Market Forces: Should a taxi ride cost even more?

In the rain on Wednesday night, I got a cab home from the city – a $15 fare. Near my house the driver had to turn from a busy road into a side street, across oncoming traffic.

As the windscreen wipers flicked back and forth, the oncoming headlights of a bus distorted into a kaleidoscope of colour in the raindrops. At that exact moment, the driver took his foot off the brake and began to make his turn.

Every muscle in my body tensed and I opened my mouth to shout something, but then he stopped again. The bus had to swerve past the yellow bonnet of the car. Once it was gone the driver proceeded.

And I’d rate this guy as one of the better drivers I’ve had in recent times. At least he didn’t drive on the footpath.

So when the state government announces it is raising the fares on taxis, what do I think? I say thank god. Let’s make driving a taxi rewarding enough that people with a will to live and proper skills want to do it.

The government is proposing to raise flagfall from $3.20 to $5.20 after 5pm and to $6.20 on Friday and Saturday nights.

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A sheltered industry

The market for taxis has long been a mess. A big part of the problem is the lack of actual market forces. The industry has long been regulated to within an inch of its life. The biggest single rule has been a cap on the number of taxis in Melbourne, that drives up the value of a cab.

The licenses (aka plates, aka medallions) that permit you to have a taxi in Melbourne are worth hundreds of thousands of dollars. The owner gets half the money you pay. The value of the medallion exists only because the number of taxis is regulated.

As the medallion owner reaps return on the investment, the cab driver gets screwed. An Age journalist recently trained and worked as a cab driver and made $8 an hour for his troubles.

One of the reforms proposed by the Victorian government’s taxi review was for the split of revenue to change from 50:50 to 55:45. A ten percent increase for the driver is hardly earth-shattering, but it has been opposed by the Victorian Taxi Association. That is the peak body for the industry. Unsurprisingly, it doesn’t effectively represent the users of taxis or the casual drivers. It is backed by the money.

It also opposed the big reform proposed by the taxi industry review, increasing the number of cabs in Melbourne. Despite its arduous work in representing the interests of the medallion holders, that reform has driven down the price of a taxi license. (In 2012, licenses were changing hands for as much as $500,000.)

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The government has agreed to a clever approach – leasing 12 month taxi licenses at $22,000 a year. This price is indexed at below the rate of inflation. The eventual effect is that the price of a taxi license approaches zero, and the market is no longer held hostage by the medallion holders.

The other big change that is being stealthily introduced is deregulation of fares. Part of the problem is that a taxi is just a taxi. There’s no easy way to get a good one. No way to offer a better service and charge a higher price.

Quality lottery
Another yellow ball bouncing round the barrel of the quality lottery

But in country areas, the government is introducing a rule that allows taxis to set their own fares. I see a link with today’s announcement. Might higher fares in the city build a consensus that really, deregulated fares are the desirable outcome?

Hopefully by that point, the taxi industry as we know it will cease to exist anyway. The hire car and limousine market has also been given freer rein under these reforms. Hire cars differ from taxis because they cannot pick up fares on the street –  they have to be booked. Pre-smartphone, this was an impediment. Now booking your ride is only an app away.

The biggest player in this space is Uber.  It started as a a way for towncar and limo drivers in the US to make money in their downtime, and is now available worldwide. The little car-hailing company that could is now worth an estimated $3.5 billion. According to their website, riding from my house to the city could cost as little as $10 and you might end up riding in a Prius or a Mercedes.

If they put our yellow cabs out of business, I won’t shed a tear.

Why the public transport election promise is bad policy, but good news.

A super bold plan has come out of the Victorian Government. They pledge to make public transport free in the city centre, and to abolish Zone 2, the higher-fare zone in the outer suburbs.

The idea is clearly a vote winner – a small group of people benefits at the expense of taxpayers everywhere. The Labor party adapted the policy faster than you could say “Harold Hotelling.”

It is a flashy announcement, like putting Protective Services Officers on every station, that reveals its proponents don’t really use public transport and want to believe something – anything! – other than really expensive infrastructure improvements are key determinants of service quality.

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This blog has advocated for free public transport in the past [Myki vs Free PT] but in this case the best I can say is that I don’t hate these ideas.

Let’s have a look at what will really change under this plan:

Free public transport within the city.

