Lift the Cap FAQ

[vc_row][vc_column width=”1/1″][vc_toggle title=”Can the City lawfully remove limitations on the number of permits available to operate a taxicab?” open=”false”]In a recent memo prepared by the Office of the City Attorney of San Diego for Councilmember Marti Emerald, the City Attorney unequivocally stated: “Yes.  The City has broad discretionary powers over the granting of taxicab permits and may remove the limit on the number of permits.”  Citing a previous memo, the City Attorney asserted “taxicabs are common carriers for purposes of regulation because the industry services offered are public in nature and take place on streets and highways in and around the City.”

San Diego City Council has the legal authority to remove limitations on the number of taxicab permits. Under Council Policy 500-02, the City has restricted the number of taxicabs on the streets of San Diego.  The City adopted a formula that theoretically ties the number of taxicabs to the demand for the service.  However, while the aim is to maintain a level that is sufficient to meet the needs of San Diego residents and visitors, the current system is not responsive to the needs of consumers in the City as evidenced by the entry of thousands of vehicles operating under different app-based transportation services.

[/vc_toggle][vc_toggle title=”Does the lifting of the permit cap by the City constitute a taking?” open=”false”]Regulation of the taxicab industry is a traditional subject of the police power of cities and counties. Under its police power a city may regulate virtually all aspects of the taxicab business, including who may operate a cab, the number of cabs, the meter rate, and the geographic coverage of operating cabs.

California courts have consistently upheld a local city’s authority to regulate the taxicab industry.  For instance, in Cotta v. City and County of San Francisco (2007) 157 Cal.App.4th 1550, the reviewing court analyzed the City of San Francisco’s authority over the taxicab industry.  When the San Francisco airport adopted a program promising benefits to taxis using natural gas, drivers bought natural gas cars to use at the airport.  After several years passed, the airport reduced these benefits, motivating the purchasers of the natural-gas cabs to sue.  The court held that the purchasers could not recover any damages from the City of San Francisco noting that California courts have consistently invalidated agreements that had the effect of surrendering or impairing the police power.  Here, in San Diego, the City has entered into no agreement regarding the duration of a permit to drive a taxi.  Even if it had, the agreement would be void under the principle expressed in Cotta.

Permit holders may also argue that the City’s altering of their permit rights is properly subject to an inverse condemnation claim.  Article I, section 19, of the California Constitution provides, in pertinent part, that “[p]rivate property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.” Our Supreme Court has held that “the rule requiring compensation for property taken for or injured in connection with public use has been held to apply to personal property, such as valid contracts and contractual rights…” Most importantly, no permits will be taken by the City if the permit cap is lifted. Lifting the permit cap will create opportunity for other taxi drivers to become owner-operator taxicab drivers without altering existing taxicab permits in any manner.

California courts have consistently held that taxicab drivers do not obtain any vested right in the grant of permission to operate taxicabs on the public roadways. In other words, here is no possessory interest in the speculative market value of the licenses.  Rather, that permission may be altered at the discretion of the issuing authority as “the use of streets by taxicabs is a privilege that may be granted or withheld without violating either due process or equal protection.[/vc_toggle][vc_toggle title=”Will lifting the permit cap flood the market?” open=”false”]Economists have found that there is little empirical evidence that lifting the permit cap would over saturate the taxi market. Many researchers propose that consumer demand should determine the supply of taxicabs, not rigid formulas. Researchers at the Institute of Justice argue, “Evidence for systemic market failure in taxi markets is thin.” Economist Adrian Moore, Ph.D., of the Reason Institute advised that there has been no evidence of oversaturation of taxi markets in other cities that have lifted the permit cap.[/vc_toggle][vc_toggle title=”Under an open market will drivers be able to make an income? Will there be enough passengers?” open=”false”]UTWSD’s main concern is a livable wage.  An open permit system will allow drivers to work for themselves and designate their own hours.  The take-home income increases because drivers will no longer be subject to unreasonably high leases. There is no evidence that a closed market benefits drivers as most of the profits accrue to the owners of the licenses that the drivers rent. With an open market, drivers will have the option to adjust their working patterns according to seasonal ebbs and flows in the tourism industry, peak hours, and busy event drop-off locations.

Notably, with an increase in supply of taxis, the availability of taxi services will increase for these low-income communities. Historically, impoverished areas receive the least attentive taxi service. Demand from seniors, the disabled, and the impoverished account for the most taxi trips.  Furthermore, increased mobility within low-income communities will serve to promote entrepreneurship.

Removing barriers to entry will increase the number of taxis operating and permit consumers to choose from an increased supply of services that best meet their needs.  If more taxis are available, taxi services will be more attractive to consumers and wait times for cabs will decrease.  Researchers have observed an increase of up to 30% in service levels after open entry deregulation. Other studies have shown that even in overcrowded markets, because of the increased competition, there is room for small business development that is not available in closed markets.  These potential small business endeavors provide economic opportunities for minorities and low-income individuals that can be extremely impactful.

