CAP.3 DISE/,JO GEOMETRICO

This chapter reports the views of San Francisco stakeholders in the taxi industry, as expressed to the study team in interviews, and via the Taxi Driver Survey. Full analysis and results of the Taxi Driver Survey is available in a separate volume. Views expressed in this chapter are not necessarily those of Hara Associates, and may cover topics outside the scope of this study. The chapter is intended to provide decision makers with contextual information on the issues. Comments relevant to the mandate of this study are incorporated in the analysis and recommendations in other chapters.

Interviews were conducted in person, in the summer and fall of 2012, supplemented by follow-up interviews in 2013 with companies and driver associations that had expressed interest in further discussions during the first round of interviews. Town Hall meetings over drafts of this report also influenced the final version. Industry views evolved in response to the competitive challenge of shared- ride services and proceedings of the California Public Utilities commission. A partial list of respondents is provided in Appendix A. The identity of some driver respondents has been protected.

3.1

VIEWS ON METER RATES

Drivers, company owners, and customers alike all agree that rates currently are not too low. “The drivers are happy,” said one company owner, “they’re getting about $40 more per shift.” Are the rates too high? The majority think they are now about right.

Driver representatives and companies were especially conservative in light of the pressure they feel they are experiencing from limousine services and shared rides. Those interviewed after insurance rates had increased markedly were asked if now was the time to adjust meter rates to cover the expense. The majority replied “no.” Taxi industry town hall meetings were nearly unanimous in their desire to leave meter rates unchanged under present competitive uncertainty

On the current rates: “The initial fee seems high,” said a representative of the hospitality industry, “but the cost of the whole trip isn’t bad. Still,” this person continued, “San Francisco has the third highest rates in the country. But on the other hand, Uber charges more.” The last point was made repeatedly. Another added “Meter rates seem reasonable. No one complains about it.”

Another person, also from the hospitality industry, said, “It feels like you pay too much and get less than you should. The price here is very high. Time is of increasing value to people, and they’re getting less patient. If you have to wait half an hour and then pay a lot, too, people get really annoyed.” This person also noted that Uber charges even more than taxis, but claims people feel it’s worth it if the service is reliable. Another said that as a SF resident, public transit is his first choice, but when he’s really in a hurry, he calls Uber. For many people, reliability trumps cost as a concern.

A few, however, including a fleet owner and the manager of another company, thought the recent increase (around 20%) was too high. “It hurts drivers in the long run,” claimed one. Another pointed out that the current rate structure provides “too much incentive for people who stay at the airport; the recent change means you can make $7-8 more on an airport run. The time spent waiting at the airport for a fare—an hour-and-a-half, on average—is that much time a driver isn’t serving the rest of the city.” This mirrors the hospitality industry representative who said, “Rates in the city are fine, but it is pricey from the airport; it costs $45 to reach the city limits.” A taxi company manager pointed out that bumping up the price of a cab makes it more difficult for working class people and those who can’t afford a car. At least one city supervisor is adamant that rates rise no further until service improves.

Reliability in relation to cost, rather than the current rate per se, was how most stakeholders articulated their concerns about price. In terms of reliability, the issue most frequently raised was the difficulty of getting a cab in the neighborhoods. Strong views here were discussed in the previous study Managing Taxi Supply, and also reflected in the survey of San Francisco residents. Suffice to say here, that a number of interviewees—passengers, suppliers from the high tech industry, as well as taxi industry representatives across the board—suggested the possibility of a surcharge or some other monetary incentive to improve neighborhood service. All made the suggestion knowing that it might increase fares for at least some passengers. Several pointed out that even a ten percent premium would still make a cab ride cheaper than using Uber.

The nest question was when and how meter rates should be set in the future. Stakeholders not directly employed by the industry were less aware of the huge gap—some eight years—that justified the recent, obviously large 20 percent hike. A few suggested there be an annual adjustment. Most, however,

hastened—unprompted—to say this would be too frequent. Those in the industry were, naturally, highly cognizant of the length of time that preceded the last increase, and thought a review every two years would be reasonable. Some thought it mandated already, that there was supposed to have been a formula under the direction of the Comptroller that didn’t happen. A few put forward the idea of a trigger for reviewing rates, such as a spike in gas prices. However, when asked if that would mean that a drop in gas prices should trigger a decline in fares, most favored a regular review—although, having been burned at the pumps, they were reluctant to completely ignore the possibility of somehow considering oil price spikes.

Stakeholders were then asked how they would like to see rates set. Three options were suggested: using the Consumer Price Index (CPI); using some sort of taxi cost index that specifically takes taxi-related costs (insurance, fuel, etc.) into account; or waiting until the demand is so strong that it can no longer be ignored.

Several loudly decried the third option, which they pointed out, is what commonly has been used. Most initially favored the CPI as they are familiar with it, but even a brief explanation and discussion of the taxi cost concept resulted in its being favored. Sample responses and follow-up concerns included:

Yes. I like the taxi cost index concept a lot. But is it perhaps more applicable to gate fees than to meter rates? (driver)

I like the taxi cost index concept, but maybe a big spike in gas should trigger an increase. (driver) I like the idea of a model related to the actual cost of operating a taxi. (driver)

I lean towards the cost index approach to meter rates. I don’t think San Francisco has ever considered looking at that kind of model. (dispatcher)

If we have a cost profile [based on a taxi cost index] that is continually kept current, maybe what the profile showed would trigger a review rather than simply a fixed date. We want the drivers to make a good living, and you want to have a safe service. It needs to work in conjunction with the public transportation system. (company owner)

Definitely, rates should be adjusted based on a formula that reflects the cost of operating taxis. (driver)

Transparency—how the public will view the method used to set fares, which inevitably means raising them—is the main concern about adopting any given method. Consistency—that the same method will be employed every time rates are set, is a complimentary concern. One company owner took a

somewhat cynical, albeit from his perspective, realistic view, saying, “Intellectually I like the taxi cost index. But in reality, I’ll go with letting the pot boil, since that’s what usually happens.” Most participants who were in a position do so agreed to provide basic information to support the development of a cost index.

