October 7, 1998
To:Task Force to Review the Taxi Industry
From:Commissioner of Urban Planning and Development Services
Subject:Executive Summary of the Review of the Toronto Taxi Industry
Purpose:
This report presents an overview of the review of the Toronto Taxicab Industry as conducted
by the Toronto Task Force to Review the Taxi Industry. As such, the report serves as the
executive summary to the attached detailed report entitled "Report to Review the Toronto
Taxi Industry", that provides the analysis to support the recommended reforms.
This executive summary addresses the extent of research and analyses conducted, describes
the study methodology, provides an overview of the feedback received through deputations,
submissions and workshops, and describes the conclusions and recommendations for reforms
to the taxi industry.
Funding Sources, Financial Implications and Impact Statement:
There are operating cost implications to Toronto Licensing due to changes in administrative
procedures and resources that result from this study. Specifically, a requirement for ten
additional enforcement staff is identified and requires an increase in the amount of
approximately $800,000.00 for staff and equipment, in Toronto Licensing's 1999 operating
budget. Once these recommendations are implemented, it is expected that the quality of the
taxicab industry will improve and demand for enforcement will decline. Other implications
related to increased training and complaints handling requirements will become evident as the
recommendations are implemented and will impact future budgets in the year 2000 and
beyond. It is recommended that these impacts be reported to the Emergency and Protective
Services Committee and Council within six months of approval of this report.
The current practice requires Toronto Licensing to recover operating costs through annual
licensing fees allocated proportionately to each industry that it regulates. The changes
recommended in this report are for the benefit of taxi licensees and it is therefore
recommended that any budget increase be offset by an increase to the license fees paid by taxi
service licensees. Recognizing the timing of this report, the proposed improvements to the
taxicab industry will be additional to the license fees 1999 taxicab license fees already
approved by Council at its meeting on October 1 and 2, 1998, as contained in Clause No. 2 of
Report No. 9 of the Emergency and Protective Services Committee. This approval provides
for taxicab licenses to be issued for a period of eight months in 1999. Therefore, impacts on
Licensing fees that result from the recommendations in this report can be incorporated into the
calculations for the next license period for taxicab license.
The recommended reforms also impact the current market value of taxicab licenses, lease
rates for taxicabs, and income for drivers. These changes are designed to be implemented
gradually so that the impact on individuals can be appropriately managed. These changes are
necessary and will serve to benefit the Toronto public and visitors and the taxi industry
overall.
Recommendations:
It is recommended that:
(1)The Task Force approve the attached Report to Review the Taxi Industry and forward it to
the Emergency and Protective Services Committee and Council for approval;
(2)The recommendations for reform be approved as a package recognizing the
interrelationship of all initiatives and that the all changes are necessary to improve Toronto's
taxi service in accordance with the goals of the Task Force to Review the Taxi Industry;
With respect to customer service:
(3)To adopt a new Taxicab Passenger Bill of Rights for all Toronto taxicabs, to be displayed
on the back of the passenger seat, easily visible to passengers, to inform that Taxicab
passengers have a right to:
_A professional driver who:
_is licensed and knowledgeable;
_knows the major routes and destinations in the City of Toronto;
_speaks and understands English;
_is courteous and provides assistance;
_provides a safe ride;
_knows and obeys the by-laws and all traffic laws;
_offers a silent ride if desired;
_Direct the driver on the route to be taken;
_A quality taxicab:
_in good mechanical and physical condition;
_with a clean passenger area and trunk;
_air-conditioned or heated on demand;
_with easy access to seatbelts;
_with a smoke-free environment;
_equipped with a meter that issues receipts noting the date and time of the trip, distance,
taxicab license number, and the fare charged;
_An effective customer complaints process;
_Reduce the tip if the above services are not provided;
(2)in order to implement recommendation number (3), the following steps be taken to give
effect thereto;
(3)all Toronto taxicabs be equipped with a receipt machine that provides the passenger with a
receipt noting the date and time of the trip, length of the trip, registered number of the taxicab,
the fare charged, and the Toronto taxicab customer service telephone number;
(4)information from the receipt equipment be made available to Toronto Licensing as
required, for information, training, and review purposes;
(5)Toronto Licensing adopt the easily remembered customer service number
1-877-TO-TAXIS;
(6)Toronto Licensing develop a plan respecting steps to be taken to augment the current
customer complaints process with a marketing plan and resolution process and report back to
Emergency and Protective Services Committee within six months to identify any impact with
respect to resources to provide for:
_taxicabs to boldly display the customer service number, posted on the Taxicab Passenger's
Bill of Rights, with the accompanying plate number and driver's name posted alongside the
advertisement;
_all taxicabs to display the customer service number with a safe driving message on the back
of the taxicab, visible to other vehicles;
_Customers to have the option to file an on-line complaint whereby personal information, as
well as an account of the incident, can be filed;
_the customer with the choice of either filing a complaint against a driver through an
industry-wide organization such as the Taxicab Advisory Committee, or attending a short
hearing with the regulatory authority;
_Toronto Licensing to respond in writing within 7 days to the customer to inform them of
actions to be taken;
_Toronto Licensing to resolve complaints within 90 days and advise customers in writing
respecting the outcome of the investigations;
_The industry to assume a greater role in the self-management of their trade;
With respect to industry structure:
(2)Council endorse the principle that Toronto is a world class city and that as ambassadors
for a world class city, Ambassador Taxicabs must provide:
_High quality driving skills;
_High quality customer service skills;
_High quality vehicles;
(2)Ambassador Taxicab licenses be issued to persons who:
(a)successfully complete the Advanced Ambassador Taxi training course, with access to the
training program as defined by recommendations 26-30, below;
(b)operate a vehicle that by year is one model old at the time it enters service as taxicab and
that is replaced at the end of its fifth model year;
(3)Ambassador Taxicab licenses shall be issued to eligible person as defined in a rate not to
exceed 300 licenses annually;
(4)A vehicle that is converted to natural gas or a taxicab meeting criteria for barrier free
accessibility may be eligible for a two-year extension;
(5)Ambassador Taxicab licenses shall:
(a)be driven by the License holder;
(b)not be transferred;
(c)not be leased;
(d)entitle the Taxicab to display a distinguishable Ambassador Taxicab insignia, including a
decal and vehicle stripe, visible to potential passengers;
(e)entitle the Taxicab to pick-up passengers at Pearson International Airport, if agreements
can be reached with the Greater Toronto Airports Authority;
(6)the existing 3,480 taxicab licenses be grandfathered and the characteristics of the standard
taxicab licenses (Standard Licenses) include:
(a)transferability of Standard Licenses as currently provided for under By-law 20-85 for a
period of two years;
(b)after two years, Standard Licenses may be transferred only to persons holding a valid
Toronto taxicab drivers license who may:
_lease the taxicab;
_drive the taxicab; or
_transfer to a person holding a valid taxicab drivers license;
(c)leasing of taxicabs as currently provided for under By-law 20-85 is continued, with the
following amendments:
_a lessee may be party to only one taxicab lease agreement at any one time, and the lessee
must drive the taxicab on a full-time basis;
_a lessee can hire up to three alternate drivers;
_New taxicab drivers who drive standard taxicabs, must successfully complete the existing
three week training program offered by Toronto Licensing;
(d)all Standard License owners must participate in the industry by:
_personally attending all three annually scheduled inspections;
_file annual documents in person at Toronto Licensing;
_attend all hearings relating to that owner's license or vehicle in person;
(e)a taxicab operating with a Standard License may be designated as an Ambassador Class
Taxicab where the Standard License holder:
_successfully completes the Advanced Ambassador Taxi training course;
_operates a vehicle that by year is one model year old at the time it enters service as a taxicab
and that is replaced at the end of its fifth model year;
(3)A taxicab operating with a Standard License that is designated as an Ambassador Taxicab
("Designated Ambassador Cab"):
(a)shall be driven by the License holder;
(b)shall not be transferred;
(c)shall not be leased;
(d)shall entitle the Taxicab to display a distinguishable Ambassador Taxicab insignia,
including a decal and vehicle stripe, visible to potential passengers;
(e)shall entitle the Taxicab to pick-up passengers at Pearson International Airport, if
agreements can be reached with the Greater Toronto Airports Authority;
(6)A Designated Ambassador Cab may abandon its Ambassador Cab Designation, and
continue to operate as a Standard Licensed Taxicab;
(17)Toronto Licensing investigate with the Ministry of Municipal Affairs and Housing of the
Province of Ontario, the possibility for the City of Toronto to set limits on lease rates and
instituting conditions for lease cancellations;
With respect to industry responsibilities:
(18)Council endorse the concept of self-management and work to create the conditions which
will permit it to be implemented over time;
(19)Council endorse the continuation of the Taxicab Advisory Committee (TAC);
(20)The TAC be structured in such a way to develop the industry capacity for
self-management;
(21)The structure be amended to include: elected representation from taxi drivers, elected
representation from taxicab license owners, elected representation from industry managers
including designated agents and brokerages; and that there be ex-officio representatives of
Toronto Licensing, the Board of Trade, the Hotel and Restaurant Association, the Province of
Ontario, the proposed Greater Toronto Services Board, and the Greater Toronto Marketing
Association;
(22)The mandate of the TAC include:
_Drivers code of ethics;
_Driver safety and property loss and the possible assistance that can be offered by Toronto
Police Services in this regard;
_Reasonable accessibility to taxicab transportation for the disabled;
_Performance reviews and incentives;
_Passenger complaints handling;
_Study and make recommendations to Council on the applicability of self-management to the
needs of the industry;
(23)the Chief Administrative Officer (CAO) address industry self-management and the issues
identified in recommendations 20-21 above, in the development of the terms of reference for
the Taxicab Advisory Committee;
With respect to training:
(24)Toronto Licensing develop and provide a five-day, taxicab license owner and designated
agents certification course that must be taken annually by all taxicab license owners and
designated agents and addresses at a minimum:
(i)changes in By-law 20-85 or other relevant legislation;
(ii)Toronto tourism information;
(iii)Performance statistics respecting the taxicab industry;
(iv)Workshop to discuss potential improvements to the taxicab industry;
(25)Toronto Licensing develop and provide a three-day, taxicab driver retraining program
that must be taken every two years by all taxicab drivers that addresses at a minimum:
(i)changes in By-law 20-85 or other relevant legislation;
(ii)Toronto tourism information;
(iii)Performance statistics respecting the taxicab industry;
(iv)Workshop to discuss potential improvements to the taxicab industry;
(v)Defensive and rough weather driving skills including an in-car driving test;
(vi)Customer service skills;
(26)Toronto Licensing, in accordance with City procedures, prepare terms of reference to
contract out to colleges or other appropriate training institutions, the development and
provision of an up to three-month, advanced driver training program for the new Ambassador
Taxicabs, that addresses at a minimum:
(i)Toronto tourism;
(ii)Importance of taxicab drivers to serve as ambassadors to Toronto;
(iii)By-law 20-85 and other relevant legislation;
(iv)Toronto geography and road network;
(v)Taxicab meter/trip records;
(vi)Services for passengers with disabilities;
(vii)Communications and professionalism;
(viii)Cultural and gender sensitivity;
(ix)Passenger and driver safety;
(x)Financial planning;
(xi)Small business practices;
(xii)CPR and first aid;
(xiii)Defensive and rough weather driving skills including in-car testing;
(27)Toronto Licensing in consultation with the City Solicitor, report to the Emergency and
Protective Services Committee on the necessary amendments to the By-law to change the
purpose of the current drivers list and owners list to a mechanism to determine who has access
to the advanced Ambassador Class training for the purposes of obtaining a license;
(28)Access to the Ambassador Class training program for the purpose of obtaining a license,
should continue at ratio one to one from the owners list and drivers list, as currently provided
for in the By-law;
(29)When an individual's name reaches the top of the list, they may:
(i)Elect to take the training;
(ii)Defer their training under the following provisions:
_Each individual may only defer two times;
_Each individual must notify Toronto Licensing that they elect to defer training to the next
available year or to the bottom of the list;
(30)Drivers and owners from the current list who take the course and do not pass, be given
one opportunity to add their name to the bottom of the list and retake the training program;
With respect to taxicab quality:
(31)Ambassador Class Taxicab licensees must provide a vehicle that by year, is one model
year old and must be replaced by five model years old as defined in the description of motor
vehicle portion of the current Ontario Ministry of Transportation and Communications
passenger motor vehicle permit for any vehicle;
(32)Grandfathered licensees by the year 2003, provide a vehicle that by year, is one model
year old and must be replaced by five model years old as defined in the description of motor
vehicle portion of the current Ontario Ministry of Transportation and Communications
passenger motor vehicle permit for any vehicle (1999 model or newer) and that the upgrade in
vehicle quality be phased-in as follows:
(i)In the year 1999, no motor vehicle that, by model year, is more than eight years old shall
be used as a taxicab by the time of the second mechanical inspection of such taxicab (1992
model or newer); and no motor vehicle used as a taxicab may be replaced by a motor vehicle
that, by model year, is more than three years old;
(ii)In the year 2000, no motor vehicle that, by model year, is more than seven years old shall
be used as a taxicab by the time of the second mechanical inspection of such taxicab (1994
model or newer); and no motor vehicle used as a taxicab may be replaced by a motor vehicle
that, by model year, is more than two years old;
(iii)In the year 2001, no motor vehicle that, by model year, is more than six years old shall be
used as a taxicab by the time of the second mechanical inspection of such taxicab (1996
model or newer); and no motor vehicle used as a taxicab may be replaced by a motor vehicle
that, by model year, is more than two years old;
(iv)In the year 2002, no motor vehicle that, by model year, is more than five years old shall
be used as a taxicab by the time of the second mechanical inspection of such taxicab (1998
model or newer); and no motor vehicle used as a taxicab may be replaced by a motor vehicle
that, by model year, is more than two years old;
(v)In the year 2003, no motor vehicle that, by model year, is more than five years old shall be
used as a taxicab by the time of the second mechanical inspection of such taxicab (1999
model or newer); and no motor vehicle used as a taxicab may be replaced by a motor vehicle
that, by model year, is more than one year old;
(vi)a vehicle that is converted to natural gas or a taxicab converted for barrier-free
accessibility is subject to a two-year extension to the retirement date;
With respect to regulation and enforcement:
(33)Toronto Licensing increase the commitment to enforcement of the taxicab industry by 25
per cent, requiring additional enforcement staff of ten full-time equivalents;
(34)The appropriate adjustment for staff and equipment, reported by Licensing to be
$800,000.00, be made to the 1999 operating Licensing budget submission and the increase in
license fees be calculated for the next license renewal period;
(35)The Commissioner of Urban Planning and Development Services report to the
Emergency and Protective Services Committee and Council on the resource and budget
implications respecting other recommendations in this report related to training requirements
and the customer complaints process;
(36)Toronto Licensing in consultation with the City Solicitor report to the Emergency and
Protective Services Committee, on recommendations for changes to By-law 20-85 or other
legislation to enhance enforcement of licensing By-law offences within the taxicab industry;
(37)Toronto Licensing, in cooperation with the Ministry of Transportation of the Province of
Ontario, develop and seek appropriate approval for a coordinated taxicab license identification
program to provide:
(i)Ontario license plates attached to taxicabs identified as such by a vertical "TAXI"
wordmark that clearly identifies the vehicle as a taxicab;
(ii)a coordinated numbering system that provides for matching numbers for Ontario License
plates and Toronto taxicab plates;
(38)Toronto Licensing investigate the possibility of identifying limousines by a vertical
"LIVERY" wordmark on the Ontario license plate that clearly identifies the vehicle as a
limousine;
(39)Toronto Licensing work with the Ministry of Transportation of the Province of Ontario to
develop an inspection program to provide regular taxicab safety blitzes;
(40)The Taxicab Advisory Committee and Toronto Licensing work with the Toronto hotel
industry to develop guidelines to ensure that hotel doormen hail only Toronto licensed
taxicabs for guests;
(41)Toronto Licensing work with the Ministry of Municipal Affairs and Housing of the
Province of Ontario to seek amendments to the Municipal Act to remove the exemption for
non-Toronto, Airport plated taxicabs and limousines that currently permits them to pick up
fares within the boundaries of the City of Toronto;
(42)Toronto Licensing enter into discussions with the Greater Toronto Airports Authority to
explore initiatives that would allow Toronto Ambassador Class Taxicabs to pick up
passengers from Pearson International Airport;
(43)Toronto Licensing in consultation with the City Solicitor seek to amend By-law 20-85, to
license designated agents as managers, subject to duties and obligations to be developed by
Toronto Licensing;
(44)This report be referred to the Licensing Commission (Licensing Tribunal) for
information;
(45)In the interest of public safety, the City Solicitor and Toronto Licensing staff report to the
Emergency and Protective Services Committee on possible By-law amendments to limit the
number of hours that taxicab drivers can drive a cab to a maximum of 60 hours over seven
consecutive days and also to require taxicab drivers to maintain a daily log, documenting
hours worked, that must be provided to Toronto Licensing for review upon request;
(46)Toronto Licensing in consultation with the City Solicitor amend the By-law to provide
for an evening surcharge, in the amount of $2.00 per trip, be introduced between the hours of
9:00 p.m. to 6:00 a.m.;
(47)Toronto Licensing discuss the possibility of amending the Municipal Act with the
Ministry of Municipal Affairs and Housing of the Province of Ontario to allow for the
introduction of minimum penalties for offences under By-law 20-85, and report back to the
Emergency and Protection Services Committee on actions that can be taken;
With respect to implementation:
(48)Toronto Licensing develop an implementation plan that defines the schedule for change
and includes:
(i)Implementation and management plan for each recommendation requiring action by
Toronto Licensing;
(ii)provisions for performance review to measure the success of these initiatives;
(iii)a communications plan to inform stakeholders of the reforms and the status of
implementation;
(49)this report be referred to the City Solicitor for the purpose of developing specific
instructions to amend By-law 20-85, as required by these recommendations; and
(50)the appropriate City Officials be authorized and directed to take the necessary action to
give effect thereto.
Council Reference/Background/History:
At its meeting on April 16, 1998, by adoption of Clause No. 2 of Report No. 3 of the
Emergency and Protective Services Committee, Council established a Task Force to Review
the Taxi Industry. The creation of this Task Force was the culmination of a number of recent
articles in the media and the concerns expressed by the public, taxicab owners and drivers,
Toronto Licensing, the Board of Trade and the tourism industry respecting the state of the taxi
industry in Toronto.
