The following study was an award winning proposal from the Institute for Justice for the Pioneer Institute’s 1995 "Better Government Competition".

OPENING BOSTON'S TAXICAB MARKET

by

John E. Kramer and William H. Mellor

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 well 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 well below the market level, Boston taxi medallions sell 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 sell 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 11 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

Nationally, barriers to entry are entrenched and long-standing. A 1974 study by the United States Department of Transportation found that regulations restricting entry of new cabs and preventing discounting of fares cost consumers millions (nearly $800 million if annually adjusted for inflation to 1992 dollars) and estimated that removal of these restrictions would have created 38,000 new jobs in the taxi industry.4

In stark contrast to the regulation-imposed stagnation on the taxi industry is the relative freedom and vitality experienced by limousines. With open entry into the limousine market, Boston's yellow pages list nearly 10 pages of advertisements for limousine services, compared to less than two pages for taxis. According to a Boston Globe feature from earlier this year, "The number of companies offering limousines or sedan services at Logan International Airport has skyrocketed from 30 a decade ago to almost 700 today....Logan pickups by Boston taxicabs increased by 10 percent last year over 1993. Limousine pickups--even though they have to be booked ahead of time--increased by more than 30 percent."5

The taxi industry's response to the growth of limousines has been purely anti-competitive. Rather than calling for its own deregulation, which would allow new competitors to enter the field and compete for their corner on the market, a 1988 Forbes feature titled, "Regulation at its Worst," reported, "Since 1980 the number of limousine livery companies nationwide has grown fourfold, to 6,500. Predictably, the taxicab industry's first response has often been to demand that regulators squash the upstarts by controlling their numbers, rates and airport pickups."6

A telephone survey conducted in August 1995 by the authors of this report of a dozen taxicabs and limousines found that a taxicab from Brighton to Logan International Airport would cost approximately $20, while a 1995 "black top" Lincoln Town Car limousine, including a uniformed driver, reading light, newspaper, and cellular phone, was only $9 more.

This is typical of other cities where taxicabs are regulated while other industries are allowed to follow market forces. According to information distributed by the Indianapolis mayor's office, before Indianapolis opened entry into the taxi market and deregulated fares, riders could hire a 35-foot limousine (the price of which is unregulated) with a television and VCR to or from Indianapolis International Airport for half the price of a taxi on the same route.7

Closing the Poor Man's Gateway

As noted in a New York Times article in 1992, taxi driving has for generations been recognized as a "poor man's gateway to mainstream America."8 The current regulatory scheme in Boston benefits only the existing medallion holders, their lobbyists, and their lawyers. As a result, most Boston taxi drivers do not enjoy the fruits of their own labor. They must pay exorbitant weekly fees for the "privilege" of driving for someone else who owns the taxi medallion. In essence, cab drivers become urban sharecroppers.

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 modern 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 "ruinous competition," but the majority of taxicab regulations were already in place in the late 1920s.10 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 taxi 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.11"

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 of regulation. 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 could not enter the market.14

While some cities prohibit outright new entrants to the taxicab market, others achieve the same results while preserving the facade of open entry. Many cities like Philadelphia condition entry on a showing of "public convenience and necessity," a standard which, in practice, proves almost impossible to satisfy. A 1983 survey of 103 cities with populations of 50,000 or more found that 87 percent restricted entry in some manner:

"30 percent had a fixed number of licenses; 9 percent had a fixed ratio of licenses to population; 25 percent required a showing of public convenience and necessity to obtain a license; 6 percent had franchise requirements; and 17 percent had minimum service standards.15"

While safety and insurance requirements are valid, there is no reasonable basis for restricted entry. A 1984 study of taxicab regulations by the Federal Trade Commission concluded that "there is no persuasive economic rationale" for most regulations, stating "restrictions on entry, minimum fare controls, and restrictions on ride-sharing...reduce rather than increase efficiency."16 Economists, left and right, agree virtually unanimously and state that consumers are the big losers (second only to would-be cab owners); they pay higher fares, wait longer for a cab, and get worse service than they would with competition.17

The Unseen, Underserved Customers

Poor, minority, and elderly consumers are hit especially hard by these regulations.18 Members of these groups are less likely to own cars and are more likely to live in areas that are served poorly, if at all, by taxicabs and other forms of public transit. A 1978 study commissioned by the Urban Mass Transit Administration determined that by every measure, low-income individuals "rely more heavily on taxicabs than do higher income individuals."19 Another study, conducted in 1980, found,

