Interesting observation. For someone who was around this unique industry when cross-subsidization was the norm, it is interesting how the economics of the industry have been turned upside down by a mix of tax law changes and the relentless pressure to reduce costs.
In the good old days 'leventy-7 years ago, drivers were all employees and the boss, with a fleet of, say 100 vehicles, would direct a rotation of drivers into most areas of a city to serve those areas. The boss directed effective utilization of his fleet to best serve the citizens of his community.
These outlying subsurbs might not be profitable, but the service in those areas was cross-subsidized by the more profitable areas of the city, such as the downtown area. On balance, the owner operated a profitable business.
Tax laws gradually changed in the late 60's, early 70's, out of which the pressure to cut costs provoked the birth of the independent contractor and leasing. As a consequence, the driver pool gradually became atomized to such a degree that cross- subsidization became unworkable. The principle is great and sound, but reality regretably intruded into this idylic world, making a mockery of conventional economics.
It was in this early era that the concept of accessible taxicabs emerged in response to growing concerns and pressures from the community of people with disabilities. A gradual realization was emerging that such folks were actually being discriminated against by denial to on-demand personalized transportation at reasonable cost.
The original concept, still upheld BTW by most regulatory authorities and transportation economists, was a taxicab so designed as to facilitate equal transportation opportunities for both wheelchair passengers and conventional passengers, all at same standard taxi fares, all on demand.
Thus was born the "accessible taxicab". The most notable example is the London Taxi in the UK and many other major cities around the world, except for North America. Here the vehicle of choice is a modified van, typically capable of transporting 1 person in a wheelchair, plus up to 3 companions. Or alternatively via changes in seating arrangements, a number of conventional passengers and no wheelchair at all. Some van conversions are capable of carrying more than 1 wheelchair.
During the conception and birth of accessible taxicabs, the principle of cross-subsidization was a critical component upon which success was built. Profit from conventional passengers cross-subsidizes the losses of transporting people with disabilities. Unfortunately, economics and the concept are on a collision course.
It is no secret anywhere that wheelchair accessible taxicabs, used exclusively for transporting people with disabilities at standard taxi fares, will go bankrupt. For the service to be profitable, it is imperative that such vehicles be used for both kinds of passengers. However, in an atomized leasing environment, there is little that can be done to strike a balance of service. Which lessee is going to willingly accept the losses?
Accessible taxicabs are in place now in many municipalities. Some municipalities, for whatever reason, are attempting to restrict their use to transporting only people with disabilities at standard taxi fares. Such a policy is an absolute guarantee of collision with economics. The obvious consequence is evaporation of the service; something the community of people with disabilities will not tolerate.
So, with the concept well established, expectations of equal accessibilty with equal fares now firmly entrenched, and a collision looming on the horizon, what's to be done? Do we do nothing until the collision actually happens? Or do we prepare for it now and somehow come up with some workable corrective action?
I believe it is absolutely inescapable that accessible taxicabs will emerge as the shape of things to come in the future. I have no crystal ball, only a firm conviction that accessible taxicabs will become mandatory throughout North America at some unknown time in the future. And they will all be operated at standard taxi fares for all passengers equally.
The standard 4-door passenger sedan, widely in use as a taxicab, will eventually evaporate. It's a bad design for this purpose anyways, for it fails miserably to simultaneously protect a driver, provide passenger comfort, and facilitate wheelchair passengers. Conversely, accessible taxicabs, such as the London Taxi, do satisfy these fundamental requirements.
The concept of cross-subsidization is valid and appropriate, and will in all probability be steadfastly upheld by regulatory authorities and transportation economists alike. The mechanism to make it workable is however, quite negotiable.
From an InterNet discussion 3 March 2000
Accessible taxicabs were, and still are in most jurisdictions, defined as a taxicab service available to all, regardless of personal mobility, at standard taxicab rates. This was based on the premise that the positive revenue stream from the standard taxicab service would cross-subsidize the negative revenue stream from transporting people with disabilities.
