Thursday, December 12, 2013

Option 3 Dissected

As the regulatory option discussion concerning "Option 3" nears a conclusion I think it time I discuss the potential ramifications minus allegory or rhetoric.  While others, including friends move toward discussion and compromise I remain appalled at what I see as the potential dismantling of an industry, something that is clearly unwarranted.  Having stated earlier that the situation we are facing is wholly artificial, our own  "Gulf of Tolkin" incident, I am alarmed at what I view as the hypnotized masses walking forward toward an contrived oblivion.

 I will be discussing the "how and why" of  "Option 3", its history and why it can only be viewed as unacceptable.  Hopefully everyone will see my conclusions as non-biased, based solely upon factual analysis.  Again, as said in earlier comments, I am not placing the blame upon fellow victims like the "for-hire" and "limousine" industries.  Though while not supportive of their continued operations, I feel a settlement, especially concerning the "for-hires" is essential.  The blame for what everyone is dealing with lies solely with local regulators and administrators.  But first more history concerning all this should be helpful.  This juncture is not accidental, the combination of mistakes and miscalculations made over a series of many years.


"Option 3" is a misinterpretation of history, taking all of the negative facets of taxi and turning them on its head.  In other words, "Option 3" is history turned upside down, serving only as reconcilable solution if you believe a convex image is not distorted but real and actual.  When blame is your operative view, then of course the taxi industry is criminally dysfunctional, justifying all punitive responses.  Understand that at least in Seattle all the decisions affecting the industry the past 40 years have been made by people who have never driven a taxi.  What we see today are the missteps of the past masquerading as verifiable reality.  Call it a distortion.  Call it false assertion.

If you really want to know what will happen if "Option 3" becomes reality I suggest reading, which can be found on-line, a 1983 article written about the City of Seattle's 1979 deregulation of the local taxi industry, "Seattle Taxis, Deregulation Hits a Pothole," by Richard Zerbe.  You should also check out Goldy's April 11, 2013 Stranger column about failed taxi deregulation where he quotes from a 2001 report originating from Craig Leisy's Consumer Affairs office , explaining why deregulation was/is a bad idea.  The study also states the dire impacts of deregulation.

One important point to consider is that the 1979 deregulation only affected taxis.  The outcome was so disastrous that the industry was re-regulated a short five years later.  What is so scary about "Option 3" is that it expands the market by allowing 200 "for-hire vehicles" to convert to "taxi licenses" and allows unlimited numbers---thousands?---of ride-share vehicles to operate legally in Seattle. "Option 3" also adds fifty additional taxis to the mix.  By reading Zerbe's well-researched piece and the City of Seattle's own report one might conclude that 'Option 3" is not an option at all unless your goal is to destroy the local industry.  As I keep saying, our local market demand will never sustain that level of intrusion.

As is often said, history is an able teacher, and failing to heed history's lessons can be both foolish and dangerous.  History in this case tells us a broad deregulation is not the answer.  The answer, I will be presenting, lies elsewhere.

For-Hire Vehicles: Why They Are Not  The Answer To Seattle's Taxi Market

Approximately three years ago a decision was made to put in place a "de facto" deregulation of the taxi industry minus any consultation with extant taxi associations or current industry leaders.  After refusing to consider releasing additional taxi licenses, the City of Seattle's Office of Consumer Affairs encouraged the release and purchase of nearly two hundred "for-hire" vehicle licenses.  King County in turn opened the "for-hire" spigot, allowing for what I understand to be an unlimited number of county-based "for-hire" licenses to be created.  The unfortunate consequences were many.

City of Seattle licensed "for-hire" vehicles come with a limited operational mandate,
forbidding them to cruise for passengers within Seattle's city limits, thus removing any direct "street" competition with regulated taxi cabs.   City of Seattle based "for-hire" drivers can only legally receive passengers through dispatched calls.

Knowing this, the Office of Consumer Affairs decision to release the "for-hire" licenses was curious and dumbfounding, because they were released without legally requiring affiliation with an association or having a proven dispatch system.  What the City of Seattle did then was encourage the creation of TWO HUNDRED separate businesses with no ability to legally operate.  Why the City of Seattle did this is yet to be answered.  So far no one has accepted responsibility for this bone-headed move. 

Unfortunately two hundred new business owners found themselves instantly burdened with operating costs similar to taxis but having no ability to pay those expenditures.  The City of Seattle neither conducted any cost analysis or business planning prior to releasing these licenses to the public. Nor did they offer any guidance or assistance to the naive people who purchased them.  In short the City of Seattle failed its own governmental mandate to protect and serve its citizens.  The results of this failure has been catastrophic, impacting both the new business owners and the taxi industry.

The "for-hire" owners had to make a choice.  Given that it takes years to develop a successful business model, they either had to give up their licenses or go to where the money is, meaning taking the risk of picking up passengers illegally upon the streets of Seattle. 

Fast forward to now, and minus any real enforcement, the "for-hire" vehicles are now an established but completely illegal fixture.  All requests made to the City of Seattle to suspend licenses have been completely ignored, making the City of Seattle in some form accomplices to the documented theft over the past three years. 

