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Taxi to the Future

eye on the news

Taxi to the Future

New York’s political leaders should stop dithering and enact congestion pricing. April 6, 2018
New York
Economy, finance, and budgets
Politics and law

Uber and its competitors have made life more convenient for their many customers in New York. Uber alone picks up 289,000 passengers every day; last fall, it actually surpassed yellow-taxi ridership. The service is especially useful for residents of outer boroughs, which yellow cabbies have long found uneconomical, and sometimes unsafe, to serve. Yet half of Uber’s rides begin in Manhattan and often end there, too, and the service has contributed to the growing congestion of the borough’s streets. As transportation consultant Bruce Schaller noted in a study last year, growth in the for-hire car business has “added nearly 50,000 vehicles and over half a billion miles of driving to the city’s streets in just three years.” The crush of new vehicles is one reason that traffic speeds have slowed from 9 miles an hour to 7 miles an hour in Manhattan’s central business district (below 60th Street) in just six years.

The governor, mayor, and state legislature should stop dithering on congestion pricing. Imposing a fee to carry passengers into or within Manhattan should reduce the number of for-hire drivers operating at any given time, provided the fee is high enough, which would improve traffic flows.

The state and city should also acknowledge that part of their job is to ensure market fairness, rather than use regulation to discriminate against one or another market participant. Until e-hailing companies disrupted the taxi industry, the city’s purpose in limiting the number of yellow cabs (the current cap is 13,587 ) was to reduce congestion in the densest areas of Manhattan. In the 1930s, when New York created this system, it had no technological way to control congestion by charging a fee; now, thanks to transponder readers such as E-ZPass, it does. The inevitable transition from a medallion-based to a cordon-based system of controlling traffic in the densest parts of the city, however, should acknowledge that one segment of the market has already paid a congestion fee: the yellow-medallion owners.  So far, proposed government congestion fixes haven’t fully acknowledged this reality. Governor Cuomo’s Fix New York panel, convened last year to address Manhattan congestion, has proposed a fee ranging from $2 to $5 on all for-hire car trips that “touch” Manhattan’s central business district. Yet treating yellow-medallion owners and drivers the same as Uber and Lyft ignores the fact that medallion owners paid for this privilege, albeit under a regulatory system that now seems obsolete. It’s sensible to update regulations for new technology, of course, but taxi drivers and medallion holders in effect would be paying a congestion fee twice.

Unfortunately, New York State has just passed legislation that is unlikely to reduce congestion or establish a level regulatory playing field for the taxi industry and ride-sharing firms. The state has decreed that Uber and its competitors must pay a $2.75 surcharge per ride below 96th Street and that traditional cabbies must pay $2.50. But this fee likely isn’t high enough to deter the behavior of Uber and Lyft customers, which is ostensibly one of the purposes of the charge, in addition to raising money for the state-run Metropolitan Transportation Authority. Uber, in particular, already heavily subsidizes the cost of a ride through the billions of dollars in losses that its investors incur each year. The fee, then, may only raise revenue while serving as a nuisance—exactly the kind of tax policy that a state shouldn’t pursue. Second, the 25-cent differential between the charge on cab rides and the charge on Uber rides nods at the fact that medallion owners have already paid a hefty fee without doing enough to ameliorate this imbalance. At the city level, Mayor Bill de Blasio has been if anything less forward-looking, vacillating even on the concept of a congestion cordon in Manhattan.

Why not, then, exempt yellow cabs from this fee, at least for the first decade of a new regulatory regime, in consideration of the price they have already paid? Over ten years, a driver picking up or dropping off 15 fares a day within Manhattan would save nearly $300,000 on the higher fee suggested by the Fix New York panel, a significant portion of the medallion price. Green-cab owners, who paid a much smaller fee, during the Bloomberg era, for the right to pick up fares outside of core Manhattan, could accordingly get a smaller number of free trips within the central business district, over a shorter time period. A cordon system that differentiates between license plates held by for-hire cars and those held by private vehicles, in order to charge each a different fee, should be able to differentiate between the license plates of yellow cabs and other for-hire cars, as well.

The rise of ride-hailing services has put enormous pressure on the taxi and livery-car industry—sometimes with grim consequences. Four New York City taxi and livery-car drivers have committed suicide since December. Nicanor Ochisor, a yellow-medallion owner, hanged himself in Queens two weeks ago. The value of his taxi medallion, which he expected to lease out to finance his approaching retirement, had plummeted from more than $1 million to less than $200,000 over the last few years. Black-car driver Douglas Schifter shot himself in front of City Hall in February. “In 1981, I averaged 40-50 hours” per week, he wrote on Facebook beforehand. Now he was working more than 100 hours per week to make ends meet. “I cannot survive any longer with working 120 hours. Due to the huge number of cars available with desperate drivers trying to feed their families, they squeeze rates to below operating costs.”

Government can’t shield—and shouldn’t shield—people entirely from bad luck, bad decisions, and economic change. Yet New York State and City certainly shouldn’t exacerbate the problems with bad regulations. Elected leaders at both the state and local level can take steps that would make city streets less clogged—and address an unfair imbalance of the current situation.

Photo by Drew Angerer/Getty Images

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