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D.C.'s taxi drivers supported Vince Gray -- and now they want payback

By Ezra Klein

The worries that some of us had about D.C. mayor-elect Vince Gray were never really about Vince Gray. They were about the constellation of interests that had converged behind his candidacy -- many of which were angry about common-sense reforms made under Adrian Fenty.

One of those groups were the city's taxi drivers, who'd been forced out of D.C.'s inane zone system -- where your fare was based on how many arbitrary boundaries your cab driver managed to touch in the course of a single ride -- and into meters, like the ones that exist in every other city. They're not happy about that, but they realize no one will let them restore the zone system. So they're going for the next best thing: Taxi medallions, which force down the number of cab drivers so it's harder to get a cab but more lucrative to run one. Donald Marron explains:

I love taxi medallions.

As an example for my microeconomics students, not as policy.

Just last week, I used New York City’s medallion system to show how an entry barrier — the requirement that each yellow taxi have one of a limited number of medallions — could create profits in an otherwise viciously competitive industry.

How much profit? Well, according to the most recent data from the city’s Taxi and Limousine Commission medallions for independent cab drivers traded at between $610,000 and $620,000 in October. If you figure 8% as a reasonable rate of return of this asset, that translates into almost $50,000 in pure profit each year from driving a cab, thanks to the entry barrier.

That's bad policy, but sometimes bad policy is good politics. City Paper quotes Derje Mamo, a taxi driver who was active on transportation for the mayor-elect’s campaign, who says, "He’s got one year, that’s it." And no one knows better than Gray what happens when the city's established interests turn against you.

By Ezra Klein  | November 15, 2010; 9:00 AM ET
Categories:  DC  
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Comments

This analysis seems suspect. First, of course, not a lot of investments are making 8% this year. Second, where's the money coming from? Fares are already regulated, so (assuming you think cabs should be regulated at all) it's not coming from consumers. Instead, it's the difference in per-cab earnings between 12,000 cabs (in new york) competing for X rides a day and, say, 20,000 cabs competing for 1.1X rides a day.

Cabs cruising a city looking for passengers are perhaps as close as you can get today to the "reserve army of the unemployed".

Posted by: paul314 | November 15, 2010 9:25 AM | Report abuse

Fenty delivering goodies to his base--Common sense reforms! Gray doing the same thing--Political payback!

Posted by: endaround | November 15, 2010 10:02 AM | Report abuse

I'm going to dispute your worry about an introduction of medallions.

Have you taken a cab in New York recently? Compare that experience with DC cabs. They are so much nicer than DC cabs that it isn't even a close argument. Last week I rode in a DC cab that was a 1980's Chevy station wagon. It smelled bad, the seats were threadbare, and only one door opened. The driver, then, didn't have change for my $20 bill, so I ended up leaving him a (unjustified) $5 tip.

Two weeks ago, I rode in a Toyota Prius cab in New York. I watched the weather report on the tv screen in front of me, while Mayor Bloomberg reminded me to buckle my seatbelt. Then, when the ride was over, I paid by swiping my credit card. Maybe I paid a bit more per mile, but I don't really mind, because I got so much more for my money.

Maybe it is a little more difficult to get a cab outside of midtown on a Friday night. But, those medallions afford the city government a great deal of authority over cab drivers. The many requirements, like credit card payment and the requirement that all NYC cabs will have to be hybrids by a certain date could only come about because of the power that the city has in issuing the medallions.

I say give them their medallions, but then put them under the regulatory control of DC's Department of Transportation, with a mandate to make our cabs cleaner, greener, and more user friendly. Then, us consumers can get some non-price-related benefits, and the cabs can get a guaranteed income from the medallions.

Explain to me again why "That's bad policy"?

Posted by: andrewholland | November 15, 2010 2:06 PM | Report abuse

I'm going to dispute your worry about an introduction of medallions.

Have you taken a cab in New York recently? Compare that experience with DC cabs. They are so much nicer than DC cabs that it isn't even a close argument. Last week I rode in a DC cab that was a 1980's Chevy station wagon. It smelled bad, the seats were threadbare, and only one door opened. The driver, then, didn't have change for my $20 bill, so I ended up leaving him a (unjustified) $5 tip.

Two weeks ago, I rode in a Toyota Prius cab in New York. I watched the weather report on the tv screen in front of me, while Mayor Bloomberg reminded me to buckle my seatbelt. Then, when the ride was over, I paid by swiping my credit card. Maybe I paid a bit more per mile, but I don't really mind, because I got so much more for my money.

