- December 16, 2014
Cities everywhere work to balance the need for regulation—to ensure public health and protect quality of life—with the need to promote economic growth. To achieve this balance, cities must periodically review their regulatory regime—exploring questions of when to regulate and what rules might best govern the permitting, licensing, compliance, and monitoring of local business activity.
Recently, the City of New York tackled a major issue of this type—the regulation of taxi transportation. This case offers important lessons about the approach and process that New York City employed, including the central role that local policy makers may take in driving regulatory reform. Additionally, the New York case demonstrates the importance of using data and evidence at every step of the reform process.
Taxi transportation is a vital element in the transportation network of New York City. Cabs and livery drivers knit together neighborhoods across the sprawling metropolis and provide over 1.2 million rides to residents and visitors every day. While the scale and reach of the taxi system in New York City is impressive, policy makers identified a major gap in access and service—chiefly, that residents in the four boroughs surrounding Manhattan, often referred to as the “outer boroughs,” were experiencing inconsistent, limited, and variable transportation service. In response, New York City’s Taxi and Limousine Commission (TLC) broadly restructured its regulatory regime and created a new class of taxi licenses in 2012 for “Boro Taxis,” or green taxis. Boro Taxis launched in 2013 and only pick up passengers in areas typically neglected by traditional taxis—Northern Manhattan and the outer boroughs—through street hails and pre-arranged service, thus expanding access to consistent and regulated transportation for residents across the city. This case study describes the significant regulatory reform undertaken by the City of New York to improve the availability, safety, and access to taxi transportation across the five boroughs of New York City.
I. THE PROBLEM
The majority of New Yorkers rely on public transportation or livery services—only 22% of residents in Manhattan own a car compared to the national average of 91% of households owning at least one car. The taxi and livery system in New York City is the fourth largest transportation provider in the United States. The system is regulated by the New York City Taxi and Limousine Commission (TLC), which oversees yellow taxis, for-hire vehicles, commuter vans, paratransit vehicles, and certain limousines. Despite the scale of the taxi and livery network, the existing system of yellow taxis and for-hire vehicles did not adequately serve all of the boroughs of New York City. Riders in Queens, the Bronx, Brooklyn, Staten Island, and Upper Manhattan had been left out in the cold, too often literally. However, New York’s iconic yellow taxis tended to cluster around the midtown and lower Manhattan central business districts, where drivers know they can easily pick up passengers by street hail. By contrast, in the outer boroughs, yellow taxi service was scarce and residents primarily relied on illegal livery services with inconsistent pricing, quality, access, and availability.
The problem of inadequate taxi service across the five boroughs of New York City prompted the City to undertake an assessment of the existing regulations that governed taxi service to identify opportunities for reform.
II. UNDERSTANDING THE PROBLEM
Faced with the stark imbalance between the demand for taxi services outside of Manhattan and the inadequate level of service provided, the City of New York examined facts about the history of taxi services, the status of the existing livery service market, and the demand for these services.
Service Delivery Background
The lack in street hail taxi services in the outer boroughs, and the clustering of yellow taxi service in the central business district of the city, is attributed to a reform effort in the 1980s. Under the Koch Administration, yellow taxis became “dual use”—they were allowed to pick up passengers by street hail and also by dispatch. However, a new problem presented itself; there was no way to guarantee service either way. Taxi drivers could discriminate against passengers on the street (e.g., handicapped passengers) and rely on pre-arranged dispatch calls only, or drivers could ignore passengers requesting dispatch service and pick up passengers on the street. Eventually, yellow taxis became “single use”—they were only allowed to pick up passengers by street hail. For dispatch service, the for-hire livery service was created to respond to pre-arranged pick-ups. Because yellow taxis were only allowed to pick up passengers via street hail, yellow taxis began to cluster in Manhattan and pre-arranged services became more popular in the outer boroughs. This created a service gap—yellow taxis conducted street hails and became ubiquitous in Manhattan, while residents of the outer boroughs primarily relied on dispatch service. Over time, livery drivers illegally accepted street hails, and street hails of livery cars became common.
Empirical Evidence and Use of Data
To examine the imbalance between Manhattan and the outer boroughs, the TLC conducted observational studies, analyzed GPS data, and collected input from citizens via 311. In 2006, the TLC commenced an observational study to document the prevalence of illegal street hails of livery cars throughout the City and to map hotspots where these illegal pick-ups were occurring. The TLC also installed GPS in yellow taxis to record where yellow cabs were operating.