This definition likely had its origin with authors of the legislation perceiving the taxicab industry to be organized along traditional corporate structures, not unlike the world in which they were employed. Unfortunately, there are many in this situation who did not, and perhaps still do not, understand the profound evolutionary organizational upheaval in the industry, emerging out of changes in the tax laws.
In most jurisdictions, the traditional corporate organizational model no longer applies to the taxicab industry. Atomization has emerged as a firmly entrenched organizational structure where the concept of cross-subsidization can no longer work. Individual single-vehicle owner-operators cannot be expected to cross-subsidize transportation of people with disabilities. The economics simply do not support the concept any more, and it is now out-of-synch with reality. The principle of undue economic hardship is now intruding into an otherwise honorable, commendable objective - equal access to personalized transportation.
A case in point emerged in Calgary, Canada about a year ago, where the dominant taxicab company providing accessible taxicab services applied to the City for a surcharge to be added to any accessible taxicab trip involving transportation of a person with disabilities. Astonishingly, the city approved the surcharge, clearly a discriminatory measure against the community of people with disabilities.
However, not long after that dubious victory, this same dominant taxicab company apparently divested itself of its accessible taxicab vehicles under the claim of undue economic hardship. The surcharge apparently was seen as insufficient to cover the true cost. Perhaps someone among us, knowledgeable of the current Calgary situation, could bring us up to date on how the community of people with disabilities in Calgary is now being serviced.
Yesterday, the Winnipeg Free Press carried an interesting, if not ominous, guest editorial relative to this issue (see below). While it does not specifically identify accessible taxicab service, the principles which it explores are quite relevant. Perhaps others on the TAXI-L list might comment on this situation from their national viewpoints not only in Canada, but in other countries.
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Winnipeg Free Press
(Winnipeg, MB, Canada)
25 July 1998
Editor's Foreword
How do you treat people equally if doing so imposes unequal costs on fhe providers of the treatment? It is a vexing human rights issue that amendmeats to human rights legislation attempt to address by enshrining the concept of undue hardship. Winnipeg lawyer Yude Henteleff believes that as well-intentioned as these amendments may be, they threaten to turn back the clock and once again relegate disabled people to "charity" status.
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The Government of Canada has recently enacted amendments to the Canadian Human Rights Act whereby anyone seeking to justify refusal to accommodate a person who has been discriminated against must show that it would cause them undue hardship.
The government should reconsider such amendment, because, in my view, the principle of undue hardship may be inherently discriminatory, particularly when applied to persons with a physical or mental handicap.
The problem with the cost-benefit approach, fundamental to the undue hardship principle, is how do you factor in relevant issues, which, in my view, are incapable of being given doIlar values.
Let's assume a school board takes the position that by adding a special-needs child to a classroom will cause the other children undue stress. How do you quantify that under the undue hardship rule? How do you quantify in dollars the loss of socialization opportunities to a special-needs child, whom the school system wishes to remove from an integrated setting because the cost of a full-time aide to keep the child in such a setting is, in their view, prohibitive?
The ultimate justification for applying the undue hardship principle is that it has become too costly to provide services to a special-needs person in order to enable them to achieve equality.
No such ultimate test, however, is applied to persons who are non disabled. In the result, I believe the principle of undue hardship is discriminatory.
There are those who argue that the principle of undue hardship will make governments more accountable and their decisions more rational. The principle of undue hardship means that those seeking to avoid accommodating a handicapped person must prove that to do so would cause them undue economic hardship.
The obligation to accommodate limited by undue hardship has introduced economic considerations as a defence to discrimination claims. This principle had its beginning in cases involving discrimination in employment where it is relatively easy to determine that an employer will suffer undue hardship if required to accommodate.
Matters such as costs of disruption or putting in an elevator are relatively easy to calculate. To put it bluntly, because of the defence of undue hardship, some people can be discriminated against because it is considered efficient and economical.
