularion indicate thar adminisrrative costs either did not change or increased following deregularion, In San Diego, open entry was reported to increase the time and dollar COSt of permit processing and related activitiesIO. This was influeneed primarily by rhe volume of 9 USDOT/UMTA, Effim ofTttxi Rtt;'.da,ory Rtvision in Sta"k, 1983. p. 98. 10 USDOT/UMTA, Effim ofTttxi R'l;"Its,ory Rtvision in San DitKO, 1983. pp, 200-204, Ana/Viis of1iz:,Mab Rtgultstion an,! Dcrtr.uJation Final Report pagt J 5 Comparison of Fleet Age by Size of Taxi Company. ;;an Diego (one year after deregulation) oyer 30 cabs 4 to 30 cabs 2 to 3 cabs 1 cab ~ en '" '" '" ~ ~ ~ '" co '" '" '" '" '" >- >- >- >- ~ ':' M '<T V 0- M ~ 100.0% 90.0% 80.0% c:; '" 70.0% '0 60.0% " .,;j Cl '" "J 50.0% ~ -, . ro.;l " "'i'i 40.0% .~ ~ " . :; .~ .~ 30.0% E ~... ::J ~j 20.0'% u ) 10.0% 0.0% en :::! ~ ~ '" '" co " " '" >- >- >- en co ... ^ .;, '" how to read this chart: each bar shows the percentage 01 a ileet that is equal to or less than /he age displayed on the horizontat axis. source: U5DOT/UMTA. Effects of Taxi Regulatory Revision in Sa" Diego, 1983, p. 8.11. [continued from previous page] new permit requests submirred by market entrants. In Seatrle. ,taff cOStS were reponed to increase due to the larger number of taxis to be impected. Inspection effortS were exacerbated by the provision for quanerly fare ch""ges, which necessitated a corresponding increase in meter validations II. Oakland and Berkeley. in contrast. experienced immaterial changes in coStSl2. As nOted earlier, open enrr{in rllese cities did ,not result_ in a large influx of new operators. In the cities for which objective and con~istcnt data are available regatding the effects of deregulation. the fuJly-deregulated model (i.e.._open entry and ind:mry-set fares) appears to have yielded few desired changes in taxi service. An increase in the number of taxis was the most clearly-arrained objective. Other unanticipated and unarrractive resulrs that were associated with the large influx of new operators encouraged most open entry cities to reconsider taxi detegulation. These post-deregulation changes in regulatory structure are described in the following section. 11 USDOT/UMTA. Effie" o/Tai R<r;.lalory Revision in Sea,,". 1983. p. 146. 12 USDOT/UMTA. Tai R'l"IaIOry Revision in Oakland 0- Berkeley. C,,/ifom!a: 1'"0 Case Seud!cs. 1983. p. 54. A1l4iysis o/Taxicab &ru"zWIII ~nd Dmru"zrion Final Report pag.16 nost-Deregulation Changps in Regulatory Structure In respo'nse (0 lb: problems nOled abl)"c, mOSI of lhe cilics lhal deregulated hav. since r(,'erred (0 some form of cegulation. AI; shown in the graph on the following page (top). this wave of re-rerulalion was led by the largcst cilies of the group that had the mOSI Intonsi"e airpon aClivit)'. Parricularly notablc was a shift from opon entry (0 some form of re- regulation. pre~=nted in . he lable below. Date of Initial Tvocof&-Rc...,J"tion Dau or R~- Ci". Da~vu!n('ion Rrrr'J''''rion .. 1\c1anca 1965 Prc-dcrcrmincd ceiling. 1981 rc(!ul:ltl:d fares Indi:ln:Ip,~lis 1973 Pre-decermined ceiling. i 974' rcou),tcd farcs Milwauk ;c 1979 Pre-determined ceiling. 1992 rcpulJtcd f;arcs O,kland 1979 Pre-determined ceiling. 1968 rc"ub.!ed f.arcs 53n Diego 1979 Prc-dtccrmincd ceiling. 1982 maximum farcs SeJttle 1979 Pre-determined ceiling. 1984 maximum farcs Phoenix 1982 Aitnon f"nchisc 1983 5acramc:r..to 1982 furnorc pcrmirs unknown . The current reguialory strucmre for the origin,1 21 deregulated cities shows a clear split berween tlte fully-rec;ulated and fully deregulated models. The current SlalUS of lhese ,cities is as follows: (I) six cities lhat were previously open encry have re-regulaled alllaxi ';ervices: (2) cwo cities lh"\l were previously open enery have regulaled airporr-based serviees. '.vhile retaining an open entry approach for non-airporr services; (3) lhree cities had deregubted farcs only, and have concinued this practice while retaining entry controls (e.g'., convenience & necessiry'; (4) six cities retained a minimum standards approach; ;nd (5) four cities retained the fully-ckregubted approach. combining open entry with indust:v-set fares. Of the thirteen cities tho had originally opted for open entry. only fout continue this practice roda\'. The cities that have fully" re-regulated" taxi services tend to be larger cities in which deregulation (i.e.. open entr}') had amacted a large number of independent operacors - :\danca. Indianapolis. San Diego. and Semle. Two other large cities - Milwaukee and Oakland - re-regulated for other reasons. Two open ent:y cities - Phoenix arod Sacramento - chose co regulate taxi service rrom airports. rhe most ,'isible source of prob'ems, but retained the open entry system for all other taxi services. In th'Ose cities. private-secror "franchise systems" also have evolved wherein major hotels enter into exclusive concracts wi,h taxi companies to provide service co cheir I'uests. Thus, the formal and informal regulation of major stand markets was dfected in some deregulated cities co protect consumers who are unlikely or unable co shop for the best . . I:LXI among compellng s~rvlces. .1na/ysu .fT~a" R<gul4fio f and Dn-<gul4rion Final &pon pag< 17 :i~(i~Current:Rtr' "tilato'" .StructUi:'''\i ,feltles"'''? ~tlllmDl!retiJat~cr;Tax% BetWe'~9791&119f3' . . 0 , + + ... .:. <t + ( ) + .. .:. . ~~. . 25,000 20,000 ~ <IJ o o o ~ <IJ 15,000 - c QJ E ~ 10,000 ro c. c UJ 5,000 o o 200 400 600 800 1,000 1,200 Population (OOOs) + Re-Regulated o Airport Regulated .:. Minimum Standards ~ Deregulated ;:.~'1Reg!,llatciiy;.5thJctureSin:m~regulatedand Re::Regulated Cities'- J, Current Regulatory Structure in. the 21 Deregulated Cities 6 5 . . = . <3 '0 3 . " E 2 , z 6 5 . . ~ 3 <3 2 '0 1 . " 0 ~ ., z -2 -3 .. J> ~.~ .r$-t- <t-';::'v~.,\c ~""'~.,\e Changes in Regulatory StructurL' Compared to Initial Deregulation Open l!nlry Mlnlmunl Standard. Franchi.. Syslem Convenience & nee...it'! population retlo Predetennlned Coiling .' .<+ ~ ~.~ Aru:/ysu ofTaxiub &gu/4rum ''','' Dmgukrion Final Report page 18 Th~ ~ici~s which had limit~d d~r~gulation 10 far~ only r~pore~d no significant issu~s and (0 our knowl~dge hav~ mad~ no ~nsuing r~gula(Ory chang~s. Ea~h of th~s~ Cili~s has ~nrry r~Slrictions, how~v~r. Th~ citi~s includ~: (1) Tampa (population ratio approach); (2) D~s Plain~s, Illinois (conv~ni~nc~ & n~c~ssiry approach); and (3) Charlo((~ (franchis~ sysr~m approach). Th~ citi~s which cmploy~d a minimum srandards approach (0 markel ~nrry, which is a mid-poinr b~rw~~n full d~r~gulation and full r~gulation of caxi s~rvic~s, lik~wis~ r~pore~d no significanr issu~s and accordingly hav~ mainrain~d this srruccur~. Thcs~ citi~ includ~: (1) Poreland, Or~gon; (2) Fr~sno, California; (3) Madison, Wisconsin; (4) Kansas City. Missouri; (5) Tucson, Arizona; and (6) Jacksonvill~, Florida. Th~ minimum slandards (~.g... 24-hour disparch capabiliry) ~x~rcis~d in th~~ ciri~s acr to rais~ th~ COSl of mark~r ~nlry. thus discouraging ind~p~ndcnc own~r-op~ra(Ors thaI ar~ nor affiliar~d wirh a taxi coop~rariv~ or company. Th~ four citi~s which hav~ r~lain~d a fully-d~r~gulat~d SYSl~m ar~ among th~ small~sl of rh~ Cili~s lhat had initially impl~mcnr~d full d~r~gulalion. Th~s~ citi~s includ~: (I) B~rkel~y, California; (2) Spokan~, Washington; (3) Tacoma, Washingron; and (4) Springfield, Illinois. * * * * . In r~rrosp~ct. the ~ff~cts of ta..xi d~r~gulati[)n hav~ rang~d from b~nign (0 adv~rs~, d~p~nding on local conditions and mark~ts. Th~r~ app~ars (0 b~ scant ~vid~nc~ thar doregulacion fully achi~ved th~ goals on which its impl~mencation was pr~miscd. though som~ goals c1~arly w~r~ achi~ved (e.g., mor~ taxis, less r~gulatory involv~m~nr by gov~rnm~nc). M:lrk~t imperf~ctions p~culiar to th~ taxi industry, including unusual proquct su!,ply (~.g.. fim-in, first-oue qu~u~s at cabstands) anci consum~rs' lack of knowl~dg~ of taxi p"c~ and qualiry, t~nd (0 n~gate th~ improv~m~nr in pric~ and p~rformanc~ associar~d with d~r~gularion in orh~r industri~s. . Ale 1(YIis of T iVXab :'.'cgrJation tln4 ncr.grJatiorr Fin:a.l Report page /9 APPENDICES A: Current & His~orical Regulatory Changes in Deregulated Cities B: Comparative L-ice and Supply Statistics Bibliography APPENDIX A: Current & Historical Regulatory Changes in Deregulated Cities z o - .... <: ...:i o o gj ~ U ~ .... ~ (JJ r;l o z <: :::: u IX o .., < ~ -'I 'J . 0==- . >.~ ",,0 NO 0 C 0' N~ on - ... <"" << < < "":; c." on;;:: 00 M _0 "'<- ON Eo 'C ." . z- -- M"': <- . - - C- O . ." . -"" .<- ZZ N"" Z ., M"" ..,.<- ..,.00 "t. .... - .... .... V) .... .... .... .... . O? c 0- I > .S '" ." "0 :g C r et 'u ~ '" .!:! '" !:l:: " ~ v- v. .e v- v. v- i: " " , " " " " u u " '" t: c c " E c <<l .;j E U E , " u " " " " " u u " > " " " > " " " "'"' E ~ E E E E E E E E c E E c c > E E ~~ " " " " " " " '" r. 0 " " ;; 0 0 '" " v- ~ ~ v- ~ v. v. v. v. v. U v. v. ~ U ell v. v. v. - c .S '" :; ell u !:l:: :.- ~ u Z 00- '" ~ ell .= 'u u - v. 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APPENDIX B: Comparative Price and Supply Statistics COMPARISON Or- TAXI PRICE AND SU~PLY IN :JEREGlILATEC. REREGt::-A.TEO. A::O REC:ULATEO CITI!:S 5.Mile Fare Taxis er 1 K ptlp Population Number of Taxis Category/Cities 1985 1985(92$) 1992 1985 1992 1985/ 1992 1985 1992 _ft~~-I._:;l'!L;IIJ.'_~I'ed'~_~_'~tt!~.~\.'..;;..:.;~.~.~~ ~.-.,.~." ,.~. .....~t~,l~,~Jt..,~.',.~.j,~,;."....,. ...~...:~....'_i.';..~.;;....:..l:...~.~;. ......_' :~'" .~.~...:.~. :1~.,';';~ -.-<: "),:;::'" . . ' .: ", ""'~'.- ~ ':;_~ q1~?;; '7...> ;;:;'::0 ~'u_ ~ ---- ,C'~.20 :: S10.79 '-S~70 -'''''~ci:2~- .-.', 0':15'- ~:'! ... -';0;' _.:, '.~~, . .' ~1.;~~:~: KansasCily 56.20 S7.27 57.50 1.19 1.30 444/ 431 530 560 Madiso" 55.83 56.83 58,40 0.42 v.52 16B ' 204 70 t07 Phoenix 56.70 S7.86 57.22 D.39 0.49 8331 10~3 325 506 Portland 56.BO 57.9B 5B.20 0.G7 0.98 365 367 24., 360 Sacramento 57.00 58.21 59.94 0.77 0.55 294 I' 401 225 219 Tampa 55.75 56.75 5B.15 1.20 0.B9 2B5 450 343 400 Tucson 56,40 57.51 57.BO 0.35 ').19 371 I 425 130 BO Average 56.73 57.90 5B.36 0,65 0.63 3791 465 241 2B7 Median 56.55 57.6B 5B.1B 0.54 0.5' 330 413 235 290 Maximum 59.20 SID.79 S9.94 1.20 1.30 833 1.043' 530 560 Minimum 55.75 56.75 57.22 0.24 0.15 16B 204 63 62 it~"{t~!,!Jjj'tljjJl'E~?;fi -~f~1N?f E~~~ .fX~~urgl~flif:=T ~~"C'S0 -:-~-'~("'l-"C-' -FC":-';:,f'7";]!w: Atlanta 55.BO 56.BO 57.30 3.39 ..30 42B 3QB -- ..-;..45'0..-'....,';562 Indianapohs 54.70 55.51 5B.15 0.52 0.52 705 757 366 394 Milwaukee 55.75 56.75 57.50 0.66 0.61 601l 657 400 400 Oakland 57.00 5B.21 59.40 1.29 1.16 3'9 3BB 450 450 San Diego 5B.00 59.3B 59.00 0.99 0.7B 931 1.151 920 900 Sea"l. 56.BO 57.9B 5B.00 1.15 1.32 490 530 562 700 . Average Median Maximum Minimu,-n 56.34 56.30 5B.00 54.70 57.44 57.39 59.3B 55.51 5B.23 58.0B 59.40 57.30 1.33 1.07 3.39 0.52 1,45 0.97 4.30 0.52 excluding Atlanta Average 56,45 57.57 5B.41 0.92 O.BB Median 56.BO 57.9B 5B.15 0.99 0.78 Maximum 5B.00 59.3B 59.40 1.29 1.32 Minimum 54.70 55.51 57.50 0.52 052 ,."'~ .~ '... - .~_..~-~ 'j;l;l)!:~: ,. ~ ~...,';t'~' --:Z--"""~-~.--'_____ .....W.l:!".:I"t=...~ - rYi1S ..~....~r,..,-~.....~ >f"('I.~:;.~'--*". l;/{i '-I' __., .. ..,....-. . . . R~;'iil8ied~Clitu..':. ../1#;;_-..... -'!J.,. ;~"',...w ...'"~:::: ';~;.::, .~. ~t'~.. Z;'\ r.~:~>' .:: "" , "--. : ~_'~_ ....--- to-.- ~,.._"'_... .-t-.... _n._"i>. .'.:Jl;.. _+__ :<-to no.. _ _.... Minglon 55.BO 56.BO 5B.30 3.05 3.46 Augusta 5UO 55.04 56.40 OA6 0.58 Baltimore 54.80 55.63 S6.30 1.41 1.60 Boston 56.70 57.B6 59.10 2.6B 2.67 Buffalo 56.15 57.21 5B.75 LOB 1.06 Las Vegas 5B.50 59.97 59.00 2.53 1.87 Memphis 55.35 56.2B 56.65 0.40 0.52 Mobile 55.20 56.10 57.15 0.24 0.27 New Orleans 55.90 56.92 55.90 2.B7 3048 Orlando 55.60 56.57 $6.91 1..67 1.21 Pittsburgh. 57.BO 59.15 5B.17 1.22 0.B2 Rochester S6.90 S8.09 58.20 1. 1 0 1.26 San Antonio 56.20 $7.27 $6.90 0.57 0.8t San Jose 56.40 S7.51 $10.60 0.22 0.33 Tulsa 55.35 S6.28 57.25" 0.52 0.60 Average Median Maximum Minimum '56.05 55.90 5B.50 54.30 1.37 1.06 3AB 0.27 57.11 $6.92 59.97 55.04 57.71 57.25 510.60 55.90 1.33 1.10 3.05 0.22 5B5 549 931 3'9 617 60B 931 3'9 '-"'~'.':'.;- :._ n.:':' 152 240 769 5691 346 I 179 646 205 561 133 410 246 B'6 673 375 423 375 B'6 133 Note: several deregulal~ and .'eou1aled Cities are omrtled due 10 incomplete data lor 1985 Of 1992. Oeregulaled olias indude those using minimum staodarns. as well as open entry. ~ Far.., wi.: O.rtvtd fn)m Inl.rnatloNl Taxicab ancl U....,.,. Allocation memOer SUt'lrllys fot 1911S and 1992. 011. tor Photrn:';"'" obtained ";1. i'lt.tVi....... eonduald by PIiee Wal.mouat. 1985 lares Wtlf. con....nf41O 1892 doll." based on !he CPI lor pn...all transpon.tion COSlS (USOOL Bureau of UXlr Slalistlesl Papulation: Estimated Irom US Census. 1985 popuJalicn was interpolated from 198-4 and 1986 Census 'Sllrnales. 1992 ~tion was .xttapo&ated based on g~ ral. berween 19813 ancl1990 Census estimates. 642 594 1.151 36B 697 657 1.151 3BB 175 2'0 721 571 3'3 306 576 lB' 462 lB2 365 234 931 B26 366 432 365 931 175 691 506 1,450 366 73B 575 1.5B2 394 540 569 450 450 920 900 366 394 ... .'-":~':~ ..~~~~~~f& 464 605 110 140 1.0B5 1,151 1.525 1.525 375 365 453 573 256 300 50 50 1 .60B 1,60B 222 220 500 300 270 295 4Bl 750 150 270 196 219 516 375 1.60B 50 558 300 1.60B 50 BIBLIOGRAPHY . BlBLIOGRAPlf.' 1. General Studies Airpon Operators Council International; Worldwide Airpor: Traffic Rqort; 1985 and 1990. Frankena. Mark and Paul Pautler; An Economic Analysis 0/ Taxicab /(egulation; unpublished paper for the Federal Trade Conunission; May 1984. Gallick. Edward and David Sisk; "A Reconsideration of Taxi Regulation;" Joumal of Law. Economics, and Organization 3:1; 1987. International Taxicab Association; Does Taxicab Deregulation Make SellSe?; March 1984. Interm.tional Taxicab Association; "The Case Again,t Taxicab Deregulation;" 1982. International Taxicab Association; Taxicab Fact Book; 1985 to 1992. Paratrans,it Services; 77ze Erperiences of U.S. Cities with Taxicab Op;:n Entry; Octob~r. 1983. Rosenbloom. Sandra; "The Taxi in the Urban Transport System;" unpublished paper; December 1983. Seligman. Joel; The Application of the Federal Antitrust Laws 'to Municipal Taxicab Regulation; December 1983. Shaw. L.. Gorman Gilbert. et. al.; Taxicab Regulation in U.S. Cities: Volume I (Final Report); October 1983. Stalians. Gene; "Regulatory Revision and the Taxicab lndustl'y: \Vha: We Have Learned;" presentation for the New Zealand Taxi Proprietors' Federation; August 30. 1988. Teal. Roger; "An Overview of the American Experience with Taxi D~regulation;" unpublished paper: 1988. Teal. Roger and Mary Berglund; "Impacts of Taxicab Der~gulation in the USA;" reprinted from Journal of TrallSporr Economics and Policy; January 1987. II. Case Studies Buck. James; "The Seattle U-Turn;" unpublished paper; S~ptember 1992. Counry of San Diego. Department of Transponation; Taxicab Stud)'; January 1978. Gelb. Pat; Effects of Taxi Regulato!)' Revision in San Diego, Califomia; May 1983. Gelb. Pat; Effects of Taxi Regulatory Revision in Searrle. Washington; May 1983. Gelb. Pat; Taxi Regulatory Revision in Porrland. Oregon: A Case Stud)'; September 1982. . /1/.) ;~, 1#- , . ",".' .' ,I,J tv' ~;;~~@il ~~!'~0 ;t}:,b . If' Review of Taxicab Regulatory Changes in Cincinnati, Indianapolis, and Seattle prepared by Institute for Transportation Research and Education North Carolina State University Box 8601, Raleigh, NC 27695-8601 for International Taxicab and Uvery Foundation 3849 Farragut Avenue, Kensington, MD 20895 May 1998 $25 for ITlF & ITLA Members $50 for Non-Members @ International Taxicab and Uvery Foundation Review of Tuicab Regulatory Owagcs in Cincinnati. lndianapolis. and Seattle 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 2.0 2.1 2.2 2.3 2.4 2.5 3.0 3.1 3.2 3.3 3.4 3.5 4.0 4.1 4.2 4.3 4.4 4.5 5.0 5.1 5.2 5.3 5.4 6.0 Table of Contents IlltrtHillctioll ......................................................................... 1 Importance of the Taxicab Industry Taxicab Organization Structure Theory of Taxicab Regulation Taxicab Regulation in Practice Deregulation in the Taxicab Industry Study Goals/Objectives Data Collection Methodology I 2 3 3 5 6 6 Cillcinnatl, Ohio... ..... ....... .... ..... ... ...... ..... .... ............. ...... ....... 7 Introduction 7 Historical Changes in Taxicab Regulation - 1940's to 1993 7 Motivations For the 1994 Regulatory Change 8 Key Provisions of Regulatory Changes - February, 1994 9 Impacts From the 1994 Regulatory Change 12 Illcli~JIC>lis, IJtcli~1l ............................................................. lei Introduction Historical Changes in Taxicab Regulation - 1970-1993 Motivations For the 1994 Regulatory Change Key Provisions of Regulatory Changes - 1994 Impacts of the 1994 Regulatory Change 16 16 17 19 22 ~~tt14e, ~8U5I1iI1~oll ............................................................... ~~ Introduction 27 Historical Overview of Taxicab Regulatory Changes - 1979-1996 27 Motivations Leading to Additional Regulation in 1996 29 Key Provisions of the 1996 Regulatory Changes 29 Impacts of the 1991-1996 Regulatory Changes 32 Discussioll: Cross-City Compllrisons ......................................... 3ei Introduction 36 What Taxi Regulatory Changes Occurred? 36 What Were the Motivations for These Changes? 37 What Have Been the Impacts of These Changes? 38 COIlc:lltSloltS ........................~................................................ '1!i BibUography ..................................................................................... ... .... 48 . Instiblle for T....porwionReoean:h and_on 1.0 Introduction This report presents the results of a study of taxicab regulatory changes in three Cltles: Cincinnati, Ohio; Indianapolis, Indiana; and Seattle, Washington. To understand the significance of the study findings it is first necessary to understand the context in which these regulatory changes occurred. This introductory section of the report presents provides background information on the taxicab industry, taxicab company organizational structures, a perspective of industry/government regulation, and a review of the study data collection process. Sections 2.0 through 4.0 describe the regulatory changes that occurred in each of the three cities, the motivations for those changes, and the impacts of the changes. Section 5.0 provides cross-city comparisons, and Section 6.0 presents study conclusions. 1.1 Importance of the Taxicab Industry Myths and perceptions about taxicabs are very different from reality. Often viewed as a service of last resort operated by poorly qualified drivers, the industry is frequently misunderstood both by the public and by transportation policy-makers at all levels of government. In addition to being the mode of last resort (transportation safety net) for the elderly, disabled and poor, the taxicab is also the mode of choice for many business travelers, tourists, special school students, corporations transporting customers and packages, hospitals transporting blood and medical supplies, automobile dealers transporting service customers, and a wide range of businesses. It is an industry for which images are very misleading. One poorly understood characteristic of the industry is its availability of service. It is perhaps unique as a nearly ubiquitous industry that provides service twenty-four hours a day, everyday. It serves virtually all cities and towns in the U.S., and it does so through operations which, with a few exceptions, are locally owned. Thus, it is an indigenous industry that is available nearly everywhere at nearly any time. The amount and range of service provided by taxicabs in the United States is staggering. In 1986, the last year for which national survey data are available, taxicabs transported 1.43 billion passengers (Stanley and Burby, 1988). This figure compares with about twenty million Amtrak passengers, approximately two billion urban rail passengers, and over five billion urban transit bus passengers (Gross and Feldman, 1994). Taxicab operators in 1986 provided this service using 170,000 taxicabs and operating 10.1 billion vehicle-miles. Urban rail systems that same year operated over 400 million vehicle-miles, and urban buses operated about two billion vehicle miles. Thus, the U.S. taxi industry is ~f comparable size--depending on the measure--of urban transit buses and urban rail systems and larger than Amtrak. These numbers, however, underestimate the size and importance of the taxicab industry. In the past twenty years the taxicab industry has diversified through new services, such as executive sedans, and through contracts with public agencies, such as transit authorities and human service providers. In 1986 nearly two-thirds of the taxicab operators provided services under contracts with hospitals, corporations, cities, transit authorities, and human service agencies. The extent of Review ofT:uic:ab Regul:atory Ch:anges in Cincinnati. lndi:anapolis, and Se3nlc: contracting is evident in the fact that in 1986 only 83.2% of the vehicles in the taxicab industry were taxicabs. That is, there were 170,000 taxicabs plus about 34,000 vans, buses, executive sedans, and limousines operated by taxicab companies. When these additional 34,000 vehicles are included, the taxicab industry transports 2 billion passengers per year. 1.2 Taxicab Organization Structure In interpreting the results of this study it is helpful to understand the organizational structure of the taxicab industry in the U.S. and in these three cities. Typical of the local taxi industries in other large U.S. cities, the local taxi industries in Cincinnati, Indianapolis, and Seattle are characterized by three factors: 1. Independent contractor drivers; 2. Extensive competition; and 3. A variety of organizational structures. It is appropriate to explain how these factors are present in these three cities. According to a 1986 national survey, more than three out of every four taxi drivers work as independent contractors (Stanley and Burby, 1988). "Independent contractor" in the case of taxi drivers means that the driver either owns or leases his or her taxicab vehicle and is free to work where, when, and how he or she wishes, subject to city regulations. Independent contractors operate as small, one-person businesses rather than as employees. Given that the ~nd toward independent contractor status has not abated in the eleven years since the 1986 survey, it is likely that few employee taxi drivers remain in most large cities. The taxicab fleet owners interviewed for this study indicated all their drivers worked as independent contractors. One of the myths of taxicab service is the belief that a single company owns all the taxicabs in a city. The Stanley and Burby 1986 survey found that in cities over 200,000 population only 6.9% of the responding companies operated all the taxicabs in their cities. In fact, 58.9% reported that they operated less than half of the local cabs, and many of these were operated by owner-drivers who owned their own cabs but operated under the auspices of a fleet operator. This large amount of local competition is evident in Seattle, Cincinnati, and Indianapolis both before and after their recent regulatory changes. In 1994, before it opened entry, Indianapolis had 392 cabs licensed among three major companies, severa! small companies and cooperatives, and 26 independent owner-drivers. In 1995, prior to implementation of the requirement in Seattle that all taxicab operators belong to an association, there were 210 independent owner- drivers and seven companies. There was also extensive competition among 20 companies operating in Cincinnati prior to the relaxation of entry requirements in 1994. These three cities also reflect the national picture of organizations within the local taxi industry. All three cities have taxi comnanies in which some vehicles are owned by the company and leased to drivers and some vehicles which are owned by drivers but which are operated under the auspices and color scheme of the company. All three cities also have associations or Ins.bIt. for Transportalion _ and Education. May 1998 2 Review of Taxic:1b Regulatory Changes in Cincinnati. Indianapolis. and Seattle coooeratives composed of owner-drivers. And, all three cities have large numbers of owner- drivers who operate as one-person companies. The importance of these three organizational forms results from the very different ways in which they operate. Companies, as well as some associations, often work hard to market taxi service among local businesses, tourist facilities, and general public. Companies and associations also typically have dispatch services for their drivers, and in most cities operate twenty-four hours a day. Individual owner-drivers, on the other hand, seldom do marketing, are not affiliated with dispatch services, and normally serve walk-up locations such as airports and hotel stands. 1.3 Theory of Taxicab Regulation The underlying theory and rationale for governmental regulation of l/IXicab services is that such regulations are necessary to correct market imperfections. Simply put, market imperfections exist when the necessary conditions for a free market are not met (Frankena and Pautler, 1984). Some of the most important of these conditions are: many service providers; many consumers; and perfect information among consumers about the prices and qualities of all providers. In many industries these conditions are met. Restaurants are an example; there are many restaurants, and prospective diners can examine a restaurant and even review its menu before deciding to dine there. A diner can even leave a very unsatisfactory restaurant. Moreover, each restaurant has a clear identity and location, so an unsatisfied diner can decide whether or not to return to the restaurant and can tell his or her friends about the quality and price of the restaurant. There are even reviews and guidebooks rating restaurants. For taxi service the situation is generally very different. For local taxicab consumers who frequently telephone for taxicab service, the conditions might be met. However, for other consumers the situation is very different. Persons hailing a cab, engaging a taxicab in a queue at a hotel or airport taxicab stand, trying to get a taxicab in the middle of the night, or simply not frequent taxicab users all lack adequate information on alternative taxicab providers and lack the ability to shop for cab service. And, an unsatisfied taxicab user-unlike an unsatisfied diner- may be unable to exit a moving cab in hopes of finding another, more satisfying one. For all these situations there is a need for regulations that ensure the taxicab user that some level of safety and service is met by all taxicabs. 1.4 Taxicab Regulation in Practice Generally, taxicab regulation is a municipal responsibility. It is entirely so in most states; in a few states, such as Pennsylvania, Nevada, Maryland, and Kentucky, there is limited state involvement in taxicab regulation. Taxicab regulation is of two types: (I) economic regulation; and (2) safety regulation. The second of these is relatively uncontroversial. Cities impose certain licensing requirements on taxicab drivers and vehicle owners. Drivers must meet age, health, driving history, and character standards. Vehicles must meet safety and design standards. While there is sometimes I..tilllte for TnIIlIpOIIali... R......b .... EduClllion - May 1998 3 Review of Taxicab Regulatory Chnnges in Cincinnati, indianApOlis. and Seattle controversy over how these standards are imposed and enforced, there is fundamental agreement that cities should impose safety regulations on taxicabs and drivers. Such is not always the case for economic regulation. Economic regulation consists of three types: (I) entry controls; (2) fare regulations; and (3) service requirements. Of these the latter two are also relatively uncontroversial. Virtually all cities, other than a few very small ones, impose some restrictions on fares, either by setting a uniform fare or by setting a maximum or minimum fare. Service requirements include two-way communication, 24-hour service, prohibitions on soliciting passengers, conditions under which a driver can refuse to transport a passenger, and many other such provisions. It is the entry controls that provide the controversy in taxicab regulation. Entry controls are requirements that cities place on applicants for taxicab operating licenses, not on taxicab drivers' licenses. Cities vary considerably with respect to the strictness of their entry control, and there are six categories in which these entry controls fall. These are: 1. Fixed ceiling or medallion (30.4 %) 2. Public convenience and necessity (25.4 %) 3. Minimum standards (17.6 %) 4. Open entry (12.2 %) 5. Population ratio (8.7 %) 6. Franchise (5.7 %) The numbers in percentages are the percentages of U.S. cities with each type of entry control (Shaw et al., 1983). Note that one-half of the cities with open entry had fewer than 10 taxis in the city. Also, the restrictiveness of entry in cities using a population ratio depends on the ratio chosen. . Of these entry controls the first and last ones elicit the greatest attention. Economists, reporters, and taxicab regulators in other cities point to New York City, which has had a medallion system since 1937 and whose medallions now trade for over a quarter million dollars. To critics the New York situation represents the archetypal example of the problems of a system that fixes the number of medallions over time. On the other hand, the elimination of all entry control (#4), which is discussed in the remainder of this report, creates a set of other problems such as higher fares, poor quality drivers, overcrowding at key taxi stands, poor vehicle conditions, etc. (Price Waterhouse, 1993; Gelb, 1983a and 1983b; Zerbe, 1983; Teal, 1987). Often lost in the debate over entry controls is the fact that there are four other mechanisms for controlling entry. To varying degrees these mechanisms blend control over entry, the ability to expand taxicab supply to meet demand, and the preservation of competition. The franchise mechanism, for instance, is used by Los Angeles to limit the number of taxi companies while allowing these companies to compete with each other and to grow or contract according to how successful they are in this competition. The minimum standards option means that there is no limit placed on the number of taxicab providers but each one must meet certain standards of customer service, such as a minimum number of taxicabs, a place of business, twenty-four-hour dispatching service,and a maximum age of vehicles. The other two mechanisms are merely ways to expand the total number of taxicab licenses over time if demand increases. Institute for Transponation Research and Education _ May 1998 4 Review of Taxicab RegulalOf)' Clumges in Cincinnnb.lndi:mapolis.and Seattle 1.5 Deregulation in the Taxicab Industry During the aftermath of the airline deregulation of 1978 there was a concomitant interest in deregulation of other transport modes, including intercity buses, trucks, railroads, and taxicabs. However, whereas these other modes were regulated at the state and national levels, taxicab regulation is usually a local matter, and hence deregulation was a local decision. In fact, few cities opted for deregulation; Price Waterhouse (1993) found that 21 cities had deregulated their taxicabs prior to 1983 and that no cities were known to have deregulated between 1983 and the time of the Price Waterhouse study in 1993. Still, these 21 cities--especially Seattle and San Diego-received extensive attention from transportation regulators across the country and were extensively studied (Gelb, 1983a and 1983b; Teal, 1987; Frankena and Paulter, 1984). "Deregulation" in the case of taxicabs almost always has meant "open entry," a term that means a dramatic reduction in requirements that an applicant must meet in order to be granted a license to operate a taxicab. A few cities have also experimented with deregulation of fares, but primarily deregulation has meant open entry into the industry. These 21 cities show the dramatic differences between economic theory and actual results. Proponents of taxi deregulation argued that open entry would enable new, better operators to enter the taxi industrY, thereby instilling more competition which would improve service quality and reduce fares (Frankena and Paulter, 1984). In reality, nearly the opposite occurred as fares increased and service quality declined. New entrants did not enter the industry; rather, existing drivers became independentdriver-owners and congregated at airports and hotels. Price Waterhouse concluded, "In retrospect, the effects of taxi deregulation have ranged from benign to adverse." Dempsey (1996) has presented the theoretical explanation for the differences between the predictions of deregulation proponents and the actual results. He argues that, unlike the other deregulated transportation industries, the taxi industry is characterized by low capital costs and customers who do not have the opportunity to shop among different taxicabs. As a result, in a deregulated environment taxicab operators have a perverse economic incentive to drive down their costs and service quality instead of competing for new customers. The result is a proliferation of owner-drivers who can enter the market without incurring costs for a central office, dispatching, 24-hour service, marketing, and sit at public stands at hotels and airports. Given the results of the 21 cities' experiences, it is easy to understand why Price Waterhouse found only 4 cities had retained their open entry regulations and that the impetus for re- regulating the industry came first from the airports. The recent actions by Seattle represent a full circle return to regulation after experimenting with open entry and deregulated fares in 1979 (Zerbe, 1984; Lewis, 1995; Avants et ai., 1995). The actions of Indianapolis and Cincinnati, however, are noteworthy as the only two cities in the past decade or so that have chosen to deregulate their taxi industries. Inso.... for T....ponaIi... _ ond ll<l'...~0Il - May 1998 5 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle 1.6 Study Goals/Objectives This report presents the results of an examination of recent taxicab regulatory changes in three cities: Cincinnati, Ohio; Indianapolis, Indiana; and Seattle, Washington. These three cities are not similar in their regulatory actions. Two of the cities have implemented open entry while the third has moved strongly in the opposite direction. However, given that few large U.S cities have implemented new taxi regulatory policies in the past decade, the actions of these three cities are of considerable interest. As a result, the International Taxicab Foundation has funded this study to examine the impacts of the regulatory changes in these three U.S. cities. The intent of this study is to provide accurate documentation of why regulatory changes were made in each of the case study sites. The study is also intended to clearly identify and describe the impacts that these regulatory changes have had on service quality, local taxicab fleet operators and drivers, the tourism industry, neighborhood groups, regulatory agencies, and passengers. 