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Best Practices Studies of Taxi Regulation Managing Taxi Supply

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Best Practices Studies of Taxi Regulation Managing Taxi Supply San Francisco Municipal Transportation Best Practices Studies of Taxi Regulation Managing Taxi Supply (***DRAFT***) Best Practices Studies of Taxi Regulation Managing Taxi Supply ***Draft*** Prepared for: San Francisco Municipal Transportation Agency By: Hara Associates Inc. Bayswater Square, 1066 Somerset Street West, Suite 406, Ottawa, Ontario, K1Y 4T3 613-722-5528, 613-482-4901 (fax), www.haraassociates.com/taxi and Corey, Canapary & Galanis 447 Sutter Street, Penthouse North, San Francisco, CA 94108-4601 415-397-1200, 415-433-3809 (fax), www.ccgresearch.com Hara Associates Reference: 1517 April 3, 2013 TABLE OF CONTENTS Executive Summary ..................................................................................................................... i 1 INTRODUCTION 1-1 1.1 ORGANIZATION OF THE REPORT ..................................................................................................................... 1-2 1.2 SOME IMPORTANT TERMS .............................................................................................................................. 1-2 2 INDUSTRY STRUCTURE AND ISSSUES 2-1 2.1 A QUICK SKETCH: TAXIS IN SAN FRANCISCO ................................................................................................... 2-1 2.2 TAXI SHORTAGE: CUSTOMERS ARE NOT BEING SERVED ................................................................................ 2-2 2.3 FAILURE IN THE DISPATCH MARKET ................................................................................................................ 2-4 2.4 IS UBER THE SOLUTION? ................................................................................................................................. 2-5 2.5 COST SQUEEZE ON COMPANIES AND TWO-PRICE MEDALLION MARKET ....................................................... 2-6 2.6 TIPPING SQUEEZE ON DRIVERS ....................................................................................................................... 2-8 2.7 COMPARISON TO OTHER CITIES ...................................................................................................................... 2-9 3 STAKEHOLDER VIEWPOINTS 3-1 3.1 NUMBER OF TAXIS .......................................................................................................................................... 3-1 3.2 MANAGING THE WAITLIST .............................................................................................................................. 3-6 3.3 MEDALLION TYPES AND ISSUE ........................................................................................................................ 3-7 3.4 TIPPING PRESSURE ON DRIVERS AND COST SQUEEZE FOR COLOR SCHEMES .............................................. 3-12 4 HOW MANY TAXIS? 4-1 4.1 CLARIFYING THE QUESTION: WHAT IS A SHORTAGE OF TAXIS? ..................................................................... 4-1 4.2 CAN YOU EVER HAVE ENOUGH TAXIS? PEAK, OFF-PEAK, AND AVERAGE PEAK ............................................. 4-2 4.3 COMPARISON WITH OTHER CITIES: TAXIS PER CAPITA ................................................................................... 4-3 4.4 HARA ASSOCIATES’ TAXI DEMAND MODEL ..................................................................................................... 4-4 4.5 INADEQUACY OF DISPATCH TAXI SERVICE IN SAN FRANCISCO ....................................................................... 4-5 4.6 STREET OBSERVATIONS ................................................................................................................................... 4-8 4.7 ACCOUNTING FOR HOUSEHOLDS WITHOUT PRIVATE VEHICLES .................................................................. 4-14 4.8 FUTURE CRUISE SHIP DEMAND ..................................................................................................................... 4-16 4.9 HOW MANY TAXIS FOR SAN FRANCISCO? TWO KINDS OF TAXI SHORTAGES ............................................... 4-17 5 ANALYSIS AND RECOMMENDATIONS 5-1 5.1 CRITERIA FOR A GOOD SOLUTION .................................................................................................................. 5-1 5.2 POST-K MEDALLIONS AND THE WAITING LIST ................................................................................................ 5-3 5.3 ISSUING NEW MEDALLIONS ............................................................................................................................ 