"In addition to causing misallocation of resources, taxi regulations adversely affect the distribution of income. Low-income people spend a larger percentage of their incomes on taxis than do high-income people, and in many taxi markets, consumption of taxi rides per capita is higher for low-income people. As a result, [these regulations] impose a disproportionate burden on low-income people.20"

Boston's predominantly African-American neighborhoods continue to receive inferior taxi service. Would-be riders from such neighborhoods as Roxbury, Dorchester, and Mattapan find it difficult, if not impossible, to get cabs at night.21 One well-publicized example of the substandard service received by minorities occurred in 1992 when City Councilman Bruce Bolling was refused cab service to his neighborhood by a white driver who said the neighborhood was too dangerous.22 The city's notoriously poor service to minorities was also the subject of a 1982 Harvard case study, which examined incidents as far back as 1968.23 The poor service to the minority community continues despite regulations that require drivers to carry any passenger to and from any points in the city unless the fare is "seeking a place or person for immoral purposes...noisy or otherwise disorderly...or intoxicated."

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 command 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 out...entrepreneurship. A vote for deregulation is more than a squabble over taxicabs. It's a stand for equal opportunity, jobs and individual initiative--basic ingredients of the American dream."25

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 taxicabs, jitneys, and limousines. This model is by no means the definitive solution to solving Boston's taxicab woes, but it provides a starting point for discussion.

PUBLIC AND PRIVATE COSTS

Public costs of maintaining the current system include increased subsidies for inefficient public transportation, increased fares, loss of tax revenue from new businesses, and costs of maintaining an inefficient bureaucratic regulatory apparatus. Private costs include higher fares, less efficient service, foreclosed avenues of productive livelihoods, and loss of employment-creating endeavors in the inner city.

If deregulation is achieved, there may by some additional administrative costs for vehicle inspection, insurance verification, driver training and so on. Much of these costs could be shouldered, however, by the taxi industry itself in the form of administrative fees when seeking a license.

LEGAL, POLITICAL AND OTHER OBSTACLES: THE VESTED INTEREST

To a great extent, having a closed system, such as Boston's taxi industry, creates a public subsidy for those inside the system. Medallion holders are shielded from competitors, and therefore the value of their operations increases disproportionately. They will fiercely challenge anyone who seeks to take away that unfair advantage. The concentrated benefits provided medallion holders gives them enhanced political as well as economic power. However, the inevitable existence of beneficiaries of a subsidy does not justify maintaining a corrupt or unconstitutional system.

Making Existing Companies Compete

The most frequently raised argument against deregulation by taxi companies and their lobbyists is that adding more cabs on the street will cut into their market share and make them earn less money, perhaps even go out of business. One would be hard-pressed to find another industry where the city government gives such protection to existing for-profit companies. There are no guarantees that existing companies will not lose market share to new companies--nor should there be. Eliminating over-reaching government regulation on both entry and fares will let the most efficient companies that provide the best service at the best price thrive, while those that don't meet those market demands will not.

Opponents also occasionally claim there is no need to open the market because there is a chronic shortage of drivers for the limited number of medallions that already exist. However, with the high lease prices drivers must pay medallion owners, it is no wonder drivers are hard to come by. By opening the market and allowing drivers to work for themselves, more owner/drivers (rather than merely drivers) can be expected to enter the market.

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 commodity 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

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 common for governments to protect large capital investments of electric and water companies, such practices have no analogous purpose in the taxicab industry. Recouping the investment in a car is not in the same league as a capital-intensive utility. Furthermore, cabs are not essential services like water and electricity.

Predatory Pricing

Every industry would enjoy having the government set artificially high prices for its product. But given a choice between a system where all consumers pay the highest fare or a system where passengers are allowed some bargaining room to reduce their fare, we expect most consumers would select the latter. In addition, if prices fall, the industry could expect a larger ridership, thereby increasing their efficiency and offsetting the lower fares.

In 1979 and 1982 respectively, Seattle and Phoenix deregulated entry into their market as well as fares, while maintaining a price ceiling at their airports. According to Forbes magazine,

When fares were deregulated in Phoenix, dominant Yellow Cab raised rates from 85 cents to $1.20 a mile. [In 1988], Yellow still charges $1.20 a mile. And consumers' choices include Discount Cabs at 90 cents a mile or black Lincoln "V.I.P." cars at $1.50 a mile."27

A telephone survey of prices in August 1995 found that Yellow charges $2.45 for the first mile plus $1.30 each additional mile, while Discount charges $2.30 for the first mile plus $1.10 each additional mile.28

However, if Boston decides to open entry but maintains artificially high fares, basic economic principles demonstrate the city can expect a glut of taxis, which may exacerbate any difficulties in the transition to a market-based system.

