In August 2018, Mayor Bill de Blasio signed Local Law 147, pausing the issuance of new FHV licenses for one year – except for wheelchair-accessible vehicles (WAVs) and electric vehicles (EVs). The EV exception was later abolished by the TLC in June 2021.
The legislation also gave the Taxi & Limousine Commission (TLC) the authority to determine the number of FHV licenses to issue after the expiration of the initial one-year pause. The law also requires the TLC to review, every six months, whether additional FHV licenses should be issued and to report the results of their review. The law specifically says that the TLC may issue any number of new FHV licenses upon a determination by the commission that issuing such a number of new FHV licenses would increase the availability of for-hire services in different geographic areas of the city where such services are needed, and where such licenses would not substantially contribute to traffic congestion.
In August 2019, the TLC adopted a rule that extended the pause on issuing new FHV licenses and continued. The TLC conducted its first review in August of 2020 and determined that no additional FHV licenses would be issued from September 2020 through February 2021. In February 2021, the TLC’s review of congestion, service levels, driver income, and license attrition found that there is no need to issue additional FHV licenses.
In February 2021, the TLC’s review concluded that there is no need to issue additional FHV licenses. In August 2021, the TLC’s review concluded that there are sufficient existing FHV licenses to satisfy current passenger demand. The same findings were made in February 2022.
As we approach August 2022, just about everyone in the FHV industry is waiting with bated breath to see if the TLC will lift the cap, continue with the cap, or at least allow existing stakeholders in the industry an opportunity for a modicum of growth. With a new Chair at the Commission, no one is able to read the proverbial “tea leaves” to predict what the Commission will do. So, who are these stakeholders? We have, among others, base owners, taxicab owners, and operators from all FHV classes.
We all know NYC’s FHV industry is complicated and dynamic at the same time. Complicated primarily because of all the rules the TLC has implemented over the years. Dynamic because the FHV industry is always in a state of flux.
The entire industry is based on the laws of supply and demand. The more drivers there are on the road, the more a base is able to satisfy the travel needs of the consumer. If demand stays the same, fewer drivers on the road mean a base is less likely to be able to satisfy the travel needs of the consumer. Of course, we also have the reality that assuming demand stays the same, more drivers on the road typically equate to less earnings per driver. It is a very delicate balancing act, but it is something that is primarily dictated by the consumer. It is all about consumer demand.
The problem with the TLCs analysis is that the agency equates consumer demand to the number of trips performed in any given period of time. In reality, consumer demand cannot be based solely on the number of trips performed because it does not take into account the people who would have utilized FHV services but chose not to because of price and/or other considerations. If the supply of drivers decreases and demand stays the same, then price tends to go up. Some people who once utilized FHV service are no longer able to do so because the cost has gone up.
Also, the TLC cannot really evaluate demand unless one takes into consideration that demand drastically rose for the long period in which Uber and Lyft subsidized the cost of each ride in order to grab market share. Also, the TLC’s evaluation of driver earnings is not quite accurate as it only takes into consideration the amount earned by those who accept trips from High Volume Services like Uber and Lyft.
Finally, the evaluation of traffic in NYC is a joke. The bulk of all traffic evaluated is in Manhattan. Manhattan is an island that is 13.4 miles long and 2.3 miles wide, with an estimated population of 1.6 million people. In 2021, there were 33 million visitors to Manhattan. Since the advent of the automobile, traffic has always been an issue, and it always will be. I understand the desire to decrease levels of traffic in the city, but I also understand the difference between an attainable goal and one not based on reality.
I know of not one person who has said they think the cap should stay in place. The FHV market will never be in perfect equilibrium, but it is the market itself that should be dictating who can grow and who should go. I have stated time and again that the function of regulations is to enforce the rules and not to pick who should and who should not be the winners and losers in the marketplace.
By now, we all know the horror stories from the fallout of the yellow taxi medallion bubble and how it subsequently burst. We must all remember it was the TLC that regulated taxis into the bubble. Also, it was the TLCs failure to regulate Uber and Lyft when they entered the market and the City Council’s fault for not implementing a cap on the massive growth of Uber and Lyft when they had the chance in 2015.
Are these the people you want regulating the growth of the FHV industry? Or should the market dictate who can stay in business and who can be a driver?
The livery industry is not adding more vehicles but losing them and doing so en masse. From 2015 to today, the number of livery vehicles available for livery bases to send dispatches to has been reduced from approximately 25,000 vehicles to less than 8,000. The livery industry needs more licensees. A continuation of the cap will eventually strangle the livery industry right out of existence. There are only so many times that a customer will call a livery base for transportation and be turned away due to there being no available drivers.
The loss of livery drivers is a problem, not only for the livery industry but for those who live in the outer boroughs and upper Manhattan. Local community car services going out of business means those in communities at the edges of Queens, Brooklyn, and the Bronx have more limited options for affordable transportation.
Livery bases don’t engage in surge pricing. They are primarily mom-and-pop businesses, many of which are minority-owned and operated. Where do these people turn for transportation when public options are limited, and their local community car service is forced out of business due to unduly burdensome regulations and a regulatory agency that uses the cap on new licenses as a means to determine who will be the winners and who will be the losers in the FHV industry? So long as the safety of the public is secured and the business in the FHV industry continues to operate with honesty and transparency to the public, the TLC should lay off and let the public decide.
When the government engages in economic regulation rather than letting the laws of supply and demand and traditional market forces work their issues out, innovation is stifled, and the market does not operate in the most efficient and fair manner. Lifting the cap fully or even partially will allow the market forces to come back into action, thus giving those who are struggling under the cap a fighting chance to survive. Maintaining the cap for another six months will likely cause many to go out of business or simply leave the industry. No one in the industry is making money hand over fist. Most drivers and base owners are struggling just to stay open and stay alive.
No one has ever said that they wished the government would come in and regulate the economics of an entire industry. That is because government regulators are typically not good businesspersons. While regulators are good at regulating, they are not experts in business and have proven to be a disaster when it comes to shaping how the market should operate. The TLC’s job is to ensure that vehicles are safe and in good working order, that drivers meet certain standards and abide by safety rules and that dispatch bases are interacting with the public in a transparent manner. The TLC does this and, unfortunately, too much more.
It is time for the TLC to get out of the business of picking winners and losers and simply let the market take over. The market always works itself out. On the other hand, the TLC has a poor history of regulating the economics of the FHV industry. I would hope the TLC would learn from the taxi-medallion debacle that it should stay out of the economics of the FHV industry.
My opinions may not make me popular at the TLC, but that’s not my job. My jobs is to be open, honest, and sometimes outspoken, and to represent the interests of the FHV industry – something I have always strived for. I will continue to do so because unless someone speaks up, change for the better will never come.