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 Regulation
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 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 l 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 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 of C. 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 of tbe 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 more ramp taxi medallions. The decision was made just before the 1996 PC&N hearing in November of 1996. It was decided to delay any decisions on more permits until the permits had been issued.

I held a 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 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

Open 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).

Purpose of Regulation

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 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 1). 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).

Types 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 (Arnott, 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 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 she/he 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 Regulation

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 Regulation

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. 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 (1993).

Driver Quality

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

ln 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 of 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.

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 10th in the ratio of cabs to the population.

Against 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.

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 of living. 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 11, 1998 and April 3, 1998.

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 of a taxi arriving after' telephone call was under 57%. Between 8 P.M. and 10 A.M. 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 A.M. 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 of 212 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 8A.M. 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 of 200 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.

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 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

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.

Airport

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 Taxicab 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.

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 alternatives 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?

Ramp 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.

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.


PCN EXHIBIT LIST

Exhibits #1 thru 3 (1996 Submissions)

Exhibit #4 - Letter &am John A Marks
Exhibit #5 - Report from Strategy Campaigns (Whitehurst Group)
Exhibit #6 - 1997 Letters (in favor for additional taxis]

Exhibit #7-A - 1997 Letters (Opposed to additional taxis)

Exhibit #8 1998 Letters in favor of additional taxis)

Exhibit #9 1998 Letters (Opposed to additional taxis)

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 Wolter-Veterans Cab 1997

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


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