Taxi Industry Inquiry – State of Victoria

Taxicab Regulation

In North America

Prepared for:

Taxi Industry Inquiry

State of Victoria

By:

Hara Associates Inc.

Bayswater Square, 1066 Somerset Street West, Suite 406, Ottawa, Ontario, K1Y 4T3

613-722-5528, 613-482-4901(Fax),

Hara Associates Reference: 1518

April 28, 2012


TABLE OF CONTENTS

1Introduction to the Sample Cities

2Terminology

3Jurisdiction

4Taxi Licensing and Entry Management

4.1License Issue

4.2Classic Regime

4.3Owner-Driver Regimes

4.4Regulation of Driver Lease Rates

4.5Underserved Neighbourhoods – License Requirements

4.6New York – A Hybrid Regime

4.7Los Angeles – The Franchise System

4.8Open Entry Regimes

4.9Open-Entry – Taxis Per Capita – and Potential for Unrealized Social Surplus

5Vehicle Requirements & New Technology

5.1Driver Safety & Trend to Cameras

5.2New Technology Wave – Passenger Back Seat Experience & Data Collection

6Data Collection & Performance Monitoring

6.1Los Angeles – Comprehensive Reporting for Twenty Years

6.2Other Cities in Canada & USA

7Driver Training & Testing

8Accessible Taxis

9Integration with Other Modes

10Adjustment of Meter Rates & Fares

11Potential Lessons from the North American Experience

12Individual City Profiles

APPENDIX A: List of Interview Respondents

Taxicab Regulation in North America 1

Taxicab Regulation in North America

The State of Victoria has established a Taxi Industry Inquiry to investigate all aspects of the taxi and hire car industry. The Inquiry will recommend a set of reforms to the government focused on achieving better outcomes for the travelling public. This research paper has been commissioned by the Inquiry to document current practice of taxicab and vehicle for hire regulation in Canada and the United States.

North America represents a large pool of experience and a variety of experiments in taxicab regulation and reform. The United States and Canada also share a common underlying legal tradition with Australia. This paper seeks to identify useful ideas, options, and lessons learned from the North American experience.

The work is based on 12 selected North American cities, supplemented by broader context drawn from a variety of sources. Analysis is also supported by Hara Associates’ 20 years of practice in advising taxi and vehicle-for-hire regulators in the United States and Canada.

The paper begins by introducing the sample cities, and clarifying terminology. Cross-sectional analysis follows on a variety of topics, ending with observations and lessons learned. Topics include:

  • Licensing regime for taxicabs and brokers (companies), and methods of managing entry to the industry.
  • Vehicle standards, including safety, new technology and wheelchair accessible taxicab service.
  • Licensing regime for drivers, and training and language requirements.
  • Licensing regime for meter rates.
  • Innovation in monitoring performance standards relative to passenger concerns such as dispatch times and shortest route.
  • Approaches to integrating taxicab service with other modes of transportation.
  • Advantages and disadvantages as perceived by the regulators of these jurisdictions.

The paper concludes with profiles of each of the regimes, providing detail on current practice and their history of regulatory reform.

1Introduction to the Sample Cities

Twelve regimes were selected on their representativeness of current practice, the innovative alternative they offer, or their experience with regulatory reform. These are:

  • Boston. Boston went through a reform period where the quota of taxicab licenses was expanded significantly, without apparent long run impact on the market value of taxicab licenses (termed medallions).This suggests Boston as a possible example of how potential taxi demand is underestimated when current low supply leaves some market segments unserved.Along with New York, Boston is also one of the leading cities in requiring technology-based passenger information systems in taxicabs, requiring this information to be shared with the regulator (although analysis is not currently used to track individual company performance).
  • Chicago. Chicago is a classic North American regime that maintains a limit on the total number of taxis serving the street-hail and dispatch markets. Its main reform initiatives have been to expand permitted taxi numbers in combination with promoting owner-drivers, and quotas to serve outlying and low-income areas.Pursuant to an extensive review, a new ordinance will take effect July 1st of this year, but detailed regulations are not yet public.
  • Indianapolis. Indianapolis is a large U.S. city that moved from a cap on the number of taxis to an open-entry regime in the 1990’s.In contrast to experiments with full deregulation in the 1970’s by other cities, Indianapolis continued regulating in other areas, including caps on meterrates.Thus it is an example of the “open-entry” option that is often suggested as an alternative to deregulation.
  • Las Vegas. Las Vegas is a well-known North American example of what can be done when a jurisdiction makes taxicab service a civic priority.Las Vegas is a city built on tourism, and wants its visitors to spend as much time as possible at entertainment centres rather than in taxis. Regulated at the state level by the Nevada Taxicab Authority, Las Vegas gets high marks from visitors on the quality of its taxi service. Many of the licenses are limited by time and neighborhood to address peak-load and neighbourhood service. Las Vegas is also an example of a public convenience and necessity regime. New entrants must demonstrate the need for their services in hearings, where other affected parties may intervene, including current operators.
  • Los Angeles. Los Angeles is the longest running example of a franchise system. Taxi companies are awarded service areas for 10-year periods based on bids and maintaining performance standards.Taxi numbers are adjusted using performance reports on dispatch times and telephone answer times.
  • Minneapolis. Minneapolis is another city that has moved recently from a license-limited to an open-entry regime. Limits on taxi numbers were completely removed as of January 2011. As with Indianapolis, this is an example of open-entry as opposed to the deregulation experiments of the 1970’s.
  • New York. New York’s yellow cabs are a well-knownexample of a regime that caps the number of taxi license availability.When new licenses are auctioned by the city, they can yield as much as $1 million for the right to operate a single yellow taxi.Less well known is that New York’s dispatch market is open-entry. There is no limit to the number of vehicles that may enter the dispatch vehicle-for-hire market.New York also undertook major technological reform recently leading to the regulator having close to real-time access to each taxicab trip in terms of fare, origin, destination, and route.
  • Phoenix. In the late 1970’s a number of U.S. cities experimented with full deregulation of taxis, lifting limits on taxi numbers, deregulating meter rates, and other restrictions. Most of these cities were unsatisfied with the results and restored more traditional regimes. Phoenix is of interest because it retains an essentially deregulated environment, with unregulated meter rates and minimal vehicle standards.
  • San Francisco. San Francisco is an example of a mature system that switched to driver-owned taxi licenses and forbade transfer of licenses.It provides a long-term view of the advantages and disadvantages of moving strongly to protect driver income. Among the current challenges are the increasing age of taxi drivers, who must remain active to retain their licenses.
  • Seattle. Seattle is another city that deregulated in the late 1970’s.In contrast to Phoenix, Seattle is one of the many cities that returned to setting a cap on the total number of taxis.
  • Toronto. Toronto is a classic license limited regime.It has two points of interest for this study. One is that it has experimented with a large increase in the taxi fleet using a special license restricted to owner/drivers, whose drivers had to complete substantial additional training.Toronto also has a large and well-established taxi driver-training program that it markets to other jurisdictions.Toronto has launched a thorough review of taxi bylaws, with results expected this year. It also has a standardized languageproficiency test established within a broader Canadian standard of graduated language proficiency for different occupations.