5-3 APPENDIX A: List of Interview Participants APPENDIX B: Taxi Stand Observation Charts APPENDIX C: Peer Cities Executive Summary The San Francisco Municipal Transportation Agency (SFMTA) assumed responsibility for regulating San Francisco’s taxis in 2009, as a result of a ballot initiative. The SFMTA is now undertaking a comprehensive review of its regulatory practice to improve the taxi industry’s ability to serve the community and operate sustainably. As with most cities, San Francisco limits the number of taxis it licenses. This places responsibility on the SFMTA to ensure there are sufficient taxis to serve the public, while also ensuring that taxi industry stakeholders have the opportunity to earn reasonable rates of return.1 This study reviews taxi supply and demand conditions in San Francisco, assesses whether it would be in the public interest to have more taxis, and recommends a regime for regulating the ongoing management of taxi numbers. It draws upon a number of data sources to make its recommendations. These include: Experience reported by San Francisco stakeholders; Structural analysis of San Francisco’s taxi industry; Comparison to peer cities; On-street observations of taxis; Application of Hara Associates Taxi Demand model; Surveys of taxi users (results in separate volume Taxi User Surveys); A telephone survey of taxi drivers (results in a separate volume Taxi Driver Survey) This study is the first in a series of studies of Best Practices in Taxi Regulation produced for the SFMTA by the team of Hara Associates and Corey Canapary & Galanis. Useful terms are defined in Chapter 1. Structural issues in the industry and comparison to taxi regulation elsewhere are in Chapter 2. Chapter 3 summarizes the views expressed by San Francisco stakeholders. Chapter Four is a technical analysis of taxi demand and the number of taxis. The full text of recommendations is in Chapter 5. SUMMARY OF FINDINGS AND RECOMMENDATIONS Structural Issues in the Industry It is found that: There is a significant taxi shortage. In addition to failure of dispatch to the home, downtown passengers are often queuing for taxis at empty stands; The statement that color schemes are under a cost squeeze between capped gate fees and rising medallion fees is valid, and a product of the taxi shortage; Many drivers are paying excessive medallion lease fees and/or are forced to tip color scheme staff excessive amounts to secure a shift taxi; The fairness and service quality objectives of gate fee caps is being undermined; Examples from other cities show that limits on medallions ultimately must be revised; and that it is possible to manage significant expansion while protecting driver income and medallion values. 1 The requirement to ensure the opportunity for fair and reasonable rates of return also follows from the regulation of taximeter rates by the SFMTA. Hara Associates ii Two Sources of Taxi Shortage San Francisco’s taxi shortage is the product of two sources. The lesser source is that medallion numbers have not kept pace with demographic and economic changes in taxi demand since the last major adjustments completed in 2000. Population increases, the greater cost of owning private vehicles, and rising Bay Area commuter volume, suggest that taxi demand in core San Francisco markets has increased by around 23.2%, while medallion numbers have increased by only 14.9% over the same period. The second source is the long-term systemic undersupply of taxis to neighborhoods outside the downtown core. The size of this shortage is evidenced by failure in the dispatch market where neither drivers nor customers have confidence in the ability of traditional dispatch to serve them. It is further supported by on-street observations and user surveys conducted by Hara Associates and Corey, Canapary & Galanis. San Francisco residents report a high degree of unreliability in service to their homes, and long average wait times even when a taxi does eventually show up. The result is suppressing not only taxi demand, but also associated complementary demand for public transit for commuting. It is also constraining the volume of business that San Franciscans give their dining, entertainment, and nightlife industries. Challenge of Limousines and Shared Rides The larger shortage is visibly exposed by the rapidly growing limousine and shared ride services. Blurring of the line between limousines and taxis is enabled by smartphone applications (apps) and related technologies. While there is a place for these services, they are not the right solution for a taxi shortage. There are public safety reasons why a more heavily regulated service called “taxis” is the norm around the world. Greater monitoring of vehicles, driver training, and street inspection is necessary for an on-demand service where strangers pick up strangers, often in the dark. This is what taxis provide. Even the traditional striking paint jobs for taxis have a role in monitoring and enforcement, as compared to nondescript black cars. While initial limousine entrants
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