[/vc_toggle][vc_toggle title=”Is this policy unfair to current permit holders?” open=”false”]Thankfully, the City is not proposing to take away anyone’s permits. The proposal simply expands the opportunity for hard working taxi drivers to apply for a City owned permit of their own.

Many permit holders have recouped their investments over the years. Permit holders have already received lease income that has paid for the initial purchase over the course of two decades. Additionally, nothing in the proposed policy prohibits permit holders from continuing to receive income from leasing their permits. They will, like all other businesses, have to improve their operations to make their taxi business efficient and profitable in order to meet consumer needs. This proposal will no longer allow for absent owners who simply gamble on the speculative value of a permit in an underground market.

The underlying rationale behind the City’s permit cap and issuance of taxi permits is to serve the public interest, not to preserve skyrocketing permit prices on the black market.  Permits are a license, not a property right.  Individuals have no vested right to investments that are mere speculations on an intangible market. Lost profits extending from political gamesmanship in an unanticipated, unintended secondary market is not of the concern of the City of San Diego.  The constitutional definition of “property” does not apply to the increased value of permits caused by ineffective regulation.

[/vc_toggle][vc_toggle title=”Do more studies need to be done on deregulation?” open=”false”]Benefits of deregulation noted throughout multiple studies:

  •      Reduced fares, as supply of service providers compete in the market
  •      Competition creates lower operating costs
  •      Improved service quality with higher importance on reputation, as competition encourages taxi drivers to provide friendly reliable service and clean vehicles
  •      Innovations such as shared-ride markets and special services for the disabled and elderly, creating market niches where none had existed
  •      Increasing demand for taxi services, as prices fall and quality improves
[/vc_toggle][vc_toggle title=”Do we need more taxis or do we need to look at the relationship between drivers and permit holders?” open=”false”]For the past five years UTWSD, Councilmember Marti Emeralds office and countless others have tried to push for reforms in regard to vehicle age limit, taxi lease caps, retaliation protection, an end to taxi permit transfers and much more. Even when trying to implement rules where permit holders would be required to give drivers receipts for the hundreds of dollars they pay each week to rent a car from a permit holder San Diego Transportation Association (SDTA) has fought these issues the entire way.

In fact, in internal emails that are now public record, SDTA members stated that their main objectives are to:

– Stand firm against or for any illegal/illogical or legal/logical position taken by the city authorities regarding dissolving or transfer of the MTS Taxi Administration to any other organization.

– To become the only organization to represent the San Diego Taxi Industry by having the final professional and decisive word on any subject matter or issue related to this industry.

–  To despair adversaries, especially the Union, in standing against the positions taken by this industry on any relating issues, in order to lead them to dissolution. (meaning United Taxi Workers of San Diego)

–  Provoking Permit Ownership vs. Present Permit Holdership (in other words take ownership of permits away from the City and the public and make permits private property)

Additional quotes by Permit Holders:

“This seems to be one dimensional. We’re talking about a group of people that are from a certain part of the world, let’s call it Somalia, Africa, represented by UTW.” – Tony Hueso to KPBS

“I’m not refugee living in a one bedroom with other refugees paying total of rent for five people. I am not on welfare on top of my housing allowance.” – SDTA member speaking on record at City Council Budget Hearing before being cut off by then Council President Todd Gloria 6/10/13

In SDTA’s document “Dispelling some myths about the taxi industry” they mention a driver who owns a used 2009 Ford truck. When asked how he could afford such a truck he said “it was those African taxi drivers that were complaining”.

Unfortunately throughout all of this, the Metropolitan Transit System (MTS) has not played a unifying or problem-solving role. They have stated to UTWSD representatives that they have no authority from the City of San Diego to “intervene” in the business relationship between permit holders and lease drivers.  On the other hand their long list of regulations regarding lease driver behavior shows their inclination for intervening in the most personal aspects of their working conditions despite asserting that these drivers are “independent contractors.”

[/vc_toggle][vc_toggle title=”Shouldn’t we regulate Uber and Lyft?” open=”false”]Yes, Uber, Lyft and other rideshares should have regulations. The state of California just passed a bill AB 2293 that will close the gap on insurance and calls for more oversight of rideshare companies which is a step in the right direction. Both taxis and rideshares, as common carriers, should play by similar rules, consider why rideshare companies are here in the first place, which is because there are not enough taxis providing the services in demand. Taxis are fewer in number, expensive and are operated by drivers that are overworked and overstressed. These problems have existed for a long time in the taxi industry but have not been addressed because of the monopoly held by current permit holders. We must first create a dependable San Diego transportation industry, which means above all, addressing the problems within the San Diego taxi industry.

[/vc_toggle][vc_toggle title=”Why is this reform important?” open=”false”]Drivers have consistently noted safety issues and problems in the taxicab industry.  However, they fear retaliation and intimidation whenever they comment on improved safety measures and working conditions.  Many have been fired and blacklisted from different dispatch services.  As permit holders, drivers will have the opportunity to increase their living wage and be less intimidated by the scarcity of options in a de facto monopoly.

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