1.7 Data Collection Methodology In conducting this study the research team relied on flI'St-hand information collected on-site in the three cities. Two members of the team visited each city for approximately three days each. In addition the team followed up with telephone calls to gather additional information and to clarify information gathered during the in-person interviews. The in-person and telephone interviews were conducted in all three cities with key stakeholders, including representatives from: the taxicab industry (fleet owners and taxi drivers); the tourism industry (hotels and restaurants); neighborhood groups; and local taxicab regulatory and enforcement agencies. These interviews were conducted following an interview guide designed to solicit information on three primary issues: (1) What regulatory changes occurred; (2) Why did the regulatory changes occur; and (3) What have been the results of these changes? By interviewing persons with different perspectives on the taxi industry the study team endeavored to obtain a balanced, objective answer to these three questions. InsU.... for TllUISporllIlillll ~ IIld _on - May 1998 6 Review of Tnxicab Reguhnory Chmtges in Cincinnati.indianapolis. and Seattle 2.0 Cincinnati, Ohio 2.1 Introduction The metropolitan area of Cincinnati covers 3,810 square miles and had a 1990 population of 1,744,124. The City supports a variety of public transportation alternatives that includes fixed- route bus and specialized human transportation. Taxicabs are a vital component of the public transportation network. The area is serviced by 499 taxicabs representing 44 taxicab companies. In 1994, Cincinnati adopted a taxicab ordinance that relaxed entry into the market. While this ordinance maintained the public convenience and necessity form'of entry regulation, new criteria were inserted which made it much easier for applicants to demonstrate that new services would meet the needs of public convenience and necessity and thus gain entry. 2.2 Historical Changes in Taxicab Regulations. 1940's to 1993 During World War II, a two-tier system for regulating vehicles for-hire was implemented in Cincinnati due to wartime restrictions on fuel. tires, and vehicles. This was the first occurrence of opening entry into the taxicab industry in Cincinnati. In addition to taxicabs that operated throughout the metropolitan area, automobiles for hire were authorized to operate only in suburban locations. Business for the latter operators was generated through telephone calls only; 'automobiles for hire were, not allowed to use taxicab stands. Following World War II, automobile for-hire operators were allowed to become licensed taxicabs. In 1986, public vehicle regillation was transferred to the Office of Consumer Protection from the Police Department. There were a total of 348 taxicab licenses issued to serve the city. Additional licenses were not issued due to an inability of applicants to prove an unmet need to serve the public convenience and necessity. Yellow Cab of Greater Cincinnati held approximately 275 of the 348 licenses and leased licenses to individual drivers who operate their own vehicle. In 1987, an individual submitted an application for 80 taxicab licenses and proposed this new company would use new vehicles and outfit drivers in uniforms. At a public hearing, existing taxicab company owners prevailed on the City Council to place a moratorium on issuing new licenses. One council member requested that the Chief of Consumer Protection rewrite the ordinance to better reflect his view of how the taxicab industry should be regulated. The council member who made that request subsequently became mayor. The City Council dealt with the proposed revisions to the ordinance on a piecemeal basis. The only significant change that was adopted was the addition to the vehicle safety inspection program of an annual mechanical inspection to be conducted by an Automotive Service Excellence (ASE) certified inspector. Institule for TlIllSpOl1Olioo _1IId I!dllClllion. May 1998 7 Review of Taxicab Rep)acory Changes in Cincinnali,lndian:apolis. and Se:anle During 1988-1993, the City operated under an unofficial cap of 348 taxicab licenses issued. I This was an administrative policy decision; no cap on the number of taxicab licenses to be issued was specified in the City ordinance. No additional taxi permits were issued during this time as no applicant could prove the need for additional taxicabs under the public convenience and necessity requirement. In 1993, Yellow Cab Company of Greater Cincinnati was sold to an owner of approximately 60 taxicab licenses who had been affiliated with the company and whose vehicles wore the Yellow Cab Company colors. During this individual's tenure as Yellow Cab Company owner, there were problems with taxicabs failing mandatory vehicle emissions tests because of disconnected pollution control equipment in 1996. As a result, the federal government levied a large fine against the company, which led to that owner entering bankruptcy and defaulting on his business loan from the previous company owner. Therefore, in 1996, ihe person who had sold the company in 1993 repossessed the company. As a result of this incident, Yellow Cab Company lost over 100 licenses, and when it was repossessed in 1996 Yellow Cab Company operated 168 taxicabs. It was reported that the publicity generated from the vehicle emissions test failures resulted in an unfavorable perception of the taxicab industry by several local government officials and increased political support for changing taxicab regulation in Cincinnati. In 1993, just prior to the open entry ordinance, Yellow Cab was the largest taxicab company. Skyline Taxi, the second largest company at that time, operated approximately 75 taxicabs. There were a total of 20 taxicab companies operating 348 taxicabs. There were 8 independent owner-drivers and six with twelve cabs or fewer. About 75 pe~ent of taxicab licenses and about 90 percent of the radio-dispatched taxicabs operating in Cincinnati were affiliated with three companies.2 .. . . 2.3 Motivations For the 1994 RegnIatory Change There were several motivating factors that lead to the 1994 regulatory changes in the City. First, several taxicab license holders affiliated with Yellow Cab Company of Greater Cincinnati as well as drivers from a variety of taxicab companies made City Council members aware of their desire to own and operate their own taxicab company. The mayor and a majority of City Council members came to believe that a greater number of independent owner-drivers should be allowed to participate in the industry. Also, some of these local politicians disliked the practice of "selling" taxicab licenses and believed licenses should not have a value other than that charged by the City. . Another motivating factor was that regulators and City officials believed that relaxing entry requirements would result in an improvement in the condition of taxicabs and an improvement in service, particularly to areas experiencing inadequate service. The City was investigating I "Taxicab Regulation in Ohio's Largest Cities," prepared by the Buckeye Institute for Public Policy Solutions, Dayton,OH, 1997. 2 Arthur L. Herold, "Statement of Arthur L. Herold: Webster, Chamberlain & Bean, Washington, DC, on Behalf of Consolidated Transportation, Inc., Skyline Taxi, Inc., and Veterans & Best, Inc. Before the Law & Public Safety Committee of the City of Cincinnati," January 29, 1991. 1nsti..1O foe T.....,....aOll _b and I!ducaIion - May 1998 R Review of Taxic:ab Regulatory Changes in Cincinnati. Indianapolis. and Seattle potential means of improving the safety, maintenance, and appearance of taxicabs and improving drivers' appearances through changes to the ordinance regulating taxicab operations.3 Taxicab company owners were opposed to open entry because they believed that drivers would start independent companies, generating two unfavorable consequences. First, existing companies would need to recruit new drivers to replace those who left to form their own companies. Second, new companies would not be required to utilize central dispatching, provide 24-hour service, or provide service to all areas within the City. Each of these practices, while enhancing the quality of service, adds to the cost of providing taxicab service. If these requirements were to be deleted from the ordinance, existing taxicab companies would be competing unfairly with new independent operators who would not be required to shoulder the same cost burdens to provide service, leading to an overall degradation in taxicab service. The existing fleets will then have to re-evaluate whether to continue to provide late-night service and to respond to short trip requests. 2.4 Key Provisions of Regulatory Changes --February, 1994 The Cincinnati taxicab ordinance was revised effective February 1994. The 1994 ordinance (Chapter 407: Public Vehicles, Chapter 408: Drivers' Licenses for Public Vehicles) applies to taxicabs, limousines, handicapped livery vehicles, animal-drawn carriages, and pedicabs. The 1994 ordinance retained the provision that applicants prove a need for service based on "public convenience and necessity" in order to obtain a license. However, the primary criteria specified for public officials to determine if a public vehicle license is to be issued include: >- "Whether the vehicle for which the application is made is a suitable vehicle to be operated as a taxicab...." >- "Whether the applicant's proposal will increase taxicab service in areas of the city where taxicab service levels are deemed inadequate...." >- "Whether the applicant's proposal includes service improvements above the level of service generally available from taxicabs currently operating in the City of Cincinnati." >- "The applicant's history in the operation of taxicabs or other public vehicles in the City of Cincinnati and other communities." >- ''The applicant's procedures for inspection and maintenance of its taxicabs." >- ''The applicant's training procedures for its drivers." >- "The applicant's rules and regulations governing driver's appearance and conduct." >- "Other matters presented by the applicant or other parties which relate to the issue of the public convenience and necessity which the director deems of value in determining whether the application should be granted or denied." >- "In determining public convenience and necessity the director shall not consider the impact an applicant's business may have on the business of existing license holders.,,4 J Ibid. · Cincinnati Municipal Code, Chapter 407: Public Vehicles, Section 407-7: Issuance of Public Vehicle Licenses, February, 1994. Institulc for Tnnsporwioa -.... ond _... - May 1998 9 Review of Taxicab Regulatory CIwIgcs in Cincinrwi. lndilUUlpOlis. and Seanle The final criterion has been interpreted as removing any burden of proof on the applicant for showing public convenience and necessity and thereby effectively eliminating any cap on the number of taxicab licenses that the City may issue. Anyone with a vehicle passing inspection and appropriate insurance coverage may now apply for a taxicab license and be likely to be granted a license. The 1994 ordinance removes any service requirement, including 24-hour service, all-city service, and dispatching service. In contrast, however, to its hands-off approach to service requirements, the ordinance does stipulate a minimum fare of $3 per trip. The 1994 ordinance does not state a cap on the number of licenses that the City may issue. There were 347 taxicab licenses issued and 20 companies in business in 1993 just prior to open entry. Following adoption of the new ordinance, the number of licenses issued quickly rose to 587, and the number of companies in operation rose to 40. The number of independent owner-drivers increased to 19. In 1998 there are currently 44 companies licensed to operate taxicabs in Cincinnati. Twenty- three of those companies are independent owner-drivers. Another three companies are comprised of an owner-driver plus one or more other drivers who own their own taxicab. There are currently 639 taxicab licenses issued. However, 110 of those licenses are now in escrow for non-usage. Cincinnati is unique among the three cities in placing into an escrow pool licenses that are surrendered, revoked, or not renewed. The City may also place a license in escrow due to lack of an operational vehicle. A license or licenses in the escrow pool may be reclaimed singly, severally, or totally without a showing of need and necessity. A license placed in escrow remains available for restoration to the owner for a two-year period. If the licensee has not restored the license within this two-year period, the license reverts to the City. According to regulatory personnel, escrow of licenses has mostly occurred at small companies operating 1-2 taxicabs. Table 2.1 shows significant changes in the taxicab industry and in regulations that have occurred in Cincinnati since 1986. InstilUIC for TlIIIIpCldaIion Rosean:h and Educ:alion - May 1998 10 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle Table 2.1: Significant Changes in the Taxicab Industry and Regulations in Cincinnati I CriterioD 1986 ~ 1994 July, 1997 ~ , 22 (1990) Taxicab 33 21 (1991) 40 44 Companies 20 (1992,1993) 19 independents 23 independents 8 indeoendents Taxicab Licenses 348 347 587 (cap lifted) 639 (cap of 348) of which 110 are in escrow 1990-91 Not Avail. Licensed Taxicab Not Available 1,301 (1992) 1,170 1,007 Drivers 1,174 (1993) Fares Maximum Fares - Maximum Fares - Maximum Fares - Maximum Fares- Amount Not Amount Not $2 drop, $0.20 per $2 drop, $0.20 per Available' Available' 1/6 mile, $12.00 per 1/6 mile. $12.00 per hour waiL hour wait, $3 minimum fare. $3 minimum fare. Inspecton 3 3 until 1992 2 2 2 after 1993 Vehicle Safety - Safety - Safety- Mechanical - Inspections Semi-Annual Semi-Annual Semi-Annual Annual, Safety- Semi-Annual Liability Not Available $100,000 minimum $100,000 minimum $100,000 minimum Insurance as of 1lI19188 Required The number of licensed drivers currently fluctuates between 900-1100 (a 15% reduction from pre-deregulation levels). Applicants are examined by the director of safety or his designee as to their knowledge of the provisions of the taxicab ordinance, the geography of Cincinnati, and local traffic regulations through a written examination. The 1994 ordinance revisions also established a minimum fare of $3 per trip reportedly due to the compact size of the City. A maximum fare structure has been in effect during the 1986-1997 period. Current maximum fares are: $2.00 drop charge, $0.20 per 1/6 mile, and $12.00 per hOl11" waiting time. Fares for trips to locations outside Cincinnati are based on the meter rate plus a surcharge. The total fare rate charged for mileage outside the City limits must be no more thail 25 cents per mile in excess of the meter rate. , The taxicab inspector was unable to provide these amounts. _..'" for T....ponatioo Reoean:h and I!duc:alion . May 1998 11 Review of Tuicab Regulalory Changes in Cincinnati. Indianapolis. and Seattle Approximately 20 years ago there were 5 inspectors who, in addition to taxicabs, held responsibility for inspecting City buses. There were 3 inspectors as recently as 1988. The 2 current inspectors have responsibility for oversight of all public vehicle licensing-including limousines, animal-drawn carriages, pedicabs, and handicapped livery vehicles-as well as inspecting taxicabs. The 1994 ordinance revisions increased the rigor of taxicab inspections. Prior to 1995, taxicabs were subjected only to a safety inspection. Under the current ordinance, taxicabs must pass an annual mechanical inspection by an Automotive Service Excellence (ASE) certified mechanic, plus semi-annual safety inspections by City inspectors. Taximeters are subject to semi-annual inspections. The addition of the mechanical inspection requirement is perceived to be an outcome of Yellow Cab Company operating taxicabs in poor mechanical condition and unable to pass mandatory vehicle emissions tests during the 1993-1994 period. Failure of these tests resulted in the federal government levying a large fine against the company and was largely responsible for the company going into bankruptcy. Minimum liability insurance on each licensed public vehicle, except handicapped livery vehicles was increased through the 1994 ordinance to $100,000. Handicapped livery vehicles must be covered by a $1 million combined single-limit liability policy (death, personal injury and property damage). There is only one insurance company currently writing coverage for taxicabs operating within the City. Other current regulations affecting vehicle licenses include: > Companies providing radio dispatch must secure a public vehicle dispatching office license, at an annual fee of $16. Radio dispatch is not required. > Twenty-four hour service is not required. > Licensees holding 25 or more taxicab licenses must apply for additional licenses in blocks of five. > A reasonable and consistent effort must be made to operate all taxicabs within a given 30-day consecutive period, or the license may be revoked. However, licensees with 10 or more taxicab licenses may keep up to 10 percent of their vehicles out of use. Licensees with less than 10 taxicab licenses may keep one vehicle out of use. > Licenses may be transferred between licensed owners for a $10 fee. 2.5 Impacts From the 1994 Regulatory Change 2.5.1 Market Share Prior to the 1994 relaxation of entry there were 20 companies in operation. Yellow Cab Company of Greater Cincinnati, held approximately 275 of the 347 licenses issued in 1993. DUe to the 1994 regulatory changes, other taxicab companies were started and/Qr expanded (Towne Taxi, Around the Clock Taxi, etc.). wnw" for TI'lIIISpCXlaIiOllIlaean:llIlld Education. May 1998 12 Review or Taxicab Regulatory Chanps in Cincinnati. Indianapolis. nnd Scanle There are now 44 taxicab companies legally operating in Cincinnati with the majority of the City taxicab business held by five companies--Yellow Cab Company of Greater Cincinnati (97 licenses), Skyline Taxi (77 licenses), Towne Taxi (45 licenses), Around the Clock Taxi (48 licenses), and Veterans Taxi (21 licenses). Individual license holders are also affiliated with each of these companies-Yellow Cab Company of Greater Cincinnati (4 affiliated licenses), Skyline Taxi (1 affiliated license), Towne Taxi (21 affiliated licenses), Around the Clock Taxi (21 affiliated licenses), and Veterans Taxi (2 affiliated licenses). Twenty-three of the 44 companies possess one license, and several companies provide service primarily to suburban areas. 2.5.2 Disparity Between Services Offered By Large and Small Companies Fleet owners were critical of the disparity between service provided by the larger taxicab companies and independent owner-drivers. The larger companies provide central dispatching, 24-hour service, and service to all areas within the City. Many independent owner-drivers primarily serve friends and repeat customers within a limited area and do not operate 24 hours or 7 days throughout the week. Suggestions to improve this situation, which were provided by both taxicab fleet owners and a regulator, include: > Requiring provision of central dispatching (through either a company or a dispatching association); > Requiring provision of 24-hour service; > Requiring every company fleet to have a minimum number of taxicabs.as a means of helping to ensure that service is available to all areas of the City; > Requiring every company to have an office location; and )> Requiring drivers to log all drop locations. The purpose of implementing these suggestions is to create an "even playing field" throughout . he industry by treating all operators the same while at the same time ensuring customers that all operators meet at least a minimum level of service. 2.5.3 Service Taxicab dwners, regulators, and customers stated that there is currently a need for additional taxicabs in service at night, as shown by the difference between typical wait times during the day and at night which were cited by company owners and customers. Fleet owners reported that the average wait time for service during daytime hours is 15-20 minu~. compared to l-l-Y:z hours at night. The reason given for that difference is that few independent owner-drivers work at night, and those who do work nights generally provide service only to known customers. It was also reported that the reason for the lack of, taxicabs on Friday and Saturday nights is that the day business is lucrative enough that drivers do not need to drive nights. It w.as declared that drivers who are willing to work nights are particularly difficult to find in Cincinnati. Several customers stated that the average response time to an address in a public housing project was 45 minutes during daylight hours, but that taxicab service to that neighborhood is often not available after 5:00 p.m. This lack of service has existed for the past four years (since deregulation). _bile forTransponad... Resean:blllld Educali.... May 1998 13 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle 2.5.4 Driver Shortage All the taxicab company owners interviewed cited a current shortage of qualified drivers. This is the result of the relaxing of regulations on entry to the business, which has resulted in a rather fixed supply of drivers now spread over more cabs. The difficulty of attracting new drivers to the industry is shown through price competition in the daily lease rate charged to drivers by companies. There have been periodic price wars among larger companies in an effort to attract drivers away from other taxicab companies. Fleet owners stated that current driving record requirements and the prohibition on hiring individuals with a criminal history are excessively strict and prevent some otherwise qualified drivers from gaining work, thereby reducing the potential labor pool. 2.5.5 Other Problems Cited Deregulation has not led to an improvement in vehicle condition. A regulator expressed the belief that additional enforcement personnel are needed at this time, since the number of enforcement personnel has remained constant for the past five years despite the increase in the number of public vehicle licenses issued. Several customers stated that the poor condition of many vehicles had not improved since the 1994 change in regulation, and service is poor on weekends and at night, especially in poorer neighborhoods. However, enforcement personnel believe that taxicabs are in somewhat better condition now than prior to the relaxation of entry, and credit this improvement to ownership of cars by independent owner-drivers. The taxicab inspector stated there has been no decrease in the number of complaints since entry was relaxed. The inspector was unable to provide the number of complaints received before and after deregulation. The larger taxicab company ownerS said that the lack of a requirement for 24-hour, 7 days per week service and central dispatch has created differing expectations for service provided by independent owner-drivers compared to larger companies. As one large company owner stated, "Companies need to provide equal service. Now the four large companies provide service at their expense; other small companies eat the gravy." Providing taxicab service late at night and early in the morning is not profitable but is generally believed to be critical to the community. A regulator 'believes 24-hour service should be required as a condition of receiving a taxicab license. This regulator believes that independent owner-drivers should be accorded an opportunity to operate their own business, but that the owner-drivers should be held accountable for providing service 24 hours a day. His suggestion of a means to achieve these goals was that independent owner-drivers form groups to reach some minimum required size for a company or association, an approach which Seattle has adopted (Section 4). The association would provide a means of providing sufficient taxicabs to provide 24-hour, 7-day service throughout the city while allowing owner-drivers to operate their own businesses. One practice that existed prior to the relaxation of entry and persists afterward is taxicab driverS providing service in areas for which they do not hold valid licenses. This problem exists in the greater Cincinnati area on both sides of the Ohio River in both Ohio and Kentucky. Cincinnati- licensed taxicabs, with the exception of 31 vehicles permitted to operate from the Greater -- forTlIIlSpOrlaIion _1IIlI EducaIion. May 1998 14 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle Cincinnati Airport under sublease agreements with Kentucky operators, cannot legally pickup at the airport, which is located in Kentucky. This situation results in deadheading for all Ohio operators except these 31 taxicabs. It also prevents a large influx of independent owner-drivers from obtaining Cincinnati licenses and waiting at the airport with the associated problems of overcrowding, soliciting, litter, etc. Institute for Transponation Research and Education - Mar. 1998 15 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle 3.0 Indianapolis, Indiana 3.1 Introduction The metropolitan area of Indianapolis covers 3,532 square miles and had a 1994 population of 1,461,700. The City supports a variety of public transportation alternatives that include fixed- route bus and specialized transportation. Indianapolis implemented a significant change in its regulation of taxicabs with 1994 revisions to the City-County ordinance that allowed open entry into the taxicab business and established a maximum fare structure. 3.2 Historical Changes in Taxicab Regulation - 1970-1993 The unified City/County government was implemented in 1970, creating the Consolidated City of Indianapolis. Taxicab regulation was placed in the Controller's Office. Until the late 1960s, there were 423 taxicabs licensed in Indianapolis. Prior to 1970, the City taxicab ordinance had limited the number of taxicab licenses available by a population ratio of one cab per thousand population. In 1970, that limit was replaced with a ceiling of 600 taxicab licenses. Both prior to and following the 1970 change in the maximum number of licenses to be issued, taxicab licenses were issued based upon a finding of public convenience and necessity. In 1972, 502 taxicab licenses were issued. Red Cab held the majority-approximately 400-0f these licenses. Four other companies held approximately 90 licenses, and independent owner-drivers held 10 licenses. By 1972, Red Cab was experiencing financial and service problems. In 1973, company employees went on strike against the company, and Red Cab entered bankruptcy and ceased. operations in August 1973. City offici81s became concerned about the condition of the local taxi industry as a result of Red Cab's problems. As Red Cab deteriorated, city officials suspected that many licenses were inactive. To curb this practice and to ensure that only active taxicabs were licensed, vehicle inspections were required every 30 days, and licenses of vehicles inactive for over 60 days were revoked. The taxicab ordinance had stipulated that the City could revoke any permit not in use for over 60 days. This provision was the basis for the revocation and reissuance of permits. The Controller revoked 255 licenses during 1973.. Taxicab licenses were redistributed at two periods during 1973 through administrative actions of the Controller's Office. The first redistribution took place in April-May of 1973, when 125 revoked licenses were reissued to new applicants. Ninety-four additional revoked licenses were reissued in April 1974. All the available licenses were not requested. During the second period of reissuance in April 1974, a total of 466 licenses were issued, compared to the 502 licenses that had been issued hi April 1973. There was only one new entrant to the taxicab business through these two periods of reissuing licenses. The other 33 recipients of taxicab licenses were individuals from within the taxicab business, many of whom were taxicab drivers. Requirements to provide 24-hour dispatch and to maintain a downtown office were retained but not enforced. There was no Inslitutc forT....porlllliOll Rcsean:h and Educ:alion - May 1998 17 Review of Taxicab Regulatol)' Changes in Cincinnati. Indianapolis. and SeaRle requirement for a minimum number of taxicabs. In 1985, the Controller's Office again made vehicle licenses available, but there were no applications for licenses. While the City-County ordinance allowed the Controller's Office to issue a maximum of 600 taxicab licenses, the number of taxicab licenses issued was at the Controller's discretion. There were 393 licenses issued in 1985. The Controller believed there was a need for additional licenses at that time; therefore, applications were sought for additional licenses. No applicants came forward. In 1993, the year prior to IndianapolislMarion County adopting open entry and maximum fares, twenty-nine taxicab companies were in operation, and 392 taxicab licenses were issued. This represents a decrease in both the numbers of taxicab companies and taxicab licenses from 1974, when thirty-six companies were in operation and 466 taxicab licenses were issued. 3.3 Motivations For the 1994 Regulatory Change The primary motivation for deregulation of the taxicab industry in Indianapolis came from the City/County government, particularly Mayor Stephen Goldsmith, who held a philosophical view that government services should be privatized and/or deregulated in those instances in which potential economic benefits could be realized. Mayor Stephen Goldsmith formed the Regulatory Study Commission (RSC) through an executive order in 1991. The purposes of this commission were to investigate the feasibility of privatizing many publicly provided services and to revise government regulation of various boards, agencies, and commissions. A total of 61 different municipal services were privatized or deregulated as a result of RSC studies. Taxicab regulation was among the flfSt public services to be examined by the commission. The RSC study of deregulating the taxicab industry focused on opening entry and changing from a City-set fare structure to a maximum fare structure.. The study also recommended deleting the requirements for 24-hour service and radio dispatching. Government officials believed that burdensome regulation should be minimized, allowing market economics to dictate business success or failure. Mayor Goldsmith stated, ''The taxi industry is a good example of an area where regulations had completely displaced the economic principles of demand and competition.,,6 A former member of the RSC stated that the impetus for investigating deregulation of the taxicab industry were: >- The ordinance was seen as restrictive to entrepreneurial activity. Taxicab drivers wanted to be business owners, and government officials believed the ordinance unfairly prevented this from occurring. >- Prices were fixed. This was the only instance of a price for a service being fixed at the municipal level. Several taxicab drivers had approached government officials requesting the ordinance be changed to allow entry into the taxicab business with fewer restrictions. The majority of those drivers were African-Americans. Therefore, opening entry to the taxicab industry offered an · "Regulation and the Urban Marketplace," Stephen Goldsmith, Cato Institute, January 1997) InstilUte for Transporl8lion Resean:h and Education - May 1998 18 Review o(Taxicab Regulatory CIwtges in Cincinnati. Indianapolis. and Seattle opportunity for govemment officials both to advance their economic and entrepreneurial philosophy and to respond to pressure to increase minority business ownership. Supporters of taxi deregulation included the Chamber of Commerce, the Indianapolis Urban League, the Hoosier Minority Chamber of Commerce, the Indianaoolis Recorder, downtown hotels and banks, and some medical providers to the elderly. Supporters believed that deregulation would increase the level and quality of taxicab service, reduce fares, and provide small business start-up opportunities. "Proposal 72 was introduced to improve customer service and increase economic opportunity in the local ground transportation industry. In some areas of the city, there is little or no service and the service is not of high quality. This proposal gives everyone an opportunity to benefit.,,7 The improvements to be realized from implementing City Council Resolution 72, as cited by the Regulatory Study Commission8, were: > "Open Market Entry: The proposal (would) lift the arbitrary cap on the number of allowable taxis. > Price Competition: ...Operators may charge whatever they want below the existing ceiling, meaning the proposal will allow prices to fall, but not rise above the maximum ceiling. > Job Opportunities for Indianapolis Minorities: Disproportionately, the Indianapolis black community is the demographic segment that both depends upon taxis the most, and ... can benefit the most from an opening up of that industry. The people who want and are denied the chance to own their own cabs are overwhelmingly African-American. It is not inconceivable that adoption of Proposal 72 could lead to 100 new black-owned businesses in the first six months. > An Improved Local Ground Transportation Infrastructure: An unreliable and expensive taxi industry hurts retail, restaurant and convention business. An improved taxi industry will have a positive impact upon the entire community. > Allowing the Creation of a Local Jitney Industry: This provision is extremely important to transit dependent people who can not afford the high price or unreliable service of local taxis. In addition, this provision would not only increase employment opportunities by enabling more people to get jobs, it would create jobs and business opportunities in its own industry." . Proponents of opening entry indicated that applicants for taxicab licenses were prohibited by existing regulations from starting their own businesses. In August 1992, the City Controller had attempted to award 39 new taxicab licenses by lottery. That action was blocked by a lawsuit brought by license holders that contended the controller didn't follow established procedure. A review of the taxicab ordinance shows that it did not prohibit single-vehicle taxicab companies or stipulate a minimum number of vehicles for a taxicab company. The issue was really that 7 Tom Rose, Assistant to the Mayor for Regulation Affairs, as quoted in The IndianaDOlis Recorder, Saturday, March 26, 1994. · ''City County Council Proposal 72: Improving the Local Ground Transportation Marketplace," Mayor Stephen Goldsmith's Regulatory Study Commission, March 31,1994. InstibllC for TlIIIIpOltlIlion Research and Bduc:alion - May 1998 19 Review ofT3Xicab Regultl.lory Ch41nges in Cincinnati. Indianapolis. and Se:lnle regulators had not issued additional licenses to applicants. While 392 licenses were issued, the Controller's Office could have issued up to a maximum of 600 licenses. Licenses were issued based on a finding of pul;llic convenience and necessity. Regulators did not see a need for additional licenses based on a finding of public convenience and necessity and maintained the number of licenses at a constant level. All fleet operators opposed the proposed deregulation, arguing that consumer price gouging would result, quality of service would decline, that some taxicab companies would be forced out of business, and that drivers were being misled to believe that taxi service is easy and inexpensive to provide. 