Table 1: Population and Taxis Per Capita
City / Jurisdiction / Population
(US Census 2010) / Approx.
number of taxis (including dispatch only) / Taxis per 10,000 people / Estimated
number of drivers / 5 km fare ($USD)*
Boston / City of Boston / 617,594 / 1,825 / 29.6 / 6,000 / $10.90
Chicago / City of Chicago / 2,695,598 / 6,900 / 13.9*** / 10,500 / $7.64
Indianapolis / City of Indianapolis and Marion County / 903,393 / 800 / 8.9 / 900 / $9.21
Las Vegas / Clark County (includes Las Vegas) / 1,951,269 Las Vegas 583,756 / 2,409 / 12.3*** / 4,700 / $11.18
Los Angeles / City of Los Angeles / 3,792,621 / 2,361 / 6.2 / 8,000 / $10.94
Minneapolis / City of Minneapolis / 382,578 / 687 / 18.0 / 1,300 / $10.49
New York / New York City / 8,175,133 / 51,353 / 62.8 / 50,000 / $8.31
Phoenix / State of Arizona (including Phoenix) / 6,392,017 Phoenix 1,445,632 / 2,000 / 13.8 / 2,000 / Not regulated
San Francisco / City and County of San Francisco / 805,235 / 1,500 / 18.6 / 7,000 / $11.49
Seattle / City of Seattle / 608,660 / 1,110 / 14.0 / 1,200 / $10.02
Toronto / City of Toronto / 2,615,060 / 4,968 / 19.0 / 10,000 / $12.85
Washington DC / District of Columbia / 601,723 / 7,000 / 116.3 / 8,000 / $7.41
* 5km distance fare excludes any time charges for slow traffic or when the taxi is stopped. Fares are calculated on a pro-rated basis, rather than "on the nickel" to ensure a smooth comparison between cities. U.S.fare distances converted from miles to kilometers.
** Canadian fares converted to $USD. Canadian 2011 Census population used.
  • Washington DC. Washington DC is one of the few large U.S. cities to retain an open entry system.While the number of taxis is not capped, a temporary freeze on new company permits was imposed in November 2010, and has recently been extended. (Established companies can still put additional cars on the road.) Washington has one of the highest per capita taxi service levels in North America.While taxi availability is generally very good, concerns about quality led to the suspension of new permits pending a thorough review.

Because this sample has been selected for interest, there is an over-representation of unique cases. The analytic sections will indicate which cases are closer to the norm (where a norm can be said to exist).

The selected cities include the three largest U.S. municipalities (New York, Los Angeles, and Chicago) and the largest Canadian municipality (Toronto). The other cities are also large, ranging from the sixth largest U.S. city (Phoenix) to the 48th largest (Minneapolis). The sample is representative in the sense that it covers a good portion of the population served by taxis. Table 1 shows population and taxis per capita of each city.

2Terminology

Terminology in taxi regulation varies widely from jurisdiction to jurisdiction. The meaning of the same term may vary from city to city, and country to country. For example, vehicle for hire tends to be a generic term in North America, referring to licensed vehicles that provide any kind of public service, whether it is prearranged, dispatch, or street-hail. In other countries, the phrase for hire may refer to a vehicle that is only permitted to take prearranged or dispatched fares. For the purposes of this paper, the following terms will be used:

  • A taxi, taxicab, or cab is a vehicle that is licensed to pick-up street hails and/or stand in designated public areas to wait for customers. In most North American jurisdictions, a taxi may also take pre-arranged fares by dispatch, cell-phone, or internet application.
  • A limousine is not taxi.With exceptions in some jurisdictions, a North American limousine is commonly a separately licensed class of service that takes prearranged calls.In most regimes, the limousine is required to be a luxury vehicle, and is required to charge a fare that is usually much higher than a taxi. These restrictions are imposed to prevent limousines, which are not limited in total numbers, from competing with taxis, which are usually limited in numbers.The net result is that both taxis and limousines may serve the dispatch market, but limousines end up serving a smaller luxury market.A common further restriction is that limousines must be booked a number of hours in advance, as opposed to on-demand dispatch service.
  • A medallion or plate is the license to operate a taxi vehicle.They take their name from the identifying device the taxis must display.For example, the New York medallion takes its name from the metal medallion bolted onto the hood of taxis.Other cities may use the term medallion even though a taxi license takes the form of the usual square metal numbered plates. Such cities may also reserve the use of the term “license” for drivers’ licenses, and refer to vehicle licenses as permits.
  • Open entry, as opposed to “deregulated,”best describes a jurisdiction that has deregulated entry requirements, removing the cap, but has retained other forms of regulation such as maximum meter rates, relatively stringent vehicle standards and driver training.
  • Street-hail is literally the hailing of a taxi from the street by a customer.This is not legal in all cities.Thus the street-hail market may also include other forms of walk-up traffic, such as fares taken from a taxi stand.
  • Taxi stand is a location where taxis line-up to await fares.Most cities have designated curb spaces for taxis to stand.Private properties may also establish stands, such as hotels, bars, pubs, airports and railway stations.