Accordingly, this establishes two categories of equality claimants: those whose equality we decide we can afford and those whose equality we decide we cannot afford.
As one commentator recently put it, because of the current political climate of fiscal restraint, people with disabilities are in danger of being pushed back to their former status as objects of charity and are less likely to achieve the real status of full equality that human rights laws promised them.
As the commentator further pointed out, the idea of undue hardship is one further stumbling.block since it measures out equality in teaspoons, in small doses that will not cause undue cost or disruption, and will not fundamentally change systems that are inherently discriminatory.
There may be situations where the cost to an institution to provide special-needs persons equal access to general services is so high that it may very well put the whole institution into peril.
That on the face of it may justify the undue hardship principle as a justifiable defence. The result, however, would be that persons with disabilities bear the total impact of that potential consequence.
Surely, the impact of the cost of such services should be borne proportionately by all those who are, or are entitled to be, in receipt of such services or by the community at large, not just the person with disabilities.
The introduction of the concept of undue hardship into human rights legislation has been touted as a better means of attacking systemic discrimination. It is also seen by the government as advancing the opportunity for persons with disabilities to achieve substantive equality.
In my view, for the reasons given, it will not advance either. In fact, it may very well do the opposite.
A better approach to be used may be one that incorporates the very onerous conditions that must be satisfied by a party invoking Sec. 1 of the Charter of Rights and Freedoms in order to limit or take away the equality rights granted by Sec. 15. Factors such as human dignity, self-respect and the right to be recognized as human beings equally deserving of recognition are relevant and can be brought into play. And it would be a much better way to attack systemic discrimination.
The recent amendments permit representation to be made as to what rules should apply to the principle of undue hardship. That is of no help when it is the very principle itself, that is in question.
I commend the government for its concern. Sometimes, however, as is the case here, the best of intentions does not necessarily achieve the desired objective.
Should purpose built taxicabs be introduced into North America? Absolutely, Admirable, Desireable, Do-able, and Recommended. Critical considerations fall into Driver Safety, Accessibility, Longevity, and Cash Flow.
Purpose-built taxicabs easily solve driver safety and accessibility issues. No secret there, they've been around for 'leventy-7 years in a number of countries. And where in use, driver safety in particular has basically ceased to be an issue. Accessibility has become a common service, although standards are still a little loose.
The UK situation has some good indicators to review that are applicable here in North America. The same basic taxicab has been in use on the streets for so long now (~40 years) that both drivers and users have come to look for it and expect it. Longevity has established it as a high quality vehicle, easily recognizable, and satisfies all the basic requirements.
A new purpose built taxicab in the UK has a perceived service life of ~12-13 years before it evaporates from the manufacturer's view. That does not mean they are junked at 12 years. It simply means that cascading ownership eventually hides it from the tracking system. In most cases, these vehicles often continue in service for many more years, by new Knowledge grads, by rural operators, or whatever. Many have been known to exceed a half million miles without a major engine overhaul.
Cash flow is undeniably a major impediment where licences have acquired real property value in defiance of common law that simply says an intangible permission to operate a taxicab for hire cannot acquire such value, a theoretical impossibility.
In common law, a licence is simply official government permission to do something for a fixed period of time in return for payment of a prescribed fee. It was never intended or perceived that a licence might one day acquire a real property value of its own out there on the street.
All the recognized financial models hold this to be true, considering only the capital cost of equipment, and not the insane mortgages currently the norm. It is incredibly unfortunate that regulatory authorities in most every jurisdiction failed to recognize a fundamental law of economics when they imposed licence quotas without simultaneously prohibiting transfers. The minute something is made scarce, it acquires a value if commercial trading allowed.
Now regulatory authorities are faced with a serious dilemma in trying to deal with these unforeseen licence values, a product of their own inattention, if not ineptitude. Any attempt now to deal with the problem is quite correctly seen as a threat to these licence values, potentially having the effect of extinguishing an asset that the regulatory authority allowed to happen by tacit silence.