3.4 Key Provisions of Regulatory Changes -1994 Prior to implementation of Proposal 72 on July 1, 1994, entry to the taxicab industry was regulated by the need to prove public convenience and necessity, and the City of IndianapolisIMarion County set fares. The City/County Council voted to adopt Proposal 72 in May 1994, and revisions to the taxicab ordinance became effective in July 1994 allowing open entry and changing to a maximum fare structure. The proposal made these major changes to the taxicab ordinance: :> Eliminated the cap of 600 taxicab licenses; :> Replaced a set fare rate with a maximum rate, although all rates must be posted outside the taxi and with the local government; :> Eliminated the 24-hour service and central dispatch requirement allowing companies to operate part-time; :> Lifted the prohibition against hailing a cab; :> Added licensing requirements for limousines (previously licensed by the State); :> Changed inspection of limousines and jitneys-two mandatory annual safety inspections plus up to three surprise safety inspections where. warranted by citizen complaints; :> Increased the permissible operating life of taxicabs from 5 to 6 model years maximum; limousines and jitneys allowed a ten-year maximum vehicle operating iife; :> Changed insurance requirements-increased the minimum liability insurance for taxicabs from $100,000 to $300,000, but reduced the required minimum for limousines from $1,500,000 to $300,000; :> Increased the annual license fee to better defray costs of issuing and administering licenses-for taxicabs and limousines from $102 to $152; for jitneys from $25 - $50 to $152; :> Set maximum mileage and wait time rates; and :> Implemented a maximum "pick up" charge similar to a meter drop charge. The number of taxicab stands in the downtown area was reduced from 35 to 8. It was perceived that some taxicab stands were taking space that could be better used for parking. A business organization stated that the need for taxicab.s to wait in line at stands created traffic congestion Institute for TnnsponaliOll _ and I!dueaIion . May 1998 20 Review of Taxicab Regulatory Owtges in CincinnaIi. Indianapolis. and Seattle on some downtown streets. and that organization now states that the congestion no longer exists. It is impossible to state that the elimination of the requirement for taxicabs to pick up customers only at stands in the downtown area was totally or partially responsible for this change. It should be noted that while the 1994 ordinance deregulated the taxicab industry. it actually began the municipal regulation of the limousine industry, requiring licensing of limousine and jitney operators and requiring inspections of limousines and jitney vehicles as well as taxicabs. The current ordinance (Chapter 996: Public Vehicles For Hire) applies to taxicabs. limousines. and jitneys. Table 3.1: Slgnfficant Changes in the Taxicab Industry and Regulations In Indianapolis Priorfo;~'14' .' :"Alterl974" Prior;firop., o. I. ~lll!..<,. €~~'IfTI~; ~~.~... 199fi CurreDt lIfl'll~' ,;.Clfhl...lIlf, ...... '. 10 36 29 123 106 Taxicab Companies (5 Co.'s, (4 Co.'s, (3 Co.'s, (83% one or (2 major co.' s, Slndep.) 32Indep.) 26Indep.) two cab 104 sma1l co.'s ooerations) and indeo.) 502 466 392 460 372 Taxicab Licenses Cap al6OO. Cap al 600. Cap al6OO. No cap. No cap. (492 major-302 (0 Red Cab. 151 (201 Yellow. (172 Yellow, (173 Yellow. Red -Cab. 5 I Yellow. 158 66 Indep.. other co.'s and 20 Hoosier. Yellow, 139 other linns, 157 other co.' s Not independents 1791ndep.) other firms; JO Indep.) Available) Not Available) Indeo. ) Licensed Taxicab Not Available Not Available Not Available Not Available Not Available Drivers" 631(\992) $0.95 drop, Pick-up charge Pick-up charge Fares Records Not Records Not $0.30 per liS (amount not (amount not Available"" Available"" mile, $0.30 per specified), plus specified), plus minute wait $0.40 per liS $0.40 per liS after 1"3. mile, $0.40 per mile. $0.40 per $6.50 min. minute wail, minute wail, Airport. $5 downtown $5 downtown flat fare. flat fare. Inspectors I I I I I Safety - Safety-3 per Safety-2 per Safety-2 per Vehicle Inspections Not Available 4 per year; year; Meter- year plus up to year plus up to meter -monthly 3 per year. 3 unscheduled, 3 unscheduled. Meter-2-S Meler-2-S oer year. Minimum Liability Not Available Not Available $100,000 $300.000 $300.000 Insurance "Information unavailable on number of licensed drivers due to the method of record keeping. Controller's Office InIlilute for TaaspcxlIliaa R-..b IIld Educ:aliaa- May 1998 21 Review of Tnxicab Reguhuory Changes in Cincinnati. Indianapolis. llfld Sennle tracks only the number of new and renewal applications processed within a given year, and licenses are valid for a 2- year period. License period runs from applicant's birthday to birthday. The number of new/renewal driver's license applications for the past 4 years is: 1993-155, 1994-330, 1995-242, 1996-367, 1997-313. As. of March 1998,648 public vehicle for hire driver's licenses were issued. The 1998 figure includes both taxicab and limousine drivers. "Information on fares and minimum liability insurance was unavailable from the Conuoller's Office. An historical record of this information is not maintained. The number of taxicab permits increased initially following the 1994 deregulation but has since decreased to less than the number prior to opening entry. Thirty-two companies started within the six months following opening entry, and 75 percent of these companies were minority- or woman-owned. From opening entry in 1994 to 1996, the number of taxicab permits increased from 392 to 460. City records show that 83 percent of new entrants were small, one-or two-cab operators. However, the number of taxicab companies decreased from 123 in 1996 to 106 in 1997. The number of taxicab permits also decreased, from 460 in 1996.to 372 in 1997. It is difficult to attribute the relative contributions of several factors to this decrease. Other forms of for-hire transportation have become available in Indianapolis. For example, jitneys are now permitted to operate in Indianapolis-Marion County. However, it was reported that no jitneys are operating in the city. Limousines increasingly compete with taxicabs, particularly in the airport market. Prior to 1994, there was a cap of 75 limousine licenses; there is no cap on the number of limousine licenses under current regulations. While the number of taxicab companies has grown from 29 to 106 under the most recent open entry, the number of active taxicab licenses has actually decreased from 392 iri 1994 to 372 currently. The number of licensed taxicab drivers is difficult to calculate due to City/County record- keeping procedures. City/County Government officials were unable to provide an exact number of active taxi driver licenses as the Controller's Office tracks only the number of new and renewal applications processed within a given year. However, officials did state that at the end of 1992, 631 persons were licensed as taxicab drivers and there are currently 648 taxicab and limousine driver's licenses. Complete historical fare information is not available from the Controller's Office. The rates shown for 1994, prior to enacting open entry, are accurate; however, the taxicab inspector believes that this rate had been increased just prior to that time. He was unable to conf1l1ll this or to provide the date of the increase or the previous fare rates. Regulation of taxicab fares has changed from a government-set uniform fare to a government-set . maximum fare. Prior to the July I, 1994, regulatory changes, the taxicab ordinance set fares as follows: >- 95 cents drop charge (base rate), 30 cents per each 1/5 mile, 30 cents per minute wait time after the first 3 minutes. >- $18.00 per hour plus $1.50 per mile in excess of 12 miles in any hour. >- . $6.50 minimum fare originating from airport. , Institule for TllIIISporlIltion _and l!duc:aliCIII' May 1998 22 Review or Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle After July I, 1994, fares were subject to the following maximum amounts: > 1994: An undefined base rate plus 33 cents per each 115 mile, extra passenger 55 cents, 33 cents per minute wait charge. > 1995: Base rate plus 36 cents per each 115 mile, extra passenger 60 cents, 35 cents per minute wait charge. > 1996 and after: Base rate plus 40 cents per each 115 mile, extra passenger 65 cents, 40 cents per minute wait charge. One should note that no fixed or maximum charge is specified for the base rate for 1994 through the present. Each company establishes its base rate. Fares may not be changed more than once each calendar quarter. Current base rates range from $1.25 to $5.00. The two largest companies, as well as most independents, charge a $1.25 base rate. A flat fare of $5 is now an option for travel within the downtown area. Customers may request that the meter be used instead, which in many cases results in a lesser expense, due to the compact size of the downtown area. Historical information on the median base rate is not available; the Controller's Office does not track median rates or calculate them on an annual basis. This is due to the difficulty of compiling and computing such statistics due to the frequency of taxicab companies entering and leaving the market. The number of taxicab inspectors has remained at 1 since 1994. Both vehicle safety and meter inspections were required 3 times per year prior to July I, 1994. Vehicle safety inspections are currently required to be conducted only semi-annually. The minimum liability insurance requirement prior to July 1, 1994 was $100,000. Effective July 1,1994, the minimum liability requirement was increased to $300,000. 3,5 Impacts of the 1994 Regulatory Change There are differing opinions on the success of the most recent open entry in Indianapolis. The three greatest objectives cited by regulators, fleet owners, drivers, and business and hospitality orgllnh'llion representatives to be realized from deregulation of the taxicab industry were: > To increase business opportpnities for those desiring to operate their own taxicab businesses, particularly members of minority populations; > To improve customer service; and > To open the for-hire transportation market to a variety of service options. The first objective initially appeared 10 be partially accomplished, as shown by the increase in the number of taxicab operators and the initial growth in the number of permits issued through 1nsIi.... for Tnnspoctadaa _1IId 1!d.....0II - May 1998 23 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. :md Seattle 1996. However, the more recent decrease in the number of taxicab permits and taxicab operators does not support accomplishment of this objective. It should be noted that this objective is not a transportation objective. Opinions vary as to the success in accomplishing the second objective. Business and hospitality organization representatives that supported deregulation believe that (at least initially) overall customer service had improved, as shown in the following statements. "Within 6 months of deregulation, the city reported 32 new companies had started, three quarters of which were owned by minorities or women. Pick up rates were 12% lower for new companies compared to existing companies. Average mileage rates were 3% lower, and the average rate for the first mile was 7% lower.,,9 Eight months following deregulation, Indianapolis Downtown, Inc. (100 supported "the Council's ongoing support of taxi ordinance 76 (sic). Through deregulation, we've recognized improvements in the following areas: >- Increased the number of individual taxicab owners/entrepreneurs. >- Improved visibility of rate by posting on outside of taxi. >- Improved quality standards. Newly licensed taxis are clean and well-maintained. >- Improved access to taxis. Customer/visitors can now "hail" a cab. >- Opened market to more limousine service." "101 believes a deregulated taxicab industry is essential to its ultimate success as an affordable and efficient people mover. The positive market forces from deregulation are evident. However, taxi cabs in Indianapolis have yet to reach their highest potential as an everyday mode of transportation for our citizens and visitors. to., However, 101 also recommended three changes to improve customer service. Those changes included elimination of the $5.00 "Downtown zone" fare, moving a taxi zone, and incorporating a "requirement to place a window slick inside the back seat taxi window which says 'Thank you for visiting Indianapolis...How's my service? 327-5411',11 A spokesperson for Indianapolis Downtown, Inc., stated that none of these recommendations has been implemented: 101 has not commented since the number of taxis fell below pre-deregulation levels. but local fleet operators stated that the reduction in total number of taxis is an objective measure of the decline in customer service being provided to the citizens and visitors to Indianapolis. Regulators are unsure if customer service has improved since 1994, as the City/County does not maintain a historical record of the number of complaints recorded. A regulator stated that the number of complaints has increased. However, most of these complaints involved customers' perceptions of having been charged an excessive fare. Checks by the. taxicab inspector have 9 Ordinance 72 Update, Regulated Competition in the Indianapolis Ground Transportation Marketplace, Economic Development Committee, January 19, 1995. .0 From a letter written by Helen L. Brown, Director, Management Services. Indianapolis Downtown, Inc. to Dr. Philip Bont, Councilman-25" District, dated March 21, 1995. . "Ibid. InstilU.. for TnnsporlaIion _ ond Education - May t998 24 Review of Taxicab Regulatory Changes in Cincinnati. lndianapolis. and SeAtlle shown that in most instances, fares were charged correctly. With the maximum fare structure, trip fares can vary depending upon the fare charged by a particular operator. The second most prevalent type of complaint is that a driver did not know a destination address or took an excessively long route. To respond to these complaints, the taxicab inspector modified the driving test in 1997 to determine better a driver's ability to locate specific addresses. Driver applicants are now asked to drive to one or more street addresses as opposed to a hotel or attraction. One regulator believed that there has been no change in service to poor, minority neighborhoods and to individuals with disabilities. Taxicab company owners stated they did not believe service quality had improved since open entry was implemented. In terms of meeting the third objective, opening the for-hire market to additional service options, there are now fourteen limousine companies in operation. Regulators and airport staff stated there is increased competition from limousine service at the airport. Paratransit services have also been deregulated; regulators speculated that unlicensed neighborhood jitneys may offer increased levels of service in some areas. No jitney companies are or have been licensed by the city. However, at least one medium-sized taxicab company and numerous independent owner- drivers have left the taxicab industry in Indianapolis within the past three years. 3.5.1 Market SluJre There was, and continues to be, extensive competition in the taxicab market The number of taxicab companies operating in Indianapolis increased threefold following the periods when permits were redistributed in 1973-74. In April 1972, ten taxicab companies operated in Indianapolis-nine companies (A Cab, Duncan Cab, J Cab; Lawrence, Cab, Northside Cab, State Cab, Yell-O-Taxi, Yellow Cab, Yello Taxi) plus one independent dispatchiitg association. In April 1974, 36 companies were inoperation-4large firms plus 32 independent owner-drivers. The number of taxicab companies remained relatively stable through June 1994, when 29 companies were in operation. The three largest companies at that time were Yellow Cab (201 licenses), Metro (41 licenses), and Hoosier (50 licenses). Following adoption of Proposal 72 in July 1994, the number of taxicab operators initially grew to 45 companies. Currently, 106 companies provide taxicab service in IndianapolisIMarion County. The largest company is Yellow Cab (172 licenses). Other companies include Yell-O- Cab, Hoosier Cab, Union Cab, Budget Cab, Airline Cab, Reliable Cab, and Al Taxi. There are now approximately 30 companies that operate only one or two taxicabs. The number of active licenses now issued (372) is less than the total number of licenses issued in April 1974 (466). The number of licenses has fluctuated throughout the past 25 years, reflecting both changing regulations and changing conditions in the private, for-hire transportation industry. For example, in November 1979, 360 licenses were issued (Yellow Cab-156, Northside-71, consortium of State Cab/ Metro Cab/Carver Cab/several independents-68, other independent owners-65). In June 1994, prior to implementation of the revised ordinance, the number oftaxi licenses was capped at 600 and there were 392 licenses issued (Yellow-201, = InsIiIUlO for TnnspcxlIIion _ and EducaDlIIl . May 1998 25 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle Metr0--49, Hoosier-42). 3.5.2 Taxkab Company Business Failures Some taxicab companies, particularly those with 20-50 licenses and which provided 24-hour, 7- day, radio dispatch service, were placed in a position in which they did not have sufficient resources to compete effectively with Yellow Cab and the independents for business. Those companies were not able to provide service effectively throughout the entire area and at all times of every day. Medium-sized companies also lack the flexibility and low operating costs enjoyed by independent owner-drivers. The exit of Northside Cab Company (the third largest fleet) from the taxicab business was attributed to conditions resulting from provisions of the 1994 ordinance. Yellow Cab and Hoosier Cab are the only companies now providing radio dispatch and service to all areas of the City. The owner of another company that has been in business for ten years is now considering closing that business due to lack of profitability. Several owners and regulators stated that many taxicab businesses started by individual owner- drivers have failed within one year of start-up. Some regulators who advocated deregulation admit that success has not been as positive as had been hoped, citing the many companies entering and leaving the market. Some of these business failures were attributed to the inability of some independent owner-drivers to replace their single vehicles when they reached their maximum age threshold of six model years. 3.5.3 Fares According to fleet owners, deregulated fares cause confusion with customers. Visitors arriving at the airport are directed to the first vehicle in the taxicab queue. Visitors may not realize that fares can differ among taxicab companies. Several regulators and representatives of the business community believe that the $5 downtown fare should be abolished in favor of a return to using metered fares. Metered fares are less expensive than $5 for many trips within the downtown area, and the use of metered fares would result in cost savings for many customers. Interestingly, Indianapolis Downtown, Inc., which had advocated implementation of a Downtown Zone in 199412 reversed that position in 1995, and recommended charging by the meter within the downtown area. 13 An airport representative said that fares have increased since they were deregulated. A study of fares done two years ago (after deregulation) showed Indianapolis alnong the 15 most expensive cities in the US for taxicab fares. As a result, airport staff stated they may investigate the feasibility of requiring lower fares for trips originating at the airport. An examination of inflation-adjusted fare amounts shows that fares have risen a faster rate than the Consumer Price Index (CPI) for the 1993-1996 period. The cumulative increase in the CPI 12 From an attachment to a letter from Helen L. Brown, Director. Management Services, to Dr. Philip Borst, Councilman. dated March 28, t994. 13 Letter from Helen L. Brown, Director, Management Services. to Dr. Philip Borst, Councilman. dated March 21, 1995. _bite for Transportation Researtb ....1!ducali0ll - May 1998 26 Review ofT:uticab Regulatory Changes in Cincinnati. Indianapolis. and Seattle was 8.6 percent for the period. Using this multiplier, the 1993 fares of $0.95 base rate, $1.50 per mile, and $18.00 per hour wait time would increase to $1.03 base, $1.63 per mile and $19.55 per hour wait in 1996. This is significantly less in all categories than the 1996 actual prices of $1.25 base rate (typical charge used by most operators, although this rate varies from $1.25 to $5.(0), $2.00 per mile, and $24.00 per hour wait. 3.5.4 Qualified Drivers Indianapolis, similar to Cincinnati, is enjoying a period of economic growth and low unemployment. In addition, many drivers for larger companies have started their own taxicab businesses. Owners of two of the larger companies in Indianapolis cited difficulty in acquiring sufficient numbers of qualified drivers. There is a relatively fixed pool of taxi drivers that is now serving a greater number of companies. Regulators acknowledged this problem. In 1994 alone, 40 Yellow Cab drivers started their own businesses. Another company owner mentioned the loss of approximately one-third of that company's drivers over the past three years, stating many of those drivers had become independent owner-drivers. 3.5.5 Other Problems Cited It has been reported in the media that some drivers are unable to communicate effectively in the English language and are unable to comprehend customer requests. Regulators and two taxicab company owners believe the lack of requirements for radio dispatch, 24-hour, 7 -day service, and a central office location have resulted in the creation of a two-tier . system of service. Larger companies provide service to all areas of Marion County .at all times, and independent owner-drivers provide service at times and to areas at the discretion of individual drivers. A regulator also stated that the lack of a requirement in the taxicab ordinance for a central office location has m~e it more difficult for enforcement personnel to contact taxicab operators. Finally, company owners believe that the lack of hiring additional enforcement personnel concomitant with the initial increase in the number of licenses resulted in insufficient enforcement activity. The Controller's Office is now responsible for administering and enforcing regulation of limousine and jitney companies in addition to taxicab companies. Instilllle for Transpotlalion Resean:h and EducatiOll . May 1998 27 Review of Taxicab Regulatory Changes in Cincinnati.lndi;:mapolis, and Seattle 4.0 Seattle, Washington 4.1 Introduction The City of Seattle covers 84 square miles and had a 1995 population of 532.900. The Seattle metropolitan area (King, Kitsap, Pierce, and Snohomish Counties) contained 3,020,000 people within a 6,300 square mile area. The City supports, though a regional transit authority, a variety of public transportation alternatives that include fixed-route bus, specialized transportation, and light rail. In 1979, both the City of Seattle and King County opened entry and allowed taxicab companies to set their own rates. Seattle permanently closed entry in 1991; King County followed in 1992. In 1996, the City of Seattle revised its ordinance to implement a minimum standards taxi regulatory approach. 4.2 HIstorical Overview of Taxicab Regulatory Changes -1979-1996 Prior to 1979, King County and Seattle each regulated both taxicab entry and rates. Entry was restricted according to a population ratio, and the City and County Councils set rates. In 1976, King County, the City of Seattle, and the Port of Seattle embarked on a program to regionalize taxicab regulations and licensing. The intent was to standardize fees. and regulations, enforcement, and rate review procedures while maintaining adequate service levels throughout the county. For example, the County and the City allowed reciprocal licensing for vehicles and drivers. In 1979, the County and the City passed ordinances opening entry and deregulating fares. Deregulation resulted in problems peculiar to each jurisdiction. For example, the airport had a surplus of taxicabs and problems with taxi drivers refusing short fares and poor conditions of taxicabs. The County and the City found that open rate setting resulted in severe abuses as evidenced by one company filing a $10 drop, $50 per mile charge. Each jurisdiction passed ordinances or implemented procedures to address these unique concerns. However, the variance in rates among different taxicab operators created consumer confusion resulting in a consumer perception of price gouging. It was not unusual for a traveler to pay a different return fare for transportation between the airport and downtown. Many taxicabs were also perceived to be in poor condition (Zerbe, 1983; Lewis, 1995; Gelb. 1983a). In 1984, in response to these problems, the County returned to regulated entry by placing a moratorium on the issuance of new taxicab licenses and returned to setting taxi rates by ordinance. The City maintained open entry but limited fares by implementing a taxi rate ceiling. The County's entry moratorium expired in 1985; returning the County to open entry; however, fares continued to be set by ordinance. Also, in 1985, the Port placed a moratorium on the issuance of permits to operate at Sea- Tac Airport. This was because the number of airport permits had grown to 236, a number that airport staff deemed excessive. .Airport staff stated that there was confusion among customers from the variance in fares, the poor condition of taxicabs, and poor customer service that resulted from deregulation. The airport, as a major milrket, had attracted a great number of taxicabs, creating long waits for drivers between trips. The airport Inslitute for TroaspodIIIi... _.... Educalion . May 1998 29 Review o( TuicAb Regulatory Changes in Cincinnati. Indianapolis. and Seattle implemented the moratorium in response to these conditions as one step in an overall process to improve airport taxicab service. The Seattle-Tacoma International Taxicab Association (STIT A) was formed in 1989. The purpose of forming this association was to place all taxicab operations at the airport under the aegis of a single entity, facilitating administration of ground transportation services. This association became, and remains, the sole taxicab operator licensed at the Sea- Tac International Airport. King County placed a moratorium on the issuance of new taxicab licenses in 1986, when an Ad Hoc Taxi Committee was formed to study and recommend a method for determining the optimum number of taxis to operate in the County. The ordinance was revised as a result of the work of that Committee. First, a moratorium was placed on the issuance of new taxicab licenses. Second, a process was developed to establish rate and entry recommendations based on objective data. The County began to gather revenue and expense data on a quarterly basis from each licensed taxicab owner in July I, 1988. These revenue/expense data were used by the County to establish an average net profit, which provided regulators with an indication of the industry's financial health and viability. When these data were contrasted with optimum and actual service response times, regulators could develop a better-informed view of the taxicab industry. A Regional Taxicab Commission, which included representatives from King County, the City of Seattle, and the Port of Seattle, was formed in September 1988. The purpose of this Commission was to recommend taxicab rates, entry restrictions, and other related revisions to the King County Code. Recommendations on entry were submitted in February 1990. Those recommendations included increased standards for licensing and operations of taxicab vehicles and for-hire drivers. The Commission's term expired on December 31, 1990, before fmal rate recommendations were submitted. The Executive Staff of the County and the City jointly drafted an ordinance incorporating many recommendations of the Regional Taxicab Commission in the fall of 1990. On January 14, 1991, the City of Seattle adopted Ordinance No. 108357, limiting entry in the City. The King County Council passed Ordinance No. 9986 on June 10,1992, restricting entry in the County effective September 6, 1992. On August 17, 1992, the County Council passed Ordinance 10498. In addition to raising fares from $1.20 base ratel$1.40 per mile to match the City meter rate of $1.80 base rate/$1.80 per milel$.50 per minute wait, this ordinance: > Continued entry restrictions; > Capped the number of taxicab licenses at 561; > Changed the quarterly data collection process to an annual filing; > Eliminated the mandated use of the net profit ratio in rate and entry recommendations; _ > Enhanced the mechanical certification process, and safety and sanitation requirements for vehicles; > Increased the number of mandatory safety inspections; and > Increased for-hire driver standards for entry. Institum for TIIllIpOClIlioa IlaOlIn:h IIId 1lducaIi0ll- May 1998 30 Review of Tuicab Regulatory Changes in Cincinnati. lndianllpolis. and SeaRle The impetus for this change to greater regulation came from the tourism and hospitality industries. Both the hospitality industry and City regulators stated there was a lack of control over taxicabs. Fare rates were not standardized and could be set at excessively high levels, some drivers lacked English language skills, some drivers lacked sufficient geographic knowledge to drive customers to requested destinations, and some drivers refused short trips. In August 1995, King County and the City of Seattle entered into an interiocal services agreement. This granted authority for the County to issue City of Seattle for-hire driver's licenses as an agent for the City, and for the City to issue County taxicab vehicle licenses as an agent for the County. In addition, the agreement granted authority for County licensing inspectors to enforce the City taxi code as agents for the City and for City licensing inspectors to enforce the County taxi code as agents for the County. This specialization allows licensees to apply to only one agency to obtain both licenses. 4.3 MotivatioDS Leading to Additional Regulation in 1996 By the mid 1990s, several downtown businesses, such as the Westin Hotel and Clipper Navigation, and organizations representing business and tourism interests requested increased regulation of taxicabs. Spokesmen for the business and tourism industries indicated that many taxicabs were in poor condition, some drivers lacked geographic knowledge of the City, some passengers with short trips were refused service, and some foreign guests were not transported via the shortest possible routes. Passengers complained that fares were inconsistent. Le.. one fare was charged from the airport to a given hotel and another fare was charged on the return trip to the airport. In addition, some drivers were reported to lack English language. skills. The mayor. and several council members were supportive of a more cooperative and coordinated regulatory effort between the County and the City. Some members of the taxicab industry also believed additional regulation would be beneficial to the industry. These problems were determined by the City to be artifacts of the 1979 open entry, after which many independent owner-drivers entered the Seattle taxi market. Despite the various steps taken by the city, county, and airport to re-impose entry restrictions, there were in 1995 approximately 210 independents and 7 companies operating in Seattle. Most of these operators had no place of business and could not easily be located by the one on-street taxi inspector. Recognizing the magnitude of the service and enforcement problem it faced, the city brought in a peer review team of current and former taxi regulators from other cities. This team issued a report that called for increased self-enforcement by the industry (Avants et al., 1995). The ordinance enacted by the city in 1996 implements the recommendations of the peer review team. 4.4 Key ProvisloDS of the 1996 Regulatory Changes In fall 1996, the City of Seattle changed its taxicab regulations effective January I, 1997. The City ordinance contains some new requirements that move the city significantly toward tighter control over service quality and greater industry self-enforcement. Most significantly, taxicab license holders are now required to belong to associations, associations are required to meet 1Dsli1ll1lO farTnlIIpCldOIion _.... _.... Mal 1998 31 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle service standards such as providing dispatching, providing twenty-four-hour service, having at least 15 cabs, and using the same color scheme, trade name, and dispatch services. Radio dispatch is required for all taxicabs operating in the city. This requirement can be met by use of a mobile radio telephone service until December 31, 1999. After that date, the requirement can only be met by using two-way radio communication. Each association is also held responsible for the services of its affiliated cabs through a point system for rule infractions. It should be noted that this new ordinance does not restrict entry. Each association may grow without limit, so new operators can always enter the market. Likewise, there in no limitation on the number of associations, so new associations can be created at any time. Taxicab associations must: >- Maintain a business office which is staffed between 9 am to 5 pm; >- Ensure that each affiliated taxicab is insured as required; >- Accept on behalf of any owner or driver of an affiliated taxicab all correspondence from the Director of the Department of Finance (taxi regulator) to that owner or driver; >- Collect and provide information on operations and customer complaints; and >- Pay all penalties that are assessed against the association, affiliated taxicab licensees, or affiliated drivers. Associations may be comprised of one or more companies and/or "independent taxicabs". An "independent taxicab" is defmed as "a taxicab that, prior to October I, 1996, shared a central dispatch service with 9 or fewer other taxicabs. Independent associations now include Emerald City Taxi, Northwest Taxi, and Royal Taxi. The City also required all drivers to retake the written examination and demonstrate English language proficiency to renew their license. These changes affect approximately 50 percent of County licensees who hold City licenses as well as County licenses. Refer to Table 4.1 for a summary of changes from 1979 to the present. IasdIUIO fllr TIIIIIpClIlIlion __ ~OII . May 1998 32 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle Table 4.1: Significant Changes in Taxicab Industry and Regulations During Period Prior to Criterion Prior to Open or Open Entry Limiting Entry Current Entry In 1979 (1979.1984\" In 1"1 Taxicab Companies or 7 Companies, Associations 57 -80-85 210 10 Associations indeoendents 421 City -520 City City Not 645 City, Taxicab Licenses 402 County 426-648 County Available, -850 County 561 in County (includes Co. only and combined Co.ICity 166 Airoort 1,865 Total 446 Co. only Licensed Taxicab Drivers Not Available Not Available 1329 Total 818 Co. wi City Endorse. 