These concerns include:
_continued deterioration of the quality, safety, and reliability of taxicabs that do not provide
adequate service to the public or a positive image for the City of Toronto;
_lack of priority to customer service that reflects poorly on the taxicab industry and the City
of Toronto;
_that the characteristics of taxi licenses has evolved the industry structure to include an
increased number of participants for individual licenses that splits potential revenues more
extremely than can be supported by the industry;
_inflated values of taxicab licenses that provide incentives for absentee and passive investors
to own taxicab licenses without investing or participating in the industry; and
_that the current situation hampers the ability for many drivers to earn a fair wage.
Council approved the following guiding principles for the Task Force:
_the general public has the right to expect and demand clean, safe taxicabs;
_the general public has the right to expect and demand courteous, knowledgeable and
experienced drivers;
_drivers have the right to expect and demand a fair return for their labour;
_plate holders have the right to expect and demand a fair return for their investment; and
_the City has the right to expect and demand that its by-law will be obeyed.
At its meeting on May 11, 1998, the Task Force to Review the Taxi Industry adopted the
report entitled "Work Plan for the Task Force". The report described the resources, tasks and
timelines involved in reviewing the Toronto taxi industry, consulting with stakeholders, and
developing recommendations. The work plan consists of three phases, namely: research and
scoping of issues, analysis and consultation, and report and recommendations.
At its meeting on June 22, 1998, the Task Force adopted the report entitled "Status of the
Review of the Toronto Taxi Industry" for information. The report provided a summary of the
deputations received from stakeholders and presented the status of the review of the taxicab
industry, including an overview of issues and a summary of possible solutions. It addressed
the structure for the workshops held on July 6, 1998, that were designed to gain feedback
from various participants in the Toronto taxicab industry. The report also more clearly defined
the goals of the Task Force, namely to ensure that the Toronto Taxicab industry:
_provides safe and secure service to the public;
_offers high quality customer service in clean, comfortable taxis;
_employs courteous, knowledgeable and experienced drivers; and
_permits people who work in the system to share fairly in the costs and benefits.
Comments and/or Discussion and/or Justification:
The Toronto taxicab industry needs major improvement. Too often its passengers suffer from
a ride in an inferior vehicle with poor quality service. Customer complaints are common and
severe, as many passengers perceive a dilapidated taxicab as an unsafe taxicab. In too many
cases, this perception may be reality: at any one time, an estimated 70 taxicabs are serving the
public while in dangerous and unsafe condition. Many passengers describe an intolerable lack
of comfort and a complete lack of customer service. This situation is an unacceptable,
negative reflection on the image of the City of Toronto as a world class city. Taxicabs must be
ambassadors for our City of Toronto.
The problems of the industry have been blamed on bad or unenforceable rules in the By-law,
poor enforcement of the By-law, and to the structure and temperament of the industry itself
Overcoming these problems, and providing high quality service to the customer is the goal of
the this report. The 50 recommendations are organized around five points:
10Create a Taxicab Passenger Bill of Rights: to focus the industry on customer service;
20Improve the Cabs: retire dilapidated cabs and replace with newer, quality vehicles;
30Improve training: so that all people in the industry, owners and drivers, know what the
public expects and have the skill to do the job;
40Create Ambassador class cabs: to put greater pride of ownership behind the wheel; and
50Strengthen Enforcement: to make sure it all happens.
Every recommendation is an integral part to an overall plan designed to improve the taxicab
industry. It is critical to approve these recommendations as a package rather than piecemeal,
as the expected positive impacts on the industry will not be realized by isolated measures.
Some recommendations directly address the quality of vehicles and training requirements,
while others address issues less obvious to the public such as regulations and structure of the
industry.
The poor existing state of the industry has evolved over 30 years and no fair and reasonable
reform can transform it into a customer-based service overnight. Countless studies in the past
have not been implemented for various reasons or change has been ineffective. As a result, the
industry continues to decline. In addition, many industry stakeholders are frustrated and
demoralized, with customers paying the ultimate price with poor service.
There have been some heartening, isolated improvements in the industry in recent months.
But we take them not as a comfort that the industry will self-improve and that no change is
necessary, but rather as confirmation of how positive change can be. Efforts by the industry to
participate in this process and introduce better quality vehicles for example, are applauded. It
is evidence that the Toronto taxicab industry is determined to improve. This is a signal of
support that the time for change is now to secure a successful and respected future for Toronto
taxicab industry participants.
The proposals contained in this report will bring immediate, visible improvement to the taxi
industry. In the first year alone, Torontonians would see the retirement of all cabs over eight
model years old. That's approximately 50 per cent of the fleet upgraded in 1999, (1,738
taxicabs). By the year 2002, all Toronto taxicabs would be no more than five model years old.
At the same time, continuous improvements in training for all drivers and owners would lead
to discernible improvements in service and driver knowledge. These changes would have an
immediate positive impact from the back seat view in a taxicab.
Industry Background:
The Taxi industry is governed by the Toronto Licensing, and By-law 20-85. A taxi may not be
put on the road unless it is licensed by Toronto Licensing. Similarly, no one may drive a cab
except a Toronto Licensing approved driver. The holder of a cab license may:
_drive the plate as taxi driver;
_lease the plate to a taxi driver; or
_sell the plate.
Only about 20 per cent of owners drive their own plate. About 60 per cent of drivers hire a
middleman-manager, known as a "designated agent" to operate the plate on their behalf. The
remaining 20 per cent lease the plate to a driver directly, without a designated agent.
The number of taxicab licenses is strictly limited. Drivers' licences have traditionally been
relatively easy to obtain. This has resulted in a relative over-supply of drivers for the number
of available plates. There are well over 10,000 licensed taxi-cab drivers for the 3,480 licensed
taxicabs on the road in Toronto. Cabs tend to be driven in two twelve-hour shifts, so there are
roughly three drivers for every possible taxi shift.
New plates are issued based on a formula which projects demand for taxi services. Toronto
Licensing maintains waiting lists for owners and drivers for new plates. At present, these two
lists combined are over 2,500 names long. No new taxicab licenses have been issued since
1992, although had the model been applied from the freeze in 1993 to today, 233 new licenses
would have been issued.
Drivers say that the over-supply of drivers allows owners to command "take it or leave it
prices" for plate leases. Owners are quick to point out they only charge what the market will
bear, and that no one is forced to remain a cab driver. Many drivers claim that that they feel
compelled to continue driving even if their returns are low, because they must continue to
drive to keep their name on waiting list for a new plates.
The market price of owner's licenses has grown in recent years: from $49,976.00 in 1993 to
$85,000.00 in 1998. Income derived from leasing provides an annual average rate of return of
13 per cent. This is a spread of 8 per cent over the returns from standard investment options,
such as Canada Savings Bonds.
The Taxicab Passenger Bill of Rights
It is apparent that it is necessary to change the culture of Toronto's Taxi Industry. The focus
needs to change to customer service. This can be promoted by setting clear performance
standards that the City of Toronto expects in its cabs.
The Taxicab Passenger Bill of Rights was a concept introduced in New York as part of the
sweeping reforms brought to New York's cab industry. It has had a major effect in refocusing
industry priorities and in raising consumer expectations. This report recommends the adoption
of the New York Bill of Rights with minor amendments: for example, as much emphasis is
put on heating as on air conditioning, given the realities of the Toronto winter.
It is believed that the Bill of Rights will be the benchmark against which developments in the
industry will be tested. In that sense, it is the centrepiece of the report. All the other
recommendations serve as a means of giving effect to the service standards contained within
it.
Better Taxicabs
There are not as many new cabs on the road as there used to be. In 1982 over 80 per cent of
cabs were less than three years old. Now, only 20 per cent of Toronto's cabs are less than
three years old.
Similarly, the retirement age of cabs is getting older. Until 1992, all cabs were retired at the
end of their sixth model year. Many argued that if age extensions were permitted, then the
fleet would be improved because owners would put better cars on the road. In reality, it did
not work that way. In 1998, over 50 per cent of the cabs are over eight years old and
maintenance violations have gone up since 1992.
On average, 2 per cent of vehicles fail their scheduled inspections and are found to be
"dangerous and unsafe" That figure translates to roughly 70 taxicabs.
Of greater concern, in a recent spot check performed by Toronto Licensing, 14 out of 21 cabs
inspected were removed from service as "dangerous and unsafe". Clearly, there is a problem
of vehicle quality that must be addressed.
At present, cabs may be no more than three years old when they enter service, and are retired
at the end of six years. They are eligible for age extensions beyond six years, however, when
they can pass a mechanical inspection.
The report recommends that taxicabs be no more than one model year old when they come
into service and that they be retired at the end of their fifth model year. It is recommended that
these new age restrictions be phased in over five years. It is also recommended that age
extensions be made available for two years where the vehicle has been fitted for natural gas or
for provided handicapped accessibility features. No other extensions shall be offered.
Better Training
The skills of the driver are as important as the vehicle in providing a safe and comfortable trip
for the consumer. It is believed that it is necessary to make sure that drivers have the skills
necessary to provide exceptional customer service.
Toronto Licensing has recently adopted a three-week training course for drivers, but the
overwhelming majority of license holders got their license before it was instituted. They
obtained their license on the basis of a three day course. While on-the-job training has been
their classroom, there are changes in the industry that require on-going training.
Accordingly, the report recommends that all drivers take three-day refresher course every two
years. The course would cover changes in the By-law, developments in tourism, defensive
driving and customer service. It is also recommended that drivers who fail the current
three-day course be required to take the current three-week course to maintain their license.
Training is not only important for drivers. Owners and designated agents also need to
maintain their skills, particularly given how many owners are not active in the industry on a
day-to-day basis. Accordingly, an annual five-day course is proposed for all owners and
designated agents.
Ambassador Class Taxicabs
The issuing of new taxicab plates is probably the most controversial aspect of the industry.
The limit on plates creates a closed market. The number of cab licenses determines how many
ways Toronto's Taxi "pie gets sliced". Adding new plates adds new mouths to feed, so
industry concern over new plates is understandable.
The matter should also be of concern to the City. The issuance of new licenses should not
merely grow the industry, but also grow it in a way that promotes the health of the industry.
The report makes two key recommendations:
The first relates to how we issue plates. The second relates to the characteristics of the new
plates. Together, the recommendations are designed to ensure that new entrants to the taxi
industry will offer a high quality service that we will be proud to have as Ambassadors for
Toronto.
First: how we issue new plates. This report recommends that over time, the city should move
away from the existing system whereby an economic model determines when new plates
should be issued.
Instead, the city should draw from the London, England model, whereby new participants
may enter the industry after making an investment in customer service. In London, this
investment takes the form of passing a notoriously difficult test - an investment of about two
years of the applicant's time. A two year course does not appear to be necessary in Toronto's
case: the City is simply not that complicated. Nevertheless, there needs to be a legitimate
barrier to entry to prevent the market from being flooded with cabs.
This report recommends that the barrier should not be absolute, as at present, but rather
permeable: The City should facilitate individuals who want to make the necessary investment
to get into the industry.
Secondly, the barrier should promote the health of the industry by leading to a positive
investment in the skills and tools of the prospective cab driver.
Accordingly, two components are recommended.
_The applicant would be required to successfully complete a three-month course specially
designed for Toronto taxicab drivers.
_Second, the applicant would have to put a car on the road that was no more than one model
year old at the time it entered service.
Initially, it is recommended that licences be issued on this basis to a maximum of 300 licences
per year. Over time, however, it is recommended that numeric limits be abandoned in favour
of the modified London model.
The second recommendation relates to the characteristics of taxicab licenses. The problem
with issuing new licenses of the existing kind is that it provides an economic windfall to the
recipient, with no corresponding benefit to the public. The plate is issued at a cost of roughly
$6,000.00, but soon is saleable at a market value approaching $85,000.00-$90,000.00.
Furthermore, the right to lease the plate means that the new owner may soon cease directly
serving the public.
Analysis reveals that owner-drivers are the least likely drivers to have complaints made
against them for poor vehicle maintenance or bad service. This is attributed to two factors.
First, an owner-driver is his or her own boss, and operates without the burden of lease costs or
other layers of management. With fewer expenses to pay, the owner driver has more money to
channel into vehicle maintenance. Secondly, it appears that the positive influence of pride of
ownership translates into better cars and a more consistent, higher level of customer service.
Unfortunately, the number of owner-drivers is in decline. While they made up the majority of
the industry in the 1970's, today they make up about 20 per cent of cab drivers. The
recommendations in this report promote the existence of the owner-driver in the industry, is to
promote the industry itself.
Accordingly, this report recommends that all new plates be issued with the following
stipulations:
_They may only be driven by the owner;
_They may not be sold; and
_They may not be leased.
This would ensure that new plate owners would be owner-drivers.
Existing plates would be grandfathered under current regulations, with one exception: After
two years from implementation, plates could only be sold to purchasers with a valid taxi
driver's licence.
Enforcement
Experience in the taxi industry has shown that vigorous enforcement is necessary to uphold
the provisions of the By-law. This report recommends that action be taken to ensure that the
public interest is upheld.
First, it is recommended that amendments be made to the By-law and to the Municipal Act to
allow for more aggressive enforcement. For example, in order to charge an unlicensed taxicab,
enforcement officers must witness money change hands. Passengers are often understandably
reluctant to serve as a witness and attend a hearing. As a result, it is often impossible to
successfully prosecute an offence when it is caught by enforcement staff. This requirement
often renders the offence effectively unenforceable. Enforcement problems are exacerbated by
the requirement that the Commission must base any penalty on their judgement whether the
individual will offend in the future. Further, the Municipal Act does not currently provide for
the institution of minimum penalties for guilty offences. All of these factors make vigorous
enforcement a challenge. The report makes specific recommendations for amendments that
will enhance the ability of the City to enforce the By-law.
Secondly, the report recommends that more resources be put into enforcement. There has been
an overall decrease in enforcement resources for the taxicab industry caused by staff
reductions and workload increase. This facilitates a culture that openly contravenes the
By-law. Many participants choose to offend as the risk of penalty is limited. The report
recommends that ten new enforcement officers be hired to increase enforcement activity in the
industry.
Finally, it is believed that in the future, the industry should take a greater role in managing
itself. It is recommended that the Taxi Advisory Committee be reconstituted as an elected
body, with a mandate to work with Toronto Licensing to develop ways and means of
achieving greater industry self-management over the next five years.
Conclusion:
The simple issuance of more licenses will not improve the quality of the industry to the degree
necessary. It may be argued that the improvement to vehicle quality and driver training is all
that is required. It is more likely, however, that the existing structure, even with additional
plates, will lead to an eventual absence of owner-drivers and a continued decline in customer
service. The challenge is to propose a solution that improves quality for passengers and
provides fair returns for drivers and owners within a regulatory structure that works
effectively. We believe that this plan meets the challenge.
While this report is critical of many practices common in the industry, the criticisms do not
apply to everyone in it. There are many individuals - owners, drivers and designated agents -
who have impressed us by their commitment to good business and good customer service. We
believe that they, their peers and their customers know who they are, and we applaud them for
maintaining high standards in an often frustrating system.
The real message of this report is that taxicabs are ambassadors to our visitors and residents.
We must impose high expectations on the taxicab industry to leave a positive impression on
the City of Toronto. This can only be achieved if all stakeholders work together towards this
common goal.
Contact Name:
Katherine Borron
392-4318
Joe Farag
392-8108
Virginia M. West
Commissioner of Urban Planning and Development Services
Report to Review the Toronto Taxi Industry
October 1998
Table of Contents
FOREWORDiii
PART I:INTRODUCTION
1.1Guiding Principles
1.2Goals
1.3Approach to the Review
1.4Scope of the Review
1.4.1Research and Consultation
1.4.2Analysis and Consultation
1.4.3Report and Recommendations
PART II: BACKGROUND
2.1Industry Overview
2.2Industry Structure
2.4.1From the Point of View of the Owner
2.4.2From the Point of View of the Designated Agent
2.3Customer Service Quality
2.3.1The Toronto Taxicab Fleet is Aging
2.6Legislative Framework
PART III:INCENTIVES FOR CHANGE
3.1Industry Observations
3.2Stakeholder Feedback
3.2.1Regulation and Enforcement
3.2.2Industry Structure
3.2.3Customer Service
3.2.4Quality of Taxicabs
3.3Proposed Solutions
PART IV:BEST PRACTICES
4.1London, England
4.1.1Structure
4.1.2Regulation and Enforcement
4.1.3Unlicensed Competition
4.1.4Customer Service
4.1.5Driver Safety, Work Standards, and Benefits
4.1.6Vehicle Characteristics
4.2New York City, New York
4.2.1Structure
4.2.2Regulation and Enforcement
4.2.3Customer Service
4.2.4Driver Safety, Work Standards, and Benefits
4.2.5Vehicle Characteristics
4.3Halifax, Nova Scotia
4.3.1Structure
4.3.2Regulation and Enforcement
4.3.3Customer Service
4.3.4Driver Safety, Work Standards, and Benefits
4.4Vancouver, British Columbia
4.4.1Structure
4.4.2Customer Service
4.4.3Driver Safety, Work Standards and Benefits
4.4.4Vehicle Characteristics
4.5Montreal, Quebec1
4.5.1Structure
PART V:THE SOLUTION
5.1Taxicab Passenger's Bill of Rights
5.1.1Customer Support Hotline
5.2Ambassador Class Taxicabs
5.2.1Ambassador Class Taxicab Licenses
5.2.2Ambassador Class Taxicab License Issuance
5.2.3Conditions for Existing Licenses
5.2.4Designated Agents
5.2.5Leasing
5.3Improved Driver Training
5.3.1Technological Enhancements
5.3.2Issues for Consideration by the Taxicab Advisory Committee
5.3.3Barrier Free Cabs
5.3.4Fare Structure
5.4Improve Taxicabs
5.5Regulation and the By-law
5.5.1Enforcement
5.5.2Taxicab License Fees
5.5.3Unlicensed Taxicabs
5.5.4Penalties
5.5.5Implementation Plan
5.6Conclusions
FOREWORD
This study was conducted on behalf of the Task Force to Review the Taxi Industry (the Task
Force). The Task Force is chaired by Councillor Denzil Minnan-Wong and is comprised of
the following members: Councillor Brian Ashton, Councillor Brad Duguid, Councillor
DennisFotinos, Councillor Doug Holyday, Councillor Howard Moscoe, and Councillor
BillSaundercook.
The purpose of the review is to consider the financial and legal aspects of the industry as
presented in various reports and submissions to the Task Force, and provide recommendations
to meet the prescribed goals of the Task Force.
The work of the Task Force is supported by a staff team, chaired by the Commissioner of
Urban Planning and Development Services, and represented by the Office of the Mayor,
Licensing, Legal, Finance/Treasury, and the Corporate Policy and Planning Division of the
CAO's Office. An external consultant, StrategyCorp. Inc., also provides support to the staff
resource team. The role of the staff resource team is to provide an independent analysis for the
consideration of the Task Force in their development of policy options respecting the taxicab
industry.