The analysis of illegal street hails and GPS data told a comprehensive, empirical story: yellow taxis conducted 97% of their street hails in the central business district of Manhattan and at airports, as shown in Figure 1. Yet, there was significant demand for street hail service outside of Manhattan that was insufficiently met through illegal street hails.
Conceptualizing the Problem
Drawing on the data, TLC noted the following issues to be addressed in a reform process:
- Availability - The data collected by the TLC found that 97% of pick-ups by yellow taxis occurred in the Manhattan Core and at airports, and only a small percentage of pick-ups occurred in the outer boroughs. Because of inadequate service in the outer boroughs, residents were forced to rely on pre-arranged services or hail sometimes unregulated and illegal cars.
- Service Quality - Yellow taxis offered significant service advantages over livery cars—passenger safety was highly regulated, the pricing was certain and fixed on every ride (the meter), and in the Manhattan core, taxi service was ubiquitous. Yellow taxis also accepted debit/credit cards, making payment quick and easy. In addition, the TLC kept electronic trip records for every ride taken in a yellow taxi, allowing passengers to find lost items and the TLC to investigate passenger complaints. In contrast, the service quality offered by other livery services varied widely. Compared to yellow taxis where passengers knew there was a consistent and standard rate for distance traveled, unregulated livery services did not adhere to a regulated rate, forcing passengers to negotiate their price with every ride.
- Passenger Safety - For a passenger hailing a car on the street, it was not immediately apparent which cars were regulated and which cars were not. Unregulated cars may not have met the same passenger safety standards as yellow taxis. Drivers of unregulated cars did not pass through the same rigorous background checks as drivers of licensed taxis, meaning that they could have had criminal records, DUI convictions, or traffic violation histories.
- Market Entry for Yellow Taxis - The current yellow taxi market in New York City was rigorously regulated. There were a limited number of medallions (approximately 13,000 total) licensed to vehicles. These medallions were, and continue to be, prohibitively expensive; with a value of more than a million dollars, making it very difficult for individuals to purchase. Most medallions were owned by large companies who rented out vehicles to drivers. Furthermore, the reselling of medallions and the introduction of new medallions into the market was rare.
III. ADDRESSING THE PROBLEM THROUGH REGULATORY REFORM
The Reform Process, a multi-jurisdictional legislative approach
An ambitious reform agenda was taken on by Mayor Bloomberg and the TLC, who first announced the Boro Taxi Program in January 2011. As part of his third term agenda, Mayor Bloomberg set out to stimulate business and economic activity to the outer boroughs and took on this regulatory reform work in order to increase taxi service citywide. Further, several severe weather incidents affected public transportation in the outer boroughs, making the lack of transportation alternatives widely apparent, and heightening public attention on the issue. The political will for regulatory reform was strong.
At the beginning of the process, the TLC attempted to pass the reform proposal through City Council. However, City Council would not pass legislation unless there was consensus and support from the yellow taxi industry. From the beginning, there was strong opposition from stakeholders in the taxi and livery service markets. Both the yellow taxi industry and the livery services opposed the introduction of new vehicles specifically designed for the outer boroughs, fearing that their introduction would infringe upon their business. The most common concern was the potential impact of the Boro Taxis on the existing car service infrastructure.
Realizing that the Boro Taxi Program would not likely pass the City Council, the TLC turned to the New York State legislature to propel the reform effort. The TLC proposed a plan to issue new Boro Taxi licenses, and after some negotiation that included modifications to the plan, such as the inclusion of additional licenses for wheelchair accessible vehicles, the plan was approved by the legislature. The TLC used state regulation as a reform mechanism: the State Livery Law was signed by Governor Cuomo in December 2011, and in turn, the TLC passed rules and guidelines governing the program in April 2012.
While the Boro Taxis were ultimately the adopted reform, several other options to bring more consistent taxi service to the outer boroughs were considered and ultimately passed over due to a lack of feasibility or support. These included such measures as:
- Extending yellow taxi service;
- Monitoring and enforcing where yellow taxis should work;
- Monitoring where other livery services should work; or
- Regulating currently unregulated and illegal livery services.