601 City only (Drivers may affiliate w/up to 3 assoc.) County: SO.9O County: $1.00 County: $ 1.20 CitylCounty: drop, SO.70 per drop, $1.20 per drop, $1.40 per $1.80 drop, $1.80 per Fares mile, SO.12 mile, SO.30 wait mile, SO.35 wait mile, SO.5O wait per wait per per minute, per minute, minute, $0.50 extras minute. SO.50 elttras. SO.50 elttras over 2. over 2. Inspectors Not Available Not Available 1 City 1.5 City 1 CounlY 1 CounlY Safety: 2 per Mechanical: Annual, by Vehicle Inspections Not Available Not Available year; ASE certified mechanic; Meter: once per Safety: up to 3 per year; year. Meter: once Del Year. Minimum Liability Not Available Not Available Not Available City: $50,OOOIaccident; Insurance Required $25,OOOIperson; $50,000 There was one taxicab association in operation prior to implementation of the revised Seattle and King County ordinances in .1991. The Seattle Tacoma International Taxicab Association (STIr A) served as a model for the taxicab associations now required in the City of Seattle. The City has changed from regulating 106 companies and independent owner-drivers prior to January I, 1997 to ten associations to enhance control and service. . The number of vehicle licenses increased throughout the period from 1979 to the present. Exact numbers of vehicles licensed in each jurisdiction are not available fQr all periods. Also, some vehicles are licensed for operation. only in King County. Other vehicles are licensed for operation only in the City of Seattle. Some vehicles carry joint licenses. In addition, vehiCles licensed to operate at Sea-Tac International Airport may be licensed to operate in either or both of the other two governmental jurisdictions. Compounding this confusion, under the interiocal service agreement of August 1995, King County now performs all driver licensing, and the City of Seattle now performs all vehicle inspections for both jurisdictions. There are currently 645 Inslitu.. forTtIIIIpClIlIlionRae....llnd l!ducaIion. May 1998 33 Review of Taxicab ReguLatory Changes in Cincinnati. Indianapolis. and Seanle City-only licenses, approximately 850 County-only and combined City/County licenses. Of the 166 Airport licenses currently issued, 13 have City endorsements; the remainder have County endorsements. The same inter-jurisdictional conditions apply to driver licensing. There are a total of 1,865 taxicab drivers now licensed. Of that total, 446 have County only licenses, 601 have City-only licenses, and 818 have County licenses with a City endorsement. Uniform fares now apply to both King County and the City of Seattle. Both the City and the County deregulated fares in 1979, allowing taxicab drivers to set their own rates. In 1984, the County returned to established fare rates, and the City created a rate ceiling. The City adopted its ceiling rate as the established fare rate through the 1991 ordinance. In 1992, the City and County fares became identical. Note that this uniform rate is a result of circumstance, not a requirement of current regulations. City and County officials expressed the belief that a common fare rate is likely to become adopted as part of both ordinances in the near future as part of continuing efforts to coordinate taxicab regulation in the area. Both the City of Seattle and King County have typically employed 1-2 taxicab inspectors during the past 20 years~ There are currently one County Inspector and 1.3 City Inspectors, with plans to hire another City inspector at 50% time. A semi-annual safety vehicle inspection was required for both City- and County-licensed vehicles until 1995. At that time, an annual safety inspection performed by an ASE-certified mechanic became an additional requirement. Up to 3 safety inspections may be performed on vehicles in one year, based upon violations cited at the initial inspection. Taximeters are inspected annually. The City under the auspices of the 1995 interlocal service agreement now - performs all vehicle inspections for both the City and the County. - Current requirements for vehicle insurance coverage are a minimum of $50,000 per accident, $25,000 per person, $50,000 property damage. These requirements have not changed for several years. Certificates of Insurance must now include coverage for underinsured motorists ($25,000 per person, $50,000 per accident). -4.5 Impacts of the 1991.1996 Regulatory Changes 4.5.1 Taxicab Associations City regulations effective January I, 1997 required all City-licensed taxicabs to belong to a taxicab association as of May I, 1997, effectively ending autonomous operation by independent owner-drivers. Independent owner-drivers may still own and/or operate tlllticabs in Seattle but must be members of an association. A "Taxicab Association" is defmed as "a person or organization licensed. ..that represents or owns at least 15 taxicabs licensed by the City that use the same color scheme, trade name, and dispatch services. An individual person may be a taxicab association as long as that individual owns or represents at least 15 taxicabs and Institute for T.......- R-..b IIld 1!dw:ali0ll - May 1998 _~- 34 Review of Taxicab Regulatory Ctumges in Cincinnati. Indianapolis. 3nd Se:lttle otherwise meets the requirements of (the City taxicab ordinance),,14. Taxicab associations provide a mechanism for increased supervision of drivers, for making taxicab service more customer-focused, and for enabling taxi operators to grow according to how well they serve the public. They also bear some responsibility for the conduct and performance of their member taxicabs. Taxicab associations are assessed penalty points for specific violations of the ordinance, vehicle, and safety standards. Violations are classified according to three levels of severity. Class A violations are the least severe, and involve violations of vehicle standards. such as failure to carry a map of Seattle and the region published within the last two years, or operating requirements. such as failure to maintain a business telephone in working order during all hours of operation. Class B violations are moderate in severity, and involve infractions of vehicle safety standards, and lack of adherence to procedural requirements for associations. Class C violations are the most severe, and include operating without a valid vehicle insurance policy or valid licenses IS. Monetary penalties are assessed against a for-hire driver or the owner of a taxicab or for-hire vehicle for each Class A, B, and C violation found away from the City's inspection facility. These monetary penalties range from $30 for the first Class A violation in a year to $1,000 for all Class C violations. A vehicle re-inspection fee is assessed against a for-hire driver or the owner of a taxicab or for-hire vehicle for each Class A, B, and C violation found at the City's inspection facility. Penalty points are assessed against the driver or vehicle owner's taxicab association for all violations. Penalty points range from 2 points for the first Class A violation against an affiliated driver or vehicle owner in one year, to 20 points for all Class C violations by an affiliated driver or owner. In addition to accumulating penalty points for violations attributed to aff1liated drivers and owners, associations may also be assessed penalty points for violations attributable to association actions. If an association accumulates more than 5 penalty points per affiliated vehicle, on average, it must pay a penalty of $100 per affiliated taxicab. An accumulation of more than 7 points per affiliated vehicle, on average, results in an additional penalty of $150 per affiliated taxicab. An accumulation of more than 10 points per afflliated vehicle, on average, results in an additional penalty of $250 per affiliated taxicab. Penalty points are accumulated on an annual basis, according to a September 1 through August 31 schedule. 4.5.2 Market Sluue There are now a total of ten taxicab associations operating in the City of Seattle. In addition to STITA (166 licenses), associations now include: Emerald City Taxi (20 licenses), Farwest Taxi (117 licenses), Graytop Cabs (123 licenses), North End Taxi (24 licenses), Northwest Taxi (20 licenses), Orange Cab (99 licenses), Redtop Taxi (15 licenses), Royal Taxi (38 licenses), and Yellow Cab (176 licenses). " Seattle Municipal Code. Chapter 6.31 O.IIOV, October 21, 1996. " Refer to Seattle Municipal Code. Sections 6.310.320 and 6.310.330 for complete details of violations and their classification. JnstiIUIll for TrlInsporllIlio -.. and Education - May 1998 35 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle There has always been a lot of competition in the Seattle taxi industry. There were 57 companies operating prior to implementation of open entry in 1979. During the period of open entry in both the City and County from 1979-1984, approximately 80-85 companies were in operation at any given time. Just prior to the recent regulatory change in 1996, there were 7 companies plus 210 independent owner-drivers in the city. 4.5.3 Vehicle Age Limit An eight-year maximum vehicle age requirement is being phased in over a three-year period from 1997-1999. The current maximum allowable vehicle age of nine years applies through August 31, 1998. As of September 1, 1999, no vehicles greater than eight model years in age will be allowed as taxicabs in the City of Seattle. This vehicle age limit does not apply to King County taxicabs. . 4.5.4 Customer Complaints Under the new ordinance, passenger complaints involving a City-licensed taxicab are forwarded to the appropriate driver, vehicle owner, and association for resolution. Written responses from all these parties are required within 10 days of receipt of the complaint. If a response is not received, the allegation is deemed to be true, and the City may then take disciplinary action. King County specifies an identical process with the exception of the involvement of the taxicab association, as membership in an association is not required for County-licensed vehicles. The number of complaints of poor service from downtown hotels and the Port has decreased since additional regulatory requirements were imposed in 1996. The Westin Hotel no longer requires a special decal in order for a taxicab to provide service on its property. A representative from Clipper Navigation stated that his company has heard fewer complaints about poor taxicab service since association membership became required for taxicab operators. City staff have not noticed a significant reduction in the number of formal complaints received direcUy from dissatisfied customers. There are no records of the numbers of complaints received. 4.5.5 Driver Training/Examination All applicants for a taxicab driver's license in SeattlelKing County must attend a 2-day training course provided through the City of Seattle and taught by industry members. In 1995, the City began offering a 8 hour class (now expanded to 16 hours) that covers defensive driving, personal safety, geography, city/county rules and regulations, customer service. Applicants must also complete a one-week training course provided through their respective associations. This course includes two days of on-the-road experience with a licensed driver from that association. All drivers' license applicants must pass a written test on City/County rules and regulations and local geography plus an oral English language examination developed in cooperation with educators from the local community college. InstilUle for T....podaliOll R_ and l!ducaliOll - May 1998 36 Review of Tuxicab Regulatory Changes in Cincinnati. lndillrUlpOlis. and Seattle 4.5.6 Other Problems Cited All those who were interviewed expressed overall satisfaction with the state of taxicab regulation and the level of service provided. All parties (regulators. taxicab industry members. and tourism industry and business community representatives) interviewed perceived the current regulations to be an improvement over open entry and fare deregulation. The only negative comment was that some members of the taxicab industry believed that enforcement of some provisions of the ordinance is too strict. For example, all drivers are required to take the English language test and pay the associated fee. Regulators stated that the number of customer complaints might rise in the short term, due to the requirement that all taxicabs post consumer information boards listing the Taxicab Hotline phone number for complaints. However, regulators expect the number of complaints to decrease in the long term, as associations become more involved in providing more responsive customer service. Inslilllle lor Transporlllion _II1II Education. May 1998 37 Review or Taxicab Regulatory Changes in Cincinnati. lndi3tlapOlis. omd Sunle 5.0 Discussion: Cross-City Comparisons 5.1 Introduction Three questions form the basis for this study: 1. What were the taxi regulatory changes that occurred in each city? 2. What were the motivations for these changes? 3. What have been the impacts of these changes? Based on the fmdings in the previous three sections we can now discuss how the answers to these questions vary among these three cities. Later, in Section 6, we draw conclusions about taxi regulatory changes in these three cities. 5.2 What Taxi Regulatory Changes Occurred? The regulatory changes made by Indianapolis and Cincinnati are similar to each other and to the regulatory changes enacted in 1979 in Seattle. However, these changes are nearly opposite to those recently made in Seattle. Indianapolis adopted ooen entrY. deleted its requirements for twenty-four-hour service, removed its requirement for radio dispatching, removed its prohibition on hailing taxis, increased the maximum age of taxicabs from five to six years, and established maximum fare rates. Cincinnati adopted ODen entrY through an extremely lenient public convenience and necessity regulation in which any applicant can obtain a taxi license just by stating where the applicant intends to provide service. The Cincinnati system explicitly prohibits the city from considering any impacts on existing operators in granting new licenses. In addition, Cincinnati removed its cap on the number of licenses and eliminated its requirement for twenty-four-hour service while imposing a minimum ($3) fare on trips. Seattle, on the other hand, continued to move away from its earlier open entry experiment and increased rel!ulation by requiring all cabs to be affiliated with an association, by requiring a minimum of fifteen cabs per association, and by requiring twenty-four-hour service and radio dispatching. The requirement for radio dispatch can be met by use of a mobile radio telephone service until December 31, 1999. After that date, the requirement can only be met by two-way radio communication, to ensure use of central dispatch through each association. Cincinnati and Indianapolis are clearly similar in their taxicab regulatory changes. Both effected open entry, although Cincinnati did so by retaining its public convenience and necessity clause but making it extremely easy to meet this standard. Both cities also reduced service requirements for taxicab operators by deleting their requirements for twenty-four-hour service, for dispatching, for a place of business, and for all-city service. Curiously; however, Cincinnati also moved toward increased regulation by establishing a minimum fare for taxi trips. Indianapolis relaxed its maximum vehicle age requirement from five to six years. Josan"" for Transportalion Research IIld I!ducalion - May 1998 39 Review ofTlUi~b Regulatory Changes in CincinRllb. Indi:lfUlpolis.and Seattle Seattle provides an interesting counterpoint as well as an indication of what can be expected to occur in Indianapolis and Cincinnati. Seattle in 1979 implemented deregulation not dissimilar to the changes recently enacted in Cincinnati and Indianapolis. The recent changes in Seattle's taxi regulations can be seen as a 'continuing move toward re-regulation in response to service and enforcement problems emanating from the earlier deregulation experience. Given the pattern that Price Waterhouse (1993), Teal (1987), and others have noted in deregulation experiences, one can expect that both Indianapolis and Cincinnati will experience service problems that will lead them to re-regulate their taxis. 5.3 What Were the Motivations for These Changes? The motivations leading to the taxicab regulatory changes in these three cities differ considerably. In Seattle the impetus for the 1996 changes stemmed directly from concern among the business and tourism communities that taxi services were of poor quality and were an important detrimental faCtor in the attractiveness of Seattle as a tourism and business destination. These groups believed that the taxi industry should either be more strongly controlled by the city or else more self-regulated, hence the requirements for affiliation with associations, for twenty-four- hour service, and for a point system for rule infractions. While these industry concerns led directly to the City's increased taxi regulation, these concerns were but a step in the continuing process of remedying the impacts of the earlier experiment with deregulation in Seattle. As noted in Section 4, the city, county, and airport each took significant re-regulatory actions during the prior ten years, all designed to reverse the effects of open entry. In 1995, the City invited a peer review team of taxi regulators to review its taxi regulatory situation (Avants et aI., 1995). The peer review team pointed out the difficulty in enforcing any meaningful service standards with a small enforcement staff and an atomized taxi industry of 217 operators. It was the recommendations of this peer review team that were legislated into law by the City in 1996. Cincinnati also reacted to problems within the taxi industry and dissatisfaction with the quality of taxi service. Unhappy with earlier confrontations with elements of the taxi industry over requests for new permits and tired of problems within .the industry, the City reacted much as did Seattle did in 1979 when it, too,deregulated its taxi industry. Cincinnati might be described as reacting to problems rather than adopting a philosophy of government action. This was not so in Indianapolis. Indianapolis adopted taxi deregulation as part of a philosophical approach to government action. Inspired by a mayor who advocated less government involvement in private enterprise, the City formed a commission to examine ways to reduce government regulations of all types. It elected to implement taxi deregulation despite its earlier negative experience with a limited form of deregulation in 1973 and 1974. . Indianapolis also differs from the other two cities in that its motivations expanded beyond transportation objectives. Sometime during the consideration of its new taxi regulations the City Insu..te (or T....podlIlion Research llIld Education. May 1998 40 Review of TaxiCAb Regulalmy Changes in Cincinnati. lndianapolis. and Seattle adopted an objective of increasing the number of new job opportunities in the taxi industry, especially for minorities. Thus, in Indianapolis the deregulation initiative also became a social and jobs initiative, another fact that resembles the deregulation action of Seattle in 1979. It should be noted that the experience of Seattle and other deregulated cities has been that attempts to make the taxi industry a vehicle for social change have worked at cross purposes with passenger service quality objectives, e.g., higher fares, poor quality vehicles, short trip refusals, fewer centrally dispatched vehicles, etc. (Price Waterhouse, 1993). 5.4 What Have Been the Impacts of These Changes? 5.4.1 Level of Competition Even prior to the regulatory changes in these three cities there was extensive competition within the three taxi industries. In Seattle there were more than 220 operators, of which 210 were independent owner-drivers. In Cincinnati there were more than twenty operators before open entry, and in Indianapolis 29 operators. This level of competition is just within the taxi industry in each city and does not include the competition between taxi operators and shuttles, vans, limousines, buses, and cars. Thus, regulatory changes were not needed in order to provide competition for taxi operators in these three cities. In fact, in Seattle the intended impact of recent regulatory changes was to decrease governmental involvement in regulation of the taxicab industry while providing more control over operators and preserving competition. The 210.owner-drivers were required to join associations, and the result has been a much-reduced number of taxi providers: 10 assoc::iations. In Indianapolis there has an increase in the number of operators. Currently, about 104 independent owner-drivers and two companies compete for passengers. This large number of owner-drivers is also similar to what occurred in Seattle after its 1979 open entry and what has been reported by Price Waterhouse to occur in other open entry cities. In Cincinnati there has also been an increase in the number of operators: from about twenty to forty-four. Here, too, the pattern exists of more independent owner-drivers (15) after deregulation. However, the growth of independent owner-drivers in Cincinnati has been dampened by the fact that the airport is located in Kentucky and has not been deregulated. Thus, unlike other deregulated cities where independent owner-drivers have become overcrowded at airports, such is not possible at the Cincinnati airport. 5.4.2 Size of Industry One of the expectations of advocates of open entry is that new taxi operators will enter the industry after open entry. This hope was particularly evident in Indianapolis, which established as one of its objectives that minorities would enter the industry as taxi operators. In Indianapolis there has been a decrease in the total number of taxi permits after the most recent Insd_ for Transporlllioa _1IId Bducalioo - May 1998 41 Review of Taxicab Regulatory Changes in Cincinnati. IndianapoUs. and Seattle open entry (392 to 372). A similar decreased occurred in 1973-74 (502 to 466). One possible reason for this decline is the emergence of new competitors to taxi service, such as airport shuttles and executive sedans. Another factor may be that--contrary to the assertions of open entry advocates--there was no pent-up demand for taxi permits before open entry. This explanation is bolstered by the fact that the Controller's Office had not issued all the available taxi permits prior to the 1994 deregulation. One older taxi company has failed and left the industry after open entry. In Cincinnati there has been a substantial increase in the total number of permits after open entry (347 to 499). Currently there are an additional 117 that have been suspended by the City for non-use. No recent evidence exists regarding whether people from outside the taxi industry have entered the industry after open entry. However, for the 1973-4 open entry in Indianapolis only one person from outside the industry applied for a taxi permit; the other new permit holders were former drivers or owners (Gelb, 1983b). Anecdotal evidence from interviews indicates that few new operators from outside the taxi industry have entered the industry since open entry in either Indianapolis or Cincinnati. 5.4.3 Industry Structure The local taxicab industries have become more disaggregated in both Cincinnati and Indianapolis and more concentrated in Seattle. Indianapolis now has 179 independent owner-drivers, Cincinnati has 44, and Seattle none. 5.4.4 Service Requirements Both Cincinnati and Indianapolis have relaxed their service requirements by deleting their requirements for twenty-four-hour service, places of business, and radio dispatching. Seattle implemented a maximum age (8 years), dispatching, and twenty-four-hour service requirements. 5.4.5 Enforcement Enforcement is critical to the effectiveness of taxi regulations. On-street enforcement agents handle many enforcement matters, such as vehicle inspections, responding to complaints or emergencies, tracing lost articles in cabs, and checking equipment and insurance. The enforcement burden is greatly increased with more taxicabs, more taxi operators, and more independent owner-drivers without business locations. These three cities are evidence of the reluctance of city governments to spend much money hiring taxi inspectors. Cincinnati has decreased the number of its taxi inspectors from 3 to 2 during the implementation of open entry. Indianapolis has maintained just one inspector, as has Seattle, although Seattle has recently added a half-time inspector. Thus, while the need for Insti.... for TfIIIIJlOIlIlIoI_'" Education. May 1998 42 Review of Taxicab Regulatory Changes in Cincinn:aD.. Indianapolis. and Seanle enforcement has increased, the amount of enforcement personnel has decreased. The low-level of on-street enforcement raises serious questions about the efficacy of the regulations. Simply put, the enforcement requirements increase with the number of operators and with operators who do not have fixed places of business. In such situations taxi inspectors have great difficulty in simply locating taxi operators, and routine enforcement matters, such as articles left in cabs, become very difficult to adjudicate. Seattle, recognizing that enforcement is critical but that it was not able to hire enough inspectors to deal with its taxi service problems, opted to increase the level of self-enforcement in its taxi industry. Thus, it adopted the requirement that all taxis belong to associations and that associations exercise responsibility for their member taxis. 5.4.6 Fares Table 5.1 shows the current fares in Cincinnati, Indianapolis, and Seattle. It should be noted that distance and wait time rates shown for Cincinnati and Indianapolis are maximum allowable rates, and that actual rates may vary by taxicab company. Table 5.1: Fare Rates .-.1)'pe~.-;.. .~. .>., Drop Charge $2.00 (maximum) ''Pick-Up Charge" allowed but amount not specified (typically $1.15-$5.00 . $1.80 Distance Charge $0.20 per 1/9 mile Wait Time $0.50 per minute Minimum Fare $3.00 $5.00 . Other Surcharge not to exceed Extra passenger: $0.65 15 cents per mile for maximum trips to other cities/areas. $8.00 (maximum) $10.00 plus Pick-Up e. Extras: $0.50 each passenger over 2. $9.00 WtItulC for TIOIIIpOIlIIion _1IIId I!ducalion -May 1998 43 Review of Taxicllb Regulatory Changes in Cincinnati. Indianapolis. and S~nle It should also be noted that Cincinnati is unique among these three cities in having a minimum fare ($3) per trip. 5.4.7 Age of Vehicles Two of the three cities have a maximum age requirement for taxicabs: Cincinnati: Indianapolis/Marion County: Seattle (City): No maximum age 6 years 8 years (by August 31. 1999; 9 years through August 31, 1998; King County does not have a maximum age requirement) It should be noted that in Seattle the local airport authority implemented a seven-year vehicle age limit in 1989. Not only did this requirement predate the adoption of a maximum vehicle age by the City of Seattle, but also it is more stringent than the City's regulation. 5.4.8 Customer Satisfaction When gathering information for this report there was a great deal of discussion regarding customer satisfaction-what is the quality of service as perceived by those using, regulating, and providing taxicab transportation. In most instances throughout the country customer satisfaction is largely a subjective matter, supported only by the number of complaints received by regulators. The number of complaints is tracked for a period of several years, and trends of increasing or decreasing numbers of complaints are noted. Instead of this passive approach King County instituted a system of tracking response times for taxicabs at selected points within the County. A schedule of optimum average response times was established, and actual response times are calculated annually from reviews of dispatch and trip sheet records maintained by taxicab companies. Actual response times are compared to optimum average times to determine the performance of the industry in meeting customer requests 'for service. Information on response times for the past ten years demonstrates consistent performance within the established standards. In addition to tracking pickup times the City and County have. each established a definitive process for handling both telephone and written complaints. Complaints from customers using City-licensed taxicabs and received on the Taxi Hotline (296- T AXl) are referred to the appropriate taxicab association for resolution. Audits include a review of association complaint logs to verify satisfactory resolution of complaints. In addition to gathering information on service response time questionnaires distributed to King County taxicab patrons gather information on driver conduct/appearance and taxicab condition. Summary information from those questionnaires is presented in Table 5.2. Institute for Transpor1llliOll Reseaaob ond EduaIlion - May 1998 44 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Scanlc Table 5.2: Results of King County Surveys ~~ 1990 1991 r tm 1993 1994 1995 1996 ..... Well Maintained 70% 48% 59% 72% 69% 58% 74% Dinv. but tmadrenair 22% 32% 29% 14% 26% 32% 18% Dirtv. DOOr condition 8% 20% 12% 7% 5% 10% 7% Driver CGaduetl A-_ Excellent 71% 28% 42% 55% 35% 32% 55% AcceDtab1e 17% 59% 43% 39% 52% 47% 34% Not Accenrable 2% 14% 15% 4% 13% 15% 9% Average Wait Time 13 16 11 10 13 10 8 (Minutes) Wait Time Satisfactorv 85% 69% 85% 81% 89% 84% 95% Cincinnati does not require a taxicab company to implement or follow specific customer service procedures. The taxicab ordinance only stipulates procedures and penalties for taxicab drivers and owners who violate provisions of the ordinance. There is no formal city-wide passenger complaint process nor formal procedure for handling customer complaints. Section 996-133 of the Indianapolis taxicab ordinance stipulates that anyone knowing of .the misconduct of a liCensee may present a complaint to any police officer of the City or to the controller. The controller is to investigate the complaint with the assistance of the Indianapolis Police Department or the Marion County Sheriff, if necessary. The controller then notifies the licensee in writing that charges have been f1led against himlher and of the time of a hearing on those changes. . 5.4.9 Driver Training and Exami1uztions Cincinnati requires that all applicants for a public vehicle license show evidence of at least six months' experience in operating a motor vehicle or successful completion of a course in the operation of a motor vehicle given by a approved school. or both. Applicants are required to complete successfully written tests of knowledge of both the taxicab ordinance and City geography. Applicants must cOrrectly answer at least 15 of 20 written questions and correctly match the locations of at least 30 of 35 local businesses/attractions. While the ordinance states that the application is to set forth that the applicant is able to speak, read and write the English language, there is no such statement on the application form. Applicants for a taxicab driver' s licens~ in Indianapolis must pass a written examination and a practical test. Areas in which applicants are questioned include: 1. The applicant's qualifications; 2. The applicant's knowledge of the provisions of the ordinance and other relevant statutes, ordinances, and regulations; 3. The applicant's knowledge of the geography of Marion County and the surrounding counties; lutilula fw TlOIlSpOrlation Reseon:b aad Educalion . May 1998 45 Review of Taxicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle 4. The applicant's ability to communicate in English with customers; and 5. The applicant's skills in operating a motor vehicle, which may include a driving test. A driving test has been developed and implemented to ensure that applicants can demonstrate practical use of their knowledge. According to the Taxicab Inspector, use of this test has reduced the number of complaints about drivers' lack of geographic knowledge and/or use of a longer route than necessary to reach a destination. King County has tested for-hire drivers as a prerequIsite for licensure since 1985. The examination is comprised of two parts~rdinance knowledge and geography knowledge. The examination tests an applicant's knowledge of regulations governing fare determination, driver- passenger relations, conduct, ability to understand oral and written directions in the English language, vehicle safety, and the geography of King County and the surrounding area. Of those who have taken the examination from 1985 through 1996, 4,901 passed, and 1,479 failed. Applicants for a County-only license may take the test as often as the test is given during their 6O-day pending period. Applicants for a City of Seattle license may take the test two times. If they fail both attempts, they must wait 60 days before they can reapply and take the test again. Applicants do not receive a temporary license until they have passed the written examination. "" 5.4.10 Fees. Each of the three cities charges fees for license application and renewal for both taxicab and driver licenses. Each city also charges one or more other fees, linked to the regulatory structure in place (Table 5.3). . Institute for TransporIation _.... EducaIi<m - May 1998 Review of Taxicab Regulatory Ch:utges in Cincinrwi. Indianapolis. and Seattle Table 5.3: Summary of Fees Fee CindDD8d IndiaaapoUs Seattle Taxicab Association! $16 annual for $750 annual for Taxicab Disnatchin2 Office disoatchin2 office None Association Late Fee None None $75 Taxicab Change of Not Applicable Not Applicable $50 Assoc. Affiliation $161 annual, Taxicab License $80.50 on or after July $100 annual $240 annual City I, $10 initial application $140 annual County fee. Late fee (renewal) None None $24 Citvl$14 Co. Chan~e of Eauioment None None - $50 Citv/$25 Co. City: $240 Sept-Feb Change of Owner $10 Transfer None $120 Mar-Aug $0 Julv 16-Au~ 31 City inspection fees $30lhour, I hour Vehicle Inspection included in License Fee Not Applicable minimum, for re-test of . taximeter Vehicle Re-Inspection None None $20 Class A violations, $50 Class B violations Insoection Schedulin~ None None $20 Meter Re2istration None None $5 Suspension None None $50 Reinstatement Driver License $14 initial annual, $5 $18 bi-annual $55.annual annual renewal Add/Change Affiliation Not Applicable Not Applicable $20 (maltimum of 3 associations) Driver License Late Fee None None $10 ID Photo None None $2 Replacement License $1 I" replacement of ID None $5 Card, $2 subseouentlv. Driver Training! None None $45 training for new Examination applicants; $30 Oral En2lish Proficiencv ~ A review of comparative costs shows that SeattlelKing County is the most expensive jurisdiction of these three cities in which to license a taxicab. However, there appears to be a positive correlation between the amount of regulatory activity and the fees paid. Though the costs of regulatory fees are higher in SeattlelKing County than in Cincinnati or Indianapolis, satisfaction with the regulatory structure and with taXicab service is also greater in SeattlelKing County than in the other cities. Institute for TllIIISporIlIlion Research and Educali.. - May 1998 47 Review of Tuicab Regulatory Changes in Cincinnati. Indianapolis. and Seattle 6.0 Conclusions This study focused on three aspects of the taxicab regulatory changes in Indianapolis, Cincinnati, and Seattle: a. What regulatory changes were implemented; b. Why they were implemented; and c. What the impacts have thus far been of these regulatory changes. Based on the findings and discussion in previous sections it is now possible to draw conclusions about the regulatory changes in these three cities. 1. The regulatory changes in Cincinnati and Indianapolis are similar to those of Seattle in 1979 but are opposite those of Seattle In 1996. Both Cincinnati and Indianapolis enacted local ordinances to effect open entry into their taxi industries. These actions are directly opposite of the 1996 actions of Seattle in requiring all taxicabs to affiliate with associations and for associations to be responsible for the actions of their taxicabs. However, the actions of Cincinnati and Indianapolis are very similar to those of Seattle in 1979 when it, too, deregulated by opening entry and relaxing fare regulations. This similarity suggests that the re-regulation experience of Seattle may be indicative of what may occur in Cincinnati and Indianapolis in the future. 2. There was a competitive taxi market in each city prior to deregulation. A common perception of taxicab service is that one or a few taxi companies control the market and open entry is necessary to bring competition to the industry. However, in all three of these cities a high level of competition existed prior to enacting of open entry. 