Finally, Justice for Volunteer Taxi

Volunteer Taxi drivers and supporters celebrating their company's approval at Mesob Ethiopian restaurant

 by Daniel Horwitz

It's been a very long time coming, but today was a day that the people of Nashville can finally be proud of. After nearly a year of delay and disappointment, today the Metro Transportation Licensing Commission finally stepped aside and granted 61 Ethiopian- and Eritrean-American entrepreneurs permission to operate their own taxi company. These drivers, who first submitted an application for approval of “Volunteer Taxi” last November, walked in today’s TLC hearing making just $2.40/hour and working sixteen-hour work days. At 3:30PM, they walked out feeling like millionaires.

Free at last from the $205 weekly “licks” that they have been forced to pay the owners of Nashville’s now-defunct taxi oligopoly, today’s TLC decision means that each of the Volunteer Taxi drivers will instantly save more than $10,000 per year in unnecessary sublicensing fees. Combined with the savings that they will generate from being able to negotiate group liability insurance premiums, the drivers estimate that the Commission’s decision could put as much as an additional $15,000 in each of their pockets annually.

As soon as VT’s cabs hit the street next month, most of their drivers will also be sitting behind the wheel knowing that they have the security of health insurance for the first time in their lives. Though economists have been saying this for well over two hundred years now, it’s still amazing what a little bit of free-market capitalism can do overnight.

Helping these drivers earn a living wage, and helping them accomplish their lifelong goal of owning their own business is easily one of the most rewarding things I've ever done. As a proud citizen of this country, it’s also one of the most important. Have a conversation with any of Volunteer Taxi’s drivers, and they’ll tell you how excited they were to come to the United States and have a fair shot at achieving the American dream. Now, for the first time ever, they’ll wake up tomorrow realizing that it isn’t just a dream after all.

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice. He can be contacted at daniel.a.horwitz@vanderbilt.edu.

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Taxi Licensing Commission still dysfunctional and unconcerned

by Daniel Horwitz

The Metro Taxi Licensing Commission met Thursday and here are a few interesting things that occurred that the Commissioners could not have appeared to care less about:

Cab Companies Continued to whine about competition

Notwithstanding the existing cab companies' repeated assurances that no new cab companies are necessary because they are already providing exceptional customer service to the people of Nashville, the RPM taxi report very explicitly and quite scathingly concluded that "[n]o company was exempt from poor service— there were multiple instances of poor service on rides from all of the companies" (p. 3-24).  Additionally, given that RPM's secret shoppers also concluded that "United Cab’s arrival time also appeared to be longer than the other taxi companies," that "United Cab drivers were more often found to be either refusing credit cards or very reluctant to accept them," and that United Cab's atrocious customer service was the "most egregious of all" because its drivers "would appear to be routinely overcharging their unsuspecting customers" (p. 3-24), today's comments from the United Cab executive who cried that the closed industry was being unfairly crucified by the media were particularly entertaining.  

Cab company owners can continue to whine about the extreme unfairness of having some potential competition in Nashville's taxi industry, but for years now they've enjoyed all the profit without doing any of the work.  As I've previously noted in great detail, the only people who do any work or take any risks at all are the drivers themselves.  

Cab company owners continue to lie about their "fleets"

There is really no other way to say this, but when cab company owners like Taxi USA's Michael Solomon and Checker Cab's Mulugeta Abebe make grand promises about their "fleets" of taxis, they are lying.  These owners don't actually own any cabs.  They merely own the permits that give people the lawful ability to drive cabs, and they sublease these permits to actual cab drivers for between $150 and $205 per week (p. 1-4).  In sum, the five current "cab companies" in Nashville (which, it should be noted, actually describe themselves as "franchising companies") are outrageously profitable but completely unnecessary middle men who provide absolutely no goods or services whatsoever to the community.  

