(Quick background: A ‘gate fee’ is the rental fee charged to a taxi driver for a shift. Taxi drivers pay the gate fee, plus gas and dispatcher/cashier tips. The current average gate fee for large companies — Yellow, Luxor and DeSoto — is $91.50. The proposed ordinance increases that average gate fee to $110.)
Obviously, most cab drivers, like all rational human beings, wouldn’t enjoy a 10% ($2/hr) pay cut. Are these gate increases necessary? Is this legislation desirable? Let’s discuss this a bit.
Does SF need a taxi gate fee increase?
Here are the facts as I know them:
- Cab companies operate on very thin margins. My gate fee (average $91.50) pays all of the following:
- renting the use of the taxi medallion (artificially limited to about 1500 in SF)
- the depreciation of the actual vehicle being driven
- liability and workers’ compensation insurance
- labor (dispatch, cashier, admin, gas men, maintenance/shop)
- facilities (lease, physical plant, etc)
- vehicle maintenance direct costs (spare parts, consumables such as oil, transmission fluid, window replacements, etc)
- computer and telecommunication expenses (dispatch radios, multiple phone lines, computer dispatch systems)
- misc admin overhead (accounting, waybill record keeping, legal, paratransit compliance)
- surely more fees/costs that I’m forgetting or am not aware
These costs add up very quickly. I am surprised I can get so much for my $91.50.
- The last significant increase in gate fees was in 2002 increasing to $91.50 from $83. The City appears overdue for a gate fee increase. Here is a chart:
- The City should peg gate fees with some sort of CPI. It is only reasonable to peg gate fees to some sort of cost of living index. Not doing so effectively reduces taxi company revenue each year the gate fee is not increased. This is a good aspect of the proposed ordinance.
- Increasing gate fees comes at the direct expense of cab drivers, not City residents. The proposed fee increase is an effective hourly cut of $2/hr. (Cab drivers currently earn between $10 and $20 per hour during 10 hour shifts; $15 is a reasonable mean.) This is a pay-cut for a vital City profession that provides safe, secure, and quick transportation to City residents and visitors.
- Lower pay rates for taxi drivers leads to lower quality of service, including more dangerous drivers. Lower hourly wages limits demand for the profession, lowering the bar for potential applicants to become licensed drivers. Less qualified applicants will then become drivers, including those with more questionable driving histories, unsafe driving practices and poor knowledge of City geography.
- The ordinance presents neither clear nor compelling evidence that cab companies need increased revenue. (PDF Link, ordinance on pages 3-7) Again, I feel a case can be made that companies DO need more revenue from gate fees (see above), but the ordinance as written presents an ambiguous need for increased funding.
A few reasonable requests before increasing taxi gate fees.
Taxi drivers, City residents and elected representatives should request the following before implementing an increased taxi gate:
- Clear and definitive evidence available to the public (perhaps audited financials) that points to a need for increased revenue through gate fees. I believe a case can easily be made for increased funding for cab companies, but the ordinance as written does not present such an argument, nor has one been made clear to the public.
- A gradual implementation of the proposed rate increase. As written, this ordinance would immediately decrease the salaries of essential City workers. The least the City can do is gradually increase the gate fees to soften the burden of this legislation.
- Seriously consider implementation of service quality improvements for residents. The City (via the Taxi Commission) has talked and talked about a peak medallion system to put more cabs on the road during high-demand evening times. If the Board of Supervisors can implement legislation to increase revenue to cab companies, they should also be able to implement legislation to improve quality of service to City residents. Increased service quality, especially on busy evening shifts, would also justify an increase in meter rates paid by the public for taxi rides, also helping to soften the blow of increased gate fees.
UPDATE: Motivated by Hoopla Hattie’s comments below, I wanted to get a better idea of whether or not we are really due for a gate fee increase. I decided to calculate what the gates would be if they had increased according to the CPI to match inflation. (Of course, this assumes that the gates in 1998 were appropriate. We need financials to know for sure.)
It turns out the proposed gate fee increase puts gate fees at almost perfect parity with the CPI increase estimated for 2008. What’s more, the last gate fee increase in 2002 put gates at parity with inflation.
Assuming gates were reasonable in 1998, and of course this is a contested assumption, the City is due for an increase. And, the proposed rate seems in line with publicly available CPI data from the Bureau of Labor Statistics.