3. These three cities appear to follow a common pattern described by the literature. Price Waterhouse (1993), Teal (1987), Gelb (1983a,b), Dempsey (1996), and Frankena and Pautler (1984) all point out a common pattern that follows open entry in local taxi markets. Usually the fares increase and independent owner-drivers who service taxi queues at airports. hotels, and train stations obtain additional permits. A bifurcation of the industry results with companies focusing on neighborhood trips and independents serving the taxi stands. The problems resulting from too many cabs at these stands then cause the aiiports and perhaps hotels to institute their own controls over the waiting cabs. Subsequently, the municipal governments respond by enacting entry controls. The result is that regulation is re~imposed. which has occurred in all but four of the twenty-one open entry cities examined by Price Waterhouse. Impacts from the regulatory changes in these three cities generally follow this pattern. An Insutute for Transportation Resean:h nnd Education . ~y 1998 49 Review of Taxicab Regulatory Change!; in Cincinnati.indianapolis. and Seattle opportunity has been created for fares to rise in Indianapolis in the period following deregulation. The cost for a typical 5-mile trip with the fare rates set prior to the implementation of Proposal 72 was $8.45; that trip may now cost up to $10.00 plus a "Pick-Up Charge" at the maximum rate now in effect. The price of a trip now varies among different operators due to the regulation by maximum rate; the typical price for a 5-mile trip calculated according to rates in use by the two larger companies in July 1997 was $9.00 and $11.25. The lack of a uniform price can be confusing to visitors accustomed to a set rate for all taxicabs. The price for a 5-mile trip is now a maximum of $8.00 in Cincinnati and a set rate of $9.00 in Seattle. The level of service varies among the three cities. In Cincinnati, the number of taxicab companies doubled from 1993 to 1994, during the initial period of relaxed entry. From 1994 to 1997, there has been only a ten percent growth in the number of companies. Small independent owner-operators are reported to primarily serve downtown hotels and "personals." There has been difficulty in getting taxicabs to respond to service requests from low-income areas both before and after the regulatory changes according to residents. Residents and a regulator cited the difficulty of acquiring service during evening hours. In Indianapolis, open entry has not resulted in an increase in the number of taxicabs; however, many independent owner-operators congregate at already well-served locations such as the airport and at downtown hotels. In both Indianapolis and Cincinnati, there is a disparity in the level of service provided by larger companies using radio dispatch and independent owner- operators using cellular telephones. The larger companies offer 24-hour, 7-day service throughout the metropolitan area, while the smaller taxicab companies tend to offer service during fewer hours and to smaller service areas. The Seattle requirement that all taxicab owners belong to a taxicab association has placed additional responsibility for providing satisfactory customer service within the taxicab industry. Representatives from the hospitality and tourism industry reported a high level of satisfaction with operations under the current regulatory structure. The extent to which customer satisfaction has increased as a result of the driver training and testing programs is unknown. There were no perceptions from individuals who were interviewed in Seattle that any particular geographic area lacked an acceptable level of service. The supply of taxicabs at the airport is limited to those provided by one contractor. 4. Indianapolis experienced only a brief increase In taxi permits after its most recent open entry. The number of active taxicab licenses in Indianapolis increased from 392 prior to opening entry to 460 in 1996. However, the number of taxicab licenses then decreased. In the 1973-4 open entry there was not even an initial increase in pennits, and the number of pennits fell from 502 to 466. For the most recent open entry the number of pennits--after initially increasing--fell from 392 in 1993 to 372 in 1997. The Indianapolis experience with decreases in the number of taxicab licenses illustrates an often- overlooked fact about taxi markets: the existence of entry controls does not necessarily mean that InstilU" for TnlllSpot1aIion R_.... EduClltion. M.y 1998 50 Review of Taxicab Regulatory Ch:1nges in CincinRllli. Indianapolis. and Seanle there is a pent-up demand for taxi permits. Taxi operators face competition from a variety of other transportation providers as well as private autos. The removal of the cap on the number of limousine licenses (75) in Indianapolis as part of the revision of the vehicles-for-hire ordinance resulted in an increase in the number of limousine licenses. Fourteen limousine companies are currently in operation with 89 licensed limousines. The 1994 ordinance revisions also allowed jitneys to operate in Indianapolis-Marion County. No new jitneys have been licensed in the city. 5. The impacts of open entry are dampened in Cincinnati because airport is not deregulated. One of the common occurrences after open entry has been the growth of the numbers of independent owner-drivers serving taxi stands, especially airports. The reason for this influx is that owner-drivers are able to wait at airports and eventually get trips without having to invest in radio dispatching or advertising. In Cincinnati, however, the airport is located in Kentucky and hence was not affected by Cincinnati's open entry ordinance. Thus, the city has seen only a modest number of independent owner-drivers (15). Since most of the problems with open entry have first been manifested at airports and other major traffic generators, one can expect that Cincinnati's problems with open entry will be dampened as long as the airport is not opened to all Cincinnati cabs. 6. Seattle demonstrates the long time required to remedy the effects of open entry. Nearly two decades have passed since the beginning of Seattle's eKperiment with open entry. Although the airport, city, and county all took actions during the 1980s to re-regulate, as recently as 1996 the city was still coping with effects of open entry in terms of service complaints and too many operators to enforce effectively. Prior to the most recent regulatory actions of 1996, the city was still trying to regulate 217 operators, of which 200 were one-cab companies and most without places of business. Thus, the effects of open entry--especially the growth of independent owner-operators--lingered far beyond the open entry time period, making the re-imposition of quality controls very difficult. Instiblte for Trunsporllltion Reseuch IIld Education. May 1998 51 Review of Tuicab Regulatory Changes in Cincinnati. lndianapolis. and Se:1ttle BmLIOGRAPHY Avants, S., G. Gilbert, and B. Lupro (1995) "Peer Review of Seattle Taxicab Regulation," Report prepare for City of Seattle, Department of Finance. Buckeye Institute for Public Policy Solutions (1997) "Taxi Regulation in Ohio's Largest Cities." Dempsey, Paul S. (1996) "Taxi Industry Regulation, Deregulation and Reregulation: The Paradox of Market Failure," Transportation Law Journal, 24: I, pp. 73-120. Frankena, M., and P. Pautler (1984) "An Economic Analysis of Taxicab Regulation," Bureau of Economics, Federal Trade Commission. Gelb, P. M. (1983a) "Effects of Taxi Regulatory Revision in Seattle, Washington," U.S. Department of Transportation, Report No. UMTA-W A-06-0019-83-1. Gelb, P. M. (1983b) "Taxi Regulatory Revision in Indianapolis," U.S. Department of Transportation, Report No. DOT-TSC-1409-20. Goldsmith, S. (1997) "Regulation and the Urban Marketplace," Re2ulation, January. Gross, Marilyn, and R. Feldman (1994) "National Transportation Statistics: 1995," Bureau of Transportation Statistics, U.S. Department of Transportation, Report No. DOT - VNTSC- BTS-94-3. Lewis, P. (1995) "Cabbies Will Soon Have To Shape Up Or Hit the Road," Seattle Times, July 19. Price Waterhouse (1993) "Analysis of Taxicab Deregulation and Re-regulation," Prepared for International Taxicab Foundation. Shaw, L.C., Gorman Gilbert, C. Bishop, and E. Pruitt (1983) "Taxicab Regulation in U.S. Cities, Volume I: Final Report," Report for Urban Mass Transportation Administration, U. S. Qepartment of Transportation, Report No. DOT-I-84-35. Stanley, M. T., and R. J. Burby (1988) "A Statistical Prof11e of the Private Taxicab and Paratransit Industry," Report prepared for Urban Mass Transit Administration, U.S. Department of Transportation. Teal, R. F. (1987) "An Overview of the American Experience with Taxi Deregulation," Halda, Inc., Irvine, CA. Zerbe, R. (1983) "Seattle Taxis: Deregulation Hits a Pothole," Re2ulation, NovemberlDecember, pp. 43-48. Institute fotT....portalion Research and Education - May 1998 53 TRANSPORTATION LAW JOURNAL INDUSTRY LEADER IN MULTI-MoDAL LAH; ECONOMICS & POLICY UNlVERSITI' OF DEl'.'\'ER . COLLEGE OF LAW Taxi Industry Regulation, Deregulation & Reregulation: The Paradox of Market Failure PAUL STEPHEN DEMPSEY VOLUME 24 . t'UMBER t . SU~lMER 1990 rn.,."o. '. ;' ...... ~ ~+;. E ., "". + ""OCI.a.1\O Taxi Industry Regulation, Deregulation & RereguIation: the Paradox of Market Failure Paul Stephen Dempsey' . . TABLE OF COSTE""TS I. Introduction.........................................:..... 74 II. Historical Antecedents of Modern Taxicab Regulation .... 76 Ill. Contemporary Statutory & Regulatory Criteria Governing the Taxi Industry. . .. . . ... . . .. . . . . . . .. . .. . . . . . . .. . .. . . . . .. . 77 A. New York: .. .... .. .. .. . .. .. .. .. .. .. . .. .. .. .... .. .. . '" 78 B. Los Angeles... .. . . . . . . . . . . . . . . . . .. . . . . .. . . .. . . . . . .. .. . 78 C. Houston.............................................. 79 Copyright CJ t996 by the author . Paul Stephen Dempsey is Professor of Law and Director of the Transponation Law Program at the University of Denver. He fonnerly served as an attorney with the Civil Aero- nautics Board and the Intentate Commerce Commission in Washington. D.C. . Professor Dempsey has ..ntten more than tony law review anicles and six books: AVI^no~ LAw &. RE.GULATION (two volume$!. Butterwonh 1993); AUU.lN[;, DEREouU\TloN &: LAlSSI!.Z FAlRE MYTHOLOGY (Quorum Books. 1992): FLYI"'C BUNO: TUE FAILURE OF AUUJNE DEREG. ULATION (Economic Policy Institute. 1990); THE SOClAL AND ECONOMIC CONSEOUENCES OF DEREGUUlr.TIQN (Quorum Books. 1989): LAw de. FOR.EJON Poucy fJ'o/ INTERNATIONAL AVIATION (Transnational Publishers. 1987); and LAW &. ECONOMIC REGuu..nON IN TR.^NSPORTA"ON (Quorum Books. 1986). Dr. Dempsey holds the following degrees: A.BJ.. J.D.. University of Georgi~: LL.M.. George Washington University: D.C.L. McGill University. He is admitted 10 practice law in Colorado. Georgia and the District of Columbia. The author would like to thank Greg Hall. John Joiner de. Sam Scinta. J.D. candidates. Uni. versity of Denver. for their assistance in the preparation of this aniele. 73 74 Transportation La... Journal [VoL 24:73 . , D. Chicago............................................... 81 E. St. Louis.. " . . .. . . . . . . . .. . . . . .. .. . . . . . .. . . . . . . . . . . . . . . 82 F. Boston................................................ 83 G. Minneapolis........................................... 84 H. Denver................................................ 85 N. The Economic Characteristics of the Taxi Industry. . . . . . . P A. Industry Size and Structure ........................... 87 1. Radio-Dispatched Cabs ........................... 88 2. Tne Cabstand Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 3. Cruising Cabs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 4. Public Contract Service~. . . . . . . . . . . . . . . .. .. . . . . . . . 89 B. Industry Costs......................................... 89 C. The Passenger Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 1. The Transportation Disadvantaged ................ 90 2. Non-Residents. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 90 3. Affluent Residents................................ 91 V. Market Imperfections & Theoretical Explanations Therefor .................................................. 91 A. The Absence of a Competitive Market...... .... '" .. . 91 B. Imperfect Information & Transactions Costs......... . . 93 C. Externalities ........................................... 9-1 D. Cross-Subsidies and Cream Skirruning ................ . 96 E. Economies of Scale & Scope......... . . . . . . . . . . . . . . . . . 97 F. The Absence of Sound Economic Conditions. .. . . . . . . . 97 VI. Bipolar Views on Regulation a!1d Deregul2.tion ........... 100 VII. Empirical Results of Open Entry in the Taxicab Industry. 102 A. Entry................................................. 102 B. Operating Efficiency and Productivity. ............ .... 105 C. Highway Congestion. Energy Consumption & Environmental Pollution .............................. 106 D. Price.................................................. 107 E. Income................................................ 110 F. Service................................................ 111 G. Administrative Costs.................................. 114 VlII. Summary of the Empirical Results of Taxicab Deregulation. . . . . . . . . . . . . . . . . . ... . .... . . .. . . . . ..... .. .. .. . 114 IX. The Need For Goverrunental Planning & Oversight....... 116 I. INTRoDucnor; During the last fifteen years. Congress has deregulated: wholly or panly. a number of infrastructure industries. including most modes of transpon-airlines. motor carriers. railroads. and intercity bus compa- 1996] Taxi Industry Regulation, Deregulation & Reregulation 75 nies.' Deregulation emerged in a comprehensive ideological movement which abhorred governmental pricing and emry controls as manifestly causing waste and inefficiency, while denying consumers the range of price and service options they desire.2 In Z:. natio:1 dedicated to free market capitalisnl, go\'crnmcfital re- straints on the freedom to enter into a business or allowing the competi- tive market to set the price seem fundamemally at odds "ith immutable notions of economic liberty. While in the late 19th and early 20th Cen- tury. market failure gave birth to economic regulation of infrastructure industries, today, we live in an era where the conventional wisdom is that government can do little good and the market can do little wrongJ Despite this passionate and powerful contemporary political/eco- nomic ideological movement, one mode of transportation has come full circle from regulation. through deregulation, and back again to re-regula- tion-the taxi industry. American cities began regulating local taxi firms . in the 1920s. Beginning a half century later. more than 20 cities, most , located in the Sunbelt. totally or partially deregulated their taxi compa- nies. However. the e"-perience "ith taxicab deregulation was so pro- foundly unsatisfactory that \irtually every city that embraced it has since jettisoned it in favor of resumed economic regulation. Today, nearly all large and medium-sized communities regulate their local taxicab companies. Ty-pically, regulation of taxicabs involves: (1) limited entry (restricting the number of firms. andlor the ratio of taxis to population). usually under a standard of "public convenience and neces- sity," [PC&N] (2) just, reasonable. and nondiscriminatory fares. (3) ser- vice standards (e.g., vehicular and driver safety standards, as well as a common carrier obligation of nondiscriminatory service. 24-hour radio 1. Such legislation includes the Air Cargo Deregulation Act of 1977. the Airline Deregula- tion Act of 1978. the International Air Transportation Competition Act of 1979. the Staggcl'l Rail Act of 1980, the Motor Carrie: Act of 1980, the Household Goods Transportation Act of 1980. the Bus Regulatof')' Refonn Act of 1982. the Civil Aeronautics Board Sunset Act of 1984. the Surface Freight Forv.arder Dereg:.llation Act of 1986. the Negotiated Rates ACl of 1993. the Trucking Industry Regulatory Refor::-: Act of 199~. and TItle VI of the Federal Aviation Act of 1994. Sa g(nerally. PAUL DEMPSEY & WIll-lAM TUOMS. LAW & ECONOMIC REGl:LATlON IN TRA"lsPORTATlON (1986). and PAL:'L DEMPSEY. ROBERT HARDAWAY & WILUAM TIIOMS. AVIA. nON LAW & REGULATlO!'; (1993). l\'ote however. that although the U.S. Congress has pre. empted much of state and local regulation of the airline. railroad. and trucking industries. economic regulation of the suriace passenger transportation industry has remained largely un. touched by federal preemption. 1. Sa. (.~.. PAL'L DEMPSEY, TltI: SOCI,'L & ECO'OMIC CONSEOUE:-;CES or- Di:REGU~. no,,", (1989): PAUL DEMPSEY & As DReW GOETZ. AIRLINE DeRJ:GULATION & LAISSEZ FAJRl:. MYTlIOLOGY (1992) 3. Sa r"ural(v Paul Dem;Js.ey. Marker Fai"ure a.'ld Re~ulalon: Failure As CalalvSIS for Polmcal Change: The Choice 8enwen Imperfecl Re~u{atlon and Imperfecl RegulatIOn. 46 WASil. & LEe L Re..... 1 (1989) . . 76 Transportation Law Journal [VoL 24:73 dispatch capability. and a minimum level of response time). and (4) finan. eial responsibility standards (e.g., insurance).- 1his anicle explores the legal, historical, economic. and philosophical bases of regulation and deregulation in the taxi indust'}" as well as the empirical results of taxi deregulation, The paradoxical metamorphosis from regulation, to deregulation. and back again. to regulation is an inter~ esting case study of the collision of economic theo'}' an ideology. with empirical reality, We begin with a look at the historical origins of taxi regulation, II. HISTORICAL M'TECEDE1>'TS OF MODER'" TAXlCAB REGULATlOl'< Hackneys (horse dra\\TI coaches for hire). the predecessors of to- day's taxicabs, were regulated shonly after they appeared on the streets of London and Paris between 1600 and 16205 In 1635, Charles I ordered that London hackneys be licensed so as "to restrain the multitude and promiscuous use of coaches, "6 Nineteen years later the British Parlia- ment adopted a regulato'}' regime which Iimitcd the number of hackneys7 In the U:li:ed States, governmental regulation of private firms, rather than public o\\TIership. has been deemed the appropriate means of protecting the public interest in economicaliy viable modes of transpona- lion,S Although some attribute comprehensive regulation of taxicabs to the Great Depression. in fact, regulation began in earnest during the 1920s.9 In the 1930s, the gro\\1h in unemplOyment and unsold 4. Su Michael Kemp. Ta..ricab Sen.'ice, in PARA-TRANSIT: N!:GLEC"TtD OPi'IOSS FOR UR. BAS MOBn..rrr 64 (Urban Institute 1984): DEMPSEY &:. THO~fS. supra note 1. at 1: Roger Teal &:. Mary Berglund. The l~pa;ts of Ta;ticab Deregu:<llion in the USA. J. TRAKSP. Eco.'.;. & POL'y 37 (hn, 19S7). 5. D3\;d \\!iUiams. Injormation and Price DttamifUJlion in Taxi Marktt.S. 20 Q. Rz:v. OF EcoN. &:. Bus. 36 (1\.181). AetuaUy, common carrier liability owes its origins 10 Roman Law, beginning about the year 200 B.C. Sa DEMPSEY & THO'''lS. supra note 1. at 2. 6. U.S. DEP'T OF TRAMI'.. TAX1CAB RI::Gt..:LATIO" I" U.S. CITII::S 5 (1983). 7. [d. at 6. The London Hackney Caniage Act of 1831 (as amended in 1~3) was the first comprehensive taxicab regulation ordinance: Gene Stalians.. R~~u/atory R~yuiun and th~ Taxicab Industry: What Wt Ha\'t Ltarntd 1. Address before the 50th Annual Convention of the New Zealand Taxi Proprietors' Federation. Wellington, New Zealand. Aug. 30. 1988. 8. WlllJAM BARKJ:;R & MARY BEARD. URBAN T AXTCABS: PROlll.EMS. POTE!'>rflAL AND PLANNING. r,.; PROCEEOINGS 01" TIll:: CONFERENce ON TAXIS As PUBLIC TRA""SIT 40 (Univ. of California, 1978). Modes of Iranspon which were not economically \.iable in the market (e.g.. urban railwa~"S. Amtrak and the U.S. Postal Service) were provided by ~overnment in a process John Kenneth Galbraith is said 10 have referred to as "Lemon Socialism." 9. MARK FRANK[:-.lA & P.'\t.:L PAL'TLER. AN ECONOMIC ANALYSIS or TA.-O::JCAfI Rt;GULA. TIC'" 75 (Fed. Trade Comm.. 19R4); Su Kemp. supra note 4. at 65_ "The campaIgns of profes- sional cab associations for vehicle licensing during the late 1920$ were a direct response to the disruption in the market crealed by hil-and-run entrants."; su aLfo Edward Gallick & David Sisko A Ruo/tSldua(lon of Taxi R~,u!arlOn. 3 J.L. Eco!'o'_ & ORG. 117. 1:;3 (J98i). ....... 1996] Taxi Industry Regulation, Deregulation & Reregulation 77 automobiles produced a drastic increase in the number of taxicabs.lO While fewer people could afford to ride a taxi, the number of taxicabs skyrocketed, while occupancy rates and revenue per taxi declined. J 1 Ca- pacity and demand were moving in opposite directions. An editorial published by tho lI'asninglOr; Pos: it; h"1ucr:; 1933 illus- trates the public's perception of the chaotic state in which the taxicab industry found itself: Cut-throat competition in a business of this kind always produces chaos. Drivers are working as long as sixteen hours per day. in their desperate ef- forts to eke out a living. Cabs are allowed to go unrepaired. . . . fogether v.'ith the rise in the accident rate there has been a sharp decline in the financial responsibility of taxicab operators. Too frequently the victims of taxicab accidents must bear the loss because the operator has no re- sources of his o....n and no liability insurance. There is no excuse for a city exposing its people to such dangers.12 Economists of the era argued that taxis were a declining cost indus- try: excessive competition between numerous small operators decreased carrier eLt1ciency and increased consumer costs. 13 The U.S. Department of Transportation also sununarized the tenor of the times: Tne excess supply of taxis l~d to fare wars. extortion. and a lack of insurance and financial responsibility among operators and drivers. Public officials a::.d the press in cities across the country cried out for public control over the t3..xi industry. Tne response was municipal control over fares. licenses. insurance and other aspects of taxi ser.ice.14 . III. CONTEMPORARY STATIJTORY AND REGULATORV CRITERIA GOVERNING THE TAx! INDUSTRY Virtually all municipalities engage in taxi industry regulation under state legislation requiring or permitting such regulation. which itself acts under the guise of the state's police power. Although sometimes chal- lenged as unconstitutional on various grounds. or preempted by federal law, these statutes and municipal ordinances have been nearly universally 10. Su GORMA!'.' GILBERT &:. RODCH.T SAMLiCLS. Tllc T AXICAS: AN URBAN TRANSPORTA. TIO!'.' S:.:RVIVOR 149 (1982). II. FH.A!'.'KI:....A &:. PAL.L!:H.. suora note Y. at 75. 12. Taxicab Chaos. WASIl. Pos!. Jan. 25. 1933. editorial page. 13. Sandra Rosenbloom. Th~ Taxi In ,he Urban Transpon S.vslem. TII[;' PRIVATe OIAL Le:-:GC TO PUBLIC TRANSP'ORTATIO'" r Charles Lave. ed.. 1984). Similar arguments were made in the 192()s and 19305 in favor of regulating the ttucklng industry. Su Paul Dempsey. Running On Empn' Trucking Datguuuion and Economic Th(ory. 43 AOMI~, L. Re.... 253. 304.306 (1991) 1':, U.S. Dcp',[ OF TRA~SP.. supr.:s nOte 0. at 6.; 78 Transponation Law Journal [Vol. 24:73 upheld.'S Typically, taxis are regulated at the local level. \\ith city or county boards restricting the number of firms and number of taxis (with the issu- ance of medallions), and setting prices (usually on a mileage basis), safety, insurance and service standards. Their decisions are given ex- trcm~ deference by reviewing courts. In this section. several oi the ap- proaches to economic regulation oi taxis in some of the nation's major cities are examined. As we shall see. their similarities are far more nu- merous than their differences. . . A. l\Ew YORK The state of l\ew York permits its municipalities to adopt ordinances which require the registration and licensing of taxicabs.'. New York mu- nicipalities may also establish restrictions concerning parking and passen- ger pick-up and discharges." Jurisdiction to promulgate rules and regulations concerning the supervision and operation of taxis has been vested in the Police Commissioner." Typically. the municipal ordinances require that taxis be insured for specific amounts.'9 New York City has regulated its taxis since the 1930s. Medallions were limited to 11.787 in 1937,20 causing the medallion price to reach ex- orbitant levels, itself generating some measure of legitimate criticism of taxi regulation. B. Los ANGELES In contrast to New York, which permits municipalities to enact taxi regulations, the Texas and California state statutes require municipalities to regulate the local taxi industry."l These municipalities may enact ordi- nances which regulate entry, such as "controls, limits or other restrictions 15. Su e.g." Golder. State Transit Corp. v. ell)' of Los Angeles 726 F.2d 1430 (D.C. Cir. 1983). cen. denied. 105 S. 0. 1865 (1983). Here. a municipality's taxicab regulation sun;vcd scrutiny under the Sher.::an Act. as it fell under the "state action" exemption to that legislation. Although Title VI of the Federal Aviation Act of 199.: preempted intrastate reg:ulation of motor carriers of propeny. it die not preempt intrastate regulation of the transportation of passenger3. The Bus Regulatory Reform Act of 19l:i2. although providing (or Interstate Commerce Commis. sion review of intrastate entry. eX)t and rate regulation. did not apply to the taxi industry. s,~ also Rudack v. Valentine. 295 N.Y.S. 976 (1937) (taxi statute unsuccc:ssfully challenged on grounds that it violated claimant's due process rights). 16. N.Y. Gen. Mun.! 181(1). 17. ld. 18. Su Teuch v. Ml..::-phy. 256 N.Y.S.2d 25 (1965) 19 S~~ Foley \'. McKnealley. 325 N.Y.S.2d 165 (1971). 20. Peter Suzuki. UnrtKu.Jaud TaxIcabs. 49 TRANSP. Q. 129, 132 (1995) 21. California's statute is typical: {Elvery city or COUnty shall protecl the public health. safety. and welfare by adopting an ordinance or resolution In regard 10 ta:ucab transportation service rendcred In 19%] Taxi Industry Regulation, Deregulation & Reregulation 79 on the total number of persons providing the services, rates, safety and insurance requirements" and other requirements which will "ensure safe and reliable passenger transponation service,"22 The city of Los Angeles requires an applicant to prove "public con- venience and necessity" in order to gain entry into the taxicab industry, with entry, rates and business practices governed by the Los Angeles Board of Transponation Commissioners23 In evaluating the PC&N cri- terion, the Board may consider the applicant's financial capability, evi- dence that existing taxicabs "are not, under efficient management, earning a fair and reasonable return on their capital devoted to such ser- vice, , ,", that existing taxicabs ". . . are or are not, under normal condi- tions, adequately serving the public. . .", and ". . . whether existing services are meeting the need or demand. "2' The Los Angeles ordinance includes the typical requirements of in- surance,2S an approved identification system of color and signage,26 me- ters,2? rate regulation.2' a requirement that the driver take the most ~ direct route29 and not charge more than the prescribed fare,30 and de- scribes the circumstances under which a driver or vehicle permit may be temporarily or permanently suspended or revoked.31 The rules adopted by the Board of Transpo:tation Com."!l.issioners indude precise safety reg. ulations (including maximum age of vehicles, inspection, maintenance, re- pair, seat belt and 'other requirements), cleanliness of vehicle. counesy and honesty of driver. and common carrier service obligations.32 C. HOUSTON The licensing of new entrants under the Houston municipal Code requires a hearing by the city Depanment of Finance and Administration vehicles for caIT)ing not more than eight persons. excluding the driver. which is oper- ated v.;thin the jurisdiction of the city or county. . . ." CAt... GOV'T CoOE t 53075.5 (West Supp. 1996). The California Public Utilities Commission may not regulate the 1OCJ.1 taxi induslf')' if it is already licensed and regulated by the city. People: v. San Francisco. 155 Cal. Rptr. 319 (1979). Tens requires the municipahty to regulatc not only the arca within its jurisdiction. but also jointly o.....'T1ed municipal propeny and propeny "in which thc municipality possesscs an ov.l1crship intcrcst." Tt::x. LOCAL Gov',., t 215.004 (West 1995) 22, Tt::x. locAL GOV'T CoDE AN!". ~ 215,004 (West 1995). 23. Los ANGEt.r.S M1..'"l'-'. Coot.. ch. \'11. an, 1. H 71.00. 71.12. 24. Jd. i 71.13. 25. Jd. P1.14. 26. td. Ii 71.16. 71.19. 71.20. il.21. 27. Jd. i 71.21. 2S. Jd. i 71.25. 29. Jd i 71.23. 3U. Jd. i 71.24. 31. Jd. Ii 71.01 .71.10. 32. DEPT. or TRA!"sP.. Clli' or- Los Al"Gl:LJ:s. T ^XlC^B RL'Ll:S ^ND REGUL^TIO'-":S OF TIll: BOARD OF TRA....SI'. COM."1':-; (1991) . . 80 Transponation Law Journal [Vol. 24:73 under a "public convenience and necessity" standard, in which applica- tions are denied unless the applicants are able to prove, by clear and con- vincing evidence, that the standard is met." In assessing the PC&N standard, the director of the Depanment must evaluate the nwnber of vehicles to be operated, the effect of new entry on traffic congestio:J (\'e- hicwar and pcdestrian), the number of pernuts in operation, the irnpact on existing permit holders, and "any other facts the director may deem relevant."34 33. HOl':STO~. TEX.. CODE OF ORor:-:A:SCES ~ 46.66 (196S). The Houston Code requires all applications for the $400 taxicab permits to be filed in January of ("ven-numbered years for a hearing the folloVwing month. Ordinance 93.155 of the City oC Houston amended ~ 46-&.: of the Houston Code. requiring taxicab permit hearings to be held in even-numbered calendar years, where previous hearing were conducted annually. The director oi the department of finance and administration conducts the hearings under a "public convenience and necessity standard" in which aU applicants are denied unless they are able to provide clear and convincing e\idence that the standard is met. HOUSTON. Tex., CoOE OF OROI~ANCES ~ 46-66 (1968). However. the director retains absolule dIscretion in determining whether public convenience and r.ecessit)' requires the issuance of additional permits. since Houston ordinances require the dlrec;tor to camide:- nct or!Jy eml:n::ra:ed fac:o:-s such as effects or. traffic congestior.. the number 0: exis:i::g penni!s in operation. and potential economic impact on existing permit holders. but 3;SO "a.;) other facts the director may deem relevant." The Houston Code ~ 46-66 provides in p.!;.: I;: de;:ennining whether public convenience and necessity require the issuance of the tuicab permit 10. the application, the d:reClor shall take mto consideration: (3) Nu.rnber of vehicles to be operated. (6) The effect of ac!ditional vehicles upon the traffic congestion. vehicular and pedes- trian alike. (10) The total number of ta:ucab permits in' operation. (11) Whether the requirements of public convenience and necessit)'can be met a.",:d complied with or.l)' by the lssuance of additional permits. (12) The resulting er:ec: cpon the business of existing perrr.;t holders and upor. exist;::g agencies of mass transponation in the city (13) Any other faCtS the director may deem relevant. 34. The taxicab business in Houston. Texas, has traditionally been controlled by Yellow Cab compa.ny. which prior to 1993 held almost 70% of the 2.098 annual pemtits issued by the City of Houston. Cab Du~xulallon Dra....J Praise. Criticum. HOl.'STO~ POST. Sept. 13. 1993. 1;-. Sep. tember. 1993, The Houston City Council voted to award 49 new taxicab permits. predominantly to smaller cab companies. in an effort to respond to a rosier economic outlook and a perceived need for more competition in the industry. The partial deregulation by the City Council slgnalec a new approach by the Regulator')" Affairs Office of the City of Houston in allowing an i~creas(' in the nUr.lber of permits. an action whIch was '-'igorously opposed by Yellow Cab. In adc!aion 10 the increase in the number of taXIcab permits in Houston. the cit~. increased the taxi fares slightly from S1.50 for tbe first 2'11 mile and SO.30 for each additional 11145 mile 10 S1.50 for the f:rsl1f9 mile and $0.30 for each additional 2.'9 mile. while ellmlnating a provision providing a maximum p~r-cab fare for trips \\;thm the do.....mO....il area. HOuSTo..... Tex.. OROI~^NCE.J 93-9 (1993) Flat rates to Houston In:ercontlnemaJ Airport (IAH) and maxImum waiting time charg:s also ir:cre3sed under the am:=nd=c ordinance. so while Houston has increased the level of laXJcab competition by allo\\1ng easier em!!. It appears that pncmg controls ",ill remain in ('teet 10 prt:vent fare wars among the larger ta.'{i fleet Despite Houston's rela.'{allon of entr.... the city retains fi~ control of the taxiear- ~outes 1996] Taxi Industry Regulation, Deregulation & Reregulation 81 D. CHICAGO The Municipal Code of Chicago provides a system of strict regula- tion of license acquisition and fare selling." The code is typical of the entry criteria imposed bv most cities on the tax.i industry. It requires that new entry be permitted only where consistent \\ith the "public conven- ience and necessity", which is to be determined with an evaluation of public demand, safety, the economic impact on competitors, and the wages, hours and conditions of drivers.36 . . between the city and its two major airports. IAH and William P. Hobby Airport (HOU). Any taxicab depaning eIther airport ",ith passengers is required to pay a fial fee to cover the city'!> administrative and related expenses. and pricing to and from IAH is controlled by a flat rate scheme based on the division of the city of Houston into seven zones. Taxicab standing queues have been established at JAH. limiting passenger pick up to only those cabs that are operating under a valid city permit. and eligible cabs may receive a pnority reassignment (thereby moving to the front of the queue) if the taxicab returns to the departure zone ....ithin fony-live minutes of its previous depanure. HOUSTO:S, TEX., Com: OF ORDI_"^SCJ:S ~ 46-26 (1968). Although the city of Houston co:-ainues to regulate the lucrative airpon routes. and general meter pricing. it remams to be seen what effect relaxed entry standa:-ds ",ill have on Houston's taxicab business. One Houston City Councilman has suggested that relaxed entry has signaled the death k.nell of regulation. Cab Der~gu/.o.lion Draws Praue, CritiCISm. HOl:STo:"O POST. Sept. 13, 1993, City Councilman Frank Mancuso is quoted as saying: "In my opinion. we no longer regulate cabs. It's that simple. Everyoody and anybody is going to be au! there now. It doesn'l bode well 10 lose complete control like that:" 35. CHICAGO. Ill.... Mus. CODE, ch. 4-348-040 (1956): Ir. determining whether public con'..enience and necessity require additional taxicab set\lce. due consideration shall be given to the follo....i.::.g. 1. The public demand for taxicab set\i.ce: :!, The effect of an increase in Ihe number of taxicabs on the safety of existing ..-ehicu- lar and pedestrian traffic: J. 1n.;: dice. of i::creased compcti:ior:.: a. Or: revenues of taxicab operators: b. On the cost of rendering taxicab service. including provisions for proper reserves and a fair return on investment ir: propeny de,,'oted 10 such seno'iee; c. On the wages or compensation. hours and conditions of service of taxicab chauffeurs: 4. The effect of a reduction. if any, in the le..'el of net revenues to taxicab operalors on reasonable rates of fare for taxicab service: 5, An~' other facts .....hlCh the commissioner may deem rele..-ant. If the commissioner shall report that public convemence and necessity require additional taxicab service. the council. by ordinance. may fix the maximum number of taxicab licenses to be issued. not to exceed the number recommended by the commissioner. 