If we're going to be dealing with facts, there are 585 total permitted cabs in Nashville, and the RPM transportation consultants clearly stated that "virtually all of the regular taxicabs are owned by the taxi drivers" (p. 3-1)-- leaving very little room left for any of the current cab company owners' aforementioned "fleets."  Perhaps notably, the study also found that Taxi USA-- Nashville's biggest cab company by far with 205 taxi permits (p. 3-1)-- has only "one company-owned sedan" (p. 3-3).  

MTLC continues to defer new cab permits

The Volunteer Taxi drivers first submitted their permit application in November 2011.  At the November 2011 hearing, the TLC deferred its decision on their application to December 2011.  At the December 2011 hearing, the TLC then placed two future conditions on the granting of Volunteer Taxi's permits, and deferred a final decision until June 2012.  At the June 2012 hearing, the TLC then deferred its decision until today, July 26th.  Today, after wasting hundreds of people's time for about three hours, the TLC again decided to defer a final decision until August, citing their own failure to provide adequate public notice for today's hearing.  

I'm generally very supportive of public servants who volunteer their time for the good of the community, and I don't want to allege bad faith without any specific basis for believing that there's something illicit going on behind the scenes, but this is beyond ridiculous.  Either do the job, or step aside and let someone else do it.  

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu. 

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The indefensible public policy of shielding big taxi companies from competition

by Daniel Horwitz

Daniel Horwitz

The 149-page final report on “Taxicab and Other Passenger Vehicles for Hire in Nashville” released by the Mayor’s office yesterday has several important implications for the future of Nashville’s transportation industry, only a few of which have been picked up by local news outlets.   

Though I was among the first to question the value of Metro’s $172,810 expenditure on this study, let me also be the first to say that the fact-finding done by RPM Transportation Consultants appears to be exceptional, and that this alone may have been worth the price of admission.  Now that the underlying facts of the industry are no longer in dispute, we can finally shift the conversation to the indefensible public policy components of the current transportation licensing system, and can hold Metro legislators accountable if and when they refuse to reform it. 

The consultants’ final report includes a great many findings about both the taxi industry and the livery industry in Nashville, which I will address in turn.  With respect to the market for taxi services, the most important facts are as follows:

1)   The Transportation Licensing Commission has currently capped the number of taxi permits allowed in Nashville at 585, all of which are owned by one of five private taxi companies.

2)    In order to be able to drive a cab in Nashville, all taxi drivers must pay one of these private taxi companies a weekly fee (known as a “lick”) which ranges from $150/week to $205/week.

3)   Taxi drivers independently own or lease every single cab in Nashville.

4)   Taxi drivers themselves bear all the costs of insurance, gasoline, vehicle maintenance, and credit card processing, and also pay out of pocket for the FBI background check, driver training class, driving test, physical, and eye exam annually required by Metro.

5)    Each of Nashville’s five private taxi companies has designated its drivers as “independent contractors,” meaning that these companies do not have to provide employee benefits like health insurance or workers’ compensation, and also do not have to comply with minimum wage requirements. 

If this doesn't immediately strike you as outrageous, allow me to explain why, as both a consumer of taxi services and someone who cares very deeply about fair working conditions, Nashville’s current taxi licensing system has my blood boiling.  Take, for example, the business model of Taxi USA— Nashville’s largest cab company and the lucky owner of 205 of Nashville’s 585 taxi permits (over 35%).  “Developed in 2006 by two well known taxi industry owners and investors,” according to the consultants’ report, Taxi USA makes money by subleasing each of its 205 taxi permits to individual cab drivers at a rate of $205 per week.  Since most drivers work about 50 weeks each year, Taxi USA’s annual revenues amount to somewhere around $2.1 million annually. 

What operating expenses does Taxi USA have to offset these revenues?  Well, the company doesn't have to purchase any taxis— those are all owned or leased by the drivers themselves.  It also doesn't have to pay for insurance, gasoline, vehicle maintenance, or any other driving-related expenditures— cabbies bear those costs in full as well.  Additionally, rather than having to meet payroll and pay its employees a salary like a normal business, Taxi USA actually gets to charge its employees for the privilege of being able to work (which has got to be the most unbelievable legal scam I’ve ever heard of).  