3Jurisdiction

Similar to Australia, responsibility for regulating taxis and vehicles for hire fall to individual states within the U.S., and the provinces of Canada. Most states and provinces choose to delegate responsibility to individual municipalities, with the following exceptions:

  • Direct State Administration. The States of Arizona and Nevada control taxi regulation at the state level. For instance, the city of Phoenix, Arizona, has very light regulation, established at the state level, while Nevada has established a state-level agency, the Nevada Taxicab Authority, which deals only with Las Vegas and surrounding Clark County. Washington D.C., receives its mandate directly from the federal government, as it is not in any state. The Washington Taxi Commission is appointed by the elected municipal government through delegated federal authority. The State of New York, while delegating most authority to the city, fixed the total allowable number of taxicabs in state legislation, making it particularly hard to change.Limousines in the U.S. are also commonly regulated at the state level, with open entry regimes. On occasion this leads to a lack of cohesion in the broader car-for-hire strategy.
  • County delegation. Most large cities in the U.S are not fully independent entities. Instead, they fall within counties.The U.S. Census bureau uses the county, rather than the city, as their base unit for population reports.Functions are split between county and city levels. For the present work, this distinction in jurisdiction is usually not material. For example, the cities of Boston and Los Angeles fall under their respective counties, but both are also the administrative seat of the counties, and taxis for each are administered at the level of the city. Other cities are formally consolidated into one entity (city and county of San Francisco, city of Indianapolis and Marion County), or share the same borders as the county (New York). Seattle provides an interesting case where the city and surrounding King County have a formal co-operative agreement, resulting in a seamless service, reducing administrative burdens.
  • Selected Canadian Provinces. Three of Canada`s thirteen provinces and territories administer taxi regulation directly. Quebec and takes direct responsibility for numbers of taxis permitted to operate, and meter rates; while delegating other aspects municipally. British Columbia does the same through its provincial Passenger Transportation Board.Manitoba has only one major city, Winnipeg, whose taxis are regulated by a provincially appointed body.

4Taxi Licensing and Entry Management

As with many parts of the world, the vast majority of North American cities limit the total number of taxis permitted to operate.This often termed closed entry, or the medallion system (as per New York). The history and rationale for closed entry centres on excess supply during economic recessions – a topic discussed further below under open-entry regimes.

The rights to these permits can acquire significant value, up to $1 million in the case of a New York medallion. Control of these licenses, and how they are issued, is a key defining characteristic of taxi regulatory regimes. Table 2 summarizes the licensing regimes of the sample.

4.1License Issue

Most regimes do not have a formula or regular annual process for assessing the number of licenses required, or for issuing additional ones. In the sample, only two cities have a formula; Seattle and Toronto:

  • Seattle. Seattle’s formula is not a precise one. The municipal code empowers the regulator to issue up to 35 additional licenses per year, if needed, based on the following factors: average service response times, total number of taxi rides, total paid trips per taxicab, and average operating hours per taxicab, and any other factors that may affect the supply and demand for taxi service within the city limits.
  • Toronto. In 1998, a guideline formula was established based on a weighted average of population growth, employment growth, public transit (TTC) ridership, and convention delegates. The weights were estimated statistically by analysing the relationship between potential demand factors and growth in taxi demand, measured indirectly using statutory declarations of driver incomes required by Toronto at that time. At present, this formula has fallen into disuse following a massive expansion in taxi numbers through the issue of owner/driver vehicle permits.Permits are slowly being withdrawn from active use, as surrendered permits are not reissued.

A 2010 study by Hara Associates found a similar pattern in other cities (Table 3).[1] Of the ten cities[2], only the Canadian city of Mississauga actively applies a formula annually. The city of Ottawa has a per capita formula in its bylaw, but it is not applied.

More generally, cities with license limits tend to review the numbers of licenses only intermittently, such as when shortages or declines in service become severe enough to drive a review. Where cities do have a formula embedded in their bylaw, as in Ottawa, this does not necessarily mean the formula is applied. Unless the bylaw also establishes a mechanism for determination and distribution, and assigns responsibility for execution, there is no guarantee of application.