Schaller Consulting
Customer-Focused Solutions

Taxi Access Issues

Mr. Chairman and members of the Committee, I am Bruce Schaller, Principal of Schaller Consulting. I specialize in the analysis of urban transportation issues with particular attention to the important role of taxicabs and for-hire vehicles in New York City and elsewhere in the United States. I have worked extensively on New York City taxi and livery policy and regulatory issues, and served as Director of Policy Development and Evaluation at the Taxi and Limousine Commission from 1986 to 1994. I have also worked extensively on taxi issues in other cities in the U.S. Please note that this testimony is submitted on my own behalf and does not necessarily reflect the views of any client.

I would like to complement the Transportation Committee on holding this oversight hearing today. Although the services provided by the taxicab and livery industries in New York City are on their face quite simple, the policy and regulatory issues are complex. The services provided by these industries, their structure, and the regulatory policies and requirements that apply to them have evolved over many decades. It is thus important for the Committee to gain a broad overview of these industries before focusing on the specific policy issues that need to be addressed.

As you consider issues of taxi access, I urge you to keep in mind two key considerations. The first pertains to taxi access in the Manhattan core, and the second pertains to access in other parts of the city.

1) The availability of taxicab service in Manhattan needs to be increased so that medallion cabs regain their role as the exclusive provider of street hail in the Manhattan CBD.

Schaller Consulting's study of livery and taxi street hail activity in Midtown Manhattan, conducted for the Taxi Policy Institute, documents current conditions and the importance of this point. We randomly selected a total of 52 locations and had testers attempt to hail a cab at each location. Testing was conducted in Midtown Manhattan weekdays from 7 a.m. to 11 p.m., and on the Upper East Side and Upper West Side (up to 72 Street) weekdays from 7 a.m. to 10 a.m. We also collected data in the Theatre District on a Saturday evening as shows let out. This study was conducted throughout the month of November 2001 and the report was released in January 2002. (The full study is available at http://www.schallerconsult.com/taxi/liveryhail.htm.)

The study found a high level of illegal livery street hail activity in Midtown Manhattan. The study found that 41% of vehicles stopping for testers who attempted to hail a cab were liveries (358 of the 874 vehicles-liveries or taxicabs-that testers successfully hailed). In other words, for every 3 yellow taxicabs that stopped, 2 liveries illegally stopped for the testers. (Liveries include black cars, which serve a corporate clientele using voucher accounts, and neighborhood car services. All of the vehicles stopping for our testers had "T&LC" plates, indicating that they were licensed by TLC as for-hire vehicles.)

Illegal livery activity was heaviest after 5 p.m. in the Midtown core (40th to 60th Streets, Park Avenue to Sixth Avenue). A livery car stopped every two minutes, on average, in the Midtown core after 5 p.m. compared with one livery every 7.8 minutes overall.

We also found heavy illegal activity in major tourist areas, indicating that out-of-towners may be especially targeted by these drivers. Some of the heaviest volume of illegal livery activity occurred in the Theater District on weekend evenings, where illegal livery stops outnumbered yellow taxicab activity by 3:1.

A medallion cab stopped for our testers every 5.4 minutes, on average. This average, however, masks important differences by time of day and location. Cabs were plentiful at certain times and places, such as in the Midtown core after 7 p.m. and in other parts of Midtown before 10 a.m., and on the upper East and West sides before 9 a.m.

But finding a cab available for hail was often difficult. From noon to 8 p.m., for example, cabs stopped for the testers once every 13 minutes at the randomly selected Midtown locations.

It is important to note that the illegal livery street hail stops were not concentrated in the times and places that yellow cabs were hard to find. In fact, the number of vehicles stopping for our testers showed the same pattern over the course of the day for both liveries and taxis, with the fewest cars stopping in the mid-afternoon and the most stopping in the evening hours. Thus, liveries were not simply filling the gap created by a lack of taxi availability.

In sum, the study found a high level of illegal livery street hail activity, and an inadequate supply of taxicabs. What should be done about this situation?

Several immediate steps are needed. One is to increase the supply of taxi drivers. Twenty percent of fleet cabs sit idle due to lack of drivers. The number of new drivers licensed by TLC has fallen from over 5,000 per year a decade ago to 2,789 in calendar year 2001. There are a number of reasons for this decline: the time and expense required for the 80-hours of training required of all new drivers; the stringent exam given to new drivers; and the booming late-90s economy.

An increase in the taxicab rate of fare increase, now under consideration by the TLC, is one vital step to increase the number of drivers. A higher fare will lead to higher driver incomes, a fact documented from previous fare increases. The number one reason for driving a cab is the money, and so increased driver incomes will attract more drivers to the industry. Higher incomes will also increase retention of the industry's most experienced drivers who provide the highest quality of service. In these ways, the fare proposal will increase service to the public, increase the availability of taxicabs and improve the quality of taxicab service.

A second step is to examine requirements for training and testing of new drivers. These requirements restrict the flow of drivers into the industry and encourage would-be drivers to join the livery industry. There is no question that ambitious training and testing should be required of all new taxi drivers. Cab drivers provide a vital transportation function and act as ambassadors of the city. But given the extensive changes made in recent years, it is only sensible to evaluate program effectiveness and appropriateness. Is the City training and testing the right skills and knowledge? Are the drivers qualified and able when leaving the schools? Are qualified drivers being turned away, or discouraged from going through the process? These questions deserve to be answered.

