For decades, the Denver metropolitan area has suffered from a lack of competition in the market for taxicabs. In January 2011, Colorado State Senator Ted Harvey (R- Highlands Ranch) introduced SB 11-065 to increase competition to give Colorado residents more choice over services and quality, by opening up the taxicab market to entrepreneurs intent on providing better and more complete services. SB 11-065 is the latest attempt to loosen the grip of state regulators on the taxicab market, and it’s important to consider similar past efforts to put SB 11-065 into context.
In Colorado, the Colorado Department of Regulatory Agencies’ Public Utilities Commission (PUC) handles taxicab licensing. Proposed legislation in 2007 sought to permit unlimited operating licenses to taxicab companies who met certain requirements. However, in its final form HB 07-1114 essentially only allowed PUC to regulate the lease rate charged to drivers for common contract carriers.
The Colorado Independent reported at the time:
Under the current system three companies dominate the industry and regulatory caps limit the number of taxis a company can operate. The bill (HB 07-1114) was later gutted by the House Transportation and Energy committee and changed to control the weekly rates cab companies charge their drivers instead of dealing with permits.
A 2008 report (entitled The Taxi Industry In the Denver Metropolitan Area) by PUC noted that the legislature had several opportunities to alter the nature and scope of taxicab regulation in Colorado prior to the passage of HB 07-1114. For example,
In its early form the bill stated a legislative declaration that “competition in the motor vehicle carrier industry will benefit Colorado consumers, making for greater choice and convenient.” (This declaration was later removed.)
A second attempt at taxicab regulatory reform was taken in 2008. When HB 08-1227 was signed into law in 2008 it renewed the Colorado Public Utilities Commission under its scheduled sunset review, and altered PUC’s regulatory expectations. Previously, start-up taxicab companies had to prove that incumbent taxicab service was inadequate, and that it would serve the “public interest” if additional companies were formed. HB 08-1227 shifted the burden to the existing taxicab firms to prove that additional taxicab firms would be detrimental to public welfare; otherwise additional firms could receive authority to operate.
In spring 2009 (one year after the passage of HB 08-1227) Union Taxi Cooperative was established. The Denver Business Journal reported that after eleven days of hearings PUC granted authority for Union Taxi Cooperative to operate in Denver’s eight metro-area countries, and the firm received its official certificate of authority to operate on April 27, 2009. Union Taxi Cooperative joined the ranks of the three incumbent taxicab companies: Freedom Cab, Metro Taxi and Yellow Cab.
In July 2010 another firm, Mile High Cab Company, applied for the right to operate and was denied in a ruling by PUC administrative-law Judge Paul Gomez. The Denver Business Journal reported that two other firms (Denver Cab Cooperative Inc. and Liberty Taxi Corp.) are also seeking permission to operate, while an incumbent firm (Yellow Cab) requested a permit-increase to expand the number of taxicabs it operates. (As of press-time none of these requests were accepted by PUC.)
Regarding the case of Mile High Cab Company, Judge Gomez ruled, “when a market is at or near capacity, a homogenous, undifferentiated entrant such as Mile High, does not serve the public interest.”
Thomas Russell, Mile High’s attorney, told the Denver Business Journal in July:
“The PUC judge said that Mile High Cab was operationally and financially fit, and then the judge concluded that competition would hurt the public interest. (Mile High and its Attorney) believe he misapplied the law, and there was no evidence for what he decided.”
Russell also argued that increased competition would benefit consumers in the taxicab market, and that Judge Gomez’ issue of differentiation was not relevant to comply with HB 08-1227.
Kyle Brown, general manager for Metro Taxi (an incumbent firm), embraced the ruling saying, “I think the [judge] made a right decision. [He] looked at the market as a whole and made a decision that was proper for the riding public of Denver and state of Colorado.”
Former State Sen. Josh Penry (R- Grand Junction) co-sponsored HB 08-1227 in 2008, and expressed frustration with Judge Gomez’ recent ruling. Penry told the Denver Daily News in September 2010 that the goal of the legislation was to “ease the application process for taxicab companies with the intent of ‘opening the door for greater competition.'”
The Denver Daily News reported criticism of the ruling from political leaders across the ideological spectrum, including: then-state Congressman Ed Perlmutter (D- Lakewood), Aurora City Councilman Ryan Frazier (at-large) and Holman Carter (president of the Amalgamated Transit Union Local 1001, which represents about 1,900 Regional Transportation District transit workers.) Carter explained, “Increased competition would benefit the community. It is in the best interest of the entire community for the PUC to allow the Mile High cab to operate in the Denver Metro area.”
In January 2011 Sen. Harvey (R- Highlands Ranch) introduced SB 11-065, a bill for an act concerning issuance of a certificate of authority to provide taxicab service in Colorado. Currently, to prevent additional firms from competing, incumbent providers must prove that “public convenience and necessity does not require granting the application; or issuance of the certificate would be detrimental to the public interest.”
SB 11-065 (as-introduced) would eliminate the two legal requirements and instead require the PUC to authorize any firm that meets the following requirements:
- “The applicant has at least 50 taxicabs available for service, at least 3% of which are equipped to provide services to persons with disabilities, with one such equipped taxicab in service at all times;
- The taxicab service has a 24-hour communications and dispatch system and can operate taxicab services 24 hours a day every day of the year;
- The applicant has at least $500,000 in capital;
- The applicant has submitted to a fingerprint-based criminal history record check that did not result in disqualification by the PUC;
- The applicant participates in the federal e-verify program to verify the work eligibility status of its drivers and other employees; and
- The applicant satisfies financial responsibility requirements in the form of motor vehicle liability coverage or a surety bond.”
Section 1 of the bill also includes an explicit legislative declaration, specifically:
- “Current taxicab regulation in the state stifles entrepreneurs, needlessly limits the entry of new taxicab service providers into the market, prevents technological innovation, limits job creation, and ultimate results in poor taxicab services to customers;
- Competitive taxicab markets are beneficial to the public interest of Colorado, and the state should facilitate the creation of new taxicab service providers and increase competition between new and existing taxicab companies;
- Consumers in Colorado, including visitors to the state, benefit from increase competition among taxicab companies;
- The state’s labor market also benefits from competition among taxicab service providers; and
- To facilitate competition and improve service for consumers there should be no limit on the number of authorized taxicab service providers or taxicabs operating in the state.”
Sen. Harvey recently said (of the bill), “Colorado government needs to stop the practice of picking winners and losers in the private sector,” according to The Denver Post.
Taxicab regulatory reform has been in progress for four years in Colorado, and this most recent bill appears to address many shortcomings of previous efforts. If political leaders from both sides of the aisle can work together through the legislative process, then long-sought aspirations for reform may finally be realized and entrepreneurs will have the opportunity to compete.
For more of Reason Foundation’s work on taxicab regulation see here, here and here.
Harris Kenny is a research assistant at Reason Foundation and lives in Denver.