Part I of this report provides an introduction by way of a description of the guiding principles
and goals of the Task Force. It also discusses the approach to the study and scope of the
review.
Part II of the report presents background information including a brief overview of the
history of the taxi industry in the City of Toronto. It addresses the significant policy changes
that have led to the evolution of plate values, leasing and the current industry structure.
Part III of the report introduces the issues facing the Toronto Taxicab industry and the
incentives for Toronto Council to implement change. It also provides a summary of the
feedback and proposed solutions received from taxicab stakeholders.
Part IV of the report includes an overview of the best practice examples culled in the
research.
Part V of the report includes the recommendations, organized by a five key points for reform
to meet the guiding principles and goals of the Task Force. Recommendations are addressed
with respect to regulation and enforcement, structure of the industry, working conditions,
customer service, and quality of taxicabs. This section also includes recommendations
respecting the development of an implementation plan that will address a performance review
plan and a communications plan.
PART I:INTRODUCTION
At its meeting on April 16, 1998, by adoption of Clause No. 2 of Report No. 3 of the
Emergency and Protective Services Committee, the Council of the City of Toronto established
a Task Force to Review the Taxi Industry. The creation of this Task Force was the
culmination of a number of recent articles and the concerns expressed by the public, taxi
owners and drivers, the Toronto Board of Trade and the tourism industry respecting the state
of the taxi industry in Toronto. These concerns include:
_the quality, safety and reliability of taxis has deteriorated;
_customer service quality has deteriorated;
_the industry structure has suffered from significant growth in the number of individuals who
act as middlemen in the delivery of taxi services;
_absentee owners and passive investors in the chain of participants; and
_the current situation hampers the ability of many driver's to earn a fair wage.
1.1Guiding Principles
Council endorsed a work plan on ways to reform the taxi industry based on the following
guiding principles:
_the general public has the right to expect and demand clean, safe taxicabs;
_the general public has the right to expect and demand courteous, knowledgeable and
experienced drivers;
_drivers have the right to expect and demand a fair return for their labour;
_plate holders have the right to expect and demand a fair return for their investment; and
_the City has the right to expect and demand that its By-law will be obeyed.
1.2Goals
The goals of the review are defined in the report to the Task Force dated June 22, 1998 and
entitled "Status of the Review of the Toronto Taxi Industry", namely to propose
recommendations, an implementation plan and communication plan that will ensure that the
Toronto Taxicab industry:
_provides safe and secure service to the public;
_offers high quality customer service in clean, comfortable taxis;
_employs courteous, knowledgeable and experienced drivers; and
_permits people who work in the system to share fairly in the costs and benefits.
1.3Approach to the Review
Recognizing the growing frustration within the taxicab industry and on the part of the Toronto
public respecting the deteriorating condition of taxicabs and taxicab service, Council
established the Task Force with a very aggressive schedule to report on ways to improve the
taxicab industry. The original timeline of 90 days was subsequently extended to provide
additional time for staff to research and consider the complexity of the industry and how it is
likely to respond to various changes. This extension was also to accommodate the busy
meeting schedules of Task Force and Emergency and Protective Services (EPS) Committee
members and the following timeline is now established:
Release of ReportOctober 7, 1998
Task Force to Review the Taxi IndustryOctober 22, 1998
Special EPS Committee to hear deputations October 27, 1998
CouncilOctober 28-30 or November 25-27, 1998
The approach to the study is to compile and understand information about the Toronto taxicab
industry and the issues now plaguing it. Every effort was made to consider as much input
directly from industry participants as possible. Comparisons to other jurisdictions are made
respecting similar problems, failed reforms, and best practices. Recognizing the short
timeframe, priority was given to the most severe issues: Toronto Licensing and enforcement,
structure of the industry, quality of vehicles, skills of drivers, and customer service. Various
options were assessed in terms of legal liability and financial and operational impacts.
The proposed solution was developed by testing various scenarios with respect to
achievement of Task Force principles and goals, ability to implement within a reasonable
timeframe, and the impact on stakeholders. The implementation of the recommendations,
most importantly, should enhance the image of Toronto taxicabs from the eyes of the public
and visitors and should improve immediately, and over time, to become a positive reflection
on Toronto as a world-class city.
Although an implementation plan is critical to the success of such initiatives, time did not
permit for a specific plan to be developed. However, the report does provide some guidance in
this regard.
1.4Scope of the Review
The report provides an overview of the industry including historical background information
and the legislative regulations; a summary of issues identified by many stakeholders;
financial, legal and policy analysis of options for solutions; and recommendations for reform
that meet the goals of the Task Force to Review the Taxi Industry. The work proceeded in
three phases as defined in the approved workplan; namely, research and consultation, analysis,
and report and recommendations.
1.4.1Research and Consultation
The research conducted addressed the best practices and experiences of other jurisdictions in
initiatives taken to reform troubled taxi industries. Successful experiences in London England,
New York City, Halifax, Vancouver, and Montreal were studied in more detail and summaries
of the relevant elements of these jurisdictions are included later in the report. The research
also focussed on economic and financial reviews of renowned experts and academics.
The resource team gathered extensive statistical information from Toronto Licensing and the
various submissions to the Task Force in an effort to reasonably describe the current operating
environment. This included an overview of the By-law, relevant sections of the Municipal Act
and sample enforcement and commission scenarios.
An integral part of the researching phase included consultation through public deputations that
were held on June 9th 1998. Stakeholders, including drivers, owners, designated agents,
tourism industry representatives, and a few members of the taxi-riding public, presented their
individual perspectives on the problems facing the industry and proposed solutions for reform.
Taxicab industry stakeholders were also invited to submit written materials or provide
comments to the Task Force hotline. Although views among stakeholders vary and there was
often no consensus on issues for drivers or owners as a group, all views were given careful
consideration by the Task Force. A summary of these concerns is included later in this report.
A list of research materials and submissions received are included in the Appendix to the
report and copies of materials are available in the Clerks office for review as provided for
within the Municipal Freedom of Information and Protection of Privacy Act.
1.4.2Analysis and Consultation
Consultation was a key component to the workplan that continued through the analysis phase
of the work. Workshop sessions that were held on July 6, 1998, were considered by the Task
Force to be a rewarding exercise that offered a useful source of information and possible
solutions. The workshops provided participants the opportunity to debate issues and consider
solutions to improve the industry within the context of the legal framework that will set the
boundaries for any short-term change. The intent of the workshop discussions was to provide
a forum for interactive discussion among different points of view. Comments were taken in
context, recognizing that participants presented their own individual perspectives and did not
necessarily represent the views of others. Nonetheless, many of the workshops were
successful in reaching consensus on a number of solutions that work towards achieving the
goals for the Task Force. A summary of the work achieved by the workshops is included later
in the report.
The financial analysis includes the development of a financial model of the supply and
demand relationship for taxi services, an analysis of the viability of various taxi industry
reform options, and an analysis of the impact on plate values, lease rates, driver income, and
operating costs for these various options. The legal feedback provides opinions on various
proposed solutions within the context of the existing legislative framework. From a policy
perspective, recommendations are presented to ensure that the goals of the Task Force are
met, giving consideration to the legal and financial information.
1.4.3Report and Recommendations
The report and recommendations are comprised of five relatively distinct components, as
described in the forward to the report. The key points to the 50 recommendations in this report
can be organized by five points that:
1.Creates a Taxicab Passenger Bill of Rights
2.Creates Ambassador Class Taxicabs
3.Improves Training
4.Improves the Training
5.Strengthens Enforcement
Once considered by the Task Force to Review the Taxi Industry meeting scheduled for
October22, 1998, the report is to be submitted to a special meeting of the Emergency and
Protective Services Committee on October 27, 1998, at which time, public deputations will be
heard. It is expected that the Emergency and Protective Services Committee will forward the
report to the October 28-30 or November 25-27, 1998 meeting of Council for approval. It is
therefore recommended that the Task Force approve the attached draft Report of the Task
Force to Review the Taxi Industry and forward it to the Emergency and Protective Services
Committee and Council for approval (Recommendation No. 1).
PART II:BACKGROUND
2.1Industry Overview
The taxicab industry in the City of Toronto has grown considerably since the former
Metropolitan Licensing Commission, (MLC) (now known as Toronto Licensing) was formed
in 1953. The evolution to the industry structure has seen varied trends in the approach to
allocating licenses and the characteristics of licenses. Other significant features that influence
the current operating environment include provisions in the By-law related to vehicle quality,
training requirements, and industry culture. These characteristics all impact the level of
customer service provided by the taxicab industry.
License Issuance
In 1953, 1,500 taxicab licenses were issued and no new licenses were issued until 1961. In
1968, three owner's lists were set up based on the number of taxis already owned (1 license,
2-9 licenses, and 10 or more licenses), and new issues occurred in a proportion of
50:20:20:10. By 1973, the number of licenses had increased to 2,105. In 1976, as a result of
the Lastman report, the list to acquire a taxicab license was combined with new issues going
to owners and drivers in the ratio of 1:9. In 1985, the ratio was changed to the current ratio of
1:1 for owners to drivers.
To be placed on the drivers' list for license issuance, a driver must drive full-time for three
years. After issuance of a license, a driver must comply with all aspects of the By-law,
including driving full-time for a five-year probationary period, after which time, the license
can be leased or sold. To remain on the owners' list for license issuance, owners must manage
taxicabs on a daily basis for a five-year period. During this period, an owner can rent the
taxicab on a daily basis, but, they cannot lease the license and a designated agent cannot
represent them. Owners that are not bound by this probationary period can lease their taxicab
and may choose to be represented by a designated agent. The current waiting time for a new
license is estimated to be in excess of 20 years. Figure 1 below shows the number of licenses
issued over the period 1976 to 1996. The last issue occurred in 1993, when 68 new plates
were issued, for a total of 3,480 plates in circulation.License Characteristics
Two key economic features of licenses were introduced as the Toronto taxicab industry
evolved that are, in part, responsible for the state of industry today. The first critical change to
the characteristics of taxicab licenses occurred in 1963 when the MLC allowed licenses to be
sold on the open market. This change was significant in that up to this time, a license was only
valuable as a means to make an income from driving. The ability to sell the license in the
open market transformed it into a capital asset, with value created by a limited supply.
The second change occurred in 1974 when the former Metropolitan Toronto Licensing
Commission permitted the leasing of taxicab licenses. Under the provisions of leasing, owners
are required to provide a maintained and insured vehicle that is fully equipped and licensed as
a taxicab. This change was introduced for several reasons. First, the Commission felt it was
unable to enforce the then current By-law prohibiting leasing due to collusion between the
driver and owner. Second, some felt it was better for drivers, because in most cases it was
cheaper to lease than to rent on a daily basis. Third, leasing created a perception by many
drivers that it allowed them to achieve status of entrepreneur rather than driver/employee.
The proliferation of plate leasing can be observed from Figure 2 below, increasing from 32.1
per cent of available plates in 1982, to 78.0 per cent in 1997. Table 1 below shows plate value
for the same period, and the rate of return implied by the lease rates (market capitalization of
lease rates). The rate of return remained relatively stable at approximately 12.6 per cent per
annum. Under current conditions, the rate of return represents a spread approximately 8.0 per
cent over a risk-free investment such as Canada bonds. Presumably, the spread represents the
risk-premium associated with investing in a taxi license.
Table 1 - Rate of Return Implied by Plate Value and Lease Rates
Year |
Average Plate Value
$'s |
Average Monthly Lease Rate
$'s |
Rate of Return on Plate
% |
1982 |
45,024 |
519 |
13.83 |
1983 |
46,373 |
528 |
13.66 |
1984 |
56,345 |
623 |
13.27 |
1985 |
68,893 |
679 |
11.83 |
1986 |
82,825 |
739 |
10.71 |
1987 |
89,442 |
742 |
9.96 |
1988 |
80,000 |
760 |
11.40 |
1989 |
81,601 |
779 |
11.46 |
1990 |
78,672 |
807 |
12.31 |
1991 |
73,376 |
783 |
12.81 |
1992 |
54,472 |
645 |
14.21 |
1993 |
49,976 |
610 |
14.65 |
1994 |
67,295 |
680 |
12.13 |
1995 |
69,799 |
746 |
12.83 |
1996 |
74,363 |
850 |
13.72 |
1997 |
80,000 |
900 |
13.50 |
|
|
Average |
12.64 |
1.2Industry Structure
Over the years, a variety of arrangements have evolved between plate ownership and the
delivery of taxicab services. The result is an industry structure that provides for up to five
participants to be associated with each taxicab: owner, Designated Agent (DA), lessee, driver,
and an alternate driver.
Industry Structure
2.4.1From the Point of View of the Owner
There are generally three options available to a plate owner. These options include:(i)Hire a designated agent: lease or give control of the plate to a designated agent for a
monthly fee;
(ii)Lease directly to a driver: lease the plate directly to a driver; or
(iii)Owner-driver: drive the taxicab with an option to hire alternate drivers on a shift basis.
The first two options are associated with plate owners who do not wish to be active in the
daily driving of a taxicab. With respect to the third option, the license owner may join a
brokerage, operate independently, or operate as a member of the Independent Taxicab
Operators Co-operative.
2.4.2From the Point of View of the Designated Agent
A designated agent will usually enter into a lease or shift rental agreement with a driver on the
owner's behalf. Designated Agents must be licensed as a taxicab owner or a driver and were
introduced, primarily for the benefit of elderly owners and industry widows, to assist in the
management of taxicabs. A designated agent will:
(i)lease a plate on behalf of the owner to a driver without providing a car;
(ii)lease a plate to a driver along with insurance and brokerage services without providing a
car; or
(iii)lease on a weekly or monthly basis or rent on a daily shift basis the plate along with a car,
insurance, and brokerage services.
If the agreement is on a monthly basis, the driver is generally expected to provide for the car
and associated operating costs, including fuel, radio/meter rental, dispatch fees, insurance, and
maintenance, even though this arrangement contravenes the current By-law. With a weekly
lease or daily shift rental, the designated agent usually provides the vehicle and related costs,
while the driver pays a weekly or daily fee plus fuel. Each arrangement dictates a different
range of payment.
From the Point of View of the Lessee
A lessee has two options available:
(i)drive the taxicab with the option of hiring alternate drivers; or
(ii)rent the taxicab on a daily shift basis.
It should be noted that subleasing is not allowed under the current By-law provisions.
From the Point of View of the Driver
A driver has several options available to operate a taxicab and may:
(i)lease a plate, either through an owner directly or through a designated agent;
(ii)purchase a plate on the open market; or
(iii)acquire a newly issued plate from Toronto Licensing (if they qualify on the drivers' list).
There are generally three possible lease arrangements:
(1)Cash-in: Drivers obtain a taxicab and equipment on a shift basis from the agent or lessee.
The average cost of a taxicab for a shift is $65. It is estimated that 22 per cent of drivers
operate on this basis.
(2)Plate lease only: The agent provides the plate and the lessee provides the vehicle and pays
the insurance and brokerage fees. According to Toronto Licensing records, in 1997, the
average cost of this form of lease is approximately $850.00 per month.
(3)Package deal: The designated agent provides the plate, insurance, and brokerage fees. The
lessee provides the vehicle. The average cost of a package is reportedly $2,000-$2,500 per
month, a 40-50 per cent mark-up.
The break down of the number of direct plate leases and package deal leases is not known,
however, records indicate that a total of 1,339 leases are under control of a designated agent,
or 39 per cent of total plates.
1.1Customer Service Quality
The decline in customer service quality is a trend influenced by the economic and qualitative
factors of the taxicab industry. License characteristics and the structure of the taxicab industry
have evolved a culture that is generally not focussed on customer service. Other
characteristics of the industry that contribute to the lack of customer service include the
quality of the fleet and the training requirements for drivers.
2.3.1The Toronto Taxicab Fleet is Aging
Toronto Licensing records show that the quality of taxicabs is declining due to an increasingly
aging fleet. Currently, over 55 per cent of the taxicabs are over six models years old,
compared to 20 per cent in 1994 and 0 per cent prior to 1990. The percentage of newer
vehicles in the fleet has steadily decreased since 1982, as shown in Figure 3. The aging fleet is
attributable to the age extension in the By-law, which allows vehicles beyond six model years
of age to remain on the road, provided that they do not have more than two major mechanical
failures.
Training Requirements for Drivers
In 1996, Toronto Licensing replaced its three-day training program with an upgraded training
program that runs for 16 days and covers a fairly comprehensive curriculum. The majority of
licensed drivers, approximately 11,000, are operating from the outdated original training
program.
The Current Operating Environment
The Toronto taxicab industry is regulated by the City of Toronto as provided for in the
Municipal Act and by By-law 20-85. In May, 1998, the City of Toronto Council approved
Report No. 6 of the Special Committee to Review the Final Report of the Toronto Transition
Team that recommended the separation of the administrative and adjudicative functions that
previously formed the former MLC. The adjudicative process, previously conducted by the
Licensing Commission, will be carried out by the Licensing Tribunal once the changes are
implemented. Toronto Licensing is the administrative body and operates as a service area
under the Department of Urban Planning and Development Services that reports to the City of
Toronto Council through the Emergency and Protective Services Committee. Toronto
Licensing is currently undergoing restructuring process that is expected to be complete by the
end of 1998.
2.6Legislative Framework
Toronto Legal Services provides the following general principles of law respecting the
authority of Council and the governing of the taxicab industry. Municipal Councils' possess
authority granted by law and the authority to enact by-laws for the licensing, regulating and
governing of businesses that is contained in section 257.2 of the Municipal Act. The specific
authority of the Toronto City Council to enact by-laws for the licensing, regulating and
owners and drivers of taxicabs is contained in section 232 of the Municipal Act.
There are two key components of the Municipal Act that have influenced specific
recommendations in this report. The first deals with the purpose of municipal licensing and
the second deals with the provision of taxicab services by airport plated taxicabs within the
boundaries of the City of Toronto.
With respect to municipal licensing purposes, in simple terms, the courts have limited the
licensing authority of municipalities to regulating for municipal purposes and not participating
in the business arrangements between industry participants. With respect to airport plated
taxicab, an exemption in the Municipal Act currently exists, that allows airport taxicabs to
pick-up fares within the City of Toronto boundaries. This facilitates taxicabs, unlicensed by
the City of Toronto, to pick up fares within City boundaries under the guise of transporting
passengers to the airport.