For the most part, the TLC engaged the legislative stakeholders in the City Council, State Legislator and Governor’s office—the entities who would eventually have to pass and sign the reform legislation. Engagement between the TLC and representatives from the yellow taxi industry and livery services was hotly contested throughout the reform process, especially by the yellow taxi industry.
- Yellow Taxi Industry - The yellow taxi industry opposed the introduction of the reform effort. They argued that medallion owners had invested large sums of money in medallions with an understanding that there would be a limited number of medallions available in the market. If the TLC introduced more taxis to serve the outer boroughs into the market, the investment that medallion owners had made would be diminished. They also argued that there was simply not enough demand for taxi service in the outer boroughs. In addition to program design, the yellow taxi industry was very skeptical of the TLC’s capacity to enforce compliance amongst Boro Taxis. Initially, the yellow taxi industry proposed a solution whereby current medallion owners would own a share of the new Boro Taxi medallions. By owning shares of medallions in both the yellow taxi and Boro Taxi markets, medallion owners would be able to support policies affecting both markets. The yellow taxi industry believed the TLC could have done a better job of inviting the yellow industry representatives to participate in the process of thinking through the problem and generating potential solutions—industry representatives believed there were opportunities for the TLC to work with them to ensure that yellow taxis were providing services to the outer boroughs.
- Livery Services - Representatives from the livery services argued that allowing yellow taxi medallion owners to automatically have a right to Boro Taxi medallions would prohibit existing livery service owners and drivers from having the opportunity to purchase Boro Taxi medallions. They also argued that creating a dual use Boro Taxi would only create the same discrimination problems that existed prior to the yellow taxis becoming single use in the 1980s.
The Reform passed by New York State and implemented by New York City
After approximately 24 months of stakeholder engagement, city agency, city council, and state legislature engagement, the reform passed by the State at the end of 2011 allowed the introduction of 18,000 Boro Taxi licenses to incrementally enter the market over a course of three years. The new licenses were not attached to the existing yellow taxi medallions.
Just like yellow taxis, Boro Taxis are required to have a uniform color (bright green) and graphics on the vehicle, meters, a debit/credit card reader, a roof light, a camera or a partition for driver safety, and GPS tracking.
The reform mandated that Boro Taxis provide service within a specific geographic boundary by street hail or dispatch in northern Manhattan, the Bronx, Queens, Brooklyn, and Staten Island. Pick-ups below 110th Street on the West Side or below 96th Street on the East Side, or at LaGuardia or JFK airports (dispatch only) was prohibited.
In the first year of service, Boro Taxis had to establish 20 percent of the fleet (or 1,200 vehicles) as accessible to wheelchair users. The reform stated that these users must be able to hail or call ahead for these vehicles, pay the same rate, and have on-demand access to transportation throughout the City.
Boro Taxis are in high demand and ridership is high, especially in Northern Manhattan and Queens. For the first time, residents of the outer boroughs of New York have access to a fleet of licensed and regulated vehicles that are designed specifically to serve them. Boro taxis are connecting residents across the city, allowing them to more fully participate in the city’s economy, educational offerings, services, and entertainments. Yet still more is needed to fully include everyone—in some neighborhoods, there are still not enough Boro Taxis on the road to meet the demand of livery services. According to GPS data collected by the TLC (see Figure 2), Boro Taxis have made pick-ups in the outer boroughs, beginning to fill the gap of service created by the clustering of yellow taxis in the central business district of Manhattan.
In total, the TLC will issue 18,000 licenses for Boro Taxis. By November 2013, TLC had issued 6,000 green cab licenses, which are all expected to be on the road by March. In addition, 1,200, or 20 percent of the Boro Taxis in the first year were accessible to wheelchair users, providing service to a diverse population.
Boro Taxis are equipped with a meter and GPS. This has allowed passengers from the outer boroughs to use a taxi service without having to negotiate a fare, as well as given to the TLC the ability to monitor Boro Taxi activity. Boro Taxis also feature systems to accept credit and debit cards, further increasing the service quality.
Boro Taxis are painted a bright green color, which differentiates them from the yellow taxis and other vehicles on the road. This color indicates to passengers looking to hail a vehicle on the street that the vehicles are regulated. Like yellow taxi vehicles and drivers, Boro Taxi drivers and vehicles are inspected by the TLC to ensure that passengers have a safe journey.
