Yellow taxi cabs and New York City — what could be more iconic?
Successfully hailing a cab has always been a rite of passage for New
Yorkers. It has bewildered out-of-towners but was traditionally handled
with little effort by seasoned residents of the Big Apple: spot an
on-duty cab, raise a hand, hop inside, enjoy a potentially strange, yet
authentic, experience.
The old-school taxi business has
been under assault in New York for some time, however, as Uber and Lyft
have spent half a decade rapidly expanding their operations.
Ride-hailing has flooded Manhattan with cars and driven down the value
of the city's allocated taxi medallions: There are 13,500 cabs in New
York City — but there is something like 80,000 vehicles aligned with
ride-hailing services, according to The Wall Street Journal.
Taxis now have a new challenge, and it could be an existential one:
congestion charges in New York, which are set to be the first in a US
city.
The congestion-pricing scheme is now part of a New York state budget,
with the fees to kick in by 2021. People driving into the congestion
zone — Manhattan island below 60th St. — will be hit with a $12 to $14
fee (it will likely be assessed using the E-Z Pass system, which already
covers many bridges, tunnels, and toll roads in the region). Taxis will
be billed $2.50 per ride, while ride-hailing services will be billed
$2.75.
Taxis don't cause congestion
But Uber and Lyft, for example, will be able to carve out a discount for
a "pooled" ride, knocking the fee down to $0.75. Taxis won't be able to
do this — and it could be impossible to monitor whether ride-hailed
pools actually wind up transporting multiple passengers.
The whole thing is intended to generate $15 billion over
five years for capital improvements to the city's mass-transit system
(in one of those "only in New York" twists, the state government in
Albany oversees mass transit in New York City). That's much-needed
funding, and one hopes it will be wisely spent. But the most recent
expansion of the city's subway, the Second Ave. line, took decades and
cost a staggering $3.8 billion, so don't get your hopes up.
Congestion pricing, of course, should ease Manhattan gridlock, but it
will do this at the expense of turning over the city's most lucrative
sections to Uber and Lyft while continuing the destruction of the taxi
business. It's a hard political bargain, which was forged by New York
Gov. Andrew Cuomo.
As far as I can tell, the plan combines accepted economic theory about congestion caused by personal cars — it's an unpriced "externality" — with a cunning effort to get well-capitalized Silicon Valley companies to pay for upgrading mass transit.
Taxi drivers caught in the middle
Taxi drivers are caught in the viselike middle. They've persuasively
argued that because their numbers have long been capped, they aren't
part of the congestion problem. This is accurate — in fact, it's hard to
see why taxis aren't exempt from the charge. They're sort of the
longstanding third leg of a New York City transit stool, with buses and
subways being the other two.
The taxi business has evidently lost that argument and
could now have a tough time competing with Uber, Lyft, and others
because ride-hailing services — already losing massive amounts of money
as they chase the growth that investors desire — will simply cut prices
to avoid any passenger sticker shock.
The double
standard at work here is actually so glaring that it's almost hard to
believe it's real. Uber, Lyft, and other ride-hailing services simply
deluged New York City streets with vehicles in an effort to rapidly
build their businesses. And we know how big those businesses can be: Lyft's initial public offering last week valued the company at over $20 billion.
The taxi business is hardly pure — economists have often argued that it
was a monopoly, and, at one point, taxi medallions were costing more
than $1 million. But New York is now using its lawmaking and budgetary
power to pick a clear winner in the transit game; the kind of money that
the Ubers and Lyfts can bring to the table is simply too humongous to
resist.
Pragmatists will tell you that the horse, so to
speak, has left the barn anyway, so it makes sense for New York to
effectively tax ride-hailing to make up for years of neglecting the
transit systems that have nothing to do with gridlock. In that case, the
taxi business, iconic or not, is expendable.
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