By-law 20-85 is the governing legislation established by the municipality, and sets out the
controls for the Toronto taxicab industry. The By-law is extremely complex and is the result
of isolated changes made over the years. The intention of the By-law and the objective of
regulation is to serve the interests of the public, while offering a structure that can support the
wellbeing of its participants. The By-law addresses provisions for quality and inspection of
vehicles, enforcement, responsibility and accountability of industry participants, and training
requirements. There are a number of provisions in the By-law that are difficult to enforce or
have not been given priority by Toronto Licensing. These issues are discussed in more detail
in the report.
PART III:INCENTIVES FOR CHANGE
The taxicab industry background reveals its incentives for change: a disjointed system of poor
customer service, declining taxicab quality based on an aging fleet, and a complex, sometimes
ineffective, regulatory system. The majority of stakeholders who consulted with the Task
Force have serious concerns with the industry. Moreover, the image of the taxicab industry is
not positive to residents or visitors to Toronto, nor is it suitable for a world class city.
The incentives for change are described in this section by observations of the industry and
feedback from stakeholders that describe problems and propose solutions.
3.1Industry Observations
Issues are discussed with respect to regulation and enforcement, industry structure, customer
service, and vehicle quality. Comments are derived from the evaluation of industry statistics
and research, and also from letters received from the public.
Industry Structure
The structure of the industry has given rise to the absentee owner, and furthermore, has led to
notion of a taxicab plate as a financial investment similar to other income-producing
investments such as bond, further boosting the plate's market value. The higher the market
value, the less opportunity a driver has to purchase a plate. As long as the supply of plates is
restricted and there is surplus of taxi drivers, drivers will continue to depend on leased plates.,
It is believed, with plate leasing and the creation of the middleman or designated agent, a
growing number of plate owners have a decreased incentive to provide a high quality or type
of service since it has no direct financial impact. The owner's financial benefits stem from
plate lease revenues. Therefore the greatest benefit would be to keep the lease fees at a high
percentage of the driver's gross earnings and promoting practices to keep the operating costs
low. Thus vehicle replacement is deferred to the extent that is allowed by the By-law.
Customer Service
The City has received many complaints from the public and visitors who are dissatisfied with
the service provided by Toronto taxicabs. Some speak of rudeness and refusal to accept
passengers who are travelling a short distance. Other letters address the physical condition of
taxicabs that feel unsafe and leave a poor impression on the City of Toronto. Some link the
state of Toronto taxicabs as a negative in the bid to host the Olympics in 2008. One such letter
from a concerned citizen referred to the deplorable state of taxis in Toronto and compared
them to service "reminiscent of the third world with beaten up cars and interiors, non-existent
suspensions and questionable safety standards. Add to this surly drivers with few language
skills and little or no city knowledge and we've got a major problem." The content of this
letter reflects a common public perception of the taxicab industry as the message is repeated
in many letters received by the Task Force.
Vehicle Quality
The aging taxicab fleet is increasingly affected by rising vehicle inspection failure rates. It is
estimated that 70 taxicabs are providing service to the public under dangerous and unsafe
conditions at any one time. One recent inspection noted a vehicle in service with nine
mechanical defects that would each render the vehicle dangerous and unsafe. Recent taxicab
random inspection blitzes resulted in pulling 14 out of 21 taxicabs inspected (67%) out of
service.
Owner-Operated Taxicabs
It would appear that owner-operated taxicabs are maintained at a higher quality standard than
fleet vehicles. Figure 4 shows the Toronto Licensing vehicle inspection failure rates for the
years from 1992 to 1996 broken down in the categories of owner, agent and lease.
Figure 4 - Vehicle Inspection Failure Rates
Prearranged vehicle inspections are held three times a year. Although all three categories
show an increase in failure rates from 1992 to 1996, the failure rate and the percent increase is
significantly lower for owner-operated taxicabs in comparison to Designated Agents and
lessees.
The proportion of owner-drivers have been on a steady decline with only 25 per cent of the
industry remaining as owner-drivers. This decline is perhaps partly responsible for the
deterioration in customer service and taxicab quality.
3.2Stakeholder Feedback
Many industry participants advocate change although the ideas and proposals among them
vary greatly. It should be noted that a significant number expressed frustration towards the
Task Force, noting that the industry has been over-studied without meaningful change. Many
note increasing frustration as the quality and respect of their industry disintegrates around
them.
This section provides an overview of the key issues, concerns, and proposals for change that
were received by the Task Force through deputations, written submissions, the Task Force
hotline, and the workshops. The main issues supported by the research and the focus of the
submissions include:
1.reform to Toronto Licensing, particularly with respect to enforcement and unlicensed and
out-of-town taxicabs;
2.industry structure and the resulting safety and working conditions for drivers;
3.customer service skills of drivers; and
4.quality of taxicabs.
3.2.1Regulation and Enforcement
Many in the industry place responsibility for the current issues, and particularly the lack of
enforcement, Toronto Licensing. Those who commented, supported the recent change to
separate the administrative and adjudicative functions, although they noted that it is too early
to conclude whether improvement has been achieved.
There was complete consensus to improve the enforcement of out-of-town and unlicensed
cabs in Toronto. Industry participants articulated that the lack of monitoring and enforcement
of the activity of cabs from other jurisdictions has seriously hampered the ability of Toronto
cabbies to earn a fair wage. Many demanded additional enforcement staff while some felt that
a common look for Toronto taxicabs would help enforcement efforts, and others suggested an
increase to the fine, penalty and regular spot checks.
Although there is general support for three scheduled inspections annually, a number of
participants commented that the inspection process is often confusing and they are not
provided with vehicle inspection requirements. As a result, many have their vehicles
pre-inspected by a mechanic, and fail the Toronto Licensing inspection because they aren't
aware of the criteria they are trying to meet. Otherwise, there was general agreement that the
current inspection program is acceptable. Some participants also suggested that pre-hearing
for show cause hearings should be abolished and replaced with fines.
Possible corruption in the industry and the inaction to deal with certain by-law contraventions
such as plate leasing, was also raised as a concern, as was the undefined roles of Designated
Agents. One of the workshops recommended that the Licensing Commission needs more
authority to impose more meaningful penalties. Others suggested that the Commission should
have industry representation or transfer responsibility for industry regulation to transportation
experts such as the TTC. A number of participants also called for the transfer of responsibility
for public complaints from Toronto Licensing to individual brokerages.
Some participants also suggested that Licensing should provide for more taxi stands,
particularly in strategic high traffic areas such as the Sky Dome and the new Air Canada
Centre.
3.2.2Industry Structure
Concerns raised with respect to industry structure focussed on the perception that deplorable
working conditions for many drivers results from the current industry structure. Many
stakeholders passionately linked low driver income to the poor quality of service. They felt
that pride in one's work and the ability to earn a reasonable wage directly relates to the quality
of service offered to the customer. Many drivers indicated that low wages result from leasing
and too many participants in the organizational chain.
Chain of Participants
Comments regarding the chain of participants also included widespread agreement that
absentee owners and passive investors are often an unnecessary and detrimental link in the
chain. Several participants concluded that measures must be put in place to limit or abolish
absentee owners by increasing responsibilities for owners to ensure they add value to the
industry. There was general agreement that taxicabs should not serve purely as investments to
individuals not committed to the industry. One of the workshops suggested that licenses of
absentee owners be taxed at a higher rate by the City. Although many stakeholders feel that
taxicab licenses should not be viewed as a pension, most are sensitive to retirees and industry
widows.
Some industry participants argue for the elimination of Designated Agents, while others
indicate that management services offered by Designated Agents are necessary.
Leasing
There is no consensus on how to reform the industry structure to resolve issues associated
with leasing. Some suggest that leasing should be abolished and others felt that leasing is
necessary to ensure continuous service during the night and for periods of inclement weather.
Others felt that leasing should continue within particular controls respecting rates and terms.
Similar positions were stated respecting Designated Agents and whether they should continue
as part of the industry and in what capacity. One of the workshops suggested that Toronto
Licensing should assume the role of designated agent or regulate Designated Agents.
Plate Issuance
The majority of parties who spoke agreed that pride of ownership is a necessary component to
the success and commitment of industry participants. However, deputants were outspoken on
the methods that should be employed in determining whether the present structure should be
expanded by distributing new plates or buying-back and redistributing old plates. While there
was division regarding whether owners or drivers interest should predominate in the
decision-making process, there was general agreement that aging cabbies and their families,
who now rely on their plate as a pension, should be given adequate protection. Alongside
discussions regarding the distribution of plates, participants expressed strong opinions on the
merits of limiting the transferability of existing and future plates. Some supported the existing
system of unlimited rights of transferability. Others argued that the plate is the property of the
City and thus it should revert back to the City when the owner ceases to use the plate for the
purpose for which it was intended.
Similarly, with respect to new plates, some felt that the market has greatly improved since the
early 1990's and that the market could support more taxicabs. In fact, some participants
suggested that the market should determine the appropriate number of taxicabs to serve
Toronto. Other participants suggested that there are already too many taxicabs on Toronto
streets and that additional taxicabs would lead to even lower incomes for drivers, and more
pollution and congestion.
A number of drivers support a solely owner-driver taxicab system that maintains a one-plate
for one-driver situation, as an ideal goal for the industry. Many agree that drivers who have a
greater stake in the business provide better service. Some proposed that the owners and
drivers lists should be abolished altogether or that license issuance should be limited to those
who intend to operate the taxicab as an owner-operator. Although there was no consensus on
how to reach this goal, one workshop suggested that any plan should allow drivers to get a
plate within five-ten years.
One of the workshops reached agreement that open deregulation would not benefit the
industry and that opportunities for the City to purchase licenses from absentee owners and the
distribution of licenses only to drivers should be explored. Another group commented that the
inflated cost of licenses now prohibit most drivers from buying a license on the open market.
Many participants suggest that the plate should be considered an asset such that it can be used
for collateral to finance the purchase of a plate. One other option presented called for the City
to provide a lease-to-own plan for taxicab licenses.
One of the workshops proposed a two-tiered system of taxicabs with a standard service and a
higher quality ambassador service to focus on business and tourism. This system calls for a
higher level of driver training with limited acceptance to phase in the increase and to serve as
a barrier to entry, distinguishable vehicles, possibly higher tariffs, and non-transferable
licenses. One of the workshops concluded that owners or brokerages should assist drivers in
establishing a pension. They also feel that the taxicab and taxicab expenses should be the
owner's responsibility and not passed on to drivers. Many suggest that a Driver's Bill of
Rights should be put in place and that the Taxicab Advisory Committee should be equitably
represented, including public representation, and democratically elected.
3.2.3Customer Service
There is little denial among industry participants, that customer service in the taxicab industry
is inadequate and must be addressed. The industry is concerned respecting its perceived image
and many individuals expressed the desire to participate in change that will focus on customer
service. While examples of exceptional service exist and many drivers operate sensitively to
customer needs, the majority of public feedback creates a view of a corrupt and complacent
industry. Often, passengers complain of reckless driving and unprofessional services.
"Members of the Toronto Board of Trade have become increasingly concerned about the
frequency and severity of complaints about taxis. These complaints have come from
customers at their businesses (restaurants, hotels, entertainment venues), as well as from their
own personal experiences. Many of the complaints have to do with the cleanliness of the
vehicle, the courteousness of the driver or the driver's knowledge/comprehension of City
destinations." (The Toronto Board of Trade, Submission to City of Toronto Task Force to
Review the Taxi Industry)
It should be noted that a number of drivers, although in agreement that customers deserve top
rate service, indicate that they are barred from providing such service due to unfair working
conditions. Some participants agree that if Toronto taxicabs were safe, reliable, and offered
exceptional service, more Toronto residents and visitors would use taxicabs.
All five workshops agreed that a Taxicab Passenger Bill of Rights, visibly posted in each
taxicab, would prove an effective measure to communicate a positive vision for the taxicab
industry to customers. Many suggest that it would set expectations for customers and
performance requirements for drivers. As such, participants feel that the Taxicab Passenger
Bill of Rights should include condition of the taxicab, qualifications and services provided by
the driver, and information respecting complaints if services are inadequate.
Issues were raised in a number of workshops respecting taxicab services for the disabled, and
many felt that more focus should be given to increasing services for passengers with special
needs. Some taxicab customers with disabilities indicate that it is often difficult to arrange for
taxicab services, particularly for short trips. They also note that many drivers do not offer
assistance into or out of the taxicab and some are reluctant to provide service to people with
seeing-eye dogs. Other issues include securing wheelchairs and scooters, using side barriers
on ramps, seeking passengers waiting indoors, and leaving a no show slip so passengers can
make alternate arrangements. One suggestion is to provide incentives for such services such
as a minimum fare for each trip that could be funded by the industry. While many drivers
express sensitivity to special needs, they also raised concerns that such services require more
time to provide assistance or load wheelchairs and consequently, the number of overall
passengers served and revenues are reduced.
A number of participants relate the quality of customer service to driver training and feel that
an integral step to deliver better service is to provide better training. Many participants cite
examples of other jurisdictions where taxicab drivers are perceived professionally. Some feel
that a number of poor quality drivers in Toronto create a bad impression for the industry and
that more rigorous screening would increase driver standards and value. In addition, some
propose that penalties imposed on bad drivers would force them to improve service or leave
the industry.
A number of individuals suggest that the current training program offered by Toronto
Licensing is a significant improvement over the recently reformed three-day program.
However, they note that an expanded version of the course would introduce a more
professional image for the industry. For that reason, many support a suggestion that training
should be provided by colleges or other outside institutions and others feel that brokerages
should participate in training. In order to achieve the desired standard of professional drivers,
some participants suggest that english language and comprehension should be a prerequisite
to training. Suggestions for the training program include: Toronto geography and tourism,
taxicab safety, driver safety, hospitality, gender sensitivity, business practices, promoting a
professional image, preventative vehicle maintenance and standard in-car training. A number
of individuals felt that drivers should participate in the development of the training program.
Some participants suggest that new licenses should be probationary and that drivers should be
required to prove their abilities before receiving a full license. Others propose that a driver's
qualifications and accomplishment should be visibly posted in the taxicab.
Many participants suggest that while a new advanced training program would produce new
high quality drivers, many of the existing drivers operate from the three-day training program
and would benefit from retraining. Many support the concept of regular mandatory training
that would encourage continuous improvement by drivers and could relay current tourism
information. Many agree that any training program should offer some flexibility for evening
classes to allow drivers to continue working while completing training requirements.
Finally, some participants note that drivers would only be receptive to advanced training if
they could be assured of a reasonable wage in return.
Driver Safety is considered a key issue by some participants who indicate that taxicab drivers
are open targets for aggressive and criminal acts. There is no consensus in the industry,
however, on actions to improve driver safety. Many recognize the importance of awareness
and suggest that training can prepare drivers for most situations they encounter. Others
express extreme vulnerability and feel that extreme measures, such as barriers between
passengers and drivers, cameras, panic buttons and prepayment systems are required.
3.2.4Quality of Taxicabs
There was little defense expressed by stakeholders for the current condition of many Toronto
taxicabs. Some indicate that the structure of the industry does not provide for investment in
better taxicabs. Concerns were widespread and include high operating costs, particularly with
respect to insurance and demands for key money, and corruption in the industry. While most
participants agree that the vehicle age extension should be eliminated, a few feel that if a car
passes a rigorous safety inspection, it should remain on the road. Some participants also
support an extended vehicle retirement date for owner-operated taxicabs, as they do not get as
much use as a fleet vehicle.
There is no consensus on appropriate vehicle quality provisions. Proposals range from no
limitations subject to mechanical inspections to provisions for brand new vehicles that will be
retired from the taxicab industry by five model years old, and every option in between. Some
suggest that more onerous provisions could not be supported since drivers are often forced to
pay for the vehicle, even though the By-law requires the owner to provide the taxicab. A few
stakeholders propose banning the use of former police vehicles as taxicabs, recognizing the
rigorous use subjected to police vehicles.
There is general agreement that improvements to vehicle quality regulations should be phased
in, to ease the financial burden of replacing taxicabs, particularly for fleets. Many agreed that
the vehicle and quality provisions for vehicles must be economically viable for stakeholders.
Through research, deputations, written submissions, and workshops, the Task Force
considered a number of proposals and suggestions for reforms. While some plans were
comprehensive, others were general in nature, however general support for change is evident
in most submissions. Nevertheless, all ideas have been duly considered, and while no single
plan, in isolation, is recommended for adoption, the proposed solution collects elements of
many individual submissions to form a solution that meets the principles and goals of the
Task Force.
The analysis consists of two main components that include:
1.a discussion respecting a number of proposed solutions; and
2.a financial comparison of a number of options presenting impacts on the industry, based on
specific assumptions, if various changes are introduced.
3.3Proposed Solutions
As evidenced by the appendix, more than 70 submissions were submitted by stakeholders that
offered a myriad of recommendations for reform. The discussion below, does not exhaust
each individual proposal submitted to the Task Force. Rather, it provides a general summary
of comprehensive submissions and attempts to address the key proposals raised by
stakeholders.
The Toronto Board of Trade Proposal
The Toronto Board of Trade recommended a 5-point plan to reform the taxi industry in
Toronto that is comprised of the following:
_Limit age of taxicabs to a maximum of eight model years;
_Adopt the Provincial Safety Standards Certification for cab inspection purposes;
_Require a fairer system for lease cancellation notices;
_Permit joint ownership of taxicabs between drivers and plate owners; and
_Regulate Designated Agents who rent plates from owners and then subcontract to drivers.
The Toronto Board of Trade also submitted a report to the Task Force entitled "Improving the
Quality of Toronto's Taxi Industry" dated June 1998, that proposes "quality as the
cornerstone" and addresses a number of regulation and enforcement matters. The report raises
safety, driver ability, and driver income as key issues. The Board of Trade also indicates that
acceptance and compliance of the By-law by industry participants would provide the ability
for the By-law to be meaningfully enforced. The Board of Trade notes concern that the
intention of the current regulations is to ensure quality service, however, "they are not being
enforced on the road". While the report refers to "numerous calls to review the existing set of
regulations in order to update, eliminate and redefine the provisions", it indicates that the Task
Force, in such a short time frame will not be able to complete that task. In their view, the Task
Force should focus on those sections of the By-law that address quality of the taxicab
industry.
Task Force Response to the Toronto Board of Trade Proposal
The recommendations in this report address the concerns raised by the Board of Trade by
improving vehicle quality, addressing provisions for lease cancellations, and regulating
Designated Agents. The Provincial Safety Standards Certification is part of the inspection
criteria currently used, along with more specific criteria used by the Toronto Licensing
inspection facility. Recognizing the concerns associated with quality of vehicles, more lenient
mechanical inspections are not supported. With respect to joint ownership of taxicabs between
owners and drivers, the principle of the plan is to ensure that owners assume responsibility for
their taxicabs and that Toronto Licensing aggressively enforce the contravention of the
By-law respecting vehicle ownership that commonly takes place.