A final point about the meter rate made by stakeholders across the board (although not by all

individuals), was that it can vary; it can be used as an incentive to alter patterns of service. As mentioned above, this will be discussed again in the section on dispatch and neighborhood service, but here it is worth noting some of the ways it was suggested it might be implemented, as this would affect meter rates.

For at least one fleet owner, incentivizing radio calls ranks as a top priority. He points out that Uber is one of the taxi industry’s biggest threats. “Their whole model is that you are going to pay more for a cab, but it is going to be reliable. We need to address this.” He suggests charging more for a radio call. It might be more or less than the drop fee. He also likes the idea of a surcharge for radio calls because it would benefit companies that have invested in providing good dispatch, and serve as an incentive for drivers to work for such companies. He believes that if drivers took, say, 15 radio calls per shift at even a $2 surcharge, it would make a significant difference. Over time, drivers would use the radio more, and use it more effectively. “Not that you’ll see a dramatic difference overnight, but you’ll see a gradual encouragement, and better service,” he says. He thinks the incentive readily could work out to an extra $320 per month for drivers.

Similar suggestions were put forward by some of those taking part in the San Francisco Travel

roundtable discussion. One proposed congestion pricing for peak periods. Another suggested increasing the rate by about ten percent, again during peak periods. A fleet owner also suggested a surcharge at peak hours. For him, the idea is that customers would make offers—that is, bid—to get reliable service. A Paratransit Coordinating Council member, speaking of the disabled medallions, pointed out there already is an incentive program that offers $750 quarterly for exceeding minimum requirements. The stick portion of the equation—citations that can lead to medallion suspension—also helps. He wondered whether a similar regime couldn’t be applied to all vehicles.

Another suggestion was that there be a guaranteed pick up fee like Uber’s—if a cab is called and the person is a no-show, a fee is charged. It could be less than Uber’s $10, but the principle would be the same. Perhaps it would only operate at certain times.

One driver spoke at length about implementing a fee for taking calls in the neighborhoods, and, like the director, charging a fee to no-shows

Speaking with some of San Francisco’s technology innovators, they too suggested the possibility of offering incentives, such as premium fees for serving certain areas, or letting customers offer a bonus when calling a cab. Whatever the incentive—or disincentive—technology can play a role in expediting the arrangement and also in enforcing its terms. For example, a meter could be shut down if a driver does not comply with an agreed-upon arrangement.

Last but not least, passengers, including paratransit users, all thought guaranteed, reliable, timely service, would be worth a premium. The question is how to define such service and what the premium should be.

3.2

VIEWS ON GATE FEES AND OPERATIONAL COSTS

Current Gate Fees and the Gate Fee Cap

Gate fees are largely an unknown consideration to those outside the immediate industry. Industry stakeholders who commented were often ambivalent:

I’m of two minds. The current fee is OK if an incentive program is implemented. On the other hand, costs like insurance and maintenance are rising. Perhaps $5 more per shift now. In future, maybe more in line with costs. At the same time, much of the cost is what is being paid to medallion holders. You somehow have to leave non-medallion holders ahead. (owner of a relatively large company)

The latter concern was echoed by a driver who maintained that, “Gate fees are too high. The price is driven up by the high fees companies pay medallion holders.” Another driver said that the current fee is too high for most drivers, and suggested that it be reduced for slow nights and raised on busy ones. Other drivers felt the gate fee should rise. “Owners should push for an increase the way drivers did,” said one. Others suggested they “go up a little bit” or “be reviewed.”

Taxi company owners who felt the current rate was OK or could rise slightly pointed out that with the introduction of hybrids, gas costs had been greatly reduced, thereby effectively lowering costs to drivers, and through the bonus paid to companies that acquired hybrids, effectively raising their take. Said one, “Increased gate fees go into the pocket of medallion holders, which increases the competition for medallions.” He also stated that maintenance costs on hybrids are 70% of those for Crown Victorias, and further, that accident rates on the hybrids seem to be lower as well. Another thought it “not politically a good idea to raise them now.”

Several owners suggested specific amounts to which the gate should rise, most citing an additional $10.00 to $15.00 above the current rate. Only one owner was adamant that “gas and gate needs to go up. It should be reviewed annually. One problem,” he said, “is that SFMTA adopted an indexing process for penalties, permits, etc. We need a level playing field. Costs are going through the roof—especially insurance—and cars need to be replaced every three years. We need a 20% profit,” he added.

In later interviews, following the sharp increase in insurance costs, larger companies were emphatic that a significant increase in the gate fee cap was needed. This position was taken even though some

company owners expressed concern that raising gate fees now would worsen driver shortages they were experiencing. The point was made that there was a great lack of trust in any ongoing cost

adjustment process by the SFMTA given the many year lag between rate adjustments in the past. Thus, even if the companies did not fully take advantage of a higher gate fee cap now, they would have the security of flexibility in the future.

In contrast, some smaller companies opposed any adjustment in the gate fee cap. They felt that, given current driver shortages, they would be unable to take advantage of any change in the cap. Higher gate fees would mean fewer drivers and unfilled shifts.