Price Gouging

By initiating a pricing system that sets the ceiling a taxi may charge at approximately what is being charged now and requiring that pricing system to be posted in each vehicle, the city could effectively undercut any argument that reducing pricing regulations will cause price gouging of out-of-town visitors or others unfamiliar with Boston's taxi fare policies. As with the predatory pricing argument, in the worst case, riders could expect to pay at most what they must pay now.

ASSESSMENT FOR REPLICATION

What we are suggesting for Boston has been accomplished in other equally difficult environments with equally onerous regulations. The situation was so bad in Denver that the Rocky Mountain News led off an editorial discussing the Institute for Justice's effort to break down Denver's taxicab monopoly with the following statement:

"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.30

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

Article __. Operator Licenses

Section __. Operator licensure.

No person shall transport or offer to transport a passenger for a fare in any public vehicle for hire without a license to operate a public vehicle for hire.

Section __. Eligibility.

To be eligible for a license to operate a public vehicle for hire, a person:

1) must possess a public passenger chauffeur or commercial driver's license issued by the state of Massachusetts;

2) must not have been convicted of a felony within the period of five (5) years immediately preceding the date of the filing of the application; and

3) either a. must not have been convicted at any time of

1. a felony or misdemeanor that involved violence towards another person;

2. drunk or drugged driving;

3. being an habitual traffic offender; or

4. being an habitual substance offender; or

b. must have had a valid city of Boston taxicab operator's license on the effective date of this section.

Section __. Application.

Each applicant for license to operate a public vehicle for hire shall provide to the controller the following information concerning the applicant, on an application form provided by the controller, signed and sworn to by the applicant:

1) full name;

2) residence;

3) office address;

4) place of residence for the five (5) years immediately preceding the date of the filing of the application;

5) age, race, sex, height, weight, and color of eyes and hair;

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 of law by the applicant;

11) the date of filing, court and description of each charge pending against the applicant alleging a violation of law;

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.

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:

1) submission of the photographs and fingerprints of the applicant to the Boston Police Department, which shall report to the controller as to whether the applicant has any criminal record, and the details of that criminal record;

2) investigation of the facts giving rise to any violation of law and any charges alleging a violation of law pending against the applicant; and

3) such additional investigation as the controller deems necessary.

Section __. Examination of application.

Each applicant for license to operate a public vehicle for hire may be examined by the controller if determined by the controller to be necessary to guarantee quality service to customers, as to:

1) the applicant's qualifications;

2) the applicant's knowledge of the provisions of this article and such other ordinances, statutes and regulations as the controller deems relevant;

3) the applicant's knowledge of the geography of the City of Boston and the surrounding region;

4) the applicant's ability to communicate in English with customers; and

5) the applicant's skill in operating a motor vehicle (including a driving test accompanied by an inspector in such circumstances as the controller determines to be necessary to protect the public.)

Section __. Pending charges of violation of law.

If charges are pending in any court charging the applicant with a violation of law, the controller shall suspend processing of the application until those charges are resolved, unless the applicant requests the controller to proceed with the processing of the application. In the event that an applicant requests the controller to proceed, the controller shall conduct a hearing to determine whether the applicant committed the alleged violation of law and whether that violation of law disqualifies the applicant from receiving a license. Evidence may be submitted by telephone or by any other reasonable electronic means from remote locations. The applicant must appear at the hearing, testify, and otherwise fully cooperate with the controller's investigation. In the event that the application is denied, the applicant shall reimburse the controller for any expenses incurred as a result of the request for a hearing.

Section __. Issuance of license.

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:

1) 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

1) be a passenger vehicle;

2) be designed and constructed to accommodate and transport not more than fifteen (15) passengers, including the driver;

3) have a tax situs in the City of Boston; and

4) be owned by an applicant eligible to apply for a public vehicle for hire license.

Section __. Applicant.

To be eligible to apply for a public vehicle for hire license, a person:

1) must be the owner of that vehicle;

2) must have a central office located in the City of Boston; and

3) must not have been convicted of a felony within the period of five (5) years immediately preceding the date of the filing of the application.