As a direct consequence of licence values draining off the lion's share of the cash flow, there is little or nothing left to acquire purpose built taxicabs. It's a horrific problem that regulatory authorities seem now to be powerless to deal with.
A licence is nothing more than an intangible permission to operate a taxicab for hire for a fixed period of time, at end of which the licence fully expires, with no guarantee of continuance, no guarantee of acquiring the same licence next year, no guarantee that the licence will not be revoked for cause, and no guarantee that the regulatory environment might not change one day.
On this fragile platform is built the awesome licence values we see today. Is it any wonder any threat is greeted with fierce response?
A new purpose built taxicab will have a price tag on it substantially higher than a used police car. With no hard legal reason why purpose built taxicabs must be acquired, used police cars are the current vehicle of choice. While true that the big Caprice and Crown Vic's are being phased out, the reality is that such vehicles will continue to be found for the taxicab industry for many years to come.
It is interesting to note that new police vehicles of choice in most of North America have for years been the big Caprice and Crown Vic's. But in the UK, the police vehicle of choice is a sub-compact 2 door. Their terminated vehicles never end up as taxicabs.
The critical impediment to purpose built taxicabs in North America will be their cost. Driver safety, accessibility, and longevity will continue to be other factors in favour, but regretably in 2nd place unless by some miracle of legislation, purpose built taxicabs become mandatory by some future target date to facilitate gradual implementation and minimize financial hardship. This will make it do-able.
From an InterNet discussion 30 October 1997
The collection of news items this morning from the San Francisco newspapers clearly points out a serious collision between fundamental principle and hard reality.
Accessibility of transportation for people with disabilities is built on the fundamental principle that they have the same right to taxicab transportation as standard customers, at same rates. Accessible taxicabs emerged out of this principle, as vehicles capable of transporting both people with disabilities and people without disabilities, both at same rates as standard taxicabs.
The principle emerged out of the basic reasonable perception that taxicab companies operate like most of corporate america. There is universal recognition that transporting people with disabilities is more costly than standard passengers, but that additional cost is intended to be cross-subsidized by the revenue emerging from all other forms of transportation within the company.
It was never intended that accessible taxicabs be 'restricted' to only transportation of people with disabilities. They were intended and widely perceived to be an acceptable replacement for taxicabs with capabilities to serve the needs of all passengers, a perfectly reasonable expectation. It is fundamentally wrong to restrict the use of accessible taxicabs to only people with disabilities.
It is also fundamentally wrong to impose surcharges on passengers with disabilities, and any such surcharges would never stand the test of a challenge before a human rights tribunal.
A very serious collision between principle and reality occurs because taxicab companies do not behave in a manner supportive of the fundamental right to equal access to transportation by people with disabilties. The continued presense of the ubiquitous independent contractor and leasing is in clear opposition to basic principle.
In hard reality, it is not the large taxicab company that is cross-subsidizing transportation for people with disabilities. It is the independent contractor lessee, a single person single vehicle company, which is bearing the cost of such service. The licence holder is basically unaffected because his lease revenue remains unchanged regardless of what the lessee chooses to do with the taxicab he doesn't own.
So long as the independent contractor and leasing are allowed to continue in existance, the conflicts and collisions will continue in an ever escalating, ever unresolvable situation. The term "taxi wars" is not inappropriate.
From an InterNet discussion 13 July 1997
The whole principle of accessible taxicabs and the legislation that emerged out of that principle was that the cross-subsidization would be born by taxicab companies organized along the tradional lines of corporate america. Something the original authors presumed to be the case without ever realizing actual reality.
While the principle is true and a seemingly reasonable expectation at the time, it appears not to have been adequately thought through. Severe problems, like those emerging in San Francisco and Calgary, will be with us a long time.
From an InterNet discussion 13 July 1997
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