The Fotinos Plan
The Fotinos Plan is premised on the creation of a separate statutory entity, the Toronto Taxi
Authority, of which City Council shall be the sole shareholder. It proposes that the Toronto
Taxi Authority issue bonds for the purposes of financing a compensation scheme for existing
taxicab owners.
The plan calls for taxicab owners to receive payment for licenses calculated by applying a 13
per cent annual rate of return on the original purchase price of the license, to a maximum of
the current market value of $85,000.00. Licenses would be returned to the City and leased to
drivers, for an estimated $650.00 per month, to finance the compensation plan. Over time,
excess funding could be applied to the serve the industry and its participants.
Response to the Fotinos Plan
Legal Services advise that there is no express or implied grant of authority to City Council to
create the proposed Toronto Taxi Authority and issue bonds for the purposes of financing a
compensation scheme for existing taxicab owners. Specifically, the authority of City Council,
as it relates to the provision of funds to business enterprises, is prescribed by section 111 of
the Municipal Act. By this provision, City Council "shall not assist directly or indirectly and ¼
commercial enterprise through the granting of bonuses in aid thereof, and, ¼ shall not grant
assistance by giving or lending any property of the municipality, including money." The
opinion of Toronto Legal Services is that the making of ex-gratia payments to holders of
taxicab owners licenses through a Taxicab Authority established by the City for this purpose
constitutes direct assistance to a commercial enterprise through the giving of money.
Accordingly, by reason of section 111 of the Municipal Act, City Council lacks the authority
to make such payments.
With respect to the issuance of debentures to finance the purchase of taxicab licenses from
current owners, section 147 of the Municipal Act provides that a municipality may incur debt
for municipal purposes. In addition, section 140 of the Municipal Act suggests that debentures
may be issued for municipal capital purposes with enduring benefit to taxpayers. Payment on
licenses that the City already has the authority to issue or revoke, does not provide any benefit
to taxpayers. In effect, the City purchase of licenses is a purchase of no real dollar value, since
the purchase does not offer any return or benefit that the City does not already have.
Other legal issues arising from this plan relate to the authority for City Council to determine
unilaterally, the amount of compensation to existing licensees and to charge lease fees to
service annual debt charges on the bonds. The authority of City Council to charge fees in the
context of licensing and regulating businesses is limited to charging license fees. Under
section 257.2(3) of the Municipal Act, in setting the amount of the fees to be charged for a
license, City Council is required "to take into account the costs of administering and
enforcing" the licensing By-law. The plate lease arrangement to service debt charges for the
ultimate purpose of obtaining sufficient funds to compensate existing owners for the loss of
their licenses does not constitute "taking into account the costs of administering and
enforcing" the licensing By-law. Accordingly, Legal Services advise that City Council lacks
the authority to lease plates to drivers.
Legal Services conclude that the combined lack of authority to provide the proposed
compensation, along with the lack of authority to require taxicab drivers to fund the proposed
compensation, makes the proposal, if implemented, highly vulnerable to successful legal
challenge.
While the methods in the Fotinos plan cannot be implemented without changes to the
Municipal Act, the underlying principle to transfer the industry into the hands of participants
in a fair and equitable manner, forms the basis for the proposed solution.
The Moscoe Proposal
The Moscoe proposal involves the City Council as the liaison between the existing owners
and drivers, a role similar to that of the current industry Designated Agents. The City would
lease taxicabs from existing owners for a set fee and would, in turn, lease those taxicabs to
eligible drivers. The lease fees paid by such drivers would be used to fund the payments by
City Council to the owners and to fund the establishment of a pension plan for drivers.
Response to the Moscoe Proposal
City Legal Services advise that City Council lacks the authority to enter into the taxicab
business in this manner as the authority delegated to City Council by the Municipal Act to
license, regulate and govern businesses does not include the authority to conduct the business
of these regulated businesses. Legal Services also advise that City Council lacks the authority
to charge taxicab lease fees. The authority of City Council to charge fees in the context of
licensing and regulating businesses is limited to charging license fees. Under subsection
257.2(3) of the Municipal Act, in setting the amount of the fees to be charged for a license,
City Council is required "to take into account the costs of administering and enforcing" the
licensing By-law. It is the opinion of the City's Legal Services that charging a lease fee for the
purpose of compensating existing owners is not relevant to administering and enforcing the
By-law, and therefore, that City Council lacks the authority to charge the fees proposed in the
plan.
With respect to the proposed Taxi Industry Benefits Reserve Fund, City Legal Services also
advise that City Council lacks the authority to establish a benefits fund for participants in
private industry.
The principle to the Moscoe proposal is similar to the Fotinos plan in that it transfers the
taxicab industry to an owner-driver design. This change is achieved in the Moscoe plan by
compensating existing owners through leasing mechanisms rather than purchasing methods
proposed in the Fotinos plan. The Moscoe plan similarly attempts to improve working
conditions for drivers in a fair manner to current owners.
Plan 2001
Plan 2001 is a reform package submitted by the Toronto Taxi Drivers Association that sets
out conditions for a transformed taxicab industry to be implemented by the year 2001. The
plan refers to the importance of the 2008 Olympic Games and that a vibrant taxi industry will
serve to benefit tourism and conventions.
Plan 2001 proposes to introduce a taxi driver's Bill of Rights that provides for:
1."A clean, well-maintained, modern vehicle that is capable of safe and economic operation
and providing optimum comfort to the passenger.
2.Healthy and reasonably safe working conditions for the benefit of both driver and the
customer.
3.An economic return on investment that will permit the earning of the minimum statutory
hourly wage in addition to all operating expenses including fringe benefits.
4.Fringe benefits to provide domestic security and enhance driver morale:
_An accident and sickness plan for drivers and their families
_A disability plan for drivers
_Life insurance and a savings and pension plan
_An annual physical and dental examination,
5.A set maximum number of hours of driving per week to ensure the safety of the public.
6.A straightforward set of rules and regulations for the industry that are easily understood and
that are enforced consistently and fairly and evenhandedly so that a driver always can know
where he stands and the public has prompt redress of complaints.
7.A voice by way of elected representation in the regulation and management of the
industry."
Plan 2001 generally proposes an industry of owner-drivers with non-transferable and
non-leasable licenses, although they suggest that five alternate drivers be allowed for each
taxicab. The plan also includes retraining and testing of all existing drivers and the
introduction of a dress code. In addition, the plan calls for minimum work hours and the
establishment of a contributory pension plan.
With respect to vehicle quality, Plan 2001 supports rigid regulations for model, size, age, and
mileage, maintenance and repair standards, and a program of annual inspections. The plan
also suggests that taxicabs be painted a standard, recognizable colour for public identification.
In addition, the plan includes for a log book, available at any time for inspection by Toronto
Licensing, that documents "driver, shifts, maintenance, repairs, annual inspections, complaints
and driver's record.
On the topic of enforcement, Plan 2001 includes for elected representation from taxi drivers at
Toronto Licensing, a Taxi Complaint Bureau and hotline, clear guidelines and rules, and a
hearing mechanism to dispose of all complaints publicly and promptly.
The plan includes specific recommendations to manage transition that include assignment of
licenses for two years, and issuance of up to 50 new licenses per month to a minimum of 500
annually for the first three years. It also proposes to cancel existing licenses after two years
without compensation and to grant new licenses to previous owners who qualify. Respecting
cases of hardship, the proposal provides for a Commission hearing to assess and award
payment from a Taxi Owners Compensation Fund.
Response to Plan 2001
A number of these suggestions are addressed by the proposed solution, however, certain
matters such as economic return, fringe benefits, and the establishment of a Taxi Drivers Bill
of Rights, are business-related that deny intervention by the City. As such, the proposed
solution includes a forum for the industry to discuss and adopt business initiatives. In
addition, there are a few concepts that are not provided for as they present enforcement
difficulties or legal issues. Such items include owner-operated taxicabs that provide for five
additional drivers, cancellation of existing licenses, and compensation only for hardship cases.
Owner-operated taxicabs have proven to be the best quality taxicabs, and as such, reform
should transform the industry to a greater proportion of owner-operators. However, qualities
of an owner-operated taxicab such as pride of ownership, are greatly diminished if accessory
drivers are allowed. This scenario provides for many layers of participants and the practice of
leasing to occur within the shadows of the By-law. In effect, enforcement would be next to
impossible to ensure that the license owner is the driver of the taxicab.
Although the City can revoke licenses under the By-law, it cannot unilaterally cancel licenses.
Plan 2001 does not define the qualifications that would be required to obtain a new license.
Presumably it requires the owner to drive the taxicab. The reallocation of licenses ignores the
current structure and the fact that, not all owners are non-participants. This action would
devalue existing licenses to zero and obliterate a number of taxicab businesses. This is not
acceptable to the Task Force as it is not fair to existing owners. The proposed solution
supports a turned focus to owner-drivers, and also recognizes the existence and value of
existing owners. The concern for hardship cases is noble, however, there is no qualifications
to define hardship cases. Under section 111 of the Municipal Act, it is beyond the authority of
the City to provide compensation to current taxicab license owners subjected to hardship by
the changes in the proposed manner.
The Toronto Taxi Alliance Proposal
The Toronto Taxi Alliance (TTA) represents owners, Designated Agents, fleet operators,
independents and brokerages and they note strong support for the principles of the Task Force.
The TTA propose an industry structure that provides for collateral value on plates, reasonable
earnings for drivers and the ability to eventually own a taxicab license, and the consistent and
fair administration of regulations. They stress the importance of agents and fleet operators to
provide dispatch and taxicab services every day, 24 hours a day.
Included in the TTA submission are recommendations for lower ages for taxicabs to
ultimately phase in to vehicles entering the taxicab industry at not more than four model years
old and retiring by eight model years old. The proposal also provides for the transfer of
taxicabs within the age provisions, resulting from ownership or lease changes.
The TTA also supports clear and fair cancellation of leases and where there is no mutual
consent, a term of notice of 60 days would apply. The plan also supports conditions of plate
ownership that create an asset for the owner such that it can be used as collateral. Further, the
TTA recommends that the plate owner, agent or lessee be allowed to purchase the vehicle.
They acknowledge that this practice regularly occurs although it is not provided for in the
By-law. The proposal suggests that this aspect of the By-law is not enforced and that often, a
lessee purchases a vehicle and registers it in the owners name to meet the obligations of the
By-law. Further, the TTA plan also supports licensing of Designated Agents to provide an
operating framework.
The TTA concurs with the industry overall in the enforcement of unlicensed livery cabs and
taxis. Specifically in this regard, the TTA supports a separate division for enforcement of
taxicabs and limousines, redrafting the By-law to make the offense enforceable (without
needing to witness the exchange of money), abolish show-cause hearings related to
inspections to fund additional enforcement staff, work with the province to change the law
regarding out-of-town pick-ups, improve the identification of Toronto licensed livery cabs,
establish an information hot-line, engage police assistance and increase penalties for repeat
offenders.
The TTA also proposes to reform the system of mechanical inspections by adopting standards
under the Provincial Safety Certifications and eliminating show-cause hearings resulting from
mechanical failures.
Their plan also encourages industry professionalism and indicates that the current training
program is not enough. With respect to training, the TTA proposes continuous upgrading for
drivers.
The TTA further suggests that while the "compliments/complaints" number is posted in every
taxicab, it is not well publicized and should be more visible to the public.
Respecting plate issuance, the TTA proposes to re-evaluate the formula used to calculate plate
issuance that recognizes recent changes in technology and the impact of courier services. The
submission draws a relationship between deteriorating driver income and too many taxicabs in
Toronto.
Response to the TTA Proposal
Many of the concepts proposed by the TTA are reflected in the recommended solution. A
number of suggestions not recommended include: the creation of plates as collateral, terms for
vehicle purchase, separate enforcement division for taxicabs, and the abolishment of
show-cause hearings related to inspections.
While licenses are deemed to be assets for the purposes of family law, they cannot be used for
collateral purposes. In legal terms, the City is the true owner of licenses as it holds authority
to revoke or suspend licenses. As such, plates cannot be declared as assets for collateral
purposes. The proposal to allow owners, agents, or lessees to purchase vehicles as taxicabs
would validate current practices that take place in contravention of the By-law. The intention
of the current By-law is to ensure that owners are responsible for their taxicabs and that
principle is supported in the recommendations. The preferred approach to address the issue is
to increase enforcement measures to ensure that owners participate as intended in the By-law.
Toronto Licensing advise that a separate enforcement division is difficult to manage as
enforcement officers address all licensing matters on a geographical basis. This system offers
flexibility for Licensing to respond to changing licensing enforcement priorities.
Show-cause hearings occur when vehicles are declared dangerous and unsafe during
inspection. Parties associated with the taxicab are called before the Commission who pass
judgement who may revoke or suspend licenses or record the offense on file. A number of
stakeholders suggest that in many instances, show-cause hearings for such inspections should
be eliminated, with the exception of repeat offenders. It is their position that such hearings
place a heavy burden on administration and stakeholders who attend.
Toronto Licensing indicates that show-cause hearings are necessary as a message to the
industry that dangerous and unsafe vehicles are not acceptable, recognizing public safety
concerns. They further suggest that allowing dangerous and unsafe vehicles to be repaired
without penalty, will increase the percentage of dangerous and unsafe taxicabs.
The Task Force feels that the most effective way to reduce show-cause hearings is to improve
the taxicab industry and eliminate dangerous and unsafe vehicles. Improved quality taxicabs
are less likely to fail mechanical inspections as explained in Section 2 of this report.
The Fareport Strategy
Fareport developed a business strategy to inject into the Toronto taxicab industry accomplish
the goals of the Task Force. The Fareport plan introduces:
_a driver support system including training and continuous learning;
_state of the art customer service technology such as convenience payment and radio-less
dispatch;
_quality based systems such as strict vehicle appearance and maintenance standards; and
_employee recognition programs, and effective and targeted marketing programs that focus
on tourism and account customers.
Response to the Fareport Strategy
The principles in the Fareport strategy are all supported in the proposed recommendations.
Co-op Taxi Associates Committee
The Co-op Taxi Associates Committee support the collective agreement as the means to
achieve fairness and equity and to address treatment of drivers, lease rates, shift rates, lease
arrangements, and labour relations matters. Their submission included a number of
recommendations that provided for:
_age limitations for vehicles;
_reform mechanical inspections to eliminate show-cause hearings;
_enforce owner accountability;
_license Designated Agents;
_improve current training and provide regular upgrading to training;
_review prospective taxicab owners to ensure they can handle the responsibilities;
_encourage the use of limo cabs;
_enforce and strengthen the By-law in connection with unlicensed livery cabs and taxis;
_amend the By-law so that a taxicab is an asset for an owner; and
_re-evaluate the formula for issuing plates to see if additional licenses are required.
Response to the Co-op Taxi Associates Committee Plan
The general principles of these recommendations are supported in the proposed reforms with
the exceptions of the elimination of show-cause hearings and amending the By-law to provide
for the taxicab as an asset for collateral purposes. The issues related to these proposals and the
rationale for not including them in the final recommendations are discussed above.
PART IV:BEST PRACTICES
4.1London, England
4.1.1Structure
Long regarded as one of the leading taxi industries in the world, the city of London has
managed to maintain a successful deregulated taxi market. The London taxi system is one of
the largest in the world, with approximately 17,000 licensed black cabs and 22,000 licensed
drivers serving the London region. Despite the large numbers, the structure of the London
system has remained committed to the owner-driver model of taxi service.
All interested parties can obtain a license to operate a taxicab business from the Public
Carriage Office of the Metropolitan Police, provided s/he meets the conditions for ownership.
The conditions for individual and corporate ownership are such that the owner-driver model
of taxi service is an incidental outgrowth of the legal provisions. That is, an individual may be
granted a taxi license if s/he owns a taxicab, possesses a taxi driver's license and has adequate
funds (i.e. 600 pounds) to maintain a taxicab in the necessary condition. A corporation can
only obtain a taxi license if they name a person within the corporation to be the proprietor on
behalf of the company. The proprietor must meet the aforementioned conditions for
ownership.
In effect, the London model's strict limit on the chain of participants in each establishment, as
well as high standards for driver training, have helped define the industry's strong views on
the pride of ownership and customer service. An individual or corporate owner of a taxi
license may lease out their taxicab, but not their taxi license. Thus, the only persons eligible to
become a lessee are those who wish to drive a leased taxicab. Accordingly, the proprietor
must own the vehicle and ensure that the taxicab remains in proper condition. It is also the
proprietor's responsibility to keep the lessee's driver's license on record. The period for which
a taxicab is leased to a licensed driver, as well as the fees payable and cancellation rules, are
left open to individual contract negotiations. The Public Carriage Office does not allow for the
subleasing of taxicabs.
The extensive training that is required to become a licensed driver has effectively removed the
incentive to become a lessee, as opposed to a proprietor of one's own taxi business. To qualify
for either the all-London (Green Badge) or suburban (Yellow Badge) license, the applicant
must satisfy the Commissioner of Police for the Metropolis that s/he is a fit and proper person,
is in good health and has sufficient geographical knowledge of either their selected area or all
of London. Entitled 'The Knowledge', the rigorous self-study training program for London
taxi drivers is famous for its demanding content and length. Candidates must complete six
stages and a final driving test. The regulatory body does not instruct candidates, but rather
administers a series of tests and sets the passing grade. The initiative rests with the candidate
to gain thorough knowledge of the points of interest in London and the many different 'runs'
(routes between two points) that lead to a particular destination. It follows that the emphasis in
the training is on the practical skill upon which the occupation rests: travelling between two
points by the most direct route possible. Once the course is completed, a licensed driver has
learned a total of four hundred 'runs' and has devoted an average of three years to the pursuit
of a license.
Interestingly enough, although London drivers are praised for their professionalism, 'The
Knowledge' contains no component for customer service and tourism training. Rather, the
lengthy training process, and general owner-driver requirements, dictates that only those
persons who wish to commit themselves to a professional career need apply.
The owner-driver model of taxi service is further supported by strict limits on the
transferability of a proprietor's license. Taxi licenses may only be transferred to the next of
kin, with the vehicle, upon death. The next of kin must then assume the responsibility and
qualifications of an owner. Licenses cannot be sold and remain the property of the Public
Carriage Office. A taxi license is regarded as the right to simply operate a taxi business, as
granted by the regulatory body. Accordingly, the right to operate a taxi business ceases when
the owner of a plate no longer wishes to operate the business. Unlike other jurisdictions, taxi
licenses are not used for investment or pension purposes.
