A bill that would open up the Denver metro taxicab market to wider competition passed the House Transportation and Energy Committee by a 10-2 vote Thursday, the first time in many attempts that such a bill has progressed so far in the legislative process.
The bill, sponsored by by Rep. Jerry Frangas, D-Denver, and supported by cab drivers, would make it easier for anyone to get a cab certificate. A driver could simply pay a $10,000 one-time fee, and a $5,000 annual fee. Then, as long as he or she isn’t a convicted felon, he’d be in the taxi business.The money collected from the fees would be used to provide cab service for the indigent.
The bill probably got a boost from recent Rocky Mountain News stories detailing the travails of a disabled woman who waited for two hours to get a cab ride of about a mile-and-a-half.
“It’s preposterous that Colorado law mandates a monopoly system where a few cab companies could preclude competition to the personal financial detriment of the drivers and the service to the community,” said John Zakhem, managing partner of the law firm Doyle, Zakhem, Suhre and Lilly, which is handling the legislation for a group of independent drivers.
According to Gary Gramlick, an analyst at the Colorado Public Utilities Commission, the number of cabs in Denver is limited, a relic of regulations from 40 years ago when the state took over taxi regulation from the city. Gramlick says Yellow Cab can operate 300 cabs; Freedom Cab, 150; and Metro up to 392. He added, though, that there are never enough drivers, so the cabs are never at a maximum on the street.
Cab drivers operate as independent contractors to the companies, paying them as much as $25,000 a year for the right to operate a taxi — even if they own their own cab. The cab companies don’t provide workers compensation, unemployment insurance, tax withholdings or even insurance, unless the driver pays them for it herself.
If this law passes, drivers will only be paying $5,000 a year, and they’ll then independent operators, not contract workers.
Zakhem says, “We are not attempting deregulation. We are attempting demonopolization. The PUC under this legislation will still have charge over safety and service requirements. The service to community and consumers does not fall off. We’re expecting that the competition will drive rates down.”
That has not been the experience in other cities that have tried this limited deregulation. According to research prepared for the Connecticut state legislature in 2004, when cities have deregulated cabs, “the supply of taxicabs increased, fares increased, service quality declined and there were more trip refusals, lower vehicle quality, and aggressive solicitation of customers.”
In Seattle, for instance, which deregulated in 1981, “Deregulation resulted in a high supply of taxicabs, variable rates, price gouging, short-haul refusals, poor treatment of passengers, and fights at taxicab stands at airports. As a result, Seattle re-regulated in 1984 …. Another study found that the oversupply of taxicabs resulting from Seattle’s deregulation reduced individual drivers’ earning potential, increased fares, and lowered the quality of service.”
Most of the cities that deregulated cabs — notably Indianapolis, Seattle and St. Louis — all reregulated them, sometimes in as little as a year.
According to John Boroski, an economist with ECONorthwest in Portland, Ore., the problem with the kind of deregulation called for in those cities, and in the Frangas bill (HB1114), is that it doesn’t go far enough. “When you have deregulation,” he says, you want to create good healthy competition. You want to allow new taxi companies and providers to come in. But they also have to compete on price and quality.”
One problem that’s occurred when this limited deregulation has occurred is that most of the newly established cabs simply head for the airport. When cab service is deregulated, more cabs hit the streets, where they all drive out to the airport to wait in line for the long distance fares. The fare from DIA to Denver is about $43.*
* Transposed numbers corrected 3/02. See comment below.