Upside: No need to deploy those rude and aggressive ticket police. Accept that the amount of crowding means the service is scarcely worth charging for anyway. Simpler for tourists.

Downside: Amount of crowding is likely to increase as we enter a tragedy of the commons situation. Public transport policy is not tourism policy – using transport policy for other ends is partly why it is not up to scratch. Less revenue to improve the system.

The end of Zone 2.

Upside: Simplicity in the public transport system is good –  people expend physical and mental energy trying to beat the Zone 2 boundary. The people who live in Zone 2 are most likely to need the discount, so there is an equity effect.

Downside: We are not at a stage where we need to encourage patronage on the system – it’s busy enough as it is.  Public transport policy is not social welfare – using it for non-transport policy ends is partly why it is not up to scratch. Less revenue to improve the system. Likely rising fares in Zone 1 over time to recoup lost revenue. 

Essentially, this is a policy with some benefits, but they do not strike at the heart of what our system needs – more services more often to more places. In fact, by reducing the amount of revenue – the Budget will estimate of how big a reduction – it may undermine that true goal.

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What this whole surprise announcement says to me is that the Government recognises Public Transport is its big weakness. And that recognition could make for a big turning point.

This government sailed into power on the failure of Labor to do PT properly, and by promising better PT – to Doncaster, Rowville and the Airport. But it has made a giant road tunnel into its signature reform. Now it is scrabbling to catch up.

The reality is that the Liberal party will probably lose the November election. They have a one-seat majority thanks to the support of corrupt independent Geoff Shaw. They have a premier we never voted for after the previous one was kicked out. They are a shambles. A poll taken in early March has the government behind 47-53. But ex-post, the big narrative to explain the election result will likely be public transport. 

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After the 2010 election, the Frankston line was identified as a crucial issue that lost key seats for Labor. If public transport is once again seen as a swing factor in 2014, the narrative will be established in political operatives’ minds. In Victorian elections, good public transport policy could come to be seen like a pledge not to increase GST, or a stern approach to boat people – an absolute must have for any party to succeed. 

Imagine if the top minister in the government was dedicated to the public transport portfolio. Imagine if that minister actually rode the trams and trains at times when the cameras were not directed at them.

It’s just possible that a golden era of public transport policy is around the corner.

Guest Post: Sabrina Lau Texier on making transportation policy in an environment of public distrust

Sabrina Lau Texier is a transportation planner who has worked in Toronto, New York City and Vancouver. She attended the University of Melbourne in 2003. The opinions expressed here are those of the author and do not necessarily represent the opinions of TransLink. 

Vancouver City
Source: City of Vancouver, 31 Jan 2014

I moved from New York City to Vancouver a year and a half ago. I landed a job in a great organization that is admired from afar for its proactive approach to linking land use planning and provision of transportation, including public transit, major roads, bridges and cycling. But I’ve learned the hard way just to tell people my occupation and not name my employer. If I say the dreaded T-word (okay, it’s TransLink) I get an earful from the surprisingly strong anti-transit crowd in this town.(1) However, TransLink’s damaged brand is not just tough for me, it’s tough for making good policy.

Making policy is not quite the same as advocating for it. I’ve found it easier to advocate (or denigrate) from a distance, often with an air of righteous indignation; however, bearing the weight of public dissatisfaction has been a different beast.

We are, in the words of a former premier, the city “that mostly got it right”. In my metropolitan area, as in many others, we have reached a tipping point on traffic congestion. Millennials defer getting a driver’s license (2,3) transit access is a new requisite for commercial real estate (4) and the installation of complete streets for all modes of travel is becoming (already is?) the new normal (5,6) With growing demand for improved transportation options, agencies everywhere are struggling to come up with funds to maintain and expand services.

Vancouver rapid transit map
Source: http://www.evergreenline.gov.bc.ca/documents/Maps_Graphics/Transit_Map.jpg

Partly in response to a persistent public perception of gross mismanagement, my agency has been through two government audits in 2012 alone, and both have found that the system has the best funding formula in Canada, and that “the organization is well run and manages its costs”(7). However, implementation of all suggested efficiencies (including cutting low-performing routes) will not be enough to meet the future transit expansion needs of Metro Vancouver. The provincial government has called for a referendum on this issue by Spring 2015.

