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Coop's advice: Don't limit taxis or their fares

MyView: Portland's changes in taxi business might need tinkering to benefit customers


A Nov. 15 Portland Tribune news story about Union Cab of Portland (Here Come the Cabs) was brought to my attention. For what it’s worth, I will offer you some free advice about taxi companies and their regulation based upon my 30 years at Union Cab of Madison Coop, Wisconsin.

In Madison, we do not have light rail and we do have serious winter that limits biking year-round. We just had a new taxi company start up in October of 2011. We have four taxi companies locally — two that charge fares by zone, two that charge by meter rates.

The fares are very similar between the two types of taxi service. Meter taxis offer individual service for higher prices for the distance covered. Zone taxis offer shared-ride service for lower prices for the distance covered.

Union Cab of Madison pays drivers on commission. The other companies charge some version of lease fees and the driver keeps the amounts over the lease fee.

In our system, anyone who wants can start a taxi company if they meet those regulatory requirements. Madison does not attempt to limit the number of permits or taxis in the market.

Above all else, stop regulating the number of permits. No, you do not know how many taxis your greater metro area actually needs. Your taxi market knows and will tell the taxi companies if you allow it to do so.

Second, no, you do not know what the fare should be set at. Let your market tell the taxi companies how much they want to pay.

Third, no, you cannot grow your taxi market. It is defined basically as those who do not have the use of a personal car and do not wish to use public transport or other means such as walking or bicycles. You cannot force people into that category.

Fourth, you do not want to allow small operators — the person who holds three permits and leases out those cars — to operate. You want fairly sizable operators with meaningful amounts of capital to be able to pay the real economic costs of operating a business as an “ongoing concern.”

You want four basic regulations. These requirements must be applied to any direct competitors to taxi companies such as “car services.”

Traditional limousine services — the ones who start their prices at $75 to $200 a ride — are not direct competitors to taxi companies. However, airport shuttle services are absolutely competitors to taxi companies.

The vehicles must be mechanically sound and safe to operate. You can accomplish this by periodic inspections and through responding to customer complaints.

The taxi companies and their direct competitors must all be required to serve the same geographical area, with the same boundaries. All such operators cannot be permitted to “red line” neighborhoods or areas, either explicitly or in a de facto sense.

The taxi companies and their direct competitors must be required to operate 24 hours a days and seven days a week.

The taxi companies and their direct competitors must be required to provide credible quality of service with very limited exceptions. Credible quality of service can mean several things. A company does not get to tell a customer on Sunday morning, “Oh I’m sorry, we only have four taxis on duty now, you will have to wait upwards of an hour.”

Taxi companies always lose money on Sunday mornings and would simply close then if they could get away with it. Taxi companies do get to say, “We’re doing the best we can, but we are caught in the traffic congestion with everyone else because of the four-inch snowfall and it will take us upwards of an hour to get you a ride.” Exempt them for that which they cannot control but hold them for what they can control.

Understand that the limited number of permits and the vehicle lease system combine to pass the economic risk of driving a taxi onto the driver, the person least able to bear it. Leasing the vehicle becomes the revenue source for the permit holder. The permit holders have no reason to consider whether or not enough business to “support” the drivers on duty actually exists during the lease period.

Therefore, you end up with too many drivers for the amount of demand, and they all suffer.

James Wold of Madison, Wisc., works for Union Cab of Madison Coop. During a 30-year career as a taxi driver, he has served repeated terms on the cooperative’s governing board of directors and on several standing committees, all with an emphasis on financial affairs.