Maybe it is a little more difficult to get a cab outside of midtown on a Friday night. But, those medallions afford the city government a great deal of authority over cab drivers. The many requirements, like credit card payment and the requirement that all NYC cabs will have to be hybrids by a certain date could only come about because of the power that the city has in issuing the medallions.

I say give them their medallions, but then put them under the regulatory control of DC's Department of Transportation, with a mandate to make our cabs cleaner, greener, and more user friendly. Then, us consumers can get some non-price-related benefits, and the cabs can get a guaranteed income from the medallions.

Explain to me again why "That's bad policy"?

Posted by: andrewholland | November 15, 2010 2:07 PM | Report abuse

Could you do this in DC?
http://cityroom.blogs.nytimes.com/2010/11/15/the-taxi-of-tomorrow-is-down-to-3-choices/?ref=nyregion

Posted by: andrewholland | November 15, 2010 2:39 PM | Report abuse

Dear andrewholland,
I am a cab driver. Do you believe that DC Taxi Commission is enforcing a new law that makes it almost impossible for drivers to buy a new vehicle for taxi? What if you find out there is unreliable and non uniform policy implemented that discourage many drivers from buying a new (financed)vehicle?
Belive it or not, I am one of those drivers. Here is the story:
Recently, I drove four hours from my home to an auto dealership that offered me the best price for a hybrid vehicle. My whole intension was replacing my 4.8/V8 2003 Mercury Grand Marques by the most fuel efficient, environment friendly and newer version of 2009 Hybrid Toyota. I test drove the new car, negotiated the price, decided to buy it and approved for loan. While closing the sale, however, I discovered that a new but undertable law that obliged the name of the cab company to appear on the title and on the sale agreement of the new vehicle. Hence, I am compelled to contact my taxi cab company to inform and allow the Company to be included in the financing agreement. However, the company declined to allow its name to appear on the loan agreement stating that I am an independent driver or it has to be paid in fully. In order to solve the problem, I also contacted DC Taxi Commission. Unfortunately, they also told me that I have to avoid such a vehicle due to the above reason.
I wish I could pay it in full than paying huge interest to bank. But this is not what I can afford right now. Finally, I returned to the dealer to inform them the complication around issues related to vehicle registration. I also apologized the dealer for my decision to cancel the sell. It, of course, was an embarrassing moment for me. Then, I jumped in to my Older Grand marquis and drove with my friend another four hours back home with nothing. What a sad day!
In closing, I also want to express my disappointment towards such a complicated policy with regards to vehicle registration. The new policy also is discriminatory. I can not understand why they allowed one of my friend to register a financed new vehicle in his name just few weeks a go while the law was already there. So the majority of the problem is with regard to such a new, unreliable and non uniform law of DC Taxi Commission. I wish I would be wrong!

Posted by: usee | November 15, 2010 5:59 PM | Report abuse

The medallion system makes a LOT of sense for NYC (well, at least Manhattan...the outer boroughs are a different matter). If anything, the problem is an excess of cabs. Traffic is already a huge problem, and any more cabs will simply mean more delays getting home.

Posted by: varunreg | November 15, 2010 10:14 PM | Report abuse

One word.....

REGULATION!

It doesn't matter WHAT agency is tasked with regulating the cab drivers if they dont do it on a regular basis and if they take the job as a favor from the mayor but have no interest in making a POSITIVE change. If they want to COPY NYC's medallions, let them.

AND... Mr Cab driver, I'm not sure if you have been listening or not but... all heck is getting ready to break loose in DC. The pot is empty, the cubbards are bare and thanks to a certain almost former Mayor, we are on our way BACK to the control board era if we dont buckle down and make some tough cuts.

EVERYONE who thinks they got a bad deal under Fenty supported Gray. Hopefully, most of you did it to see a change in how our elected officials treat and respond to their citizens. For those of you giving ultimatums BEFORE he is even sworn in, you sound more like cry babies than adults who have come together to make a positive difference. You give him one year FOR what? You give him one year OR what? Please dont fool yourself into believing the cab drivers are single handedly responsible for him getting elected. If you continue to cry, complain and threaten instead of coming to the table with a how can I help attitude, by the time one year passes, you wont be able to get the panhandler on the corner to listen to your mess. Stop embarrassing yourself.

Posted by: centsmytwo | November 16, 2010 9:11 AM | Report abuse

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