“The line between democracy by plebiscites and mob rule is very thin.” – Anne Golden(8), speaking about the upcoming transportation referendum, Jan 2014

The referendum question has yet to be set, but how do you create the message on an issue as complex, multi-faceted and far-reaching as future transportation funding? How do you reach a population that is so disillusioned with your organization, that they prefer to view the referendum as a vote on the agency itself, rather than the larger issues (9). Failure to pass this referendum has its own opportunity costs (10), but the importance of funding transportation expansion is lost as public attention is directed to how much money is spent on office coffee. The province has taken the politically-safe approach of asking taxpayers to decide if they would like further taxes to pay for transit. They have not asked taxpayers if they agree with funding recent road and bridge expansion, oil pipelines, or a coal terminal.

We are entering into this referendum woefully unequipped to succeed. At the best of times, making an argument for transit/cycling/walking is going against a 50-yr+ status quo attitude of “the car is king”. However, investments in transit infrastructure benefit more than the riders themselves. The regional economy, goods movement, personal mobility, job opportunities, and healthy communities require planning and funding of alternate transportation options. We can make many sound scholarly arguments, but it is often preaching to the converted.

“When trust is broken between the government and the governed, it’s almost impossible to generate support for public policy changes even when the proposals are right.” – Anne Golden, Jan 2014

The public has very little trust in my organization, and the media caters to this. Transit decisions, big and small, are routinely lambasted and misrepresented, with major omissions that compromise balanced reporting. There is scant awareness that the agency is also responsible for roads, bridges, goods movement, air care testing for vehicles, and pedestrian and cycling infrastructure. It is an easy news story to cater to the strong public appetite for taking potshots at the region’s punching bag. There is the sense that merely having a transit pass is the equivalent of an advanced degree in transit planning, and everyone feels they could have made a better decision.

It would be easy to put my head down, hide amongst the thousands of employees at my organization, and tell individuals in social settings that I wasn’t responsible for their particular grievance. Yet I am proud of the work that my city, my region, and my transportation authority have accomplished. I want it to succeed in the future. I worked in NYC for 5 of its most formative years in the transformation of its streets from auto-dominated through-routes to celebrations of public spaces, and I know how good news stories are borne of years of blood, sweat and tears. When one looks up from the battle, and takes a step back, it is possible to be reminded of what the fight is really for.

Traffic lights: Hate

At the intersection of ubiquity and stupidity, lies my nemesis.  The traffic light.

Let’s look at three traffic scenarios.

1.  Light traffic.

I am stuck at the traffic light for no discernible reason.  No cars are coming.   The red light has me pinned down like a gleeful high school bully.

2. Medium traffic.

Cars go in one direction for a minute.  Cars go in the other direction for a minute.  Sounds fair!  But because of the way traffic builds up gradually, and moves off only gradually, we get lines of stopped cars in both directions.

This is the traffic wave effect, expressed in beautiful, scientific detail here.

3. Heavy traffic.

People aren’t moving anyway.  The light cycle shuffles through irrelevant sequences like a failing comedian.   Noone’s laughing. Continue reading Traffic lights: Hate

What is wrong with long distance train travel in the US?

I am excited by train travel, always have been. I like riding on trains (Ashby to Embarcadero or Beijing to St Petersburg), watching trains on film (my favorite Bond film is ‘From Russia with Love’) and playing with toy trains (gosh the memories). However, when a group of friends and I recently had the opportunity to ride the Amtrak from San Francisco to Salt Lake City, we decided on renting a car instead. Why is that? Continue reading What is wrong with long distance train travel in the US?

Does this man hate cyclists? The inaugural Thomasthethinkengine interview.

The debate regarding cyclists’ rights and responsibilities continues. On the one hand the ‘vehicularists’ believe cyclists should behave (and be treated) like cars – on the other hand – (the inexplicably named) ‘facilitators’ believe cyclists should take advantage of their unique attributes and since ultimately it is their own safety at stake, they should feel free to bend the rules at their discretion. You can read more about these various views here.

Today this debate will take a new direction, by considering the input of another road user. In order to protect his identity, we will call him Gerald. Continue reading Does this man hate cyclists? The inaugural Thomasthethinkengine interview.