 Finally, by designating its employees as mere “independent contractors,” Taxi USA’s owners also get to take advantage of a legal loophole that allows them to avoid having to provide employee benefits, and can fire workers who attempt to unionize.  With a system like this, it’s really no wonder that the secret shoppers commissioned by the Metro consultants found that “[n]o company was exempt from poor service.”  Taxi drivers in Nashville are affiliated with their parent companies only on paper, and as such, they have absolutely no incentive to care about the name painted on the side of their cabs.  Notably, unless Volunteer Taxi (Nashville’s first driver-owned and driver-operated taxi company) is granted the 61 permits it has requested on July 26th, the poor quality of taxi service in Nashville is unlikely to change anytime soon.

How exactly do Taxi USA and the other four taxi companies in Nashville get away with a scheme that allows them to generate millions in revenue with almost no operating expenses?  The short answer is that all of Nashville’s 585 taxi permits are owned by one of these five taxi companies, and the TLC has completely shielded these companies from competition by refusing to lift the artificial permit cap.  In terms of actual transportation services, though, 100% of the benefits to the Nashville community are provided by the “independently contracting” drivers themselves— not the “taxi” companies (which actually describe themselves as “franchising” companies anyway). 

Notwithstanding the fact that Michael Solomon, executive Vice President of Taxi USA, has publicly whined that running a taxi franchising company in Nashville is “a challenge” and that “everybody thinks it’s easy,” best I can tell, the job of taxi company management is merely to show up to work once a week, collect money from the drivers, and go home. 

In sum, by artificially restricting the number of taxi permits allowed in Nashville and thereby preventing anyone else from being able to compete, the Transportation Licensing Commission has created five outrageously profitable but completely unnecessary middle men who provide no goods or services whatsoever to the people of Nashville.  (For anyone who cares, this nonsensical system is quite similar to the former version of our Federal student loan program, interestingly enough.) 

Practically speaking, Nashville’s cab drivers are currently paying the equivalent of a $10,000 annual tax for the mere privilege of being able to drive a cab in this city, yet instead of going into Metro’s general fund, this tax is both levied and collected by the owners of the city’s private taxi companies.  Strange as it seems, this is precisely why the Metro consultants found that so many cab drivers actually oppose a fare increase (despite making only about $2.40 per hour after expenses, according to a 2008 preliminary report to the TLC).  If fare prices were to go up, the drivers complained, companies like Taxi USA would simply raise the weekly “lick” (tax) they have to pay, and the drivers themselves wouldn’t see so much as an extra dime.   

The solution to this problem is simple.  Similar to Tennessee’s “shall issue” system for everything from bartender certification licenses to attorneys’ licenses to gun carry permits, anyone who takes the necessary classes and meets Metro’s stated requirements for being able to drive a taxi should be given a taxi permit.  More specifically, anyone who wants to drive a cab in Nashville should be permitted to do so provided that he or she: 1) passes the aforementioned FBI background check, driver training class, driving test, physical, and eye exam required by Metro; and 2) complies with Metro’s maximum fare price and quality control ordinances.   

The notion that the Transportation Licensing Commission can use its power to protect Nashville’s existing taxi oligopoly (cartel) by continually refusing to grant permits to would-be competitors like Volunteer Taxi is absurd, and quite frankly, the Tennessee Supreme Court held that this kind of behavior “clearly violates Article I, Section 8 of the Constitution of Tennessee” all the way back in 1956.  Personally, I don’t blame the Mayor’s Office for this mess at all; to the contrary, in fact, Mayor Dean has gone out of his way to understand the awful working conditions faced by Nashville’s taxi drivers, even though the TLC makes up less than .2% of the overall Metro budget.  But if your Metro Councilman is among those local legislators who oppose free market competition in the taxi industry, you really need to consider voting that person out of office in the next election.