A third vital step is to increase enforcement against livery street hails, particularly in Midtown Manhattan. TLC stepped-up its enforcement in December 2001. The impact of this enforcement should be monitored through continued measurement of the level of illegal activity, and the level and type of enforcement should be refined to maximize its effectiveness. So long as drivers can pick up street hails in Manhattan with a livery drivers license, there is little incentive for them to go through the more stringent process of obtaining a taxi drivers license. The public is the loser, since the result is too little medallion cab service, with its much higher standards for vehicles and drivers and accountability for lost property or service problems.

These steps are essential to returning the yellow cab industry to its role as the sole provider of street hail service in the Manhattan core. Once these steps are taken, the City would be in the position to consider issuing additional taxicab medallion licenses. The number of taxicabs in the city today, 12,187, is lower than during the Great Depression, and far lower than its peak of 21,000 in 1931. The number has been increased only once, by 400, in the mid-1990s, even though the city's need for taxi service has grown with rising incomes and greater levels of business and leisure activity and tourism. In part, this need has been filled by the livery industry. There are about 8,000 neighborhood car service cars based in Manhattan, an increase of 85% from the early 1990s. In addition, 11,000 black cars serve primarily a Manhattan clientele.

Other cities, facing similar pressures, have successfully increased the size of their cab industries after decades of little or no growth. For example, Boston has increased the size of its industry by 20% to the size of its taxi industry, Chicago by 43% and San Francisco by 81% since the mid-1980s. London's black cab industry has grown from 14,000 cabs in 1986 to 17,000 cabs.

While some in the taxi industries of cities with medallion systems have worried that issuance of more medallions would hurt their medallion values, the opposite has been the case. In Chicago, Boston and New York, issuance of additional taxi medallions has been accompanied by increases in medallion values. This should not be a surprise. Any industry is healthier if it meets the growing needs of its customers. Why should taxis be any different?

A program to issue additional medallion licenses should be carefully designed so that the supply of cabs reaches an equilibrium with demand, and then expands with increases in demand for service. Issuance of additional medallion licenses should be spread over a number of years, and reviewed annually to evaluate the number and timing of each round of issuance.

Fortunately, we can measure and track the relationship between supply and demand. Our recent study of Midtown livery and taxi activity shows waiting times for hailing a taxicab. This study can be repeated over time to track changes in taxi wait times. In addition, I have developed a broader measure that summarizes availability for the industry as a whole, based on taximeter and odometer readings taken at TLC inspections conducted for each taxicab every four months. The latest data available shows taxi availability dropped significantly in 1999 from earlier in the 1990s. Conversely, taxicab "live miles" (percentage of miles operated with a passenger) reached a peak of 65%, up from 57% in 1992. (See Table 1.)

These statistics can be used to track the impact on taxi availability of all the steps discussed here, and to set number and timing of additional medallion licenses to be issued.

2. It is critical to recognize the differences between the Manhattan hail market and the needs of the rest of New York City, and to recognize the complementary strengths of medallion cabs and liveries in meeting the needs of these two markets. The goal of the City should be to ensure that each of these sister industries satisfies the needs of their customers in the areas they currently serve.

Manhattan is a unique taxi market comparable only to cities such as London. The Manhattan CBD has an extraordinary density of demand for hail service and a high level of traffic congestion throughout the day. Taxi users in the Manhattan CBD need the rigorous standards for vehicles and drivers that are applied to medallion cabs because the nature of a hail service removes the opportunity to choose among competing providers, or to return to providers who offer satisfactory service. Manhattan also needs a cab industry with a relatively high passenger occupancy rate to minimize the industry's contribution to traffic congestion. And it needs a metered fare with strict tests for meter integrity.

The taxi industry and taxi regulation have been tailored over the years to the needs of the high-density hail market. It would make no sense to try to change the livery industry, which provides a quite different service and is structured quite differently, so that it could serve this same market. Much better is to change the medallion industry to meet the needs of the hail market, such as by increasing the number of taxi medallion licenses as discussed above.

The needs of the outerboroughs and upper Manhattan are, for the most part, quite different than the Manhattan CBD. Most of the service provided in these areas is by pre-arrangement. Customers are local residents who use liveries on a regular basis. They have the opportunity to try different livery bases and use the one whose pricing and service quality suit their needs. Regulation can properly focus on basic public safety concerns such as insurance and vehicle inspections. Fares and quality and amount of service can be set by competition, not regulation.

We should recognize that for the most part the taxi and livery industries meet customer needs quite well. Certain issues do need to be addressed, such as the high volume of illegal livery street hails in the Manhattan CBD as discussed earlier. Another important issue is the lack of legal street hail service outside the Manhattan CBD. While the density of street hail demand is insufficient in many neighborhoods to support street hail or taxi stand operations, there is in some neighborhoods a thriving demand for street hail. This demand is met almost exclusively by livery cars and to an extent by unlicensed gypsy cabs.

In fashioning a solution to the need for legal street hail service in these areas, the City should examine customer needs and the ability of the livery industry to meet those needs through a combination of pre-arrangement and street hail service in selected areas. This issue will require extensive discussion and consideration. It is not clear that these neighborhoods need a service modeled on the medallion cab industry, with its stringent vehicle and driver requirements. Most customers who want to hail a cab are local residents who frequently use liveries-the same situation as for pre-arranged service. There may be more opportunity for customers to choose between livery bases that they are familiar with, particularly at cab stands. Thus, a heavier emphasis on competition instead of regulation may be in order.

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