36. CIIICAOO. Iu..., Mvr-;. CODE. eh, 4-348 (1956). In 1960. the public vehicle license com- missioner of Chicago .....as granted authority to Issue additional taxicab licenses up to a maximum of 4.600. increasing the prior limitation of 3.701 medallions. Under Ihe municipal code. the com- missioner was required to repon a finding of "publ:c convemence and necessity" based on public demand. traffic safety considerations. industry comoetltlon efiects. and commissioner'dlscretion, before licenses could be increased up to the 4,600 ceiling. Over the last twenty-five years. taxi. cab medallions were predorrunantly in the hands of the two largest cab companies. Checker Taxi Company' and Yello..... Cab Company These t.....o compames controlled SO'}o of the Chicago licenses. promptlOg the Chicago City Council to pro?ose the Issuance of 1,500 additional licenses in 199~. to be distributed Q\-'er a three \'ear penoe, ....11n open emf" slated for 19Y1 Faced ....'th 82 Transponarion La... Journal [Vol. 24:73 E. ST. LoUls The St. Louis city ordinance is also typical of those governing the taxi industry. It establishes a Board of Public Service to issue certificates of PC&N, determined on the basis of: [\1,']hct:;,c:- t:-:::: cc::::;.::::s c- ::--:.::: l-~bL: rcqL:.1:~ :..:.::: propose":: c ;"ddltIO':ai ta\- icab senice within the CIty: that existing taxicab service is Dot sufficient to properly meet the needs of tbe public: the financial responsibility of the ap. plicant; the number, kind. type of equipment and color scheme proposed to be used: tht: ir:crcased t:-affic congestion and demand for increased parking space upon the streets of the city whid~ I"'.lay result. and whether the safe use of the streets by the public, both vehicular and pedestrian, "ill be preserved by the granting of the additional license; and other relevant facts as the Board may deem ad....-isable or necessary.37 . . Vehicles must be painted in distinctive colors" and must be "in a thoroughly safe condition for the transportation of passengers, clean, fit, of good appearance and well painted. "39 Taxis must be equipped with posted fares and taximeters, with fare schedules filed \\ith and approved the prospect of rapid deregulation. Checker and Yellow Cab forged an agreement y,ith the City of Chicago. providing an increase: in medallions of 1.100, coupled v.ich the: relinquishing of 1.300 l7lecailior.5 by Checker and Yellow Cab for reassignment. over a ten year period. Ann Marie l.Jpi:1Shki & Jar.c: Tanner. Taxi Deaf Gw Council's OK Afur lJ Barrie Royal, em. TRlB., Jan. 2S, 19S5. at Cl. Cl. The: new and relinquished licenses arc: awarded to independent drivers by lot- tery. whose m:!.rket s:tare .....ill increase: to 59% by 1998. Chicago's mO\'c::nent toward liberalized entry \\ill panicularly impact medallion o....nen. who received $20,(0) on the open market for a medallion in 19S5. With each issuance of a medallion through the louery. the medallion value: drops. as lottery ""inners are able to lImit the::- taxicab license investment to 5250. Toe Chicago a~reement may also affect taxicab fare reg'.:latior.. in which the Chicago City Council has been uaditionaliy hesitant to increase fares. Despite rate increases of roughly 30% i~ March. 1990. Chicago's rates were signifi.:.:lntly lower th3:'. those of-other major U.S cities. Su James Strong. Time to Dig Duptr for Taxi Rides. C1u. TRia.. Mar. 9.1990. a: C4, C5. Rate increases made by the City of Chicago in 1991 were the first S!ri~ 1981. Jerry Feldman. the president of Checker Taxi Company. Inc.. testified before a City CO'..l::cil heanr.g in 1991 :hal a three-mile t::!.xi ride i:1 Ch:cago which costs S3.60 would be at least S6.50 in Los Angeles. .55.50 in Philadelphia, and S4.60 In New York City \\'ithin three years. Ihe City of ChIcago survived a challenge to its deregulation scheme when Checker and Yellow Cab were detennined to have violated Ihe 1988 ordinance b~' setting up "sham companies" which finan.:ed the purchase of licenses for drivers in return for Ihe driver putting the medallion up for collateral. P. Davis Szymaczak. Clt,v G~ts Rar~ Vwor.\' Ov~r Cah Companies. CHI. TRI9.. May 24.1991. at C2. If the driver defaulted on the financing. Ihe medal. lion passed to the cab company. effectively circumventing the cilY's goal of limiting Ihe market share of Checker and Yellow Cab. AJlhough the City of Chicago was able 10 keep the move to liberalized entry alive. !!iven the resistance by the large taxicab companies in Chicago. it is un- clear whether the market ",,;11 be open in 1981:\. or whether Ihe City will for'ge another limited reg~!ation agreement. .'1. ST. LaVIS. Mo.. ORDI~"....ccs 58795. ~ 8.98.023 3S ld.18.98.113 39 ld! 8.98.10; 1996] Taxi Industry Regulation, Deregulation & Reregulation 83 by the Board of Public Service.'o To ensure compliance, vehicles shall be inspected annually.4l Liability insurance must be maintained.'2 To elimi- nate conflict between drivers, specific rules of conduct apply at taxi stands: Taxicab drivers entering a taxicab stand shall do so from the rear. and shall progress toward the front thereof whenever the opponunity to do so is pres- ent. The drh'er in the foremost position shall be entitled to serve the first customer arching at that location, pro\ided. however. that should the cus- tomer elect to employ any other taxicab. he shall have a free cno'ice thereof at all times.43 A common carrier obligation is imposed on drivers to accept all po- tential patrons, except service "to anyone who is intoxicated or may pres- ent a personal safety hazard, and . . . any person in funherance of any unlawful purpose. "44 , . F. BosTo~ Legislation promulgated by the Massachusetts legislature in the 1930s gavc the police commissioner of Boston the power to authorize not more than 1,525 taxis to "suitable persons, firms and corporations who are owners .of vehicles known as hackney carriages. . ."45 Regulations promulgated by the Boston Police Commissioner call for a S10 fee for a hackney carriage license, and a S2 fee for a hackney driver's license, probably th" lowest such fees in the nation." Nonetheless. because of the limitcd number of medallions issued. the market price for an existing medallion has approached S90.000 in recent years"7 In 1989, metered fares were increased 19%. raising the fare for a two-mile trip from 53.50 to 54.30.48 Boston Police regulations also call for annual vehicle inspections.49 a card displaying rates in the rear compan- ment of the taxicab,>" etiquette in taxi stands." appropriate driver ap- 40. [d. 118.98.107.305. 41. [d.~; 8.98.155-167. 42. [d. I; 8.98.172-173. 185.186 43. [d.; 8.98.425. 44. [d. I 8.9K4-I9. 45. AClS of 1930. ch. 392. 14. 46. Su CITY OF BOS1'ON. RULI~S A"'O Rcct.":LATlOSS ESTADLlSlmO BY Till! POLlCr: COM MISSIOr-;r:R FOR THr: C~ or- BOSTON FOR HACKNCY CARRIAGCS ANt) HACKNl!Y STANDS 'N ACCORDANCE WtTH CIIAPTl!R 392 or- Tilt:. ACTS or: 1930. as Qm~nd~d, ~~ 2. 4. Su also, CnT' or BOSTO~, HACKNey CARRIAGe TRAfSI....C M^~t.;l\L, ..n. Suzuki. supra. note 20, at 130 48. Mark Muro. Roa.ch~ lO BOSlof! Cab Om'us: Ta.k~ a. Hlk~. B051 0'" GLOUC. July 29. 19S9. at loS JQ CITY or BOSTO~. supra note 40. ~ 7 50 Id ~~ 8. 17. 5l ld, ~ 12 M Transportation Law Journal [Vol. 24:73 pearance" and behavior.53 including a prohibition against tranSpOITLtlg dead bodies.'4 G. MIS"EAPOLlS The :.1innecpolis T2..xic2.b Ordinance h2.s tr..:cc: pu;-poscs: (1) to achieve ". , , a better cab service for the riding public, , ,"; (2) provide "greater safety and protection to the public, , ,"; and (3) establish "better operating conditions for cab o\\ners and drivers. "55 In detennining whether the public convenience and necessity warrant new entry. the city council must conduct a hearing, at which the following criteria shall be considered: , , ITJhe level and quality of service being provided by existing taxicab opera- tors: whether additional competition would improve the level and quality of service or the degree of innovation in delivery of services; the impact upon the safety of vehicular and pedestrian traffic: the impact upon traffic conges- tion and pollution: the available taxicab stand capacity; the public need and demand for service: the impact on existing taxicab operators; and such other factors as the city council may deem relevant.S6 The Minneapolis ordinance also specifies requirements regarding the qualifications of new entrants, requiring the city council consider: [TJbe financial eapabillty and responsibility of tbe applicant: the applica."l's prior experience in the taxicab business: the level and quality of taxlcab ser- vice pro\ided by the applicant in the past in areas in which it has operated; the experience aDd competence of the applicant's drivers: the applicant's prior record of compliance v.ith the taxicab ordinance including complaints and disciplinary actions against drivers and vehicle O\\i1ers: the applicant's prior record of service complaints: the age and condition of the ,,'chicles pro- posed to be licensed by the applicant: and such other factors as the city coun- cil may deem relevant.57 Drivers must be courteous,'" assist passengers.'. accept all paying passengers"o give them receipts upon request'" not smoke \\ithout their permission"" not overcharge them.b3 drive safely...... carry liability insur- 52. [d. ~ IS. 53. Id. \! 15.20. 5~. [d. ~ 2S. It is unclear .....hether the taxi driver must Jettison a passenger .....ho dies in transa. 5S MINNEAPOLIS. Mf~:-'. TAXICAB ORDINA:'-ICI::S ch. 341 (1993) 56 Id. 1341.270('1. 57 Id 1341.270rbl 58 Id! 341.100 59 Id ~ 341.110. 61l Id. 1341.170. 61IdI341.200 6:. Id ~ 3.JI.250(dl 1996] Taxi Industry Regulation, Deregulation & Reregulation 85 ance,6S and pass a driver training course,"" The ordinance goes so far as to prescribe the clothing drivers shall wear, prohibiting as outergarmets: "T-shirts, underwear, tank tops, swimwear, jogging suits, body shirts, shorts, cut-ofts, trunks, or similar attire, , , ,"67 Licenses may be revoked or suspended for good cause after notice and hearing.66 H. DENVER . . While most city governments regulate their own taxi companies, Col- orado is something of an anomaly in that the state Public Utilities Com- mission [Puq regulates the taxi industry of Colorado's major cities69 Until 1994. entry licensing in the Colorado taxi industry was governed by the standard of "regulated monopoly";70 beginning in 1994, it was gov- erned by the standard of "regulated competition. "71 Under the prior "regulated monopoly" regime, no finding of public convenience and necessity for additional common carrier authority was justified unless the applicant could demonstrate that the existing opera- tions were substantially inadequate," for "the existence of an adequate 63. Id.! 341250(n). Rates are dealt ~ith in 11341.710-810. 64. Id.! 341.120. 65. Id.! 341.500. 66. Id.! 341.380. 67. Id.! 341.130. 68. Id! 341.980. 69. n;:e Cok:-aco Ie~i~:a:ur: author.z~d its pue to issue certificates to mOlor vehicle carri- ers in 1917. 191i Colo. Sess. La\\'!.. ch. 110, t 35. In 1969. it declared common carriers to be public utilities. 1963 CR.S. ~ 115-1-2(5} (Perm. Supp. 1969) and 1963 CR.S. ~ 115.9.2 cited in Miller Bras.. Inc:. v. Pub. UtiI. Comm'n. 185 Colo. 414, 421. 525 P.2d 433. 4~5 (1974); Section 40. 10-105(2). c.R.S. 1973. 70. Prior to 1967. motor common carriers of propeny were governed by a statutory provi- sion restricting: new entT)' under a standard of "regulated monopoly." In 1967. the Colorado legislature changed the standard to one of "regulated competition." Su Denver Cleanup Serv.. Ine. v. Pub. Util. Comm'n, 192 Colo. 537. 541. 561 P.2d 1252. 1254 (1977) (by changing the law, ""'lthout question (the General Assemblyj intended to protect the public health. safety. and general welfare b)' providing a framework for the better transponation of persons or property." 71. Judicial and agency precedent interpreting the impon of the parallel 1967 statutory change is instructive as to the standards to be employed in considering the parallel legislative change in 1994 by the Colorado legislature of entry standards governing taxi companies, n. The Colorado Supreme Coun observed that: [U)nder the policy of regulated monopoly. additional common carrier authority was not granted where adequate service was already being rendered. .. In accordance with this theory of regulated monopoly. we have held that a common carrier serving a par- ticular area is entitled to protection against competition so long as the offered serYice is adequate 10 satisfy Ihe needs of the area. and no finding of public convenience and necessity for common carner service IS justified unless present service offered in the area is inadequate:. Milier Bros., Inc. v. P'ub. Uti!. COr.'lm'n, 185 Colo. 41~, ~22, 525 P.2c! 433, 446 (197~). "Under [the concept of regulated monopolyj an applicant for a competing cenifieate was obliged to show 'substantial' inadequacy in e;ustlOg sen/ices." 185 Colo. at 430. 525 P.2d at 451 86 Transportation Law Journal [Vol. 24:73 . . and satisfactory service by motor carriers already in the area is a negation of public need and demand for added service by another carrier. "7) The Colorado Supreme Court held that while inadequacy of existing services may be considered by the PUC in a "regulated competition" en- vironment, it is no longer the controlling criterion that it had been in 2 "rc;uI2te: r.oo~opojy" regime." Under the "regulated competition" standard, the controlling criterion is the "public interest" or the "public need. "75 In its seminal decision of CM. Morey 1'. Public Uti/ities Commis. sior.76 [Morey I!J, the Colorado Supreme Court observed that the consid- eration of the public need for safe,. adequate, dependable, efficient and reasonably priced transportation services warrants an evaluation of the impact that potential new ent!)' may have in creating excessive or de- structivc competitionn In assessing new entry proposals for taxi service in Colorado, the issue of destructive competition is at the heart of an assessment of the public's interest in avoiding impaired transportation services Or higher rates. Neither can "regulated competition" reasonably be interpreted as supporting unlimited entry.78 73. Ephnam Frelfhtways. Inc. v. Pub. Util. Comm'n. 151 Colo. 596.380 P.2d 228 (Colo. 1963); Colo. Transp. Co. v. Pub. Uti!. Comm'n, 158 Colo. 136. 143.405 P.2d 682, 686 (1965) (taxi company seeking lO provide bus sen.ice failed to prove inadequac:' in existing senices). 74. Miller Bros..!:':e. v. Pub. Uti!. Cor1".:r.'n. 185 Colo. 41-1. 431.32, 525 P.2d 433. 451 (1974); CM. Morcy Y. Pub. Uti:. Comm'n, 196 Colo. 153. 156.582 P.2d 685. 687 (1978). 75. eM. Morey. 1% Colo. at 157-58. 582 P.ld at 688: CM. More)' v. Pub. Uti!. Comm'n. 629 P.2d 1061. 1065 (Colo. 1981) (hereinafter Mo,~y Il). In assessing the e\idence. the public need is broader than the indi\idual need~ or preferences of an applicant's Customers. In deter- mining whether a public need e:tis!s. the PUC may consider the needs and preferences of the v.itnesses .....ho testify ir: favor of the appliCJ.nt. although they are not determinative. Morey 11. 629 P.2d 1061. 1066 (Colo. 195!). The pub:lc nee': cor:sists of the needs of the: public as a whole. IJ a! 106i. i6. Mur~y II. 629 P.2d 1061. (Colo. 1981). 77. Tnc: Court held: As a corollary of our holding. !hat the "public need" is broader than the individual needs ilnd prefere::=es of a~ at'plica~,'s custor.-:et'1. we agree than the Commission may conSider the impact additional compelllion ma~' have. not only on the conflicting eco- nomic Interests of competing carriet'1. but also on the abiluy of existing carriet'1 to pro. vide thc:ir CUstomers and the public ~enerally .....ith safe. efficient and economical transponatlon semc.es. The obligation to safeguard the ~ener31 public against the im- paired Se:rv1ces and'or higher rates accompanying destructlve Or excessive competition is at the heart of the policy of regulated competition, /d. at 1060 [citations ommedj. "Because of this obtigation. the: pve can require a carrier to serve unprofitablt: routes that are important to certain segments of the population as a condition of granting it ::Iuthority to operale more lucrative routes." Durang:o Transp.. Inc. v. Durango. 786 P.2d 428. 4~ I (Colo. 0. App. 1989) . 7R. In .\(or~y II. the Colorado Supreme COUrt amrmed the: PL"C. \l,'hich d'enied a new appli- cation on thl,' basis of evidence which established tha:: The market for trar:sportatlon sen.'lces In the affected areas was relatively inelastic; The: llDCratln2 caoacities of e:xis{inl!: common camen. v.'c:r~ underutihzed: The llt'lc:ratlng rc:ve:lues of eXlstin!!- C3rrien. were l("l\\": and 1996] Taxi Industry Regulation, Deregulation & Reregulation 87 IV. THE ECONOMIC CHARACIERlSTlCS OF THE TAXI INDUSTRY A. INDUSTRY SIZE & STRUCI1JRE Taxicab companies comprise a $6.5 billion industry employing nearly 300,000 people,79 of whom 225,000 are drivers.so It has been estimated that the taxicab industry transports more passengers than all U.S. mass transportation systems combined'" The taxi industry is a common carrier form of urban transportation, differing from its mass transit rivals in that it is privately owned, operates over public streets on no fixed routes, and provides door-to-door (or point-to-point) service in small vehicles on behalf of." and at the direction of, individual or very small numbers of patrons,,2 Typically, the contract between the driver and passenger is informal and ad hoc. Wherc regu- lated, the price is usually based on the distance (and sometimes the dura. . Additional competition for present and prospective business would seriously impair ~ the abililY of existing carriers to continue to provide efficient and economical service to the public Morey II. 629 P.2d at 1066. The Colorado Supreme Caun subsequently reaffirmed each of these principles In Trans. Western Express. Ltd. v. Pub. Util. Com:;:'n. 877 Pld 350 (Colo. 199~), the Supreme Coun ccncluded that the entr)' standard of "regulated competitioa" is to be applied as follows: 1. Under the dcelri'ne of regulated competition. the controlling consideration is the "public need" or the "public interes:." Jd. at 353: 2. The burden of proof in e5:;:.':I115::':;-,'; r:.:!J:i: n=::c is en the applicant. Jd.: 3. Tne public need is broader than the individual needs and preferences of an appli. cant's customers. and consists of the needs of the public as a whole. [d. at 354: ~. !,he public need is advanced by "safe. efficient, and economical transportation serv- IceS. Jd.; 5. The PUC may consider the adequacy or inadequacy of existing services in deter- mining the public need. [d.; 6. The Commission may consider the impact of additional competition on the -eco- nomic health of existing carners, as well as their ability to provide the public with safe, efficient and economical service. [d.: 7. "Providing for the public need and regulating competition demands that some reo straints be placed upon inter-carrier competition therefore avoiding destructive compe- tition." Id. at 353. n.7 citing Morey 11. 629 P.2d 1061. 1066: K "The doctrine of regulated competition requires the PUC to deny an application for common<amer authority if I!ranting the application would create 'excessive' or 'destructive' compctiuon." Id. at 353; and 9. "Regulated competition is not synonymous with deregulation." Id. at 354 cUing Mor~y J/629 P.2d at 1066.67. 79. Su Roy SAMPSON, 1::1' AL, DOMJ:STIC TR^~SP'OR"^TJO~: PRACTice. TlIl::ORY, A."O POUCy 150 (6th ed. 1990). SO. ENO TRANSPORTATI01" FOUNOATIO:-';, TRA..SPORT^T101" I.... AMI:.RICA 62.C12th ed. 1994) 81. Rosenbloom. supra note 13 8~. Roger Teal. TtuLs As Public Trar-sil. PROCI::I:.nr..GS or TIlI:. CONFI:.RI::NCr. os TAXIS As PUBLIC TRANSIT 3 (UnI\'. of California. 1978): County of San Diego Dep't of Transp.. T^XKAlI STUDY 0 (1978). Su Roy S^MPSON. M^RTI:-; F^RRIS &:. DAVID SCHROCK. DOMI::STIC TR^S'i PORTATION: PRACTICL TIII:.ORY. A~[,) POLICY 150 (6th ed_ 1990). 88 Transportarion Lalli Journal [Vol. 24:73 tion) of the ride..' Airport vans and limousines differ in that they typically operate over fixed routes while taxicabs proceed directly to the destination designated by the patron." The taxi industry may be divided into several distinct segments: . . 1. Radio-Dispcrchcd Cabs The radio dispatched portion of the taxicab industry involves a cen- tral dispatching system whereby patrons call by telephone and cabs are sununoned by radio.' Taxis are equipped "ith two-way radios. and fleets are typically larger and have centralized maintenance and repair facili- ties.86 Economies of scale have been acknowledged to exist in this seg- ment of the industry due to indivisibilities of the inputs employed in marketing. dispatching. and management, as well as the need for a suffi- ciently large fleet to provide adequate service v.ithin reasonable time v.ithin a designated service territory.'7 Thus, this segment of the industry is likely to be relatively concentrated." In most cities, the telephone or- der market accounts for 70%-80% of the overall demand for taxi service.89 2. The Cabstand Business. Cabstands exist v.ith queues for both taxis and passengers at concen- trated locations such as airports and hotels. 3. Cruising Cabs. The cruising cab business consists of taxis driving along streets on which pedestrians congregate, searching for a random patron to hail them. It is profitable only in downtown urban areas of large cities where a high density of potential riders exists at random locations; the cruising cab business does not work well in cities \\ith low density populations.90 83. Kemp. supra note 4, at 57. 84. Jd. 85. FRANKE!'OA &:.. PAL,l.:r,R, supra note 9. at 11.12. 86. Kemp. supra note 4. 87. fRANKENA &:.. PAL"'T1-ER. supra note 9. at 54.~5; GILBI!RT &. S^MUIl.LS. supra note 10. at 150 ("When revenue. and hence profit. is considered. . . it appcan that larger firms do have accc:ss to significant economies of scale. First. they are more likely to be able to respond quick.ly to trip requests than arc many small finns serving the same area independent of each other:'). Su also Teal &. Berglund. supr(J note 4. at 49 ("Costs for a new entrant include radio equipment. facilities, personnel and a fleet large enough to pro...;de responsive cily-wide service where there are thought be 'economies of scope....). . 88. Teal &. Berglund, supra note 4, at 38. 89. Jd. at 39. 90. Chanoch Shreiber. Th~ Economic R~a.sons for Priet (Jnd Entry RtKUlation or Taxicabs: A Rtjoindu, 15 J, TRANsr. Ecos. & POL.'y 81. 82 (1981), 1996] Taxi Industry Regulation, Deregulation & Reregulation 89 4. Public Contract Services. Sometimes a public agency contracts v.ith a taxi company to prO\ide one of more of the following services: (A) traditional fixed route tra.'1si: or dewand-responsivc seniccs in low- density areas, or late at night. often in lieu of existing Cued-route services; (B) leeder services to fixed routes; (C) paratransit seniees lor special target groups such as the poor. the eld- erly. and the handicapped: (D) involvement in user-side subsidy program: and (E) brokerage services matching travelers to the most cost-effective pro- \ider for each service.91 B. INDUSTRY COSTS The costs of entry into the cabstand or cruising segments of the taxi industry are exceptionally modest. consisting principally of a chauffeur's license. a down payment on a car. four re-tread tires. a few gallons of gasoline, and a couple of quarts of oil. In the radio dispatch segment of the industry. fixed costs include the purchase price of a fleet of automobiles. depreciation. regular mainte- nance, the radio dispatching equipment and personnel to run it, market- ing and advertising costs, insurance, driver training. and license and pertnit fees. Variable costs in the industry are generally a function of distance. duration and destination which consume variable rates of fuel. oil and labor.90 Labor expenses have been estimated to constitute 50% of the cost of taxi service.93 Many costs are joint costs, spread over the outbound and inbound segments of the journey. A trip without dead heading enjoys two seg- ments of revenue over which to spread both fixed and variable costs. For example. a thrity-mile passenger trip to a commercial airport enjoys a high probability of returning v.ith a paying passenger. while a thirty-mile passenger trip to a remote suburban community has a high probability the taxi v.ill return empty'"' The relationship between cost and revenue of these two equivalent trips v.ill differ significantly because of the exist- ence or non-existence of a pa)ing patron on the return leg of the jour- ney.9~ In the absence of regulation. a taxi driver has a strong incentive either to refuse service to a patron seeking transportation to a remote community from which there is unlikely to be a return trip (or to charge a Yl. Rosenbloom. nou /3 92. Su Gallick &. Sisko supra note Y. at 117.8. 93. Teal & Berglund. supra nme 4, at 4~ 9~. Galilck & Sisko supra nme Y 95 ld 90 Transportation Law Journal [Vol. 24:73 price much higher, on a per-mile basis, than is charged elsewhere), and to queue for profitable trips at cabstands.9' Where profits are inadequate (as results for example, where entry is deregulated) the principal costs which can be trimmed are drivers' wages, vehicle maintenance, and the purchase of new equipment. However. taxi driver wage rates are already among the lowest in the labor force97 C. THE PASSENGER MARKET The market for taxicab services can be divided into several distinct segments, each with its Olm demand characteristics: 1. The Transportation Disadvantaged. The "transponation disadvantaged" include the elderly. unem- ployed, handicapped. children and low-income persons. In fact. a large proponion (perhaps most) of the users of taxicab service are persons of low income9S For example, a 1970 study of taxi use in Pittsburgh re- vealed that 58% of those who used taxis regularly did not own an auto- mobile: 60% of the trips were made by housewives, students, or unemployed, retired or incapacitated indi\iduals99 The 1975 National Personal Transportation Stud)' revealed that 60% of all taxi services are provided to the transponation disadvantaged. A Federal Trade Commis- sion study concluded that, "the low-income population spends higher shares of their income, and often simply more dollars, on taxis than does the high-income population. "100 Hence taxis play an essential role in transponing the disadvantaged. low mobility. and lower income segments of the population.lol The poor are panicularIy reliant on the radio dispatched segment of the markel.I02 2. Non-Residents. In large cities. the market also consists of a substantial number of oUl-of-town business. convention or vacation visitors.103 These travelers do have a competitive alternative in the form of remal cars. although usu- ally at a much higher price than taxicabs."'" Business travelers also may not be as highly sensitive to the price of taxicab service since many are on 96. Id. at 120. 97. Teal & Berglund. supra note 4. at 49. 98. Su supra note 13. 99. TeaL supra note 82 100. FRANKEN A & P"L.LER. supra note 9. al 3. 101. See GtLBERl &:. S",\"(I;ELS. supra note 10. at 11~ 102. FRAl'o'K.El"A &:. PAL,LCR. supra note 9. at 12. 103. Su Teal. supra note 82. at 14. I~ BARKER & BCMW. supra nOte l:\. at 4~ 1996] Taxi Industry Regulation, Deregulation & Reregulation 91 theit company's expense accounts.105 3. Affluent Residents. The wealthy are not financially burdened by the regular use of taxi- cabs, and enjoy the personalized nature of the service and its conven- ience'06 In certain densely populated cities, particularly those in the Eastern United States, with their congested streets and limited and ex- pensive parki:ig. a large nu;:nber of resideI4tS fmd u prin:te automobile an inCOI1Vefljent way to travel. . . V. MARKET IMPERJ'ECTIONS A. THE ABSENCE OF A CO"-IPETlllVE MARKET. In the cabstand market, the "firsl in, first out" rule severely restricts comparative shopping by consumers.107 In both the cabstand, and the cruising cab market, competitive shopping is impractical. and the transac- tion costs to prospective passengers of finding the taxi with the lowest price can be problematic. lOB One Source summarized the practical problems with competitive shopping at cabstands: First, space on airport or botel stands is usually severely limited and cabs not at the head of th.e hne often do not have a safe manner in which to pull out from the queue when hired. Second. there is no way in which one cab can be made [Q wait while a prospective passenger goes shopping.109 Another observed: fThe cab stand market) is a system that impedes price competition. because it puts drivers in a stronger position ilian customers. . .. Moreover. airport customers arc unlikely to dicker \\ith or refuse a cab that seems to be as- signed to them. especially when they do not know local fares or know tbat legal fares may ,..ary. or wben they are on expense accounts and not much concerned about costs. . . . In cab lines. . . the deterioration in quality also occurs because there can be little competition on the basis of either quality or price.11U Given these practical difficulties, it is not at all clear that a competi- tive market for taxi services either exists or can be created.111 As one 105. FRANKENA & PAL!TLER. supra note 9. at 129. 106. Su BARKER &. BCARD. supra note H al 44: GIUlt:.RT &: SAMUI:L!i. supra note JO. at Ill: SAMPSON. ET AL.. supra note 79. at ISCJ. 107. FRANKENA & PAUTLCR. supra note 9. at 142. lQ.8. GIU!ERT & SAML'CLS. supra nOle 10. at 151: FKASKENA &. PAL.'TLER, supra note 9, al 51. 109. GIU!ERT &. SAMUCLS. supra note 10. at 152. 110. Richard Zerbe. Jr.. Stau(e Taxis' Dut~ulation Hits a Pornolt. ReG. (Nov.-Dec. 19831. al 43.46. 111. "Suppl~' and dema:1d analYSIS is inapplicable to the cruiSing taxicab markel, The: condl' 92 Transportation La... Journal [Vol. 24:73 source observed, "It is not certain. . . that a 'market' in the pure eco- nomic sense even exists."!12 Moreover, visitors from other cities may be unaware of the prevailing price for taxicab services, or whether the pas- senger is protected from exorbitant pricing by a regulatory authority.lI3 Absence of a competitive market exists not only at cabstands, but in the cruising market as well. Competition in the cruising market is un- likely unless a number of taxis congregate in a single location at the same time the patron is present.1I4 One commentator lamented the absence of a traditional competitive market in the taxi business, noting that time is of the essence in the procurement of ta.xi services: Commuters almost always grab the first cab that drives by. as opposed to shopping for a taxi like. say. a restaurant, where the choices are arrayed and where the business v.itb the best or most efficient service v.ins. AU of which means that the fruits of a free market-namely that competition al- lows the best to thrive and prompts the worst to go broke-are lost. Ulti- mately. deregulation in the cab industry provides an incentive for all involved to offer the cheapest service allowable,ltS , . The spatial nature of the industry inhibits price shopping. thereby creating somewhat inelastic demand.!!6 Professor Chanoch Shreiber put it best: Unlike other atomistic markets. a taxicab market in which cruising is the main method of operation will seldom give rise to pricing competition. In most .industries sellers are at a fixed location. and customers have the ability to shop around for price and return to the seller offering the best terms. A seller can thus, by reducing his price expect to gain more business. since some customers shopping for price \\ill s\\itch to him from his competi- tors. Not so in the case of taxicabs. An individual cab operator. acting inde- pendently. ca....mot gain more passengers if he alone reduces his price below the going market rate.II7 Professor Shreiber goes on to point out that because a prospective tions for reachmg equilibrium. specified in supply and demand analysis. cannot exist in the case of taxicabs. and. the point of interaction between the supply and demand for taxicab rides is nOI an equilibrium position." Shreiber. supra note 90. at 298. 112. GU..BERT & SAMUEUi. supra note 10. at 151- 113. FR.ANKEI'l^ & P ^UTllR. supra nOle 9. at SO. 114. James Foerster & Gorman Gilbert. Taxicab Deregulation: Economic Consequences and Regulatory Choices. 8 TR^NSP. 371. 383 (1979). 115. Christopher Georges. D.C."s Checkered Cabs: Why Washtn.(lon.s Taxis Art' America's Worst. W^SIll~GTON POST. Mar. 21. 1993. at Cl. 0. 116. Richard Coffman. The Economic Reasons for Prla and Entry Re,fUlation or Taxicabs: A Comment. 9 J. TR"".SP. ECON. & POL'y 288 (1975): David Williams. lnfo;.mallon and Price Dr. raminarion in Taxi Markers. 20 Q. ReV. &ON. &. Bt.:s. 36. 37 (1981). 117. Chanoch Shreihc:r. The Economic Reasons for Price and Enm. R~,f!ulalion of Taxicabs. 9 J. TR^~~P. Eco.... & POL'" 268. 27U (1975) 1996] Taxi Industry Regulation, Deregulation & Reregulation 93 passenger who values his or her time "ill not likely turn down the first available cab on the basis of price, this mll have an "upward pressure on the price. "118 A consumer hailing a cab from a sidewalk has an incentive to take the first taxi encountered, because both the waiting time for the next cab and its price are unknownI19 Paradoxically, in an open entry regime, prices tend to rise while vehicular utilization rates tend to falP20 Potential patrons for whom price is a determinative factor, but time is not, may take the bus, subway, or some other form of public transport, . where and when it is available. However, little cross-elasticity of demand appears to exist between the taxicab and mass transit industries. for most taxi demand is time sensitive'21 , , B. IMPERFECT INFORMATION & TRANSACTIONS COSTS. The free market competitive model assumes consumers have "per- fect information." Yet consumers buying taxi service in a deregulated market often have little comparative pricing or service information, for the opportunity costs of acquiring it are high. As one source observed, ,.there is little incentive for price comparison for the occasional taxi user, as transaction costs (in time and effort) are high in relation to the poten- tial savings (less than $1 for a $5 to $6 trip)."l22 It is, quite simply, difficult for a consumer to assess the quality of transportation service at the time it is ordered, for transportation is in the nature of a "credence good"-one that cannot be examined prior to con- sumptionY3 A prospective patron can tell something about a taxi \isu- ally by the make and model of the automobile. as well as its dents, scrapes and paint job. But not until s!he enters the taxi "ill srne know how long the trip will take or how circuitous the trip will be, how smooth and comfortable the ride "ill be. how knowledgeable and courteous the driver may be. and whether the price mil be a fair one. The efficient acquisition by consumers of useful information on pric- ing is problematic in the cab stand and cruising markets. for reasons ex- plained above. Comparative shopping on the basis of price is difficult even if fares are posted because of the number of variables which com- prise the total price-drop, mileage. wait time, baggage. and additional passenger charges. Economist Alfred Kahn has observed several problems emerging from destructive competition. including consumers having a "limited abil- 118. Jd. at 271. 119. Teal &. Berglund. supra note .t. at 3b. I~O Foerster &. Gilben. supra note 114. at 378 111. Shreiber. supra note 90. at 82- 1::. Teal &. Berglund. supra note 4. at 50 123 DEMPSEY & GOeTZ. supra note 2. at 276 94 Transportation Law Journal [Vol. 24:73 ity to judge the quality of products and hence to keep it at acceptable levels even when they have a "ide range of competitive suppliers to choose from. "124 Given that comparative shopping by patrons for the best price/service combination is severely circumscribed by the absence of a true competitive market. regulation of prices and senices can signifi- cantl)' reduce consumer transactions costs. thereby increasing the number and variety of taxi trips.l2' C. E^TERI<ALlTIES. An external effect of a transaction is the positive or negative impact upon a person not a pany to it126 The negative externalities of taxicab ser.ice are felt by other users of finite road and highway resources. and the environment. Again. Professor Shreiber observes that h[tJaxicabs im- pose various external costs. Mainly. they increase traffic congestion and raise the level of air pollution. . . . The price of a ride in a system of free entry "ill cover only the private cost. The social cost per ride, which includes the externalities, \\ill necessarily exceed the price."'27 It has been argued that restrictions on entry increase efficiency by reducing the street congestion and air pollution caused b)' an excessive number of vehicleslo6 Garrett Hardin. i.r1 his powerful.essay, "The Trag- edy of the Comrnor..s," provides ir:sight as to tr.e C'cono:rJc forces leading a rational wealth maximizer to advance his 0\\11 economic interests by externalizing his costs: PI:t:J.!"e a p3sturc open to all. It is to be expected that each herdsman v.i11 try to keep as many cattle as possible on the commons. Such an ar- rangement may work reasonably satisfactorily for centuries because tribal wars, poaching. and disease keep the numbers of both man and beast well below the caff)ing capacity o~ the land. Finally. however. comes the day of reckoning. that is. the day when [he Ion g.