With respect to the livery industry, the consultants’ findings were shorter but no less dire.  (For those who are unfamiliar with either the content or the lobbyist-motivated origin of the Metro livery regulations enacted last year— which require, among other things, that limo companies charge their customers more and wait longer to pick them up— a complete summary can be found here.)  Most importantly, the consultants concluded both that: (1) “there is considerable interest in being able to offer a lower cost sedan service at $25.00, if it is legal,” and (2) “the structure for regulating [sedan] service is reasonable, as is the $45 minimum fare which provides a sufficient ‘differentiator’ between taxi service and [sedan] service.” 

Even for those who are completely unfamiliar with the state of the livery industry in Nashville, there is no need to detail what makes this latter conclusion so stupid.  If there is consumer demand for a service, Metro’s role is not to make the provision of that service illegal.  If I want to take a limo ride for $25, and if the limo company wants to charge me $25 for that ride instead of $45, there isn’t a reason in the world why we should be legally prohibited from entering into that transaction.   

Metro also has no business whatsoever favoring the taxi industry over the livery industry, and given the blind eye that the Metro government has repeatedly turned to the plight of Nashville’s taxi drivers, the notion that these regulations were actually intended to protect taxi drivers is highly disingenuous at best.  At the very least, the attorneys over at the Institute for Justice (who have sued the TLC for “impos[ing] a host of arbitrary and irrational regulations on limousine and sedan services in an unconstitutional effort to eliminate competition in the transportation market and benefit a small group of industry insiders”) can be grateful that Metro’s consultants agreed that the purpose of the recent livery regulations was pure and unfettered economic protectionism, and that these regulations had nothing at all to do with public safety.  And just like the broken taxi licensing system, this mandatory price-fixing scheme similarly justifies voting out your Metro Councilman if he or she refuses to repeal it.  Price-fixing is not the government’s role, and legislators should be punished for sacrificing basic principles like this in order to appease the influential Tennessee livery lobby TennLA.

A former Professor of mine once observed that powerful business interests often follow the strategy “if you can’t beat the competition, make the competition illegal.”  That observation could not be any more true than it is here in Nashville’s transportation market, where entrenched local interests have, to this point, successfully fought tooth and nail to prevent free and fair market competition in the taxi and livery industries.  Without question, the only beneficiaries of the policies that have recently been promulgated by the TLC are the owners of Nashville’s pre-existing cab companies and Nashville’s most expensive limousine companies, whose interests have been steadfastly protected by the Metro government at the expense of both consumers and workers alike.  For obvious reasons, this is completely unacceptable. 

Taxi and limo drivers themselves, many of whom are refugees who proudly accepted American citizenship after arriving here, often lament that they are being denied a fair shot at achieving the American dream.  They are correct.  The right to work and to be free from economic protectionism can be seen as early as the 41st provision of  The Magna Carta of 1215, it was famously reinforced under English law in the landmark “Case of Monopolies” Darcy v .Allen in 1599, and the “sacred right of labor” implicit in the U.S. Constitution itself was referenced by members of our Supreme Court as early as 1872.  

 Whether people who want to earn an honest living should be prohibited from working through intentionally burdensome local regulations is not, and never will be, a partisan issue.  (And just for the record, I’m a Democrat.)  No matter what your political affiliation, we can all agree that these atrocious policies need to end.  If they aren’t repealed soon, the legislators who are responsible for maintaining them need to be replaced.  It’s that simple. 

Daniel Horwitz is a third year law student at Vanderbilt University Law School, where he is the Vice President of Law Students for Social Justice.  He can be contacted at daniel.a.horwitz@vanderbilt.edu.

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Volunteer Taxi: American Dream to Serve as Nashville’s First Driver-Owned Taxi Company Deferred by Racism, Politics.

Nashville, TN June 12, 2012, Representatives from organizations including the Tennessee Immigrant and Refugee Coalition, the NAACP, and the Interdenominational Ministers Fellowship have enlisted their support to the  sixty–one Ethiopian taxi drivers hoping to become Nashville’s first owner-operated taxi service.