The first licenses sold for $1,500 each and the first resale was marketed at $7,000 a month later. Another 6,000 will be issued by June 2014 and 6,000 more are expected in 2015. There is already a waitlist of more than 2,000 individuals to apply for licenses. This pricing scheme is expected to raise one billion dollars for New York City. Compared to the high price of a yellow taxi medallion, the initial Boro Taxi licenses are priced at a lower entry point, allowing drivers from livery services to obtain a regulated license with the TLC.
The TLC has found no significant negative impacts—medallions for yellow taxis are still increasing steadily in price; the traditional dispatch for hire vehicles remains strong; there has not been a substantial increase in traffic congestion or accidents; and Boro Taxis are integrating well with the public transportation system.
Reactions to the introduction of Boro Taxis have been generally positive. Drivers who were able to purchase some of the first licenses have called it an excellent investment and are already seeing increases in their income. Boro Taxis have introduced few truly “new” vehicles to NYC streets: 83% of the 6,000 Boro Taxis in operation are driven by individuals who previously operated a traditional for-hire vehicle.
Critics of the program remain. Some livery service drivers argue that because the Boro Taxis can pick up passengers by street hail and by dispatch service, there is potential for Boro Taxi drivers to discriminate against individuals looking for street hail service, choosing to respond to a dispatch call. Alternatively, drivers might only respond to street hail pick-ups and ignore dispatch calls, creating an unreliable service.
Future Risks for New York City to Consider
There are some potential risks for the City of New York to monitor as the Boro Taxi program is fully launched. One such risk is that Boro Taxi drivers tend to behave like yellow taxi drives and cluster around certain areas (particularly in western Queens and Brooklyn), leaving some areas without consistent street hail options. This indicates that there may be a level of demand that is not filled, even with the addition of Boro Taxis.
- Lack of Compliance and Enforcement - While the TLC has increased the number of enforcement officers to ensure that Boro Taxis do not illegally pick up passengers within the Manhattan exclusionary zone, there are methods by which Boro Taxis could continue to make illegal pick-ups. There may not be a direct way to monitor whether these types of pick-ups occur. The inability to enforce where Boro Taxis drive is a major concern. Boro Taxi drivers are permitted to pick up passengers from the outer-boroughs and drive them the exclusionary zone. Once in the exclusionary zone, however, Boro Taxi drivers can turn off their meters, pick up a passenger, and negotiate a flat rate.
- Pricing of Yellow Taxi Medallions - There is no indication of how the introduction of the Boro Taxi program will affect the pricing of yellow taxis. In November 2013, the city’s first medallion auction in over five years, the largest bid for a “mini-fleet” of two medallions exceeded $2.5 million, by far the highest ever recorded. There is some concern with the easy access and cheap pricing to acquire Boro Taxi medallions and the dual use capacity of Boro Taxis will shift the pool of yellow cab drivers to Boro taxi cab drivers.
- Long-Term Effect on Livery Services - There could be significant negative long term effects on other livery services as Boro Taxis become more widely available. The number of other livery services who primarily operate by dispatch service in New York City may ultimately decline as a result of the Boro Taxis. Specifically, many community and neighborhood based livery services may lose business as their drivers convert to Boro Taxi licenses. In addition, since Boro Taxis have the option of picking up passengers via dispatch or street hail, drivers may favor street hail pick-ups and ignore dispatch calls. Customers who previously relied on the dispatch services of livery services may find themselves with inadequate or unreliable dispatch service. Furthermore, due to the driver’s option of answering dispatch calls or primarily relying on street hails, there may be tensions between livery base owners and livery drivers, who by state law must be affiliated with a livery base.
- Introduction of Ridesharing Companies - Around the same time that Boro Taxis entered the New York City market, ridesharing companies, such as Uber, also entered the market. As more ridesharing companies are introduced to cities around the country, cities have grappled with understanding the appropriate regulatory framework with which to address these companies. In New York City, ridesharing companies took advantage of the misalignment between the market supply of yellow taxis and the growing demand for livery services. The TLC will need to closely monitor the activity of these companies as they become more prevalent in the City and compete with the traditional yellow and Boro Taxis.