4.1.2Regulation and Enforcement
The quality of taxicabs is controlled through annual inspections conducted by the Public
Carriage Office using standards set by the Department of Transport. Taxicabs are also
subjected to interim spot checks up to four times a year. The annual 'conditions of fitness'
inspection includes a check of brakes, steering, wheels, underparts, the engine compartment,
lighting, the driver's compartment, the body, the carriage compartment, and a road and meter
test. On average, fewer than eight per cent of taxicabs are found to be unfit for service (i.e.
defective brakes, tires, suspension are the most common) following an inspections. Research
conducted by the Task Force revealed the 'conditions of fitness' test to be of a high standard.
As such, participants in the industry face standards that mandate long-term and dedicated
involvement in the industry.
The Public Carriage Office requires the annual test to be conducted simultaneously to the
annual license renewal period. If the taxicab passes its inspection, the owner pays the license
fee and a plate with a different number is issued. Conversely, a new license is not issued until
the taxicab passes the inspection.
4.1.3Unlicensed Competition
Although the black cab dominates discussions of the London taxi industry, it is indeed true
that the famous black cab shares the taxi market with approximately 40,000 unlicensed
minicabs. In fact, there is twice the number of minicabs relative to licensed London taxis.
Minicabs are generally cheaper than black cabs, especially at night and on weekends.
However, the drivers are unlicensed, untrained, frequently uninsured, and not always reliable.
The cars do not have to meet any vehicle specifications and are not subjected to regular
inspections. Minicabs cannot be hailed in the street.
While it is alleged that minicabs steal business from the licensed taxi trade, it has alternatively
been argued that minicabs are servicing sectors in the public transportation market for which
the black cab drivers have little interest. In effect, London has two de facto classes of taxicabs.
Unlicensed minicabs are known to serve mostly native Londoners travelling to suburban
destinations and those travelling long distances. Minicabs often work during unsocial hours
and in inconvenient locations. On the other hand, the black cab mostly serves the downtown
core, tourists, and businesspersons. Although the unlicensed minicab has been in existence for
a number of years, the city of London is considering legislation for minicabs over the next
two years.
4.1.4Customer Service
The London taxi industry is often commended for its example of outstanding service to the
customer. London taxi drivers do not have a strict dress code, however, smart dress is
encouraged and followed. London cabbies tend to subscribe to the unwritten dress code of
slacks and a dress shirt for professional appearance. Aside from aesthetic concerns, the Public
Carriage Office has also taken steps to ensure that drivers have free access to disability
training material. For instance, literature on disability etiquette and the Disability
Discrimination Act is readily available to all drivers. Furthermore, by January 1, 2000, all
taxicabs must be equipped to approved standards in order that wheelchair passengers may be
carried. With regard to technological enhancements, the London industry has advanced into
the areas of computer-aided dispatch systems, card reader terminals that allow payment by
standard credit cards, and automatic vehicle location by satellite.
4.1.5Driver Safety, Work Standards, and Benefits
The ethos that dominates the London industry is the notion of the self-employed entrepreneur.
Both the regulatory body and participants recognize that the success of each business rests in
the initiative of each proprietor. The Public Carriage Office admits to keeping little data on
the income received by the average cabby because the number can and does vary according to
how well the cabby runs his or her business. However, some estimates consulted state that
London taxi drivers work on average twelve to fourteen hours per day and earn the reasonable
wage of approximately six hundred to eight hundred pounds per week. Each individual
proprietor must arrange for his or her own insurance and pension provisions. Most London
cabbies are able to maintain a profitable business upon which a family can be supported and
time for leisure pursuits is available.
Driver safety is not an issue of great concern for the licensed taxicab industry. The London
industry does benefit from measures that can preempt situations that may challenge a driver's
personal security. The passenger compartment is separated from the driver by a glass security
screen. Conversation can still be maintained by way of an intercom system. The provision of
the glass screen is more in the interest of passenger privacy than driver safety. The Public
Carriage Office has also taken moderate steps to produce a safe and profitable work
environment for drivers. For instance, under the London Cab Act, 1896 it is an offence to
defraud a cabman. A conviction could result in a passenger being made to pay the fare, in
addition to paying a fine or face imprisonment.
4.1.6Vehicle Characteristics
Although the "black cab" is the signature of the licensed London taxi market, there are no
vehicle specifications regarding colour. Vehicle specifications with regard to vehicle make
and dimensions, however, are one of the most stringent in the world. Only purpose built
vehicles are permitted. At present, there are four principal vehicles - the London Taxis
International FX4/Fairway, and TX1, the Metrocab, and the Asquith. All approved vehicles
must meet certain specifications as laid out in the Metropolitan Conditions of Fitness.
Vehicles must be type approved to the requirements of the M or M1 (i.e. passenger carrying)
category of European Whole Type Approval.
The Public Carriage Office does not place any restrictions on the age of vehicles upon entry to
and retirement from service.
4.2New York City, New York
4.2.1Structure
The New York City ("New York") taxi industry is a closed system with a cap of 12,187
medallions. Although the city progressed through a massive taxi reform process in the spring
of 1998, the city's Taxi and Limousine Commission ("TLC") did not conclude that a
deregulated market was a necessary reform that would improve the perceived ills of the
industry. Hence, the fundamental structure of the industry relating to license distribution and
management remains unchanged.
The New York taxi industry is a curious mix of independent owner-drivers and fleet/minifleet
owners, both of which are fully recognized in the city's ordinance. An independent
owner-driver is an individual, partnership or corporation owning only one medallion.
Alternatively, a minifleet owner is a corporation authorized to own two or more medallions. A
fleet is authorized to own 25 or more taxicabs in operation from a central dispatch service. In
order to be granted an independent owner's license, the applicant must possess a current taxi
driver's license and must represent that s/he will drive the taxicab for at least two hundred and
ten nine-hour shifts every year. Both individual and corporate owners are required to show
that they are qualified to assume the duties and obligations of an owner of a taxicab license.
Moreover, all medallion holders are required to provide proof that they are the owner of the
vehicle that meets the vehicle specifications and insurance requirements of the TLC.
Unlike London, the New York taxi industry does not ascribe to the owner-driver model of taxi
service, as there can be a number of layers between the owner of the medallion and the
frontline service provider. The use of Designated Agents and leasing arrangements are
accepted practices in New York, provided the participants adhere to strict guidelines provided
in the ordinance. Designated Agents are permitted to act on the medallion holder's behalf and
the TLC keeps meticulous records of participating agents. An owner may only have one
designated agent for his or her taxicab(s). While the owner remains responsible for all
obligations under the ordinance, i.e. insuring their vehicle and guaranteeing that the vehicle is
in proper working order, the designated agent can perform all functions incidental to operating
the taxicab. The primary restriction facing the designated agent is that s/he cannot delegate his
or her authority to another party.
An owner may lease his or her taxicab to a licensed driver. The lessee, however, is not
permitted to sublease the taxicab to another party. The TLC respects that the period of the
lease and the cancellation rules remain subject to individual contract negotiations.
Nevertheless, the terms of the lease must be filed with TLC. In light of the relatively liberal
leasing provision, more than three-quarters of New York taxis are leased. Moreover, twenty
per cent of owner-driven taxicabs are leased to a second driver. These numbers are not
surprising considering the fact that owners can draw from an abundant pool of drivers.
Currently, there are approximately 40,000 licensed taxi drivers in New York City.
The notion that leasing arrangements are left wide open to the freedom of contract is
constrained by the fact that the ordinance permits the TLC to assume a role in preventing
lease rates from drifting into the realm of exorbitance. The regulatory authority mandates that
as of March 1, 1996 an owner may not charge a lease rate that is more than fourteen per cent
of the highest lease rate charged, for an equivalent lease, on or prior to September 30, 1995. If
the medallion was not being leased to a driver on or prior to September 30, 1995, the lease
rate may not be higher than 14 per cent a maximum $90 per shift lease.
In order to ensure that owners comply with the aforementioned leasing provisions, the TLC
has the authority to fine, suspend, or revoke the owner's license for a violation. The TLC may
also administer other penalties. Such penalties include an incremental increase in the fines
until the third violation, at which point the medallion is suspended up to thirty days. If the
violation is an exorbitant lease rate, the owner may also be made to pay restitution to the
driver, equal to the excess that has been charged.
Drivers in New York are required to obtain a license from the TLC and the conditions for
entry are not onerous. In essence, successful completion of a forty-hour training program
provides the driver with a license. The TLC does not assume a direct role in training drivers,
but rather requires the applicant to produce a certificate from a TLC-approved program.
Independent training facilities must provide a program that covers the basic areas of city
geography, TLC rules, driver/passenger relations, and defensive driving. The training program
can be waived by passing an advanced placement examination.
Similar to other jurisdictions, the rules regarding the transferability of the owner's license can
have a far reaching impact on the industry. As is often the case, transfer rights can affect the
value of the plate as well, as the ownership concentration in the industry. New York permits
the transfer of a medallion via private sale. The conditions placed on such transfers are
minimal and include the following: (a) a medallion belonging to a minifleet or fleet owner
may only be transferred to a minifleet or fleet owner, (b) a license of an independent taxicab
owner can only be transferred to another independent owner, (c) transfers are only complete
with the written approval of the TLC. Prior to a sale being approved, the purchaser is
obligated to demonstrate that s/he meets all the conditions of ownership.
Although the medallion is legally the property of the TLC, most medallion holders treat the
license to operate a taxi business as an asset. Speculation is a regular practice in the New York
industry and a private purchase remains elusive to the average consumer. Medallions have
recently changed hands for as much as $200,00 apiece. Purchasers do have the option of
financing the purchase of a plate if they desire to become involved in the industry. New York
is one of the few jurisdictions where private corporations are active in financing the purchase
of medallions. Consequently, it has become a profitable and expanding facet of the taxi
industry.
4.2.2Regulation and Enforcement
The TLC is an active regulatory body that has taken a hardline approach to curing the
problems that ail taxi service in the city. Upon conducting its own internal research over the
winter months of 1998, the TLC found the main problems facing the industry to be driver
accidents and customer safety. Accordingly, the regulatory body - with the enthusiastic
backing of Mayor Rudolph Giuliani - set out to address the recognized weaknesses in
customer service and driver quality. The highlights of the reform package introduced in May
1998, and passed in June of that same year, are as follows:
_Persistent Violator Program imposes progressive penalties on drivers who are found to
consistently violate TLC rules.
_Owners' liability insurance for each taxicab is increased from $100,000 per person to
$300,000.
_Owners must maintain a corporate bond with the TLC in the principal sum of $100,00. This
sum is payable to the city for the benefit of any person, corporation or entity who has suffered
death, personal injury, property damage or any loss from the conduct of a medallion holder
which has not been compensated by the owner's insurance policy.
_The TLC has dramatically increased the monetary fines and mandatory license revocation
that can be levied against errant drivers for such violations as: abuse, threats and harassment
toward TLC representatives and passengers, driving while impaired by drugs or alcohol,
discriminating against passengers with disabilities, providing discourteous conduct and
smoking in taxicabs. On average the cost of fines have tripled from $350 to $1,000.
_The Critical Driving Program allows the TLC to closely monitor the records maintained by
the Department of Motor Vehicles for the purpose of allowing the regulator to take prompt
action against the licenses of drivers who have unsatisfactory driving records.
_Licensed taxi drivers are required to complete a defensive driving course authorized by the
TLC every three years.
_The TLC would require the testing of new and renewal applicants for taxicab drivers'
licenses for drugs and controlled substances.
To ensure that the mechanical fitness of taxis remains at an acceptable standard, taxi owners
are required to present their taxicabs for inspection three times a year. In addition, taxicabs
may be subjected to a spot check at any time.
To add support to the effectiveness of scheduled inspections keeping taxicabs in
passenger-safe conditions, the TLC has been successful in using a combination of stiff fines,
and an independent adjudication process, as quality-control measures for taxicabs on the road.
The adjudication process is purposefully divided between consumer complaints and
enforcement complaints. The consumer complaints division hears those complaints that arise
from poor service. The hearings are quick and are heard before an administrative law judge.
Due to increased awareness of the justice that can be reached by filing a complaint, the
consumer adjudication department hears roughly ten thousand complaints each year.
Enforcement of vehicle and license requirements is heard by the enforcement adjudication
division exclusively. A summons to appear before an administrative law judge can arise from
infractions discovered at one of the three scheduled inspections each year, as well as from the
random spot checks. New York maintains an impressive inspection apparatus that ensures that
the provisions of the ordinance are adhered to and those in violation appear before the
appropriate authority. Those bodies that hold the authority to stop and inspect a taxicab
include: uniform and plain clothes TLC inspectors, the New York City Police Department's
Taxi Squad, and the Port Authority of New York and New Jersey. On average, the
enforcement adjudication division hears two to three thousand cases per week. The TLC has
ensured that a supply of nine judges works the circuit each week to maintain the swift
processing of cases.
4.2.3Customer Service
New York City has long been described as a taxi riding city due to the lack of convenient
public transportation alternatives. Not surprisingly, an emphasis on improved customer
service has been a focal point of changes instituted by the TLC over the past three years.
Many of the changes have centered on the promotion of the avenues available for consumer
complaints. Taxicabs are now mandated to carry big, bold advertising of 212-NYC-TAXI to
notify customers that a complaints hotline is available. The audiorecording on the complaints
hotline has been improved to give consumers easier directions on how to proceed with a
complaint. Greater accessibility to the complaints process was also fostered by the
advertisement of the hotline number in braille and in public locales, as well as the introduction
of an on-line complaint hearing guide and complaint form. In effect, the greater awareness of
a complaints process provided reinforcement to the New York City Taxi Rider's Bill of
Rights. The Bill of Rights is widely advertised and includes such guarantees as the right to
have an air-conditioned cab, a courteous driver, and smoke and incense-free air.
The renewed customer-centered focus in the taxi industry has been furthered by numerous
customer service enhancements. For instance, as riders enter and exit a cab, they are treated to
an audiorecording of celebrity voices that reminds them to buckle up, not to forget their
belongings, and offers the helpful reminder of the hotline number. All customers receive a
receipt, dispensed from a meter. The receipt allows greater economic efficiency for riders, as
well as providing riders with the complaints hotline number and the medallion number, time
of day of the ride, and the duration of the trip; all of which aid the investigation of a
complaint. In addition, customers benefit from easy identification of taxis, as all New York
taxis are yellow. -
4.2.4Driver Safety, Work Standards, and Benefits
Recognizing the dangers and vulnerabilities faced by drivers due to the nature of the work,
taxis in New York are equipped with a transparent partition and a protective plate that isolate
the driver from the rear seat passengers. Owners are also required to equip all taxicabs with a
help or distress signaling light system in accordance with the taxicab specifications in the
ordinance.
Drivers in New York do not receive benefits from the regulatory body outside of those that
are arranged with the owners or brokerages from which they lease a taxicab. Both the
regulatory body and the owners generally ascribe to the view that each individual must take
responsibility for the financial health of his or her taxi business such that the necessities of life
and a pension can be provided for.
With the introduction of the TLC's seventeen-point reform plan, New York taxi drivers face
stiffer regulations in the interest of improving the quality of the industry. The TLC's rationale
behind the plan was the steady purging of those persons who are not dedicated to customer
service and safety, as witnessed in their careless behaviour. Ultimately, the effect is to
improve work standards by increasing the safety of drivers and passengers, and increasing
public confidence in the trade over the long-haul. Drivers and their unions, however, have
voiced opposition to the reforms by arguing that the penalties are draconian. Nevertheless, the
city's politicians and the public have thrown their support behind the initiative.
4.2.5Vehicle Characteristics
The quality of New York's taxis stand out due to the limited life span that is tolerated for
vehicles. All cars that enter the industry must be off the showroom floor. Cars that are part of
fleets must be replaced after three years of cabbing, while cars that are driven by independent
owner-operators must be retired after five years. Extensions are only granted to those taxis
that are powered by natural gas, and only then is the extension granted for two years. The
strict provisions on the life of the vehicle recognizes the wear-and-tear that is inherent to using
a vehicle for the purpose of transporting persons and parcels up to twenty-four hours a day.
4.3Halifax, Nova Scotia
4.3.1Structure
The taxi industry in Halifax is currently structured around a closed system of six hundred
plates. There are no plans to lift the cap. Ordinance 116 expressly states that the License and
Firearms Department of the Halifax Regional Police is not permitted to issue more plates until
the number falls below 550. At present, the city is attempting to reach this figure outside the
controversial buying back of plates. Instead, Halifax has been successful in reducing the
number through such voluntary means as the plateholder relinquishing control of the plates or
the death of the plateholder precipitating the plate's return to the city.
While Halifax is similar to many other jurisdictions in regard to the closed nature of its
market, Halifax has stood out as being committed to innovative change in the area of driver
training. As the focus on improved customer service propels reform in other regions, Halifax
has sought to achieve the delivery of top rate service to the taxi riding public through the
introduction of a two-tiered taxi system. In essence, those taxicabs that are equipped with
higher caliber drivers and vehicles, via the Hotel Standards program, are permitted to service
the lucrative taxi stands located at the hotels. Those taxicabs that do not carry the distinction
are excluded. Of the six hundred licensed taxis serving the Halifax region, two hundred and
fifty are Hotel Standards certified.
The difference between a Hotel Standard taxicab and a regular taxicab primarily rests in the
quality and age of the approved vehicle, and the training and dress code required of the
drivers. While Ordinance 116 does not state that Hotel Standards taxis must be of the luxury
car variety, it does demand that vehicle have more head and leg room, and trunk volume, than
the regular class of taxicab. Furthermore, aesthetically, the Hotel Standards taxi must have
first class repairs, with no visible body fillers, primer paint, accidental damage or similar
defects. A Hotel Standards taxicab must also be no more than eight years old, unless the
Inspector determines that the vehicle is of exceptional quality. Conversely, those existing
industry participants not taking part in the Hotel Standards program are required to provide a
vehicle of standard specification, i.e. four-door sedan, at least four cylinders. Provided that the
vehicle meets the required specifications, there are no age of entry or retirement conditions
attached to regular Halifax taxicabs.
With regard to driver requirements, Hotel Standards drivers must keep a neat and clean
appearance which includes wearing a shirt with a collar and sleeves. Drivers who ply their
trade in the regular tier are required to wear a shirt, trousers or dress shorts, socks, and shoes.
More importantly, the drivers who wish to service hotels must complete the Hotel Standards
driver training regime. As such, the city of Halifax has made a point of establishing the heart
of the Hotel Standards distinction to be a revamped driver training program. That is, driver
training is not looked upon as simply a means to test a candidate's driving skill. Rather,
candidates must demonstrate competence in the areas of tourism knowledge and a
professional attitude to all facets of the trade. Drivers are expected to bring themselves to a
higher standard of professionalism through the three-step Hotel Standards certification
process. The three step certification process includes: (1) a written test, (2) a performance
review consisting of a checklist for the candidate to test what they have learned, and (3) an
in-car industry evaluation. It takes up to one year to be issued a Hotel Standards license.