On June 13, 2012, members of the Metro Council, during its 4:30 departmental budget hearings, will have an opportunity to ask the Transportation Licensing Commission: Why after nearly a year, Volunteer Taxi has not been able to serve our community, when they have met all of the standards asked of them?

In the year-long saga, the members of Volunteer Taxi have faced an uphill battle to better the lives of their families. First, in the form of vocal opposition, physical intimidation, and firings from existing taxi companies.

Secondly, Transportation Licensing Commission Executive Director Brian McQuistion, who is supposed to serve as an unbiased servant to the Commission members, voiced his opposition to Volunteer Taxi. When he was asked by the Metro Council Minority Caucus why he opposed awarding permits to Volunteer Taxi, he stated that more taxis on the road, meant less money for taxi drivers, and that the drivers would then resort to prostitution, drug deals, and overcharging customers to make a living.

Thirdly, racially and ethnically insensitive remarks made by a taxpayer subsidized taxi inspector painted all Muslim taxi drivers as terrorists! Finally, on December 20, 2011, Volunteer Taxi received approval for permits. However, the permits were conditioned upon available funding in the upcoming Metro budget, effectively forcing Volunteer Taxi to lobby for the Transportation Licensing Commission and for their right to be on the road serving our great city.

According to a study conducted by Sekou Franklin, Ph.D., taxi drivers in Nashville are paid less that the federal minimum wage and are among the lowest paid workers in the United States.  “We need no study to tell us that we are overworked and underpaid; we live this every day and night,” said Adugna Denbel, Secretary of Volunteer Taxi.  “We fled horrible conditions in our old countries, but now we yearn to be free from the undue burdens and hardships from the taxicab owners here who maintain a paternalistic system, with no advancement.” 

Under the current taxicab company system, the taxi drivers, not the owners, are responsible for purchasing their own health insurance, their own vehicle and paying all of the expenses related to the operation, such as fuel, repairs, maintenance and liability insurance. In most cases, drivers are also responsible for repairs to GPS dispatch technology provided by the taxicab company.

Additionally, taxi drivers are forced to pay a weekly fee of between $150-$210 per week ($7,800 - $10,920 annually) for the right to work for the taxi company. “We are not asking for any handouts, only for the opportunity to take care of our families by exercising the American Dream through our market economy and we pray that our dreams are not deferred by racism and politics,” says Mr. Denbel.

My Comment:
It is past time to let freedom reign in Nashville! Let immigrant and native born Americans pursue the American dream. End the paternalistic system of protectionism and crony capitalism and regulating to protect the rich and well-connected. It is time the Metro Council and this community embraced competition, innovation and free markets.

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Cab commission director's comments on drivers 'offend and shock' council members | Nashville City Paper

Brian McQuistion, head of Metro’s Transportation Licensing Commission offended Council Members and Ethiopian cab drivers seeking to start their own cab company.when he made prejudicial comments about cab drivers as reported in a piece by Joey Garrison in today's City Paper. Below are excerpts from the article. 

Multiple caucus members claim McQuistion said cab drivers, who tend to be minorities, would resort to crime, prostitution or drug-dealing if the cap on the number of cab permits in Nashville were increased and business among all cab drivers were stretched out.

He didn’t say they would become rogue. He didn’t say they would begin to do things like give rides without the meter being on. He said they would respond by going into prostitution and drug dealing. And we were shocked. We were shocked by his statement,” Maynard said.(Cab commission director's comments on drivers 'offend and shock' council members)

The Council Members and cab drivers have a right to be offended. The bigger offense coming from the Transportation Licensing Commission however is the believe that the commission knows what the price of a cab ride or limo ride should be and that they know how many vehicles for hire should be allowed to exist in the city.  While the prejudice against minorities is offensive, so is the prejudice against free enterprise and markets and the use of the Commission to fix prices and protect existing companies from competition.