-desired goal of social stability be- comes a reality. At this point. the inherent logic of the commons remorse- lessly generates tragedy. As a rational being. each herdsman seeks to maximize his gain. Explicitly or implicitly. more or less consciously. he asks. "What is the utility to me of adding one more animal to my herd?" This utility bas one negative and one positive component. (I) The positive componenl is a function of the increment of one animal. 124. AU"RED KMr-;. 11 ECO~OMICS or REGlJL^TIO~ 176 (1971). 125. Gallick &:. Sisko supra note 9. at 117. 119. 127. 126. Dempse~', supra note J. al 17. 127. Shrelber. supra note IIi. at 27-1 128.. Sa FR......~KC...^ & P,\L"TLCk. supra note 9. at 38. 42 C"fTlhe operation of taxicabs on con~es[ed streets slo.....s dowr. other road users. increasmg their lime and money COStS of travel."). IJ at 3,S 1996] Taxi Industry Regulation, Deregulation & Reregularion 95 Since the herdsman receives aU the proceeds from the sale of the additional animal. the positive utility is neatly +1. (2) The negative component is a function of the additional over-grazing cre- ated by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision- making herdsman is only a fraction of 1. Adding together the component partial utilities. tbe rational herdsman con- eludes that the only sensible course for him to pursue is to add another animal to his herd. And another. . .. [b Jut that is the conclusion reached by each and every rational herdsman sharing a commons. Therein lies tbe trag- edy. Each man is locked into a system that compels him to increase his herd \\;thollt limit - in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedoms of the commons. Freedom in a commons brings ruin to all. 129 In an environment of excessive competition created by excessively liberalized entry, the city streets are commons, the taxi companies are herdsmen, and the taxis themselves are callie. Every additional taxi on the street brings the taxi company additional revenue (panicularly where driver leasing creates an intermediate market between the taxi firm and its customers),13o although average taxi revenue will fall for all taxis as the streets become congested v.ith more vehicles than necessary to meet aggregate passenger demand. Since each individual taxi company has an incentive to increase the size of its fleet beyond the collectively rational level, according to Hardin. "[r]uin is the destination toward which all men rush. each pursuing his own best interest in a freedom that believes in the freedoms of the commons. "13t As we shall see in greater detail below, excessive taxicab entry has a negative impact in terms of industry productivity and profitability. But Hardin's main thesis is not about the economic decline of herdsmen, but of the negative externality of another son - pollution. He says: In a reverse way, the tragedy of the commons reappears in problems of pol. lution. Here it is not a qu~stion of taking ,something out of the commons. but of putting something in. . , , The calculations of utility are much the same as before, , , . Sinc~ this is true for everyone, we are locked into 'a system of 'fouling our 0\\11 nests: so long as we behave only as independent, rational. free-enterprisers. 1'::; The pollution impact l'[ allov.ing an excessive number of underutil- ~ed automobiles on the streets for any environmentally consciol)s com- 129. Garrett Hardin. The Trar:.',;', of rhe CnrnmonJ, SCIE:'iCC. Dec. 13. 196ts. at 1243 13U Su Teal &. Berglund. st.:;:'~.l ::.ote .;. at 54. 131. Su Hardin. Jupra note !.:..: 132 Id 96 Transportation Law Joumal [Vol. 24:73 . . munity is manifest. Hardin funher points out that one means of avoiding the tragedy is by ascribing private propeny rights, or in effect, "de-com- monizing" the commons. Licensing is one mechanism for creating such propeny rights, for no rational herdsman will overgraze land which is his. nor will a taxi company flood the streets within his cenificated service territory "..ith an excessive number of vehicles.'33 Still another externality involves the impact taxi service has upon a city's image, for the economy of a city as a whole may be adversely af- fected by poor or highly priced transportation set\ices. The taxi is the first and last impression a city will make on visiting tourists. convention- eers, and businessmen. A city's hotels, restaurants, airpon, convention and business traffic, are dependent upon ubiquitous. reasonably priced, and efficient on-demand taxi semce134 Further, non-discriminatory pricing based on average costs can serve a significant social objective of assuring reasonably priced semce to less affluent passengers or more remote communities. in effect requiring cross-subsidization by more .affluent patrons or dense markets. In re- viewing taxi regulatory issues, the U.S. Department of Transponation has observed, "[c]ross-subsidization, per se, is not automatically frowned upon if designed to meet some public policy objectives. "135 D. CROSS-SUBSIDIES AND CREAM SKIMMING. Most governmental authorities insist. by regulation or local ordi- nance, that licensed taxis operate as "common carriers." That is, taxis are required to provide service to low-density areas or at nonpeak times with- out pricing discrimination (i.e.: the same distance-based fare be charged to all on an "average cost" basis)136 Thus. dense markets cross-subsidize low-density and impoverished areas; peak traffic cross-subsidizes off-peak service. Unlimited or excessive entry causes owner-operators to gravitate to high-peak high-density traffic. predominantly at the airport and hotel cabstands. As one source noted: Vioen gypsy. or unlicensed, taxis siphon business and profits they se. verely limit the profits that licensed carriers need to sustain other required services. The possibility of opening entry to a taxi market also raises fears that newcomers would focus on these more lucrative areas. and experience in some cities bas validated these fcars.137 133. Su ~~nera/ly. Dempsey. supra note 3. at 17-2i. 134. GILB!!Rl & SAMUr.l..S. supra note to. at 153-4. 135. U.S. DEP'T or TRM.SP.. su.pra note 4. 136. Su Gallick &. Sisko supra note 9. at 117. 137. GtLSt!RT &. S^~n.;CL..S. su.pra note to. at 153: Su x~nually Suzuki. supra note 20. at 129 1996] Taxi Industry Regulation, Deregulation & Reregulation 97 Deregulation results in some trips becoming very expensive while others decrease in price. with the cost of service no longer averaged over space and time. Professor James Foerster and Gorman Gilbert observed: Persons \\-ith a low ability to pay. but a high need for transportation. may DO longer be abie to use taxi service. These results might occur because there will no longer be any geographic or inter-temporal cross-subsidization. . . . The elimination of whatever cross- subsidies now exist 'without income transfers could lead to socially undesir- able resuJts,13S And. as noted above. given that demand for taxi services is often time sensitive. economic regulation can reduce the transaction costs of comparative shopping.l3O E. ECONOMtES OF SCALE AND SCOPE Given the minuscule economic barriers to entry. one intuitively would not expect there to be economies of scale in the taxicab industry. Yet the per passenger overhead costs of marketing. advertising. dispatch- ing. accounting. and cab maintenance generally decline as the size of the company's fleet grows. An ability to provide ubiquitous service also sig- nificantly enhances. the marketability of the firm's product in the radio- dispatch market. for passengers thereby enjoy shorter waits. beller ser- vice. and one-stop shopping. reducing customers' transaction and oppor- tunity costs. Economies of scope are also present in the taxicab industry. A com- pany which dedicates its primary business to the radio-dispatch market can easily park temporarily idle cabs in hotel and ai'1'ort queues. A taxi company can easily dedicate capacity to the express document delivery business. F. THE ABSENCE OF SOUND EcosOMIC CONDITIONS. Absent regulation. few economic barriers impede entry in the owner-operator cruising and cabstand markets - all one needs is a chauffeur's license and a down payment on car. An open entry regime tends to put too many taxis on the roads when they are least needed. thereby injuring the economic health of existing firms and their drivers. Professor Shreiber observed: 138. Foerster & Gilben. supra note IIJ, at 3l:S5. 139. "Given that the demand b~' riders 15 general1~' for immediate service. the aggregate search performed by riders and dri"'e~ would tend to be extremely COSIly," Gallick &. Sisko supra note 9. at lIX: "IRJegulation can Increase the number and ,,'ariety of tax.! trips h~' reducln!! search COStS" Jd. at 119. 98 Transportation Law Journal [Vol. 24:73 In the absence of legal restrictions. the number of cabs most probably will vary i:::l the opposite direction to general business conditions. Very little skill is required to be a cab driver, and not much money is needed to buy or rent a car that can be used as a cab. The absence of barriers (0 entry makes cab operation the natural occupation to turn to for those that are unemployed. The disadvantage of such fluctuations is that they v.ill bring abou: a larger supply of cabs when tbere is less demand for them (i.e.. in times of recession) and a smaller supply of cabs whcn thc demand for them rises (in times of prosperiry). Moreover, cyclical fiuctuarions will tend to hurr those who make cab driving their permanent job - their income will necessarily de. cline sharply in times of recession. Restrictions arc needed to prO\ide some income stability for these drivers. who will anVV,'3V sufier in times of reces- sion because of the decrease in demand.140 . . , , Thus, the supply of labor and equipment by the industry appears to have an inverse relationship with the level of economic acti\;ty.141 Professor Shreiber wrote his pragmatic assessment of the economic characteristics of the taxicab industry in 1975. He was criticized at the time because the competitive model was not rejected on the basis of em- piricaltesting.l42 Yet, as we shall see, the empirical results of deregula- tion confirm. rather than reject, Professor Shreiber's analysis. Professors Lester Telser of the University of Chicago and William Sjostrom of the University College Cork have argued that various modes of transport are subject to core theory, which '.really amounts to saying that competition just isn't possible in some industries. . . ."143 Core the- ory emerged from game theory. 2nd as we shal! see, offers a fascinating insight into the question of why the taxicab market fails to perform the way one would expect under neo-c1assical economic theory. Game theory is broken down into two general types of '.games". or market en\;ronments - cooperative. and non-cooperative. The former are those in which the players (buyers and sellers in a market environ- ment) can communicate and fonn coalitions so as to best meet their indi- vidual needs. Players make decisions as to which coalition they should enter based on individual needs: any large-scale benefit which arises for the players is simply a by-product. In non-cooperative '.games:. (such as the infamous "prisoner's dilemma") players are unable to communicate, and therefore any decisions made are not based on mutuality.144 140. Shreiber. supra note 117. at 275-76 141. Williams. supra note 5. at 36. 142. RIchard Coffman. supra note 116. at 290. 143. Timothy Smith. Why AIr Travd DMsn', Work. FORn;~c. Apr. 3. 1995. at 41. 46: Su Wilham SjOStrom. Anlltrust Immunuy for S;llppln~ Conf~r~nces: An Emptv Cor~ Approach. 8 Al'o'TITRUST Sew- 19 (1993): William Sjostrom. Price DUCflmtnauon by 5htpptn~ Confaences. LoGISTICS.& TRA~sP. REv. 207 (1992) lJ~. Set ROBCRT AxeLROD TltE EVO:..t:TIO__ or COOPCRATlO'" (}9:-\.1) 1996] Taxi lndusrry' Regularion, Deregulation & Reregularion 99 Core theor)' is a subset of cooperative game theor)'; a core is formed when the coalitions are aligned in such a way that no player can advance his needs by defecting to another coalition or operate on his own. By contrast, an empty core arises when players can continuously form new coalitions which bring better players. Whether a core exists or not de- pends on the number of players in the game, and the market environ- ment, or rules of the game. Several economists have described various alternatives for which a taxi trip reflects an empty core.'45 Professor John Shepard Wiley, Jr., proffers an illustration of a market with an empt}' core: , , For exarnple. say that three strangers are \\illing to pay up to $7 each for a cab to the airport. Two cabs stop nearby. Each cab can carry one or two passengers. and each driver is willing to make the trip (with either one or two passengers) for a minimum of $6. Given these demands and costs, the worst-off or excluded player can block any arrangement by tempting some players to abandon others fa; a more attractive arrangement. Suppose: for instance passengers A and B force driver X do\\'D to her minimlL"TI $6 total fare. thus };elding. for A and B a fare of S3 each. As a result, passenger C is stuck pa)i.ng at least 56 to travel alone with driver Y. But driver X could gain an added S2 by dumping B and offering C a ride for S5-which C should accept becC'.use 2. S5 fare is cheaper than a 56 fare. This new coalition between X. A and C however. is vulnerable in turn to raiding by the ex- cluded players. Y and B. Now passenger B faces a tnp alone y,;th driver Y at a fare of at least 56. and both v.il1 improve their lots if they attract passen- ger C v.ith a S4 fare offer. which Y and B split between themselves and which C will prefer to the 55 that C pays as a member of the existing X-A-C coalition. TIlls coalition instability occurs for every possible cOr.1bination of players.146 As Professor Abagail McWilliams points out. an empt}' core exists when each and every coalition can be outbid by a rival coalition, so that the market cannot achieve stability; quantity and price fluctuate con- stantly.'47 With an empty core, the market tinds itself mired in unsatis- factory results, unable to achieve competitive- equilibrium. Another source summarized this illustration of dysfunctional economics more succinctly: Imagine, for instance. a market in which a taxi holds two people. and only two. Three people are waiting at a taxi stand. bound for the same destina- tion. and two taxis show up. How much does it costs a taxi to make the trip 145. Sa e.g., George Biulingmayer. Decreasing Avaogf' COSI and CompellllOn: A Nf'w Look a: the Add.\'ston Pipf' Case. 25 J.L & Eco:s. 57. XI-82 (1983). 140. John Shepard Wiley. h. Anmru.it and Corf' TJuory. 54 U. CIll. L. Rev. 556.560-61 (1987). 1.t7. Sa Abagail McWilliams. R,thmklnf Hon:.onral Market ReStrlctions In Defense of Co. opaaltor. in Empn' Corf' Markw. 0 R(\'. Eco.... & BL':). 3 (1990) 100 Transportation La... Journal [Yol. 24:73 doesn't depend on the Dumber of passengers. One taxi driver can try to make the same amount of revenue by offering the third passenger a (are of S20, but tbat passenger \\illlikely take a bus or not travel at all. rather than pay that much. So the second driver tries to upset the first driver's arrange- ment. undercutting his fare for (wo passengers. You can see what happens: Any price agreement struck by i1 coalition of two passengers and one taxi can be upset by a slightly bener offer from the other taxi (or the other pas- senger). cascading until it is no longer profitable 10 operate one of the taxis,l':S Professor Telser found six prerequisites for an empty core: (1) de- mand is unceI1ain or periodic; (2) plant capacities are large relative to demand; (3) plants exhibit increasing returns to scale; (4) plants have fixed capacities; (5) there are avoidable fixed costs; and (6) it is costly to store the product.'40 Several modes of transpoI1 exhibit these character- istics including. as noted from the hypotheticals. unregulated taxicabs. The remedy advanced by Telser is that some measure of cooperation be allowed to producers in these markets. although such intra-industry collu- sion would be antitheticalta contemporary antitrust notions. Of course. a long-recognized alternative remedy ta destructive com- petition has been economic regulation. which allows the market to stabi- lize along a more satisfactory axis. VI. BIPOLAR VIEWS ON REGULATION AND DEREGULATION UnfoI1unately. much of the political debate over whether taxicabs (and. indeed. any other mode of transpoI1ation) should be regulated or deregulated has become highly ideological and polarized. The propo- nents and opponents of deregulated entry ha\'e two vastly different \~ews of what such a change in regulatory policy would produce. ISO 14,S. Smith. supra note: 143, at 45~6. 149. L~STER TCl.SCR. ECO~01\.lIC THEORY ^....o THe CORe (University of Chicago Press 1971:)); COMPCTIT10.... COLLLiSION 1\....0 GAME TlIEORY (Aldine and Athenan. 1972): Coopera- tion. Comptrirwr.. and Efficitnn. 18 J.L. & Eco:>o;, 271 (1985): 150. Some proponents of regulation of have urged that entry controls arc: necessary to: Ensure taxicab owners a saw~factor)' Income: Ensure: the finanCial responsibility of laxic;Jb owners; Prevent traffic con'l!:c:stion; Protect mass transtt systems: and Avoid destructive competltlon among. taxi Q\o\'TlC:rs and operators: Edmund Kitch. c:t al.. Tht Rtguloflon of Tazicabs in Chico?o. 14 J.L. & Ecos. 285.321.25 (19711. L~.s. DOT LiRB"... MASS TRANS!'. AD....f!.'.. TIII:. ApPUC^TIO~ OF Till: FI::DI::R^L A~TITRtJS'1 LN.."..S TO ML'.....CIP^L T^X1CAU R(;ca;LATlo!'O 32 (1983) . Opponents of re~ulatlon have ar~ued that these limitations Increase taxicab fares; Unfairl~' llmi: competHlon: and Raise re~ulator:'- costs L'.$. DOT LRD^'" ,\1^ss TRA",sr' '\D"1Io,; . supra. al 32 1996] Ta~:i Industry Regulation, Deregulation & Reregular/on 101 Proponents of deregulation argued that eliminating pricing and entry regulation of the taxicab industry would lower prices. improve sen'ice. and prO\'ide a wider variety of price and sen'ice options dictated by con- sumer demand. thereby fostering efficient resource allocation.l5l As one source observed, "the argument is ohen made solely on ideological grounds: the competitive free market in search of profit ,,'ill always pro- \'ide better and more efficient sen'ices, "'52 More specifically. it has been alleged that deregulation would: Produce more taxi senice and faster response times; Create service innovations and sen;ce expansion to poorly served neighborhoods; Lower fares: and Reduce government costs by eliminating oversight of pricing, ser.;cc and entry. IS) Most of these predictions have been based on free market economic theory which has driven much of deregulation in transponation since the . late-I970s, insisting that government creates distonions which thwan . market incentives for producti\'ity. efficiency. and lower consumer prices!S< Unfonunately. as we have seen. the taxi industry fails to reflect the perfect competition model described in micro-economic textbooks. Professor Roger Teal, who has written extensively on the subject of taxi- cab deregulation. offered an explanation for the wide divergence between free market predictions of what deregulation should produce, and the empirical reality of what it actually has produced: The emphasis placed by L'ldustrial organization principles on ac[uaJ condi- tions in l:larkets (a..,d on the distortions which monopoly power crcares in real-world markets) proves more useful than simple micro-economic theory 15J "Students oi economIcs and urban transportation frequently cite the limitatlon on the number of taxicabs in most American cities as a clear case of unwise government poltcy. They aq:ue thaI a limitation on the number of cabs can only operate to raise the pnce and decrease the supply oi taxicab semce as compared to that which would othen\1se be providec" KITCII. CT AL.. supra note 150. al 285. ("The au:hors of this anicle share the academIC Vlev. nJ Id. Su also ROGCR TCAL & l\'IARY BJ:RGLl::"OD. EXPLAINI....G TIIJ: J."1PACTS or TAXICAB Dr:.R(<.il:LATlO' II'--' l'lIr:. USA:: (1986); ROGER TEAL. El AL.. UKUI\I'--' TRA"'SPORTATIO.-.; DCR..EGL"LATIO>'; I": ARI. ZO"'A 26 (1983): GILBERT & SAMLTCLS. supra note 10. at 146. 152 Rosenbloom, supra note 13. 153. FRI\NKCNA &:. PAL'TLER. supra note Y. at 75: PRICE \VATERIIOlJSE. A"'ALYSIS OF TAXI- CAB DERcGVLATlO~ AND RE.RCGL"LATIO-"; I. 6 (19QJl: Teal & Ber!!lund. supra not~~. at 39. In Contrast. opponents of derep:ulation contend that deregulation Ylill: Result In poorer service: Reduce safety: Produce less accountability: anc Proc'-lce less reiiabiillY. PRier: W.'\TE::RllOl:Sr:.. supra at I 15~. See, e.g. PAL.L DEMPSCY. TIlt SOCIAL &.: Eco-,;o,"IlC CO:"-;SJ:OL'C:-;CCS or DCRCGl:L\ TlO.' (1989): Dc.\-1PSCY & GOCTZ. supra nOlt: 2: p,u L DC..1PSCY. C1 AL.. supra note 1 102 Transportation Law Journal [Vol. 24:73 for analyzing the impacts of taxicab deregulation. Simple models of compet. itive behavior involving atomistic producers selling to completely-informed consumers are often used. but tbese theoretical generalizatioDs of ideal types provide no useful or interesting explanations for the results observed in tbe dominant tau markets - telephone orders and cabstands.1S5 Similarly. Sandra Rosenbloom. a scholar whose earlier literature em- braced the unregulated free market position on this subject. concludes: Unfortunately, an examination of empirical data on regulatory reform of the taxi industry to date shows few of the benefits claimed by proponents. IMJoSl anticipated economiC outcomes did not materialize. The irony is that free-market private taxis simply don't act like entrepreneurs in a free market.156 , , VII. EMPtRICAL RESULTS OF OPEN ENTRY ,:< THE TAXICAB INDUSTRY Yet we need not rely on the theoretical assumptions of what unlim- ited entry "ill produce. We have empirical results which we can assess to detennine what deregulation of the taxicab industry has produced. Before 1983. some twenty-one cities deregulated taxicabs in whole or part.l57 The eXperiences of these cities reveal that taxicab deregulation reo suited in: 1. A significant increase in new entry; 2. A decline in operational efficiency and producthity; 3. An increase in highway congestion. energy consumption and environmen- tal pollution: 4. An increase in rates; 5. A decline in driver income; 6. A deterioration in service: and 7. Little or no improvement in administrative costs. Let us examine each of these results. A. ENTRY Deregulation proponents were correct in their predictions that re- moving entry restrictions would result in increased entry into the indus- try. Because of the low cost of entry into the taxicab business (i.e.. a driver's license. and a dO\\TI payment on an automobile ).IS. deregulation 155. Teal & Berglund. supra note: 4. a: 4; [citation omlUed. a:1d the Kihg's English spdlmg employee in the angmal) 150 Rosenbloom. supra nOte 13 157 L'S DeP'T OF TR^'sr.. supra nOle 6. at III 15S. Shrelber. supra nOle ] \'7, at 275 1996J Ta.xi Industry Regulation, Deregulation & Reregulation 103 . . produced a sharp increase in the number of new taxis on the road, rising an average of 23 % in the deregulated cities, 1S9 In Phoenix, the number of taxis in active service increased by more than 50% in the first year of deregulation.l60 In Atlanta, which deregulated in 1965, the number of vehicles more than doubled, from approximately 700 before deregulation, to 1,900 in 1970.161 Most new entrants were independent ovmer/operators or small firms, who concentrated their taxis at cab stands at hotels and airports, venues which already were well served prior to deregulation.'62 Hotels and air- ports guarantee a patron if the driver is ....'illing to wait at the increasingly lengthy queues.163 A driver need not invest in a radio dispatch system to serve hotels and airports. The cabstand market quickly became saturated. forcing the estab. lished companies to focus on the radio dispatch telephone order market, which has relatively higher entry costs in terms of dispatching equipment, facilities and personnel, and requires a sufficiently large /leet to provide city-wide service. I"" Thus, the deregulated taxi industry divided into two sub.industries-a large number of independent owner-operators serving the cab stands, and a small number of larger companies focusing on the 159. PRICE WATERHOUSE, supra note 153. a: 11. Su also PARATRA....SIT Sr.RVICr;:S. be., THe EXPERJENCES OF U.S. CmES WITII TAXICAB OPEN E:"'TRY 29 (1983); U.S. DCP'T or TRANSP.. TAX: REGULA.TORY REVISIO~' ~ OA~ND AND BERKELEY, C\.LIFORNIA 49 (1983) ("fUJnchecked gro\lrlh could eventually lead to incrcasec financial difficulties for the companies. "). 160. U.S. DEP'T OF TRANSP., URBAN TRANSPORTATION DERI:.GL'LATlON IN ARIZONA VII (19~): ROGER TEAL. E1' AL.. URDAN TRA",SPORTATION DEREGUL^"IO:-'; IN ARIZONA S (1983). 161. FRANKEN A & PA'-''TUR, supra note 9. at 144: ML.'LTIPUCA1'IO:-:S. be.. DECO~IROL A:-:O RCCO.....TROL: ATLANTA'S EXPERIENCE: WITIl TAXI REGL.'1..J\1'IO:'o I (1982) (Prepared for the In. ternational Taxicab Association). The follo\.\in~ chan pro\ides data on the number of ta)l(j per- mits in selected cities before and after entry deregulation: T AXICAn PERMITS BI::FORE A:-:O AFTI::R OPI::S E:'oTR) Cit~. Before After Atlanta 7(X' (1965' 1.53X (19831 Fresno 7U (1979) 45 (1983) Indianapolis 502 (1972) 466 (1974) Milwaukee 308 (1979) 3S1 (1983) Phoenix. 300 (1981) 425 (1983) Sacramento 110 (19S2) 16,' (1983) San Diego 4091197RI 91S (1983) Seattle 12Y (1979) 230 (1983) Spokane I()() (19SOJ RO (1983) FR,\:'o[o;,C:">A &. P"CTLCR, supra nOle Y. at 1~~ 162, TL,\L & BERGLl:!';1). supra note 151. at oS: PAKA1KA:,,>sn SERVICE:s.l:-oc.. supra note ISY, at ..13 163 Su Teal & Berglund. supra note .:. at .W I~ TCAL & BERGLL":'oO. supra note 151. at Z~ 104 Transportation Law Journal [Vol. 24:73 telephone order market.'65 Because the oversaturation of the market caused inadequate profit- ability (resulting from more taxis serving the same, or a declining. number of patrons), taxi companies have suffered a very high turnover rate.1OO For example. 40% of the new taxi companies serving the Phoenix airpon failed during the first fifteen months of deregulation.167 Within eighteen months of an entry moratorium in San Diego. a third of taxi firms not affiliated with the two largest companies left the industl)',16s Nonetheless. a large number of potential entrants are ignorant of marketing conditions. and/or willing to accept subsistence earnings in or- der to be self-employed.'69 Entering the taxi business is one of the few opponunities for self-employment by indi,iduals \\ith minimum skills and little capital.170 Inadequate profitability has also dissuaded invest- ment in large taxi firms. so that most of the new entry has been at the owner-operator level. again, satiating an oversaturated cabstand market. Except in Phoenix, in the fully deregulated cities. no new taxi companies have emerged with more than twenty-five cabs.'7! Deregulation produced relatively small structural changes in the ra- dio dispatch segment of the industl)'. reflecting the relatively higher entry costs associated \\ith the purchase of radio equipment. dispatch person- 165 Id. a. 30. 166 Id. at 28-29. 167 Id. at 9; TEAL & BERGLL':"'O, supra nOle 151. at':l 168 TEAL &. BERGLUSD, supra note 151. at 41. 16<; Teal &. Berglund, supra note 4. at 29: G1LnE::RI l:. S''-''!L'CLS. supra nOle 10, at 149 170. Tne taxicab business. however. docs have its risks. According to a repon by the Na. tionallnst:tute for Occupational SafelY and Health. cab cr:.\'ers ha'/e the highest homicide victim rale among several professions. As the below chart shows. the fate is almost four urnes thaI of pollee officers a~c almost twenty times th~ rate for firefig.hters. " Rate per l00JXIO .....orke~ 21.7 !O7 61 54 55 3.5 3.3 0.1 2.3 :!.J 2.0 2.0 17 1.5 lJ Occupation TaXicab dnver-chaffeur Sherifi-bailiff Police anc deteclive Gas statlor.. 2,ara2e worker Secumy gua;d ~ Stock handler. bagger Supervisor. proprietor-sales Sales counter clerk Baitender Logging Hotel Clerk Salesperson. vehIcles Salesperson. other Butd:er. mea,CUlter Firefighter /';umber of Homicides 1.:0 36 86 II, 95 372 183 20 6 6 Ii 73 12 X Laura .'-tedder. Jon Risks High {or Cahbl~s. Roc,"" 1\-11... l"t.....:.. July 9. lQ46. at 20A. i'7j TeAL & BCRGLI"D. 5IInra note 151. al I'i . . 19%] Taxi Industry Regulation, Deregulation & Reregulalion 105 nel. marketing. and a fleet sufficiently large to pro\ide ubiquitous city- wide service where there may be "economies of scope."l72 Thus. in most cities in which entry has been deregulated. the large incumbent firms still dominate the industry. although their market share has declined as the new entrants have swarmed to dominate the cabstand markets.'73 The robust entry of new firms and entrepreneurs into the taxi indus- try. accurately predicted by deregulation proponents. has been among the most significant impediments to the achievement of consumer benefits predicted to result from deregulation: Low entT)' costs. an inherent characteristic of a totally deregulated taxi industry. represent the factor which is probably of greatest signifi- cance in preventing a more successful outcome to taxi deregulation. Be- cause capital requirements to enter the deregulated industry are minimal. vinually any self-motivated individual can become a taxi operator. Indi- vidual operators cannot effectively compete in the telephone order mar- ket. however. so they quickly oversubscribe the airport and cabstand markets. causing full-service companies to abandon these markets except for passenger drop-offs. TItis results in a reduction in economies of scope for the full-service operators. \Vith demand for taxi service stagnant or even declining, operator productivity inevitably declines with many more operators in the market."4 B. OPERATIl"G EFFICIEl"CY AND PRODUCtIVITY. Putting more taxis on the streets rarely produces more patrons. In fact. most deregulated cities have faced stable or declining demand as measured by the number of daily trips per cab or the trips per shift'75 Passenger demand declined significantly in the deregulated ciIies. falling for example. 34% in Phoenix. 37% in San Diego, and 48% in Seattle.'7h This is not at all surprising. given the higher prices and deteriorating 172. Teal & Berglund. supra note 4. at 49. 173. 1d. at 40. 47. 174. Roca::R TeAL. A.-.,; OVI:.RV113W or TilE; AMER1CA:-; EX'l'i:RII:.""CC WillI TAXI DI;RCCiLJL.A TlO:-- 14 (1989). 175. P^R^TRA~SIT Si:RVICt:.S. he.. supra note 159. at 29. 33: TCAL & Br::RGLL'~D. su.pra note 151. at 16.27: TE.AL. ET AL.. supra note 151. at 13. 176. b.,.'L TAXICAB ASS'N, Docs TAxlcAn Dt:RI:.CCLATIO", MAKE SC!'ISC: l) (19~l. "By any measure. the productlvlty of the Phoenix taxi industry has declined significantly since dereg- ulauon. ITjhe number of passeng:er tnps per active taxi per day has declined,py about one- thire for the ent;:e Indus:ry. while the number of trips pc:: shIft has decreased h.v one-Quane: (the difference re!1ects lower utilizatIOn of taus h~' operators after derej!ulauon." Tc^L. Cl ^L.. supra nme 151. at 13-1J Ir: San DIego, the number of vehicles Increased by 30~u, whtit: each vehIcle pro\'ldt::d onl~ 85%. as much ser\"lce per dJ~, In Seattle. deregulatIon produced more than a 50~o Increase in the number of laXIS. but each vehicle w~s providmg: only 76~o as much service. Staila:1s. supra note i. a: 5 106 Transporrarion Law Journal [Vol. 24:73 , , levels of service deregulation produced.l77 After deregulation, taxi productivity, measured by the number of revenue trips per day or trips per shift, fell by at least one-third.178 As Professor Teal observed, "The decline in taxi productivity after deregula- tion is a natural consequence of an increase in the number of vehicles in the industry. stable or declining taxi demand, and the lack of productiv- ity-enhancing service innovations such as shared-ride taxi services. "179 Putting more taxis on the roads merely increases the number of empty taxis and the length of the queues at the taxi stands.180 As noted above, new entrants tend not to have radio dispatch equipment and gravi- tate toward the already well served hotel and airport cabstands. compet- ing for a constant or decreasing number of passengers.'"' As one source observed, "When transportation demand is stable or declining and attrac- tive substitutes to the deregulated modes exist. the impacts of deregula- tion may be largely confined to increased competition within existing industries with few or no corollary benefits to consumers and providers. "IB2 That source went on to point out that. "Opportunities for productiv- ity improvements in urban common carriage transportation are highly limited by the basic economics of the industries inasmuch as costs for most factor inputs can hardly be reduced. "IB' The one variable cost in which there is some play is driver wages. which. as we shall see. have plummeted (although not enough to offset the steep drop in driver pro- ducti\ity caused by unlimited entry). C. HIGHWAY CO:<GESTIO:<. ENERGY CO:<SUMPTIO:< & Er<VIROr<MENTAL POLLUTIOS Putting more. and emptier. cabs on the streets not only increases highway congestion and wear and tear on the asphalt, it burns more gaso- line and produces more carbon monoxide. ozone. and other pollutants. For example. after Atlanta deregulated. 300-400 taxis lined up at airport queues: waits of three to four hours were not uncommon. and waits of up to six hours were reported.''''' Given the Damocles Sword contained in federal Clean Air Act 177. GORM^l'O GIUJCRT. Ef"l'"ECT OF Op!:!": ESTRY AND VARIABl.e FARES 0... TIll::: COST OF TAXICAB Sr;:RVlCr: TO RESlDE.....,.IAL AREAS 2 (1984). 178. Teal & Berglund. supra note 4, at 46. 17Q, ld. at 52, ISO. Sa FRA"'KC""^ & PAL:TLCR. supra note 9. at X 18!. G:LBERT. SIJpra note li7. at 2. 182. TEAL. ET A1... supra note 15t. al 2'7 IR3. Id. at 13-1~ l~ ~1l'LTlrLlCATto"S. he, SUf1ra note 161. at 32. 37 . . 1996] Taxi Industry. Regularion, Deregularion & Reregularion 107 Amendments of 1990. threatening draconian cuts in federal money for states and communities which fail to meet the carbon monoxide, ozone, paniculate and other pollutant standards, the problems of adding more, but emptier, vehicles to city streets should be manifest. Thiny-two of the thiny-five .busiest airpom in the United States are located in metropoli- tan areas which have been designated non attainment for ozone and car- bon monoxide. IS' The two means of transpon responsible for the most vehicle miles traveled to airports, automobiles and taxis, are also the most significant sources of pollution. ISo D. PRICE One would expect that excess capacity would drive prices down. as it allegedly has. for example, in the deregulated airline industry.!R7 Para- doxically, precisely the opposite has occurred in the deregulated taxi in. dustry'. As Price Waterhouse observed, "prices rose following taxi deregulation in every documented case. "1S8 Professor Roger Teal of the University of California studied pricing at nine cities which deregulated (i.e.. Fresno, Kansas City. Oakland. Phoenix. Sacramento, San Diego, Seattle. Tacoma. and Tucson). He con- cluded. "In every city in this study taxi rates are now higher in real terms than before deregulation. often by a substantial amount. "IR. Before de- regulation, in none of these cities did rates rise as rapidly as the Con- sumer Price Index [CPI]; after deregulation. price increases exceeded the CPI in each of these cities.l90 Professor Teal concludes, "taxi rates may have increased as much as 10 per cent more in the deregulated cities than they would have done under continued regulation,"!.! At San Diego. Seattle and Ponland. prices increased 35% during the first 18-24 months of deregulation.!" One source summarized the results 185. Annalynn Lacombe. Ground Access to Airpom" Prospects for IntumodaiLsm. 