Section __. Application.

a) Each applicant for license for a license for a public vehicle for hire shall provide to the controller the following information concerning the applicant and the vehicle, on an application form provided by the controller, signed and sworn to by the applicant (or, if the applicant is not an individual, signed and sworn to by one of the individuals about whom information is required by this section):

1) the vehicle's seating capacity, name of manufacturer, model year, horsepower, vehicle identification number, certificate of title number, color and state license number;

2) the logo (if any) and color scheme which will be used on the vehicle;

3) the applicant's full name;

4) the applicant's central office address;

5) the names of all persons other than the applicant who have a financial interest in the vehicle;

6) all government entities from which the applicant has previously obtained a license for any public vehicle for hire, and each date and cause for which any such license was ever revoked or suspended; and

Section __. Attachments to the application or renewal of application.

1) A public liability insurance policy or certificate of self-insurance for the vehicle; safety inspection of vehicles shall 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 shall 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 of law under which individuals control their destinies as free and responsible members of society.

End Notes

1 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 of living.

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. Wells, "The Role of the Taxicab in Urban Transportation," U.S. Department of Transportation, December 1974. Dollar figure converted to 1992 dollars using the Implicit Price Deflator for the second quarter of 1992. "Challenging 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 of Indianapolis, publication in support of Proposal 72, 1994.

8 "Challenging Denver's Taxicab Monopoly."

9 "Gypsy cabs fill a need in neighborhood," Boston Globe, January 10, 1993, p. 1.

10 Gorman Gilbert and Robert E. Samuels, The Taxicab: An Urban Transportation Survivor (The University of North Carolina Press, 1982), p. 149.

11 Mark W. Frankena and Paul A. Pautler, An Economic Analysis of Taxicab Regulation, Federal Trade Commission Bureau of Economics Staff Report, May 1984, p. 75.

12 Ibid., 79.

13 Ibid., 76, 77. In fact, New York first attempted to limit the number of taxicabs in 1932 "under the sponsorship of Mayor Jimmy Walker, but when Walker was forced to resign when it was discovered that he had been bribed by one of the taxi companies, the attempt failed." Gilbert and Samuels, p. 70.

14 Ross D. Eckert, "The Los Angeles Taxi Monopoly: An Economic Inquiry," 43 Southern California Law Review, 1970, pp. 422-424; also E.W. Kitch, M. Isaacson and D. Kasper, "The Regulation of Taxicabs in Chicago," 14 Journal of Law and Economics, October 1971, pp. 285-350.

15 Frankena and Pautler, p. 16, citing study by Shaw, et al., "Taxicab Regulation in U.S. Cities," U.S. Department of Transportation, Report No. UMTA-NC-11-0011, October 1983, pp. 29-32.

16 Frankena and Pautler, 65, 155.

17 See Frankena and Pautler; Ross D. Eckert; A. Webster, et al.; David J. Williams,"Information and Price Determination in Taxi Markets," Quarterly Review of Economics and Business 20(4), Winter 1980, pp. 36-43; and testimony of FTC economists William C. Macleod, Richard O. Zerbe, and John M. Peterson before Chicago and Seattle City Councils, 1984.

18 Clint Bolick, Unfinished Business (Pacific Research Institute for Public Policy, 1990), pp. 74-75, and Clint Bolick, Changing Course, Civil Rights at the Crossroads (Transaction, Inc., 1988), pp. 94-95.

19 Allred, Saltzman, and Rosenbloom, "Factors Affecting the Use of Taxicabs by Lower Income Groups," Transportation Research Record, Number 688, 1978, p. 23.

20 Frankena and Pautler, p. 7.

21 "Cab firm's policy may mean separate, unequal service: Red & White phone numbers target city neighborhoods along racial lines," Boston Globe, February 28, 1995, p. 1.

22 "Boston cabbie's reluctance sparks anew debate over race relations," Boston Globe, December 26, 1992, p. 37.

23 Kennedy School of Government Case Study, "Boston's Taxicab Problems, 1970," 1982.

24 Walter Williams, The State Against Blacks (McGraw-Hill Book Company, 1982), p. 25.

25 "Hailing cabs: City regulation blocks the road to slice of the 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 Change83Opening Boston's Taxi Market89Opening Boston's Taxicab Market



For further information or copies of this report, contact:

Institute for Justice
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Phone: (202) 955-1300
Fax: (202) 955-1329
E-Mail: instituteforjustice.org

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85 Devonshire Street
Boston, MA 02109
Phone: (617) 723-2277
Fax: (617) 723-1880
E-Mail: 75374.643@compuserve.com

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