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Tennessee Op-ed piece explain Volunteer Cab's victimization by Transportation Licensing Commission

Daniel Horwitz, a Vanderbilt University Law School student, has a good op-ed piece in the Tennessean today explaining the injustice done to cab drivers wanting to start their own cab company (Drivers treated badly for wanting own taxi company). He reports that at the meeting where the permit request for Volunteer Cab was being considered that taxi Inspector Walter Lawhorn made a plea to the commission not to grant additional taxi licenses until more inspectors could be hired. Mr. Horwitz says that Lawhorn argued that additional permits would simply make it impossible for him to adequately inspect Metro taxis.

The motion that was passed by the Metro Transportation Licensing Commission was that "Volunteer Taxi was to be granted some as-yet-undetermined number of permits in July, provided that: 1) the commission received an unspecified amount of additional funding in the next budget, and 2) Director Brian McQuistion performed research regarding other ways to increase commission revenue."

According to Mr. Horwitz, "the motion’s passage left many of us with the unsettling feeling that the commission had just used the plight of the cab drivers as leverage to get a bigger slice of the city budget from Metro next fiscal year."

I could not agree more and I thank Mr. Horwitz for saying it. Bureaucracies are self perpetuating and have a tendency to get bigger and bigger. It is an outrage that these taxi drivers are being held hostage by the TLC as pawns in a push for a bigger budget. It is an outrage that a new company can not enter into service because the bureaucrats do not have the manpower to monitor them. Would we accept that no new restaurants could open because of a shortage of health inspectors or no new homes could be build because of a shortage of building inspectors.

In addition to the TLC using this as an opportunity to grow their budget, something else is going on. The way this issue has been handled combined with the way the TLC has tried to drive the economy limousine companies out of business is an outrage. We are witnessing the worst of crony capitalism in which success in business depends on close relationships between business people and government officials. Crony capitalism is not free enterprise. It is closer to Fascist economics and should not be acceptable in America.

In my opinion, the Transportation Licensing Commission should be abolished and a new regulatory board should be established and new laws should be written governing public transportation. The guiding principle of any regulations should be regulation compatible with a market economy. The government should not be in the business of picking winners and losers. The purpose of any regulation should be the health and safety of the public, not protecting current providers of a service from competition.

For  more information on these issues, follow this link and scroll down. 

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Volunteer Cab "wins" approval, but may lose by delays. Update 2

Yesterday the Metro Transportation Licensing Commission approved an application from a group of taxi drivers wishing to start there own cab company called Volunteer Cab. However, the approval is contingent on a budget increase to fund more taxi cab inspectors. (link)

What? Would we prohibit new restaurants from opening because we do not have enough restaurant inspectors?  Would we prohibit new home construction because we do not have enough building inspectors. Would we prohibit the licensing of more vehicles because we do not have enough traffic cops? Would we prohibit the opening of new florist shops because we don't have enough florist shop inspectors? I think not.

Karen Johnson

Council Member Karen Johnson who has been a strong advocate for Volunteer Cab arguing for their right to start a new cab company said, "We are working on some things to address this.  Our preference is that they don't have to wait until this time.  We are working with Jerry Maynard to see what other options we have." 

I hope there are other options.  The next Metro Budget is not until June 1. According to the expanded version of this story in the print version of the Tennessean, the cab drivers are currently working for other cab companies and they fear retribution from their current employers due to this effort to start their own cab company. A delay could mean they are all out of work and financially ruined by the time they get final approval to go in business for this new driver-owned cab company. In Nashville most cab drivers own their own cab and pay all of their own expenses but pay a "lick" of between between $150 to $200 a week to the company they are associated with. If a cabbie is fired, his payments on his vehicle and some other expenses continue.

This delay is an injustice. There needs to be major reform of the way taxi cabs and limousines are licensed and regulated. It should not be the mission of the regulatory agencies to protect established businesses from competition.


Update: The City Paper does a much better job of reporting this story than the Tennessean, read here.
Update 2: For a more in-depth report from the Tennessean, see here.

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