48 TRANSP. Q. 381. 383 (1994). 186. Su ,d. at 383-84. 187. DI::MPSEY &: GOETZ. supra note 3. Actually. estimates of consumer savmgs resultmg from airline deregulation have been grossly overstated. Jd. at 243-63. 281.95. 188. PRICE W ATERHOUSr.. supra note 153, at H. 189. Teal &: Berglund. supra note 4, at 37. 4:!. This contlnns his earlier research on the expe- rience of deregulation in seven U.S. cities. TEAL & BEROLt.:SD, supra note 151. at 11. "The imponan! policy lesson to be learned tram the Arizona e:ltpenence is that tavorable impacts do not necessarily tallow the removal of institutional bame~ 10 competition in the transponation industries." TeAL ET AL. supra note 160, at 27. 190. Teal &:. Berglund. supra note 4. at 37. 42: TCAL &:. BERGl.USO. supra note'IS!. <It 14-15 191. Teal & Berglund. supra note 4. at 37. 4..: 192. PAT GCLD, EARl.Y RcsPO:"sI:S TO TAXI RCCL'LATORY CIIAf"GCS 16 (19tH); S.B COL MAS. Rr;;:cc~-r Dc.vc.LoPMcsTs I:" Tile RI:VISIO-'; or TAXI RI:GL:LATiOss ''''' SCA1TLI: A"D SA~ DII:co. TRAssP. RES. Rcc. 20 (19PoO): S~~ Paratransit Ser\'lces, Inc.. supra note 15Y, at 34 Pnces rose 600,;, in San Diego. Stalians. supra not~ 7. at 1. Address belare the 5Uth Annual Cor:ventlon 108 Transponarion La... Journal [Vol. 24:73 . . of higher taxi fares in Seattle: "[t]he high fares led to a large number of cabs, long cab lines, refusals to serve short trips. and quarrels among driv- ers concerning positions in the taxi queue, but did not lead to an above- normal profit because of free entry."..3 Cabstand rate increases were even more pronounced.'.4 This is be- cause there is, and can be, little comparative shopping at the cabstand because of the formal and informal pressure patrons feel to take the next taxi in the queue under the "first in. first out" rule.'.5 Because of the overcapacity created by unlimited entry. queues lengthen, discouraging drivers from competing on the basis of price.1OO Therefore, there is little cffective competition. In an economic environment of declining produc- tivity created by excessive entry and stable or declining demand, taxi op- erators can survive only if they can increase the revenue derived from each trip, which places upward pressure on taxi fares.'.7 Moreover, airport travelers and hotel patrons are frequently tourists or out-of-town businessmen v,ith little information about local taxicab regulatory practices or rates, and whose travel expcnses are often paid by a third party v,ith pre-tax dollars.19R Further, some of the economics literature reveals that much of passenger demand for taxi service is rela- tively inelastic v,ith respect to fare changes.''''' Thus, most passengers who need a taxi pay the rate. even if inflated. One source described the impact of price increases on low-income individuals: Tne increase in taxicab fares in residential areas produces a particularly bitter impact on low-income persons. A major and increasing proportion of residential taxicab business originates in low-income or minority neighbor- hoods. . . .[tJhis is not surprising since residents in these areas arc often de. pendent on taxicab service for mobility. These trips are for essential purposes. such as trips to grocery stores and medical facilities. In contrast, the trips from airports and dO\\'l1tov,n hotel stands are made by persons who are clearly more affluent businesspersons. \'acationcrs. and com,'entioneers. of the f';ew Zealand Taxi Proprietors' Federation. \Vclhngton. f';ew Zealand. Aug. 3U. 19~. An. other study found that partial deregulation produced no pnce or service innovations of signifi. cance in Portland. while administrative costs increased. Su U.S. DOT URUM" MASS TRANSP. AOMIS.. TAXI Rt::GULATORY Rt::VIS10N IN PORn.AND. OREGON: A CASC STUDY (1982). 193. FRANKENA &. PAI..'TLCR. supra note '). at 12'). 194. TEAL & BERGLUND. supra note 151. at 16. 195. Gelb. supra note 192. at 17; TCAL &. BERGLUND. supra note 151. at 5. 23-4 (1986); TEAL. CT AL. supra note 160. at 8. 196. PRICC WATERHouse. supra note 153. al 8: TCAL. Cl AL. supra note 160. at 24 197, h,'L TAXICAB Ass':-;. supra nOte 176. at 5. 198. Su U.S. Dep'T OF TRANS!'.. TAX] RCGULATORY RCV1SIO~ IN SA'~: DIEGO. CALlT'ORNIA 102 (1981) 199. FREDERJC FRAVI:L &. GORMA.'o; GILliERT. FAR.I: ELASTIC1TICS FOR EXCLUSIVE-RIDE T A'" SERVICES (U.S. DOT. 1971\); Te<lJ &. Berglund. supra note 4. 011 50 1996] Taxi Industry Regulation, Deregulation & Reregulation 109 Increasing fares to residential areas means that the impact of more taxicabs is borne disproportionately by low-income persons. In other words. those who can least afford /0 pay would be charged the most. . . . Those who Collow the academic argument of "letting the market decide" tax- icab fares are reatly "letting. the poor pay more. ,,200 . . Neither did deregulation result in lower fares in the telephone dis- patch markets, and it appears to be correlated with somewhat higher prices.20! This occurred because of the loss of cabstand business to new entrants, and the resultant loss of economies of scope associated therewith. Even the local patron may refrain from price shopping. Forty per- cent of all resident users take a taxi trip one or fewer times a month.202 Patrons employing taxi services so infrequently have linle incentive to take the time to engage in comparative price shopping.20) Of course, higher prices may force some low-income riders either to reduce the number of their taxi trips, or decline spending their limited money purchasing other necessities. as much taxi demand appears to be price inelastic.2'" Deregulated cities experienced growing complaints of price gouging and overcharging, particularly at the cabstands,>05 A study of pricing in Washington, D.C., in June, 1985, which then had open entry and more taxi cabs per capita than any other city in the nation,206 revealed that taxi drivers overcharge their patrons 36% of the time, and the average over- charge was 22%.207 In Seanle, overcharging of up to 50% above the av- erage fare was l'eponed208 Finns which have lowered prices generally have not stimulated lower price responses by competitors, nor have their market shares appreciably 200. GORMA!'O GU.BIZRT, EFFECT or OPI:!'.' ENTRY AND VARJA1H..E FARES ON TIle CoST or TAXICAB SERVlCE TO RE.sIDIZ:-O"TIAL AREAS 6-7 (1984) !emphasis in originalj. 201. Teal & Berglund. supra note 4. at 44: Ti:AL &. BERGLUND. supra note 151. at 15. 202. /d. at 23. 203. Teal & Berglund. supra note 4. at 50. 204. /d. 205. See PARATRA....SIT SE;RVICES. I!';c.. supra note 159. at 10. 206. One study performed in 1970 reViewed taxi entry re!!ulation by 30 cities with a popula- tion of 325.000 or more. I: revealed that the number of licenses varied from 0.2 in Phoenix to 11.3 in Washington. D.C. (which had no entry restrictions). and that the number or licenses per square mile ranged from 0.4 in Phoenix to 139.3 in Washington. D.C.: Utterback. A Summar;.' of Recent Taxicab Studies 12 (City of Milwaukee. Legislative R~ference Bureau. 1975) i1l U.S. DOT URBAN MASS TRANSP. ADMl:",. TilE ApPUCAT!o:" or THE F~D~RAL AsnTRL.'Sl L~WlO TO !'ok. NICIPAL TAXICAB REGl:LATJO!'; 31. r..31 (1983). 207. Sheldon Shane. Callfn~ All Cabs, TKAVcL-HoLlDAY MAGAZl!';[! 46 (Feb. 1985): PARA fRANSrr SERVICES. INC.. TH!: QUALITY OF RCSID!:!"'TIAL TAXICAD SeRVice '''' WASIIIl"GTO,-';. D.C. 19 (1985). 208. GELB. supra nOle 192, at IS 110 Transportation Law Journal [Vol. 24:73 increased.209 We have explored several reasons why excessive capacity in the taxi- cab industry has not resulted in lower fares, as we would intuitively ex- pect. Professor Roger Teal has succinctly summarized three supply factors and four demand factors which militate against lower fares. The supply factors are: "Monopoly" profits earned under regulation were significantly less than estimated: Deregulation did Dot create a competiti....e industry structure in the tele- phone order marker: and There is no apparent cost basis v,.;th on which 10 predicate price rcductions.ZlO On the demand side. Professor Teal offered these explanations: . . Demand for taxi service is characterized by imperfect information and . strong name recognition; The demand for taxi senice may be inelastic: Per capita demand for taxi service is either stable or suffering from long- term decline: and Leasing panially insulates taxi firms from the passenger market.211 E. INCOME In the deregulated cities. driver income decreased despite higher fares. The fare increases imposed by taxis under deregulation have not offset the sharp decline in productivity (the reduction of revenue trips per day) caused by excessive en!!)..2" The shift from employee drivers to owner-operator or lease drivers results in a loss of minimum wage guarantees for taxi drivers.2l' Most taxi drivers in deregulated cities earned less (often despite spending more hours behind the wheel) than before deregulation.2l4 For example. under deregulation in Phoenix, drivers worked an aver- age of 10-14 hours per day. six days a week. earning only about $2.00- $4.00 per houL'" In San Diego. driver wages declined 30% from pre- 209. Teal & Ber~lund. supra nore 4, at 44. 210. [d. 211. Id. at 37, 48. 212. Su TEAL. ET AL... suprQ note 160. at 14: ROGER TEAL. T AXJCAB REGULATORY C11^"'Gt: I!'o< SAN DIEGO. TAXICAB MANAGEME!N"[ 2~. 32 (Fall 1986): Teal &:. Berglund. supra nOle 4, a146. 213. Teal &. Berglund. supra note ~. al 46. 214. rAT GC:UL EFF[;Cl'S OF TAXI Rt!.Gt.:LATORY REVlSI0~ I~ S^~ DfE(,;o. CAUFORNt^ (u.s. Dep't of Transp.. 1983): PAl GeLD. Ef"'FLcrs or TAXI Rt:GULATORY Rr:;VISIOS I:'" SEATTLe.. WAHlISOTOS, (U.S. Dep't of Transp.. 1983): Tr::^L & BC;:RGLlJND. supra note 151 (unpublished manuscript). at 17.1 It Teal &. Ber~lund. supra note 4. af 46 215. TEAL. El AL.. supra not~ 160. at 1J . . 1996] Taxi Indusrry Regulation, Deregulation & Reregulation 111 deregulation levels, to only S135 a week.21. Such poor pay is for a job which has the highest homicide rate of any profession.217 F. SERVICE As we have seen, most of the new entry unleashed by deregulation has been by small companies in the airpon and hotel cabstand market - a market traditionally well served-in effect. "cream skimming" the least costly market. The telephone dispatch market, upon which most local residents rely, is generally left ";th the same, or poorer (and more highly priced), service as before, since taxis in the larger firms are now dis- suaded from entering the end of a longer queue at the cabstand market, and forced to focus on the higher-cost radio dispatch market. The radio dispatch firms have lost between 10% .to 25 % of their business because of the need to abandon the cabstand markets. which were the least expen- sive markets to serve (for it requires neither dispatching operations nor equipment dead heading).218 As we have seen. excessive entry leads to declining productivity, and because fare increases failed to keep pace. declining profitability. A car- rier facing profit erosion can reduce costs by "lowering the quality of taxi services (for example. employing a small or deteriorated vehicle, reducing insurance coverl!ge, or driving recklessly)."219 Not only has deregulation generated little service innovation,22O it is not unusual to see several ser- vice problems arise when the regulatory system collapses, including: Excessive fares: Circuitous routing: and Refused senice.221 Most cities which deregulated experienced a deterioration in servicc. The taxi refusal and "no show" rates increased, panicularly in low income areasp2 although there were many shon haul refusals at cabstands as well (probably by drivers who had sat in the queue too long and needed a long trip and a decent fare to compensate them for their inactivity}.'" 216. TI:...u... supra note :12. at 32; Teal & Berg.lund. supra note 4, at 42. 21i. D~alh On Iht Job. Tm: ECO"lOMIST Dec. 3. 19Y4. at 39. 218. Teal &: Berglund, supra nOle 4, at 5.1. 219. Gallick &: Sisko supra note 9. at 120. 220 "Exclusive ride taxi servIce remains [he only service offered in the dere~ulated cities." Teal & Berg.lund. supra note 4. at 46. Su Tt.^L ET ^L.. supra note 160. at 13: Rosenbloom. supra note 13. 221. ROBERT Rt;SSCLL. Rr:C~:-01 TAX1CAH DC\'~LOP."'1CSTS I'" Los ASGJ:'u:,s: t:-o PROCEJ::O I....GS or TlIt:: CO~"F(.RE"'CE O~ TAXI::) AS PL:DLIC TRASSIT 65 rUm\'. of Californiu. 1978) (describ. ing the illegal activlties of taxi "bandits" .....h:ch emergl:c after a major taxi compan~' fell mlO bankruptcy). Su !:~naa!l.\.. Suzuki. supra note 2U. at 129. ::: See PARATRA",sn SERVIces. I."c.. suara note 207, at 24 ::3. See PRIcr: WATCRIIOl"Se. supra note 153. at 15 III Transportation Law Journal [Vol. 24:73 The "no show" rate at Seattle increased 35 % after deregulation; the "no show" rate at San Diego increased from 5% in 1976 to 18% in 1979.224 The oversupply of cabs reduced the earning potential of drivers, causing a decline in the quality of the drivers, and leading them to engage in overcharging and discouneous behavior20' Indianapolis. among the first cities to deregulate entry in the ta.xi industr)', experienced the follow- ing problems: After the first \\i.nter the independent operators found they had no money to maintain or repair their vchicles. Insurance cancellation notices received hy the City. . . increased from "one or two" per month [Q "about Doe hundred liil)''' per month. Complaints to the City about cab service "tripled" . . . . Added to these difficulties was a reported rise in the amount of crime by taxi drivers and operators. . . {tJne reponed rapes and robberies commiucd by taxi drivers also increased.226 Reviewing the Indianapolis experience, the U.S. Urban Mass Trans- ponation Administration concluded, "adding new owners into a highly competitive supply-rich market is beneficial neither to the public nor to the taxi operators. "027 Customer complaints in Fresno, California (where deregulation lasted only eighteen months), tripled, and they ranged from price gouging to the poor 'upkeep of the vehicles.22. In San Diego, many drivers re- fused shon trips, and drivers at the end of the queue sometimes sought to serye passengers at the head of the line - often generating physical alter- cations'"OY In Phoenix and San Diego, the visitor and convention bureaus pushed for re-regulation'"'o The Washington state legislator who led the successful fight for taxi re-rcgulation said. "taxicab riders have been get- ting 'raped' by poor ser.;ce and expensive fares ever since Seattle area taxicabs were deregulated. . . . "031 Another source summarized the Seat- tle community's response to the problems created by taxicab deregulation: :!24. TeAL &. Bl:RGLl'SD. supra note 151. at 10. 225. ML:LTIPLIC^TIO.....S. he.. :Jupra note Ibl. at 40. 226. U.S. DOT URUM.. ~I^ss TR^~SI'. ADMl....... TilE INDI..../'.;APOLIS EXP[;'Rll!SCc WITII OPE~ E~'RY l:"i TIlE T^XI ISDUSTRY 9-10 (19&.1). Drug and prostitution rings were also operated by the unregulated ta:os. [d. Taxi drivers also ohen are ,,'ictims of crime. Statistically. taxi drivers and chauffeurs suffer the highest homicide rate of any profeSSion. even higher than polieemen. Death On th~ Job. supra note 217. at 39 227. Id. at 15. 22S. Sa PARATRASS1T Sr:RVICI3S. INC. supra note 159. at 10 :29 Rosenbloom. supra note 13. 230. S~~ Shane. supra no:e 207. at 46: P,'\KATRASStT SERVIC7CS. I....e.. supra nOle 159. at 23 23i. Doug Uncel"\l.ooc.. Ta.ri R~~ufarlOn /s Back tn Lap.f of Loco! Govunmnm. SC,'\T.u: TI....IES. Feb 26. 191'>-1. a: 52 . . 1996] Taxi Industry Regulation, Deregulation & Reregulation 113 The troubles in the cab lines-large increases in fares. substantial varia. tion in fares among taxis. much longer taxi lines. refusals by dri\'ers to carry passengers short distances. and minor \iolence--<:onvioced area officials. ho. tels. and the tourist industry that this market was Dot suited to full-scale decontro1.232 After deregulation, both Washington, D.C., and Atlanta, Georgia, experienced increasing problems with drivers who had a language prob- lem and poor knowledge of city streets, were overcharging customers, and were dishonest by not taking the most direct route,233 Service quality deterioration under deregulation also prompted calls for entry regulation by Congressional and media leaders in Washington, D.C.'3. The Wash- ington Post recently had this to say about taxi service in the de facIO der- egulated District of Columbia market (one out of four D.C. cabs operates v,;th an illegal permit. and bribes for the issuance of inspection stickers and operating permits were under criminal investigation): [TJhe District's cab fleet averaged 10 accidents a day last year - around 3.800 annually. That's more crashes than there afe cabs in Los Angeles. Philadelphia. San Diego and San Antonio combined. . . . [D }rivers routi..'1ely overcharge passengers. bribe their way throu!;h safety in- spections, swap cars and drive v.ithout insurance. . . . Though ours is' the nation's 19th largest city. \Vashington harbors at least three times the number of cabs of any other city in America except New York and Chicago. (Only one. New York. has more cabs-11.500.) Since this massive oversupply means fewer fares per driver. many cabbies make ends meet by cutting corners-for instance. refusing trips to out-of-the-way places. overcharging or skimping. on repairs.235 Atlanta suffered many of the same problems under deregulation: The taxi industry. . . has historically been criticized by city visitors for the poor condition of its vehicle fleet. the sloppy appearance of drivers and their negative attitudes, apparent driver lack oi knowledge of the city. and fre- quent instances of overcharging. Officials of local commerce and trade orga- nizations consistently complained that the industry was an embarrassment to 232, Richard Zerbe. Jr.. Seattlt Taxis: Dut.~ulaljon Hits Q Pothole. REGULATI01'\:. Nov.lDec. 1983. at 43. 47. At the Seattle Amtrak station, "There were reports of physical intimidation. of drivers who lied about the availability of bus service. who were slovenl)'. vulgar. and rude _ and so on." Jd. at 46. "The Sea-Tac airpon has had even worse problems in its cab lines.. .. Many /drive:s) retused shan-haul customers.." Dnvers were less k.nowledgeable. cabs d!nier." Jd. at 46. 233. PARATR^~SIT SeRVices. he.. supra note 207, at 14.20: Ml1LTIPLlCATlO:-;S. he., supra not~ 161. at 1l:~.19. 23":. U.S, DEP'l or TRA.'o;SP.. supra note 4. a: 13U 235. Christopher Georges. D.C's Chtcktred Cahs Hih\' Washin.i:'wn's Ta.xis Are Amtrlca's lVors!. WASIl. POST. Ma~, 21. 1993. a: Cl. c: 114 Transportation La... Journal [Vol. 24:73 the city and lobbied strongly for reform.236 As a result, in 1981, Atlanta reimposed entry contro]s.m Poor profitability made it impossible for many taxi companies to in- vest in new cabs, causing the average age of vehicles to grow238 For ex- ample, Washington, D.C, "~th the most taxis per capita of any city in the nation."9 also suffers from the oldest fteet.2<O Seattle's average fleet age increased 50% during the first three years of deregulation24I Charges of inadequate equipment maintenance, lack of cleanliness, and poor appear- ance also have been levied. The taxi operator is the first introduction to the city that a com'en. tion, vacation or business traveler has, and the last impression he has prior to depanure. Consequently, the convention and hotel industries often lead the charge for re-regulating the taxi industry. G. AO\llSISTRATIVE COSTS . . Although one would intuitively expect government administrative costs to fall under regulation, in fact. the U.S. Depanment of Transpona- tion case studies reveal that such costs either did not change or in. creased242 In several instances. consumer complaints led to enhanced governmental sCTUtiny of the industry. and correspondingly increased ad. ministrative 'costs. For example. under deregulation, Seattle estimated it spent more money that it ever had in enforcing the remaining vehicle regulations.243 VIII. SUMMARY OF THE E\rPIRICAL RESULTS OF TAXI DEREGUL"nOS After concluding several exhaustive studies of thc empirical results of taxicab deregulation. Professor Roger Teal concluded: Taxicab deregulation cannot be demonstrated to have produced. in most cases. the benefits its proponents expected. Prices do not usually fall. im- provements in sen;ce tire difficult to detect. and new price-senice combina- tions have not been developed. There is little e.....idence that either 236. MULTIPLICATIONS. h.c.. supra nOte 161. at 34. 237. Rosenbloom. supra note 13. 238. PRICE W ATERHOCSE. supra note 153. at 15. 239. A 1979 telephone survey reyealed thaI Washington. D.C.. had fiYe times the number of . taxicabs per capita as the next highest city. Atlanta. Washington had 14.7 per UXXJ residents. while Atlanta had 2.K U.S. DCP'T Ol" TRA~SI'.. supra note 4. at 61.6:. 240. PARATRA:SSIT SCRVtCI:S. I:-;c.. supra nOte 207. at 11. Z.t!. Rosenbloom. supra note 13. 24:::. PRICE \\."ATERIlOL"Sl:. supra note !53. at 16: PAR^TRA:SSrT SCRVICCS. he.. supra note 159. at 45. 243. Roscnbioom. supra nOle 13 1996] Taxi Industr)' Regulation, Deregulation & Reregulalion 11.5 consumers or producers are better off. Tne one important exception is new entrants to the industry. who now have an opportunity to serve a market to which they were prc\iously denied access. Even for them. however, deregu- lation is a mixed blessing. Many bave been unable to survive in tbe more competitive unregulated enviroc.ment. and those who have sunivcd are ap. parently obtaining lo\\' earnings.244 A more recent study by Price Waterhouse of twenty-one cities which deregulated reached similar conclusions: [TJhe benefits of deregulation were devaluated by unanticipated and unat. tractive side effects: , . Although the supply of taxi services expanded dramatically. only marginal service improvements were experienced by consumers. Within a year of de. regulation. the supply of taxi services increased an average of 23%. Because most new entrants were independent operators and small fleet O\l.11er5 with limited capability to serve the telephone-based market. most new service was concentrated at already well-served locations-such as airports and ma. jor cabstands. Customer wait times at these locations. already short. were reduced further. Response times in the telephone market were similar to pre-deregulation performance. Trip refusals and no-shows. however. in- creased significantly. Prices rose in ever:')' instance. Paradoxically, the infllLX of new entrants did DO[ invoke tbe price competition typically experienced in other newly-der- egulated industries. Prices rose an average of 29% iD the year followi.ng deregulation. There appear to be tv.'o sources of this unexpected event. Hrst. fare increases prior to deregulation bad consistently lagged cost in- creases. Veteran operators thus corrected prices at the first opportunity. Second. new entrants generally charged higher fares than veteran operators. The cabstand markets on which tbese operators focused their senices are generally price insensitive and. because of the first.in first-out nature of the taxi queues. comparison shopping is discouraged. For these reasons. the new entrants had no incentive to introduce price competition. Sen.'ice quality declined. Trip refusals. a decline in vehicle age and condition, and aggressive passenger solicitation associated \\ith an over.supply of taxis are characteristic of a worsening in service quality follo\\ing deregulation.245 Given the failure of deregulation to produce consumer pricing and service benefits. coupled ....ith its propensity to injure carrier productivity and profitability, most communities which have experimented with dereg- ulation have rejected it. and re-regulated. in whole or pan. their taxi in- dustry. Of the twenty-o!)e cities which deregulated prior to 1993, the cxperience with deregulation was so poor that only four of th~ smallest cities in the group (i.e.. Berkeley. California. Spokane. Washington. Ta. 2~. Teal & Berglund. supra note 4. at 54: Su a[su TE:^L & Bi:RGLUNO. supra note 151. at 30. 31. 2~5. PRICr. \\'ATJ:RIIOUSI:. supra note IS}. at II-III [emphasis in ori~ir.alJ. 116 Transportalion La... Journal [Yol. 24:73 coma. Washington. and Sprill'gfield. Illinois) retained a fully unregulated system.246 Cities which continued to embrace deregulation tended to have one of the followlng characteristics: (I) a relatively smaller population; (2) less reliant on airport acthlty; or (3) had implemented other measures which created barriers to market entry.'47 In contrast. "[eJities wbich had a relatively large population. a high level of airport acti\lty. and condi- tions conducive to low-cost market entry tended to have a negative expe- rience wlth deregulation. As a result. these cities either fully or partially fe-regulated taxi services. . . . "2.1'-; The wave of re.regulation was led by the largest cities \\lth the most airport activity among the group that had d"regulated.'4. IX. THE 1"EED FOR GOVER:":MENTAL PLANKIl"G & OVERSIGHT . . Taxicabs are an essential pan of the urban transportation infrastruc- ture. and some would argue, in the nature of a public utility."o As we have seen. the unregulated taxi market suners from the absence of a com- petitive market. imperfect information. significant transactions costs. ex- ternalities. cream skimming. the loss of economies of scale and scope. and destructive or excessive competition. collectively producing. demonstrable deleterious economic and social consequences. While deregulation pro- duces a significant increase in new entrants. it appears to cause declining operational efficiency and productivity. an increase in highway conges- tion. energy consumption and environmental pollution. a decline in driver income. a deterioration in service. and paradoxically. an increase in pas- senger rates. with little or no improvement in administrative costs. Any objective assessment of the empirical evidence would conclude that the costs of taxicab deregulation outweigh its benefits. Virtually every major 246 fd. a: 1-1II. 19 2~'7 Id. at 0 24S Id, at S :4~ Id at 1'7 ~5U One source pro....ided a comprehensive rationale for economic re~ulauorl of the taxicab industry: Government regulation is deemed necessary because taxicabs supply a sen-ice which is considered publicly indispensable and because taxicab tirms often operate as monopolies or oligopolies. Moreover. in theory. government re~ulallon of monopolies can keep prices at a reasonable level. Early common law established that cenain busi- nesses could harm those .....ho wanted or needed service b\' refusine. to serve them or b\' charging exorbitant prices. therehy justifymg public regu'latlon o{ such businesses . TaXicabs. as public utilitles. are reqUired to ser.'e ever.- customer In their ser-.ice area at reasonable rates and Without unJust dlscnm:natlon. Publtc utilLt1c~'.are also pro. hiblted from entenng a new market. surpl~in!; a new ser.'lce. orabandomng <1:'1 eXisting market ....ithout the consent of a public authon!~ The "puhllc mteresthls the determl;J- mg f::c:or i~ t':'10St govemmentai riecisiOns lr:\'olvtn!; public u!llitlcS BARKeR & BEARe:>. supra nOle 8. a: 3] 1996] Taxi Industry Regulation, Deregulation & Reregulation 117 city which has tasted economic deregulation of the taxi industry has lived to regret it, and reversed course. The fundamental question is not whether taxis should be regulated, but how they might best be regulated. That requires careful oversight by the regulatory body to assure the appropriate ratio of taxis to passellgers to ellsure prompt, safe, and reasonably priced service for the public. whi/e allowing efficient and well managed firms to earn a reasonable return on investment.251 Too few taxicabs results in excessive waiting times (and opporttmity costs) for passengers. Too many taxicabs results in lower productivity and lower profitability for service providers, despite higher fares for consumers. If there is a legitimate criticism to be levied at regulators. it is that they too often skirt this difficult task. As one commentator said of the New York medallion system: , . The main deficiency of the New ):'ork system of price/entry regulation was the total lack of any planning. Neither the fares nor the number of medal. lions issued was determined on the basis of what was needed to achieve eco- nomic efficiency in city transport. . . . The shortcomings of the l'ew York City system of price/entry regulation IS a result of poor administration. and not of any inherent deficiencies of a system of regulation.25:! Generally speaking. taxi demand is a function of two major variables - the overall economic activity in the market (including population, em- ployment and income), and the relative price and quality of service of taxis ,is-a-vis alternatives modes of transport (automobiles and public transportation). The appropriate level of taxis per thousand citizens should bc determined in light of the unique transportation needs of each city. ascertained on the basis of the density of its population.2S3 street congestion. air pollution. and perhaps such factors as the price and availa- bility of dov>'Iltmm parking.". the number of automobiles per capita. the 251. Sa generally. DBIPSCY. s:Jpra note 2. at 220.~7" 252. Shreiber. supra note 90. at 278.79. 253. The following: chan pro\'ldes data on population densities in selected cities' POPL'L^TIO"'- PCR SOL ARE f'.1ILE 1...- SCLECTeD CITICS City Chicae:o Denver Los Aneeles Philadefphia Phoenix San Francisco San Dieeo Seattle. Amencan Almanac ( 1993.9-1 ) 25-1. The following chan pro\"ldes dat<l. on the number of parking spaces per t:mp!o~'ees for selected cities' Population/Square Mile 12.251 3.051 7.426 Il.73..! :.3~2 Land Area (Sq. 227.2 IS3.3 469.3 135.1 411J.9 4~.7 )j4.0 83.9 Miles) 15.502 3.":28 0.!5.! 118 Transportation La... Journal [Yolo 24:73 number of hotel rooms. the distance of the airpon from downtO\\11,255 the volume of passenger traffic derived therefrom. and the economic health of existing taxi firms.256 For example, in the mid-1970s, taxis carried a million passengers a day (one fifth as many passengers as the subways) in a huge urban city like 1\ew York, with its rush hour grid lock.257 Cities like 1\ew York, Boston, Philadelphia, Detroit or Chicago are densely concentrated urban centers where streets are congested and private automobile parking is ex- pensive. Many residents do not 0\\11 an automobile, nor need they, given the weU developed public urban transit systems. Taxi service consump- tion would likely be at a mueh higher level in an Eastern city (built for the horse and carriage) than in a Western city (built for the automobile), like Denver. Salt Lake City. or DaUas. with their suburban sprawl, rela- tively uncongested streets, and relatively plentiful and inexpensive RATIO Of PARKING SPAcESlEMPLOYEt:.S rN SELECI"1:.0 CITIES Parking Spaces Emplovees Ratio of Spaces/Employees 36.000 50.000 IliA 77.034 117.000 1/1.5 33.200 102.000 113.1 62.500 140.000 1/22 22.669 24.000 1/1.0 43.914 94.000 112.1 27.500 58.000 112.1 48.557 156.000 113.2 . . City Charlotte Dallas Denver Minneapolis Phoenix Portland Salt Lake City Seattle Denver Dowmo\\'T\ Partnership, Inc. 255. The following. are the approximate dri...ing distance of the airPon from dO";''T\town in selected cities: AIRPORT D1ST^:-'<CC FROM DO\l,~'Towr-; I~ SEU:.crt.D CITICS (in miles) City Served Washington. D.C Denver Haustor. Dallas Kansas City New York Distance to Downto\1r'T\ ~ Dulles Denver Interna:ional Houston Interconcinent3l DFW Inte:national h.C. International John F. Kennedy 26.5 2" '" I, I, 15 256. In assessing the economic health of existing finns. the following data provide some indi- cation of national industry average performance: Ss.u::cn:o N^TIONAL T AXICAD PCRfOKM^_o,,;cr DAI^ (1993) Average Annual Miles Per Taxi 51224 Average Paid Miles Per Trip 6.3 . Average Annual Trips Per Taxi 8.359 Average Annu31 Passengers Per Taxi 13.883 Average Cost Per Mile SO.943 Industr;.. Sources. 257. Shreiber. supra note 90. at 278_ . . 1996J Taxi Industr)' Regulation, Deregulation & Reregulation 119 parking258 New entry should be modest. measured and monitored. In deciding which among several applicants should be allowed to operate in the mar- ket, a prudent regulatory authority might choose the applicant which, for example, has a sound financial base and a seasoned and experienced managerial team. a minimum fleet size with centroJized radio dispatch to serve the entire conununity adequately,259 trained and experienced driv- ers, adequate insurance, and a young. safe and environmentally sound fleet of cabs. On the last point, there is significant concern as to whether a number of cities will bc able to comply v.ith Federal Clean Air Stan- dards. If not, they stand t" lose hundreds of millions of dollars in Federal grants. The regulatory authority might also phase-in additional taxicabs over a period of years. regularly monitoring their impact upon the public in terms of price, safety and service (including customer complaints, service response times, and such), and upon the health of the industry. If the regulatory authority found that the problems of destructive competition. described above. were emerging. it might well reduce the number of taxi- cabs to be licensed during the prescribed fonhcoming period. Thus. the regulatory authority must be careful to expand entry on a phased-in basis only very gradually. and monitor the results closely. In the final analysis, the suitability of taxicab service and pricing is a 258. The fOllo....ing chart pro\ides data O~ the cistrib~llon of veh:des-to.population of a sam. ple of i41 cities: DISTRlBt..'TIO:" or Tift:: Ci\BS-TO-POPL:L,\TIO~ RATTO. IY70 Proponion of Sample Junsdictions ~o Cah licenses per thousand population Under 0.2 0.2 to under 0.4 0.4 to under 0.6 0.6 to under 0.8 o.~ (0 under 1.0 1.0 !O under 1.2 1.2 to under 2,0 2.U and over 1\1edian licenses per thousand = 0.57 III 2U 23 16 10 S 4 ; J.D. WELLS & F.f. SELOVE::R. CltAKACTERJSnCS or TilE UR!:lA:-' TAXICAII TKN'.srT INDUSTRY (1972) 259. The city officials of Indianapolis. which expenmemed y,ith open entry in the early I 970s. concluded that "they should have reqUired a mlmmum of ten ...chicles per O\lo.'T1er and radios in each cab'" U.S. DOT LiRll/\~ f\.lAss TR^!"oISf'. ADMl..... supra note 126. at Q.IU An. olher source concluded. "alllax.icabs should be required to be affillal~d wnh a fteetJar!!C' enough to ser....e all parts of the Cil~' 24 hours a day (e.g...25 vehiciesl and thaI every taxicao he required to have a two-way radiO and meter Gene Slailar.::.. supra note i. at ] 1. Address bdore the 50th Annual Convemion of th~ ~ew Zealand Taxi Propnetors' Federauon Wt:llmglOn. f\;e...... Zealand. Aug. 3U. 1988 uo Transportation La... Journal [Vel. 24:73 peculiarly lecal issue, best tailored by local governments based on the,r unique populations, spatial densities, road congestion, air pollution, and ai'1'on and hotel traffic. For that reason, whatever the national ideologi- cal infatuation \\ith comprehensive infrastructure deregulation, Congress should instead embrace an alternative national political movement-one which champions devolution, or reversing the 20th Century megatrend of power fio\\ing from the states to Washington-in favor of lo;:al con- tro1.260 In this area, the state and local governments should be left alone to foster the unique local public and private transportation system that suits them best. 260. ~1jchael Barone. Power 10 ,}u Sla[~s. U.S. lSI!wS & \VORLO Rr:.r.. JJn. 23. 1995. at 40. '.