The series of examinations administered by the Tourism Industry Association of Nova Scotia
("TIANS") are based on the National Occupational Standards: Taxi Driver Training manual
designed by the Canadian Tourism Human Resource Council. Loosely modeled after 'The
Knowledge' in London, candidates obtain the learning material from TIANS for a fee, and
through a self-study program, they learn the material and schedule a test with a TIANS
evaluator. The active participation of an independent tourism organization in Halifax is an
indication of a growing trend to recognize the importance of the taxi industry to the tourism
profession, and the valuable role trained tourism professionals can bring to the education of
drivers in their evolving role.
The content covered in the Hotel Standards training manual can be classified as "soft skills"
(i.e. customer service, language skills, gender sensitivity). Despite the classification, such
skills are now recognized as areas where taxi service needs additional attention if it wishes to
capitalize on opportunities in the market. Courses covered include: professionalism, customer
service, communication, safety, (tourism) industry knowledge, shift procedures, and monetary
transactions. Taxi drivers are guided through the standards that are expected of them, in
addition to the methods available to internalize the standards. Ultimately, candidates are
expected to play an active role in their education and commitment to developing the
professional skills needed to offer the public outstanding service.
It is important to note that upon the commencement of the Hotel Standards program in 1995,
all new drivers in Halifax are required to become Hotel Standards certified. Those persons
wishing to obtain a driver's license must first receive a temporary license from the License
and Firearms Division. A temporary license is issued to candidates who complete the original
driver training course consisting of: a language test, a test pertaining to streets and buildings,
and a test on Ordinance 116. It takes approximately four days to be issued a temporary
license. It follows that the driver has one year from the date of issuance of a temporary license
to complete the Hotel Standards certification and receive permanent credentials.
Those persons who were taxicab drivers prior to the commencement of the Hotel Standards
program are not required to upgrade their training. However, they are excluded from servicing
the hotels. Halifax City Council is considering amending the ordinance to make the Hotel
Standards a uniform requirement for all cars and drivers in the taxi industry. As such, the
two-tiers may be merged together.
Irrespective of participation, or lack thereof, in the Hotel Standards program, the ordinance
provisions regarding ownership of the vehicle, leasing, and rights of transferability apply to
both tiers. Ownership of the vehicle remains with the proprietor. A taxi license can only be
issued if the owner provides a vehicle of particular specifications and the vehicle is insured as
specified in the ordinance. Furthermore, the taxi license and the vehicle cannot be divorced
from one another. As such, an owner is permitted to lease their plate and vehicle provided that
the owner of the vehicle is a licensed owner and the driver is licensed for the tier in which
they intend to work. There is no difference in the fares charged in either tier.
The Halifax system maintains that the taxi license is not an asset, but rather a license granted
by the city to operate a business. Conceptually and in practice, the plate remains the property
of the License and Firearm Department. To that end, even if the number of licenses in
operation falls below 550, plateholders are not permitted to sell their plate on the open market.
The ordinance dictates that a waiting list for available licenses should be comprised of persons
holding taxi driver's licenses. In the interest of fairness, the names are listed in the order of
seniority according to the time the interested party has continuously held a driver's licenses.
4.3.2Regulation and Enforcement
The owner of a taxicab business is required to present his or her vehicle for inspection once a
year. The inspections are conducted by taxi inspectors from the License and Firearms
Department who use both vehicle manufacturer standards and department standards as their
guides. If a vehicle fails to meet the aforementioned standards, the inspector will suspend the
license until the vehicle complies with the By-law and is approved for operation by the Chief
of Police or his designate.
As in other jurisdictions, Halifax taxicabs can be subjected to a spot check at any time by a
License and Firearms inspector. However, due to limited resources, inspectors are only
available to patrol the streets between 8:30 am to 4:30 pm Monday to Friday. As well, the
assigned inspectors do not inspect taxis businesses exclusively, as their time is divided
between various enterprises. In the interest of improving their enforcement apparatus, the city
is examining the possibility of allocating a specific number of inspectors for taxi spot checks
exclusively.
4.3.3Customer Service
The hallmark of the two-tiered system has been the intense efforts to consciously raise the
quality of customer service. The License and Firearms Department has taken three steps to
improve service deliver to the taxi riding public. First, in the interest of making the Hotel
Standards tier readily identifiable to the public, all certified taxis carry a decal in the shape of
the international symbol of a pineapple.
Secondly, the city has attempted to maintain a worldclass taxi service by developing a special
Hotel Taxi Standards Committee appointed to investigate customer complaints made against
Hotel Standards drivers. The Committee ensures representation from a broad range of
interests, i.e. representatives are drawn from Tourism Halifax, TIANS, the Hotel Association
of Halifax, licensed taxi drivers, licensed taxi owners, and owners or managers of a brokerage.
The Committee must deliver justice expediently, as the Committee must investigate the
complaint within five days of the receipt of the complaint. If found guilty, the driver may have
his certification removed for a period of time as deemed appropriate.
Thirdly, the industry's commitment to maintaining quality service has also enhanced by the
availability of re-training courses for licensed Hotel Standards taxi drivers. The aim of the
courses has been to ensure that improvements to customer service and driver's tourism
knowledge are maintained. The Hotel Standards Committee is responsible for approving the
content of the course. The course is offered by the License and Firearms Department at least
once every six months.
4.3.4Driver Safety, Work Standards, and Benefits
The success of the Hotel Standards program can be partly credited to the recognition given to
those drivers who have taken the initiative in acquiring the necessary certification.
Advertisements in the newspaper and tourism industry newsletters announcing recent
recipients of the Hotel Standards certification has increased industry interest in and acceptance
of the program. Industry veterans and newcomers enjoy greater feelings of accomplishment
and professionalism for their efforts to offer higher quality service to the taxi riding public;
the public upon which their livelihood depends.
4.4Vancouver, British Columbia
4.4.1Structure
As in New York City and Halifax, Vancouver's taxi industry functions in an artificial market,
capped at 418 licenses. The formula employed in determining whether the number of licenses
should be increased is clearly stated in By-law No.6066. The By-law mandates that the
number of taxis should be related to the size of the population served. As a result, the number
of taxis is only permitted to increase at the rate of ten additional licenses per year until the
ratio of 1.2 taxicabs for each 1,000 of population of the City of Vancouver is reached. Due to
the strict provisions of the formula, there are no current plans to increase the number of
licenses.
In order to obtain a license to operate a taxicab, an applicant must demonstrate to the
municipal Permits and Licenses Department that s/he possesses an intimate knowledge of the
City and its traffic regulation; knowledge of the applicable By-law; and an willingness and
ability to provide satisfactory service to the public during the life of the license. Furthermore,
an owner must be able to speak, and read and write the English language. An applicant must
also provide proof that s/he is the owner of a vehicle that is meets the specifications of both
the By-law and the Motor Vehicle Act.
Leasing is permitted under the By-law, however, the participants in the chain is limited.
Under the By-law, a vehicle may not be operated as a taxicab except by the registered owner
or a driver employed by and directly responsible to the owner. Consequently, only those
persons who intend to drive the taxicab are permitted to become a link in the chain. In the
interest of enhancing the regulator's ability to enforce the By-law, the owner is mandated to
obtain a copy of the lessee's driver's license, and s/he must consequently record this
information with the Permits and Licenses Department. Accordingly, the regulatory body is
equipped with the information needed to locate drivers if and when the need arises (as it may
in regard to enforcement matters).
Interestingly enough, an individual may not apply for a driver's license until his or her
application is accompanied by a letter from the owner of a taxicab indicating an intent to hire
the applicant once the license has been granted. This provision operates to restrain the number
of persons holding a driver's license. But more importantly, it is a mechanism to keep the
number of drivers somewhat comparable to the number of taxicab businesses in operation.
Plates may be transferred on the open market in Vancouver, provided that the transferee meets
the owner's requirements in the By-law. To facilitate stability in ownership, the By-law
prohibits a transfer of the same license more than once during any calendar year.
Far from being a problem unique to Vancouver, driver training and qualifications was a
component of the structure that required improvement. As is often the prime impetus for
change, the city's taxi industry was seen to have lost its concern for delivering quality service
to the customer. Some drivers could be credited for working hard to provide good service,
however, others had inflicted serious damage to the reputation of the industry through a
perceived lack of commitment to meeting the needs of the taxi riding public. In June 1996, the
city's Standing Committee on Planning & the Environment produced a report pinpointing a
lack of universal, comprehensive driver education to be a crack in the foundation of the
industry. Prior to By-law amendments the following year, drivers in Vancouver simply had to
complete a short English proficiency test administered by the Permits and Licenses
Department. Any additional training was then provided at the discretion of the individual
brokerages. There was no uniformity in length and substance of training, and hence varied
results were the outcome. Not surprisingly, the Committee felt that a mandatory training
regime was in order.
The findings of the Committee followed with efforts by the tourism industry to bring the taxi
industry into the tourism fold. As witnessed in other jurisdictions canvassed, it is not unusual
for the tourism industry to take a leading role in helping to reform a municipal taxi industry.
Beginning in 1995, the local tourism industry examined ways to improve the safety,
professionalism and customer service provided by the industry. As a result, the Greater
Vancouver Taxi Partnership was struck which included representatives of the Greater
Vancouver taxi industry, the tourism industry, the Vancouver International Airport Authority,
and the municipal regulatory agency. In March 1995, the Partnership launched a voluntary
driver training program focused on tourism and driving skills training called TaxiHost. In the
first two years of the program, a total of 527 of 3,800 licensed drivers voluntarily signed up
for the program.
In June 1996, the Committee recommended that all new drivers are required to complete level
one of TaxiHost. By January 1997, the By-law was amended to mandate that all new drivers
were required to complete level one of TaxiHost. Current drivers can receive their level one
credentials by passing challenge exams. The success of the program has led the
recommendation to City Council that new drivers must complete up to level two of the
program.
TaxiHost is comprised of four levels, with each level recognizing a higher level of
professionalism and knowledge. In completing each level, drivers can market themselves as a
"tourism host" for the city. Those drivers that complete all four levels receive a special
Steering Wheel pin in recognition of their accomplishment and providing top rate service. The
elements of each level are described in greater detail below.
Level one - driver - is an entry-level program involving applicant screening, English
language testing and twenty-seven hours of training. It attempts to lay the foundation in such
basic service tools as satisfactory language skills, local geography and road knowledge,
developing an appreciation for the industry's role in the tourism sector. Arguably, the
highlight of level one training is the "Superhost" component whereby students receive
detailed instruction in tourism training. The standout quality of the "Superhost" course is
evidenced by the growing number of post-secondary hospitality and tourism programs that
have incorporated "Superhost" into their curriculum.
Level two - professional - requires the completion of level one, demonstrated language
proficiency at a specified level, completion of 120 or more driving shifts in the past twelve
months, and 18 to 20 hours of training and testing in specified courses that focus on teaching
candidates to be "professional" drivers. The courses covered include: Driving with Finesse
(in-car collision prevention), Taxicab Driver Safety (assault avoidance awareness), Advanced
Geography (similar to the system of road testing followed in London, England), and
Transporting People with Disabilities. In total, 100 hours worth of instruction and testing is
conducted at the professional level.
Level three - certified - requires drivers to take the initiative in preparing for a performance
appraisal by a supervisor, an evaluation by an anonymous passenger, and successful
completion of an exam that meets the criteria laid out in the National Occupational Standards:
Taxi Driver Training. Hands-on training and testing is emphasized, and tourism education is
furthered.
Level four - taxi guide - necessitates that candidates demonstrate extensive tourism
knowledge. In effect, the entire emphasis of level four is on the service provided to the
customer. Candidates must complete a written examination of tourism knowledge, an oral
evaluation by tourism industry professionals, and a performance appraisal by a supervisor.
The TaxiHost program is administered by the nonprofit Justice Institute of British Columbia.
In addition to running the TaxiHost Centre, the Justice Institute also trains other trade workers
such as bus drivers and paramedics, to name a few. The participation of an education centre in
the training of taxi drivers has been credited for having a positive impact in boosting the
morale of drivers. In taking their classes alongside other professionals, drivers benefit from
the understanding that their job has been acknowledged as a post-secondary course of study.
By all accounts, TaxiHost has been an unqualified success. More importantly, it has had the
ripple effect of inspiring other jurisdictions to reevaluate perceptions of the role of the taxi
industry in the web of public transportation. Regular foreign interest and inquires speak to the
relevance and creative aspects of Vancouver's driver training. In 1996 alone, the TaxiHost
program was honoured with four international awards for program excellence and innovation.
Two came from the Western Association of Convention and Visitor Bureaus, and two came
from the Pacific Asia Travel Association for program design. The hotel and tourist industries
remain strong supporters of the program. The Canadian Human Resource Council, an
umbrella tourism organization, has purchased the rights to the program. As well, the Ontario
Tourism Education Council is currently adapting the program to the Toronto market.
4.4.2Customer Service
As in New York, the Permits and License Department has been active in implementing
changes that allow for a more effective consumer complaints process. In the past, a lack of
access to pertinent information impeded a customer's successful filing of a complaint. It was
often difficult for the staff to determine the car number and driver of taxicabs for which a
complaint had been filed due to the fact that customers were not aware that the information
was needed, and even if customers were aware, it was not readily available. Recent
amendments to the By-law to rectify the deficiency include requiring that:
_the number identifying the car must be placed on both sides of the taxicab, near the front
and on the rear of the taxicab, and it must be prominently displayed;
_the picture identification, with the driver's name or number, must be displayed in the taxi in
plain view of all passengers; and
_the tariff decal inside the taxicab must include the complaint phone number for the Taxi
Detail.
4.4.3Driver Safety, Work Standards and Benefits
Although the initial industry reception to the TaxiHost was less than favourable, drivers have
come to accept the merits of the program. Taxi appreciation days, where TaxiHost graduates
and exceptional drivers are recognized, have been key initiatives in an effort to garner driver
support. Some initiatives to improve driver's tourism knowledge, while rewarding them with
some personal benefit, have included giving taxi drivers passports entitling their families to
free admission to 25 visitor attractions in Greater Vancouver. The tourism industry and
regulatory body have been active in providing supports to aid the education process; supports
that ultimately benefit service to the customer and thus the driver's opportunity for more fares.
Vancouver taxi drivers do not receive employment benefits from the municipality. The city
does not employ drivers. Each driver is seen to be an entrepreneur who must sell his or her
skill on the open market. With such independence comes the responsibility to secure his or her
own benefits and pension, either through arrangements with the brokerage or private efforts.
4.4.4Vehicle Characteristics
Vehicles that are utilized as taxicabs must meet the standard specifications pertaining to trunk
size, number of doors, head room and floor space. Taxicabs in Vancouver can be no more
than two years old upon entry to service. An inspector may grant an exemption for vehicles
more than two years old, for a limited period, if the exterior appearance of the vehicle and its
interior are of a standard comparable with its original construction. There are no restrictions
placed on the age of retirement of vehicles.
4.5Montreal, Quebec
4.5.1Structure
The City of Montreal sought to improve the profitability and effectiveness of its taxi industry
through an ambitious license buyback plan in the late 1980s. Between 1985 and 1990, 1,287
licenses were eliminated from the Montreal market, a 25 per cent decrease in the 5,222
licenses formerly in effect.
The buyback plan was instituted on a volunteer basis. The Ligue de taxis de Montreal
arranged for the Department of Transportation to appoint a trustee to manage the plan. The
trustee was instructed to purchase licenses offered for sale at their market value, with the
market value being set at $10,000 in June 1985, adjusted to $18,000 in June 1987, and finally
$30,000 in April 1990. The cost of the buyback plan was consequently absorbed by license
holders vis-a-vis the annual license fees ($1,000 per license) and the transfer charges payable
by those purchasing a license on the open market. The transfer charge was initially $10,000,
but had climbed to $20,000 in 1987. However, the income generated by the transfer changes
eventually led to the elimination of annual license renewal dues by 1990.
Despite the cost, license holders spent approximately $21 million dollars in the buying back
of 1,287 license. One of the primary incentives was the hope of benefiting from the increased
profitability of taxi operations and the added value of licenses, as per the reduced competition.
In the same period in which the closed market was reduced to increase profitability, a
mandatory driver training program was instituted with the aim of improving service delivery.
Since May 1994, all drivers in the major urban centres of Quebec are mandated to take a
training course lasting approximately sixty hours. The topics covered include:
_legal considerations (15 hours);
_professional and ethical relations (17 hours);
_health and safety (5 hours);
_the disabled (7 hours);
_taxi and equipment (5 hours);
_transporting management concepts (5 hours); and
_knowledge of area (examination preparation, 3 hours).
This basic training regime is often augmented by more detailed training on the knowledge of
the area in which the taxicab driver intends to provide most of his service. Such regional
authorities as the Urban Community of Montreal oversee this additional instruction.
It follows that the implementation of a uniform training program, which demand more
attention and commitment from prospective drivers, had the effect of significantly reducing
the number of new drivers entering the market. The trade off for the reduction in the number
of drivers was an increase in the number of better trained taxi operators. That is, compared to
existing drivers, the new generation taxi driver is considerably more familiar with the relevant
provincial and municipal legal provisions, the nature of the industry, and the importance of
customer service.
Perhaps the aspect of the Quebec taxi industry that has garnered the most attention of late has
been the introduction of the professional development program entitled Taxi Ambassador to
the Montreal industry. Similar to Vancouver, Montreal is one of the few jurisdictions that has
made retraining of existing drivers a priority vis-à-vis the availability of continued driver
education.
Launched in May 1995, the Taxi Ambassador "skills-upgrading" program has been tested on
the South Shore of Montreal, in Trois-Rivieres and in Sherbrooke. At all these locations, the
program has been implemented through the cooperation of local organizations responsible for
tourism promotion and taxi owners' leagues.
With regard to logistics, the program was designed and developed for taxi drivers by the
provincial Department of Transportation and the Department of Tourism, in cooperation with
the Taxi Bureau of Montreal, affiliated regional tourism organizations of Quebec and
representatives of the taxi industry. The training course has two one-day modules (six hours of
training per module): the first addresses client reception and service, and the second deals
with regional tourist attractions. Drivers who subsequently complete these modules can
officially market themselves as "Taxi Ambassadors". Graduation includes the granting of both
an official certificate and a "Taxi Ambassador" permit.
The distinction a driver carries with a "Taxi Ambassador" permit is significant. Not only are
graduates better qualified to offer sightseeing tours in their region, industry representatives
have agreed that only drivers that partake in the program can serve the Montreal Airport and
the Montreal Casino - two high volume locations. Presently, the taxi industry self-polices
entry onto either site by nonqualified drivers. However, the Taxi Bureau is campaigning to
convince the Casino and Airport Authority to make "Taxi Ambassador" qualifications part of
their entrance conditions.