As far as I know nothing like this has ever occurred before in the history of  Seattle, open criminal activity allowed to continue 24 hours a day year after year unabated and without the intervention of regulators or administrators or the police. If the equivalent armed robberies or rapes or muggings or setting up of unlicensed restaurants occurred, the ensuing public uproar would be thunderous.  People would be fired and resignations demanded.  Investigations would be conducted and perhaps officials would be indicted.

 But of course nothing like that has occurred in relation to this situation.  Incredibly, as part of the solution offered by "Option 3" these very same thieves are to be allowed to become fully licensed taxis.  If I didn't now the facts I would find all of this fictional but it isn't.  This is operational reality.

No, "for-hire" vehicles are not, and never have been the answer to what might be perceived as a transportation infrastructure problem, meaning the sometimes lack of taxis at particular hours.  The simple solution has always been to dual-plate or regionally-plate all the current taxis save the fifty King County-only licenses issued to Green Cab.  Given that they have never operated under the original issued-mandate, their licenses must be rescinded.

Similarly the "for-hire" licenses should be eliminated, allowing for some damages awarded to the owners.  Two key points here.  For the most part, the for-hire industry has never totally operated under their known operational mandate.  And everyone should remember that no one forced anyone to buy the "for-hire" licenses.  Anyone buying them clearly knew that, as the rules stated, they were prohibited from picking up "flags" in the City of Seattle.  Despite their protestations, they have no case. 

Everything they have done, from buying the licenses to operating illegally within the legal boundaries of Seattle, has been voluntary.  If anyone from the City of Seattle told them directly, or implied that one day their licenses would one day convert to standard taxi licenses, we need to see the written proof.

Ride share Vehicles: Why They Must Be Eliminated

Everyone should remember why transportation services like taxis, buses, trains, ships and airplanes and jets are regulated.  It is all about public safety.  Read your daily newspaper and you will regularly find articles about ferry boats sinking in the Philippines or buses driving off cliffs in Peru and Ecuador, often with great loss of human life.  I have been on those buses in South America and I can personally attest to the danger.  What is happening is that the regulators in those countries are not paying heed to public safety.  In the USA we know better or least we should. That is why these new ride share smart-phone based apps are a non-starter.  Just because there is a new technology doesn't mean you alter the entire regulatory and business history of an industry.  It doesn't make sense. 

Imagine that someone decided to dispatch private airplanes to customers utilizing a similar kind of app used by Lyft or Sidecar.  Why many might think it was a terrific idea you can be assured that the FAA (Federal Aviation Administration) would immediately step in and block the potentially dangerous practice.  But when the City of Seattle and King County were presented with new app-based car services, what did they do? Nothing, they have done nothing at all to protect the public from illegally operated transportation services.

One of the reasons given is that some segment of the local population likes them.  Using that justification, perhaps the City of Seattle and King County should allow unfettered use of heroin and cocaine and child pornography because a sizable percentage favors that.  One of the primary purposes of governmental authority is to provide guidance.  Even with the overwhelming support of marijuana legalization, only recently have two states voted to legalize small amounts for personal consummation. Federally you can still be thrown in prison for a very long time.  Government then uses it authority to protect both the public and regulated industries.  Oddly City and County government has openly decided not to follow their own laws and rules and regulations regarding the upstart ride-share industry.  The question is why.

"Option 3" opens up the Seattle market to unlimited numbers of ride-share vehicles.  If the owner of Amazon, a known billionaire and a backer of the ride-share industry, wants to put on one thousand new ride-share cars he will be able to do it under "Option Three."  Scary, and there will be no effective regulatory authority to stop him.   "Option 3" holds the potential then to effectively kill the local taxi industry as we know it.   This makes no sense whatsoever.

Where is the Demand?

Ever since the release of the Cooper/Mundy demand study, the City Council has kept up a steady drumbeat for the need of more vehicles to service this new and ever expending consumer base.  As I have repeatedly pointed out, one of the studies major flaw is that it never once considered or mentioned the essential disappearance of what once was a taxi mainstay, package deliveries.  This past weekend I had one solitary package when ten years ago I might have had 20 or more on a given day.  What Cooper/Mundy failed to do was the math, subtracting the business lost from the perceived increase, which it seems to me keeps us at about 1990 demand levels.  Now business could increase but most of that will be seen only for a few months of the year or during certain times of a given day.

It is a deadly game opening the market to unlimited competition because many will simply have to give up and do something else.  At this point I don't even support "Option 3s" idea of licensing 50 new taxis.  I am unconvinced they are currently needed.  As I said, dual-plating all the existing cabs other than Green Cab will fill in the current gap in the market, that is if that gap really exists.  One study proves little.  More collaborative evidence is required.


"Option 3" not only ignores reality it creates one that doesn't currently exist.  There is no need for new quasi-taxis to be added to an already depressed business environment. The town-cars, which I haven't mentioned, must be brought in under some strict regulatory authority.  The "for-hire" cars, if they are allowed to exist, must operate under their original mandate. 

And enforcement must begin immediately against the illegally operating for-hires, town cars , and ride-share services.  The City of Seattle has the authority to stop all illegal activities.  It is time it begins following its own laws and halt the predatory practices currently impacting the Seattle and King County taxi associations and their owners and lease-drivers.  It is time for fairness to be applied to an important and vital industry.


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