San Francisco Supe proposes taxi gate fee increase. Drivers need gradual implementation.

Alioto-Pier with an arrow pointing up that reads Taxi Gates

The Examiner reports Supervisor Michela Alioto-Pier recently proposed a significant increase in taxi gate fees charged to cab drivers.

(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:
  • San Francisco Taxi Gates 1998-2008 (proposed)

  • 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.

Link to Examiner article
Link to original SF City County ordinance (PDF)
Link to SF Board of Supervisors Government Audit and Oversight Committee Meeting Agenda (11/19/07)

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.)

gate fee pegged to cpi

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.

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7 Responses to San Francisco Supe proposes taxi gate fee increase. Drivers need gradual implementation.

  1. Hoopla Hattie says:

    Reading this absurd quasi-blog posting asking support for extra funds for cab companies in San Francisco truly makes me ill. This slimy spouting of flimsy cherry picked statistics smack of agenda rhetoric and sounds more like another Gavin Newsome payback to one of his secret admirers and major campaign contributors; the San Francisco cab companies. This type of political hack stabbing reminds me that the back door of politics leads directly to the sewer, and from there, the rats emerge.

    The data cited is laughable, rife with bias and inaccuracies. Cab drivers in San Francisco do not come near to making an average of 15 dollars an hour. On 2 nights a week, Friday and Saturday, hourly takes may equal or better that figure but the rest of the nights and all of the days the take is, on average, half that or less.

    The threat of putting on ‘prime time’ cabs means that the only time when any money can be counted on will be gone. Making everybody equally poor is not an intelligent solution. But, then again, intelligence is not the issue in political favoritism and hack political blogging.

    The average of $91.50 is for 7 days a week times (X) 2 or $183.00 a day per cab, or $1,281.00 per week, or $5,551.00 per averaged (4.333 weeks) month per cab (Yellow Cab has, approximately 350 cabs so their monthly take is around $1,942,850.00. That is pretty good takings for a car rental company, which is all a cab company pretends to be.

    How is it that Hertz and Avis and UHaul rent their vehicles for 1/7th this amount, have nearly the same overhead (minus order taking, dispatching and driver insurance) and still pay dividends to their share holders? A rental from Hertz in San Francisco for January 2008 for a full size 4 door sedan is $195.46 per week (including all taxes/fees).

    The larger companies provide order taking and dispatch services where the smaller ones do not. The lease rate is the same. These operations are not cheap but they are manageable. But, what do you get in these services? Precious little. Do you think the cab companies pay top wages for order takers or dispatchers? The answer is no. They pay the lowest wage they can get away with and then force tips to fill in the difference.

    Desoto stills has a decent radio dispatch system as does Luxor on computers but Yellow and the rest are either a shambles (Yellow) or don’t exist. (Yellow Cab has, at least, stopped the practice of tipping the order dispatchers but they still allow tipping at the cashier and cab dispatch windows in direct violation to the law. The other cab companies take whatever money they can coerce.

    The other major expense that rental car companies don’t have is driver insurance; currently around $800.00 per month. Order taking and dispatching costs, if done correctly, are around $500,000.00 per year. Subtracting the $9,600.00 per month insurance and the $41,666.67 monthly dispatch costs and Worker’s Compensation $43,750.00 per month (total: $95,016.67) from the $1,942,850.00 monthly take leaves $1,847,833.33 a month to compare with the operating costs and profits of rental car companies. I have a feeling that cab companies would have the slight edge in that comparison. Nice work if you can get it.

    Even taking the $91.50 as the shift fee (which is low than the reality) a driver must make an additional $40.00 for gas (per shift), pay ‘tips’ to cashiers and dispatchers making the daily nut, at minimum, $150.00. A driver must pay that amount before earning a dime for themselves. If they don’t make it they are held out of service until they can find the money or quit.

    If you go out and pull $220 from the streets, in the 9 hours you have to work, your take is $70.00 for a 10 hours shift period (only 9 hours are productive hours). If you add an average of 2 hours of waiting time before getting your cab and the time it takes to wait in the gas line and the line to pay your fees you have spent 12 hours for $70.00 ($5.83 an hour). This is a typical take for a day driver.

    Saturday/Sunday days may return substantially lower daily takes. Night drives make 20% more during the summer and fall but 10% less than day drivers in the winter and spring. San Francisco has a turn over rate of nearly 2,000 drivers per year out of a total of 6,000 registered drivers (1/3).

