News Story

Taxi Regulations, Costs Stall Carless Detroiters

(Editor’s note: This commentary is an edited version of an Op-Ed that appeared in The Detroit News on December 21, 2012.)

Communication technology could be seen as the new frontier, or the Wild Wild West if you're Uber, a ride-requesting app for use in cities from New York to San Francisco. While trying to make it easier for customers to hail cabs at the touch of a smartphone, Uber has encountered the quick-draw regulations of city governments.

But apps like these simplify transportation for both consumers and drivers — a potentially significant development for the ailing city of Detroit, which needs to allow low-income workers opportunities if it wants to eventually see higher-income workers.

The potential revenue from driving a taxi is not impressive, particularly in car-loving Detroit. Detroit has a low drop rate (the initial charge before driving anywhere), on par with Seattle and Atlanta, at $2.50. It no longer has an active branch of the International Taxi Workers Alliance, a taxi driver union still lively enough in other cities. It also holds the lowest waiting-time fare among the ITWA cities at $16 per hour. Cab fares are determined by city commission in Detroit rather than the open market, which inherently limits their earning potential.

As the Mackinac Center for Public Policy put it in its 2001 Privatization Report: "The causes of urban decay are complex, but connect the dots: Government regulations are a major reason that businesses everywhere — and entry-level workers and entrepreneurs in inner cities especially — find fewer opportunities to translate their energy and initiative into productive commerce and trade."

Driving taxis has traditionally been an alternative for low-income people to earn their way upward, but in Detroit, regulation makes it extraordinarily expensive.

Currently, Detroit limits the number of bond certificates (or "bond plates") to 1,310, and taxi drivers may only buy a bond certificate from a previous owner for about $10,000 to $20,000 on the open market (this does not include the application fee to the city). They must undergo police inspection after a bond is (miraculously) obtained, and then twice a year ever afterward. After that, each taxi also must have a Detroit license with plate, decal and card, which expires every year; a State of Michigan chauffeur's license and a city of Detroit public driver's license. These prohibitive restrictions have encouraged a black market for taxicab medallions.

Limousine operators in Detroit have it easier since they do not need to purchase a bond plate, but the city of Detroit has still attempted to enforce the bond plate requirement "whenever luxury cards pick up fares within the city limits." What's more, the driver of a limousine or other luxury vehicle is prohibited from parking or standing within 300 feet of any hotel, motel, theater, hall, public resort, bus station, railway station, airport, restaurant or other place of public gathering.

A confounding factor is undoubtedly Detroit's outmigration, which is well-documented: Michigan was the only state in the union to lose population between the 2000 and 2010 Census, and Detroit's outmigration during that same period was bigger than the number of people who fled New Orleans from Hurricane Katrina, and has continued since, unlike New Orleans' rebounding population. Taxi drivers need people to function.

What Detroit does have going for it economically is a comparatively healthy tourism population, in large part propelled by the legalization of three Detroit casinos in 1996.

In 2011, Detroit's casinos posted $1.4 billion in revenue. There are people coming to Detroit solely for the purpose of the casinos, and they and the taxi drivers need safe transportation. Their safety, however, is clearly not abetted by Detroit's regulations, which have, contrary to their purpose, only encouraged poverty and its subsequent partner-in-crime, corruption.

The regulation of taxi drivers is only the tip of the iceberg in Detroit, but it is indicative of the destructive policies that have helped the city go under, all by refusing to give those who need it a hand up and not a hand out.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.