    Cab companies have had the best of both worlds for a long time. They ignore labor laws by having 10 hour shifts without minimum wage or overtime and ignore contract law and anti-trust law by shielding themselves from the market, product tying (if you rent a Uhaul on Friday you don’t have to take it on Monday as well, as is the practice at a typical cab company) and inequitable performance of contractual obligations. They prey upon immigrant populations who are thankful to have any source of revenue after coming from countries were laws are non-existent. Cab companies are the Third World come home to roost.

    Shed no tears for the cab companies. Their ride is straight to the bank. The law is beginning to catch up with them and they now have to think about providing health care coverage for their drivers. They have threatened to go out of business if these laws are enacted or, at least, impose draconian measures. They would prefer to scratch another driver off the active list because they died than dig into their precious purse to provide a minimum of preventive health services. San Francisco loses, at minimum, 1 driver per week to preventable disease, traffic accidents, murder and suicide.

    I can see where you would advocate adding to the value of an industry over the value of other businesses (cab drivers are, by fiat, contractors) if there is some secret benefit to you. Whatever value you see in impoverishing a group of very hard working people to line with gold the pockets of those who will never have enough is for you to consider carefully. Or, as I would guess, you couldn’t care any less what happens to the politically disenfranchised. After all, it is good to be the king or, at least, a friend of a friend to the king.

    – Hoopla Hattie (copyright 2008, all rights reserved)

  2. kfarr says:

    Hoopla Hattie, I am glad you came across this post. I have feared that many people in the City are not even aware that the Board of Supervisors proposed a gate fee increase. I also appreciate and respect your strong comments.

    I want to make a few things clear.

    I agree that the cab companies have not presented a valid rationalization for an increase in gate fees. In fact, this is one of my frustrations with the ordinance as written.

    You bring up excellent points regarding the disparity of pricing between a pure car rental company and City cab companies.

    However, I would like to raise a few flags with some of the math.

    First, a significant cost factored in gate fees is the right to use the actual medallion. That comes straight off the bottom line. I’ve heard Yellow pays about $2,200 a medallion per month. That cuts their revenue (before costs) roughly in half.

    Second, I think it is very easy to imagine costs being lower than they actually are. Yes, we can both calculate revenue and subtract the cost of medallions. But, no matter how cheap you believe cab companies may be and how shitty they treat their employees (and I agree they are cheap) neither of us really knows what their true expenses are.

    This is why I believe it is ESSENTIAL that the Board of Supervisors have audited financial statements from the cab companies (and made available to the public) so that they can see what their costs actually are BEFORE a gate increase is approved. I’m sure that you agree it is irresponsible of the Board and of the greater tax paying public to regulate increases in fees without an understanding of why these fee increases are necessary.

    I was surprised to hear that other drivers’ average earnings are so low. I may have not made this clear in the post, but I have been driving a cab for about 6 months. I do not consider myself a professional by any means, but I have been diligently recording my earnings throughout my short time as a driver. As of today, my average take-home across all my shifts is $172.57. I concede that number will continue to decrease during these slow winter months, probably approaching $150, but will then be positively offset during the busier summer months. I also came across an estimate in this analysis which claims SF drivers make an average of $117 per 10 hour shift.

    I also agree with you that the City should provide for health coverage for taxi drivers. It would be easily funded (along with other improvements such as working security cameras) if the City moved toward a transferable (for sale) medallion system. But, that is a topic for another post.

    I do take issue with your claim that cab companies prey on immigrants. To me, this implies immigrants have no other choice than to become cab drivers, which is simply not the case. If you don’t like the terms that the cab company gives you (tying shifts together) then walk away and get another job.

    In my taxi course last June there were, of course, a number of immigrants learning the trade of taxi driving. I asked one guy what he was doing before. He worked at a convenience store in the City and made $9/hr. I see him now sometimes on the road, he works for one of the large computerized dispatch companies. I’ll ask him how he likes it. He says it’s hard work, but he makes a whole lot more than he ever did at the convenience store.

    Cab driving offers an amazing opportunity to unskilled immigrants. Many of these drivers have no formal education, do not speak English well, and have no other marketable skills. Yet, they can earn $15/hr tax free*. I think that’s a remarkable thing. (*Of course, we’ll continue to debate this $15/hr number. It is common knowledge that many cab drivers do not pay tax, to Uncle Sam’s great surprise.)

    Hoopla Hattie: despite our disagreements, I think we agree on a few key issues:
    – You and I both believe the City government and its residents deserve a clear explanation of why cab companies need increased revenue.
    – Increasing the gate fee will squeeze cab drivers, a hard working population that already feels squeezed as it is.

  3. Pingback: Should the City allow cab companies to charge higher gate fees to taxi drivers? « blog

  4. Hoopla Hattie says:

    Some extra information: I talked to a friend that works at Yellow and he says they pay $1900.00 for medallion privileges. Another issue is: how many cabs are ‘gate and gas’ and how many are long term lease and how many pre-Prop K medallions are there at each of the companies. How much a cab company pays for what percentage of each category of medallion is needed to complete this formulation.

    But more to my point is the treatment of drivers in regard to uncompensated labor they contribute. If you go to U-Haul, etc., the vehicle is brought to you, gassed up and functioning to legal standards. This is not so at cab companies. If there is a problem with the cab assigned to you it is incumbent upon you to waste your time to get things fixed. The cab companies use a very unreliable maintenance method of having the previous driver report problems. This system doesn’t work. If your cab breaks down the only compensation offered are hours added to your lease period rather than having those hours subtracted from the lease price. The time waiting for a tow truck, traveling to the yard, dealing with the paper work, etc., is on you.

    A rental car attendant checks your gas indicator, marks it down, and you go to the counter to finish the transaction. When picking up the car you walk out to the staging area and get into your car. You also know that your car is ready, if you called in ahead of time. You do not need to sit and wait 2 hours for a car to appear. All these conditions appear to me, as labor theft. The numbers are not insignificant and represent cost savings that rental car companies do not enjoy. So, go ahead, add in the new numbers and then subtract the uncompensated labor and see how they compare to rental car companies in the same geographical area.

    As to shift tying:

    You may not be familiar with concepts of anti-trust laws and monopolistic practice. In case you are not familiar, I will elucidate. There are 2 basic types of monopolies. One, the more familiar, is horizontal collusion where companies conspire to fix prices and agree to not compete. The other is vertical anti-trust behavior where an attractive product is coupled with unattractive products (product tying) and bundling where products are coupled with undercut product pricing to driving competitors out of business. Microsoft was convicted in federal court for this form of monopoly. Luckily for Microsoft, the verdict was thrown out after GW Bush took office.

    Shift tying (product tying) effectively shields cab companies from the market by covering unattractive shifts through coupling them to more attractive shifts. So, if there is no business on the street the cab company is immune from those market conditions. Their ‘market’ stays steady. In addition, there are no 24 hour cancellation privileges for cab drivers. So, the market artificially constructed by the cab companies is further shielded by making it impossible to forgo a rental when market conditions are down. If a driver (lessee) doesn’t show up on a dead day they still have to pay the rental fee. This represents, in my opinion, 2 levels of market shielding from the same imposed condition of shift tying.

    This is, to me, a clear violation of law and is, to my knowledge, making its way through the justice department and will be acted upon when Bush is out of office. Market shielding is the test for any anti-trust litigation. This practice clearly is intended, as far as I can see, to do just that. There should be no other relationship between lessor and lessee at a rental car company than at a cab company when viewed from this perspective. The alternative is for the cab companies to treat their drivers for what they are: employees and pay them wages for the time they contribute, including overtime after 8 hours.

    So, let’s see how these adjustments compare with the average rental car company. Do you think that Hertz would allow Avis to force the same conditions on their customers as do cab companies or do you think Avis might call foul? This would clearly be anti-competitive to a business in the same market. So, the next phase of anti-trust comes into play. When competing companies engage in the same anti-competitive behavior horizontal monopoly (collusion) rules come into play as well.

    Your implied supposition, by taking up the question of increased compensation for cab companies, should address these other questions before exacerbating the problem with incomplete arguments giving fuel to inflammatory political rhetoric. Your arguments are not new and usually come out of the mouths of some political hack or henchman each time a new political cycle rolls around. I am not convinced that you are not one of the above.

    If you are making an average above $150 per shift after 6 months of driving then it should be obvious that you are in the wrong job unless, of course, you are a well trained, well educated immigrant (or some fool artist or musician, student, etc.,) who needs cash rather than respect and humane treatment. This is remarkable and, from my observations, well above the average. Still, if you add up the actual hours spent getting, driving and returning your cab you will find that the hourly average is below, substantially below, $15.00 per hour.

    – (not so mad) Hattie

  5. Pingback: Update: Taxi gate fee increases « kfarr

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