As in Halifax and Vancouver, existing drivers were slow to embrace the concept of
professional development training, citing that customer service training was not needed and
even insulting. Nevertheless, the involvement of industry representatives in the development
of the program, and the increased professionalism and respect bestowed upon the industry, has
had an impact in convincing existing drivers to change their views.
Of significance, the professional development opportunities available to experienced drivers
are not limited to Taxi Ambassador. The Quebec Department of Transportation has developed
two additional courses, which are now also included in the new mandatory driver training.
_Taxi Aid: The aim of the three hour course is to give drivers information about their own
safety and public safety in general. Drivers are instructed in their role in helping to protect
public safety by informing emergency services when they witness incidents relating to public
safety (i.e. accidents, fires, etc.).
_Taxi Transportation for the Disabled: Taxi drivers are made to appreciate their role in
the parapublic transportation services. At the conclusion of the one-day training course,
participants should have strengthened this expertise and become more aware of the realities of
the disabled. Since the introduction of this course in January 1992, approximately 4,000
drivers have already taken part.
In sum, the professional training initiatives in operation in Quebec are seen to have been a
resounding success. Such opportunities have raised the participants' awareness of their
important social role, the vital service they provide to certain people, the public recognition
they gain from the training, and lastly, their interest in being better prepared professionally to
meet the demand for more specialized services. In an effort to continue the momentum of
enhanced driver knowledge and service, An Act respecting transportation by taxi was recently
amended to include the authority to prescribe mandatory retraining courses prior to taxi driver
license renewals through regulations in areas designated by the regulations.
PART V:THE SOLUTION
The Ambassador Class Taxicab solution combines regulatory actions with customer service
and economic principles to meet the goals of the Task Force. First and foremost, the solution
provides for significant improvement to vehicle and customer service quality. Further, the
solution responds to concerning trends within the taxicab industry such as the decline taxicab
and customer service quality, the reduction in the number of owner-drivers, and the overall
increase in stakeholders paralleled by a relative decrease in taxicab business participants. The
reformed Toronto taxicab industry provides an environment for success to individuals who
want to commit to a taxicab business and actively participate in a driving or management
capacity.
The solution proposed is a comprehensive package of recommendations organized by five
points to focus on customer service:
1.Create a Taxicab Passenger Bill of Rights
2.Create Ambassador Class Taxicabs
3.Improve Training
4.Improve the Taxicabs
5.Strengthen Enforcement
It is important to the success of this plan that individual elements should not be divided or
approved individually. Together, the recommendations meet the overall intentions of the
guiding principles and goals of the Task Force. As such, each recommendation is intertwined
with others and any change to the package must be considered with respect to implications
that it will cause to the industry. It is therefore recommended that the recommendations for
reform be approved as a package recognizing the interrelationship of all initiatives and that
the all changes are necessary to improve Toronto's taxi service in accordance with the goals
of the Task Force to Review the Taxi Industry (Recommendation 2).
5.1Taxicab Passenger's Bill of Rights
The consultation and research conducted by the staff resource team identified a chasm in
regards to a clear statement of the expectations that a taxi driver must meet in his or her
service delivery efforts. On the one hand, the taxi industry recognized that customers held
negative impressions of the service that is often provided. On the other hand, industry
representatives often spoke in generalities when the subject of customer service was
approached. Many could point to the importance of customer service, yet there was no
indication that the industry had taken direct steps to define customer service.
The Taxicab Passenger's Bill of Rights seeks to provide clear standards that should be met
every time a customer enters a Toronto taxicab. Only with clarity can drivers have a point of
reference against which they can measure their behaviour. The Bill of Rights also provides
customers with higher standards against which they can measure the performance of the
service provider. The Bill of Rights also acknowledges the importance of customers and
serves notice to wayward drivers that mediocre service will not be tolerated.
As mentioned in the discussion of the initiatives in New York City, the Bill of Rights has
been a successful undertaking in the effort to focus attention on quality of service standards.
Customers in New York have embraced the notion that riding in a clean taxicab is not a
privilege, it is a right.
The rapid expansion in technology in the modern age has no doubt had a hand in reducing the
use of taxis of the delivery of parcels. From the fax machine to courier services, the taxi
industry has had to contend with a reduction in its revenues. The reduction in revenue streams
has come at a time when passengers have more options available to them for public transit. As
such, the industry, in the interest of future viability, must find a way to win back the taxi
riding public. Indeed, the customer is the reason for the continued existence of the taxi trade.
The Taxicab Passsenger's Bill of Rights is an initiative that attempts to lay the ground work in
the efforts to renew the focus on meeting passengers' expectations.
The workshops conducted on July 6, 1998 proved to be a useful forum to debate ideas in
regard to the components of the Toronto Taxicab Passenger's Bill of Rights. All participants
provided comment on the standards that should be adopted, with many of the same points
coming forth in each discussion. There was general consensus that the adoption of a Bill of
Rights would be of great use.
It is therefore recommended that Council adopt a new Taxicab Passenger Bill of Rights
for all Toronto taxicabs, to be displayed on the back of the passenger seat, easily visible
to passengers to inform that Taxicab passengers that they have the right to:
_A professional driver who:
_is licensed and knowledgeable;
_knows the major routes and destinations in the City of Toronto;
_speaks and understands English;
_is courteous and provides assistance;
_provides a safe ride;
_knows and obeys the by-laws and all traffic laws; and
_offers a silent ride if desired;
_Direct the driver on the route to be taken;
_A quality taxicab:
_in good mechanical and physical condition;
_with a clean passenger area and trunk;
_air-conditioned or heated on demand;
_with easy access to seatbelts;
_with a smoke-free environment; and
_equipped with a meter that issues receipts noting the date and time of the trip,
distance, taxicab license number, and the fare charged; and
_An effective customer complaints process; and
_Reduce the tip if the above services are not provided (Recommendation 3).
5.1.1Customer Support Hotline
While the Taxicab Passenger's Bill of Rights is a laudable initiative to improve customer
service, the effectiveness of the Bill of Rights can only be achieved if a much improved
complaints process is put in place to enforce the standards. Presently, the public perceives the
customer complaints process to be weak and ineffective. Conversely, drivers are not
concerned that they will be disciplined for rude or discourteous conduct. It follows that the
unacceptable behaviour of a few has unfortunately been to the detriment of the industry as a
whole.
The main weaknesses that have hindered the current customer complaints process have been
the lack of public awareness of a complaints phone number, and the inefficiencies in a hearing
process that takes too long from initial investigation to final disposition. As long as the
weaknesses persist, wayward drivers will have little reason to improve their attitude and
relations with customers.
New York City and Vancouver have used improvements to their customer complaint process
to assist in the reformation of drivers' attitudes, thereby raising the level of customer service.
In New York City in particular, the number of complaints rose sharply following the
widespread notification of a new complaint process. As customers saw their complaints
leading to concerted action, confidence in the complaint process grew. Customers need to feel
that their concerns, as they relate to service delivery, are being taken seriously.
The implementation of improvements to the customer complaint process has been well
received by all stakeholders in the industry. Submissions from persons representing drivers,
owners, and customers expressed consent regarding more noticeable publication of a
complaint number, and more stringent penalties for those industry participants who are found
to be at fault. It should be stressed that the purpose of the customer support hotline is to
reinforce the standards of service that is to be expected of drivers and to educate taxi operators
that these standards are non-negotiable.
In order to facilitate better enforcement of customer service concerns, the Task Force
recommends that Toronto Licensing adopt the easy-to-remember customer service
number 1-877-TO-TAXIS (Recommendation 7).
It is also recommended that Toronto Licensing develop a plan respecting steps to be
taken to augment the current customer complaint process with a marketing plan and
resolution process, and report back to the Emergency and Protective Services
Committee within six months to identify any impact with respect to resources in order to
provide the following:
_All taxicabs must boldly display the customer service number posted on the Taxicab
Passenger's Bill of Rights, with the accompanying plate number and driver's name
posted alongside the advertisement.
_All taxicabs must display the customer service number with a safe driving message on
the back of the taxicab visible to other vehicles;
_Customers must be given the option of filing an on-line complaint whereby personal
information, as well as an account of the incident, can be filed.
_The customer complaint process should provide the customer with the choice of either
filing a complaint against a driver through an industry-wide organization such as the
Taxicab Advisory Committee, or attending a short hearing with the regulatory
authority. The options allow the industry to deal with such complaints as discourteous
conduct, where the customer may feel strongly about filing a complaint, but less so
about appearing for a time consuming hearing. In the interest of efficiency and
effectiveness, adjudicative hearings could be reserved for matters where the customer
feels that punishment beyond a verbal reprimand is necessary.
_Toronto Licensing should commit to responding in writing within seven days to the
customer to inform them of actions to be taken.
_Toronto Licensing should commit to resolve complaints within 90 days and advise
customers in writing respecting the outcome of the investigations.
_The industry should assume a greater role in the self-management of their trade. If
the customer chooses to file a complaint with an organization similar to the Taxicab
Advisory Committee, the members of the organization would determine what
appropriate action should be taken. One option that should be explored is to link a
driver performance review system, established and monitored by the industry, to
customer complaints received. After a driver receives a certain number of complaints,
his or her poor customer service record could be reflected in their review. Conversely,
those drivers who have an outstanding record with no complaints could have their
accomplishment reflected in the industry-run performance review. Another option
provides for the introduction of a satisfaction guaranteed policy that provides rebates to
customers with validated complaints (Recommendation 8).
5.2Ambassador Class Taxicabs
Toronto Ambassador Class Taxicabs will provide a safe, comfortable, courteous and pleasant
ride to residents and visitors. Improvement in the industry overall will provide fair returns
among participants and will facilitate better enforcement. The intentions of these reforms are
first to serve passenger needs, and second, to ensure that participants in the industry who
comply with City requirements, benefit from the rewards of providing taxicab services.
5.2.1Ambassador Class Taxicab Licenses
Ambassador Class Taxicabs take the positive features of the existing taxicab industry, and
eliminates practices that have contributed to the current decline in quality of service. Statistics
show that owner-drivers, with pride of ownership typically provide the best level of customer
service. Ambassador Class Taxicabs will introduce more owner-drivers as Toronto taxicab
operators and does not allow a complex system with five levels of management.
The increased number of participants that deal and take a portion of returns from individual
taxicabs has also increased. As one workshop participant indicated, a taxicab can reasonably
support a family but it cannot support five families. The ability of a driver to generate income
can have a direct affect on how a driver relates to the public and takes pride in providing safe
and comfortable transportation.
Changes to the structure of the industry must give consideration to the approved principles
that drivers have the rights to expect and demand a fair return for their labour and owners
have the right to expect and demand a fair return for their investment. Many claim that the
structure of the taxicab industry in Toronto, in concert with the regulatory process, vehicle
quality, and requirements for industry participants, is the formula for disaster that has resulted
in a continued decline in quality. For the purpose of this discussion, structure addresses
operating guidelines for participants within the structure and the number and characteristics of
taxicab license plates.
The Toronto taxicab industry is an integral part of the overall transportation system that serves
City residents and visitors. A taxicab is a transportation option for some and a necessity for
others, and as such, availability, safety and service are important considerations.
Taxicabs and taxicab drivers are also often the first and last point of contact for visitors to
Toronto, leaving often negative first and last impressions that diminish the positive
experiences of a tourist's trip. The fact that the quality of taxicabs and taxicab services have
diminished presents a negative image for the City that can effect tourism and economic
development.
The Toronto Board of Trade advises that "tourism is the largest and fastest growing industry
in the world and contributes almost $5 billion annually to the Toronto economy" (The
Toronto Board of Trade, Submission to City of Toronto Task Force to Review the Taxi
Industry, June 1998). There is little debate that the conditions and quality of service of the
taxicab industry is of substantial importance to Toronto's promotion as a world class city. The
taxicab industry's influence on the Toronto image can affect tourism and are important
considerations in initiatives such as the 2008 Olympic Games. The taxicab service in Toronto
must project and provide and highest quality and safety standards. Many stakeholders share
the view that taxicabs and taxicab drivers are ambassadors to the City. The Ambassador Class
Taxicab concept expresses the quality image that is so critical for the industry and the City to
achieve.
It is therefore recommended that Council endorse the principle that Toronto is a world
class city and that as ambassadors for a world class city, Ambassador Class Taxicabs
must provide:
_High quality driving skills;
_High quality customer service skills; and
_High quality vehicles (Recommendation 9).
5.2.2Ambassador Class Taxicab License Issuance
On one hand, many argue that the taxi market is overserviced and cannot accommodate an
increase in the number of plates. The restriction on the number of plates has resulted in
inflated plate values that allow owners to demand high fees, particularly in recognition of the
over supply of drivers. There have not been plates issued by Toronto Licensing since 1992. A
proposal to issue 100 additional plates in 1996, as proposed in the Thomas Schimski report,
was not approved due to concerns raised on behalf of owners. Concerns centered on the
expected decline in plate value, lease rates, and increased competition.
This results in the impression by many that the ownership of a license is an investment or
pension rather than a business to be managed. Some argue that the purchase of the license is
an investment in the industry that facilitates the operation of a taxicab. The industry benefits
little by the transfer or sale of the plate within the current structure because, due to the
restricted number of plates, the inflated value and regular income through leasing provides a
demand for a limited supply. The barrier to entry is not an individual's interest in the industry
or degree of participation but rather the access to capital to fund the purchase of what is
currently valued at approximately $85,000. This practice, in effect, mortgages forward the
value of the license and forces the risk to regain the value on the driver. While the City
effectively owns taxicab licenses, it does not benefit from the market value created by a
limited supply. Some other jurisdictions, such as New York City, benefit from the market
value and sell or auction licenses. It is difficult to see how the sale of a taxi license within the
industry benefits the industry in any way.
It is sufficient to say that the risk is limited for owners and Designated Agents, and fluctuates
by lease rate adjustments caused by economic pressures during recessionary periods. In fact,
there are instances where the driver is required to purchase the vehicle from the lessee or
designated agent, possibly at an inflated cost, and sign ownership to the owner to ensure that
the provisions in the By-law are met. The majority of risk within the current structure
therefore, falls to the greatest extent on the drivers. Lease costs are established at a fixed rate
and must be paid by the driver irrespective of the income earned on their shift.
There are also reports of payment by drivers in the amount of $2,000 to $5,000 required in
advance as key money simply to earn the right to lease a taxicab. This indicates that the
problem may be with how leasing is done rather than the fact that it is done.
It is difficult to determine the appropriate number of plates to service the City of Toronto. The
existing formula does not adjust for market fluctuations or demand changes due to increased
tourism or an aging population. Some in the industry propose that the number of plates should
be calculated from the expected minimum base earnings for drivers. This results in
approximately 2500 plates, significantly less than the number available today. Without other
measures, this change would result in increased plate values and higher lease rates. While
drivers would have less competition and would likely earn higher revenue, drivers who lease
would not experience a substantial increase in net earnings as a disproportionate share would
be assumed by the lessees, Designated Agents, and owners. This assumption is supported by
previous trends in the Toronto taxicab industry.
Toronto Licensing currently uses a model developed by Coopers and Lybrand that if applied
today, would result in 3713 taxicabs, nearly 233 more taxicabs than the 3480. Arguably, the
City of Toronto would be well served by additional taxicabs. Based on extensive financial
analysis, provided in the Appendices to this document, license issuance was evaluated based
on a range of economic factors. The issuance of 300 new Ambassador Taxicab licenses
annually provides a phased-in approach to introducing an open market with quality
restrictions. This offers opportunity to drivers while giving consideration to impacts on
existing stakeholders.
Recognizing the concern however, that a number of license holders do not participate in a
taxicab business, the Task Force does not support the issue of additional taxicab licenses with
the same characteristics as existing licenses. Changing the characteristics of new licenses to
reflect a customer service ethic inspired the idea for Ambassador Class Taxicab licenses that
are only be issued to owner-drivers. These new licenses provide for advanced training that
launches the service as a profession, thereby projecting a positive image for the City of
Toronto.
The financial analysis contained in the Appendix to this document indicates that 300 new
licenses can be viable within the City of Toronto taxicab market, given the alternative
structure and demand trends.
It is therefore recommended that Ambassador Class Taxicab licenses be issued to
individuals that can provide high quality driving skills, high quality customer service
skills, and high quality vehicles, at a rate not to exceed 300 new licensees annually
(Recommendation 11).
Ambassador Class Taxicab licenses cannot be transferred or leased in order to ensure that the
individual who successfully completes the advanced driver-training program is the individual
providing service to the public. As a result, the Ambassador Class Taxicab license does not
provide as much competition as the existing licenses as they cannot operate on a 24-hour a
day basis. The rationale supporting the Ambassador Class Taxicab concept, is to reward
individuals who want to participate and commit to the taxicab industry by driving a taxicab,
with an opportunity to run their own taxicab business. The provisions within the existing
structure that have allowed stakeholders to become investors have been removed from the
new licenses. Ambassador Class Taxicab licenses will be issued to persons who:
(a)successfully complete the Advanced Ambassador Taxi training course;
(b)operate a vehicle that by year is one model year old at the time it enters service as a
taxicab and that is replaced at the end of its fifth model year. It is recommended that
Ambassador Taxicab licenses shall:
_Be driven by the license holder;
_Not be transferred;
_Not be leased;
_Entitle the taxicab to display a distinugishable Ambassador Taxicab insignia,
including a decal and vehicle stripe, visible to potential passengers; and
_Entitle the taxicab to pick-up passengers at Pearson International Airport, if
agreements can be reached with the Greater Toronto Airports Authority
(Recommendation 10, 13)
Recognizing the improved quality of the future Toronto Ambassador Taxicabs, it is
appropriate for the new taxis to greet passengers at Toronto International Airport to serve as
the City's ambassadors. Access to the airport for the purposes of picking up passengers is
currently restricted to licensed airport-plated taxicabs and limousines. Arrangements for
ground transportation at the airport is under the authority of the Greater Toronto Airports
Authority. It is therefore recommended that Toronto Licensing enter into discussions with the
Greater Toronto Airports Authority to explore initiatives that would allow Toronto
Ambassador Class Taxicabs to pick-up passengers from Pearson International Airport
(Recommendation 42)
With respect to vehicle quality, Ambassador Class Taxicab licenses require the provision of
vehicles not more than one model year old that must be replaced by five model years old. In
support of environmental and accessibility initiatives, taxicab owners are offered incentives
for converting to natural gas or providing barrier-free accessible taxicabs. The new taxicabs
should also be recognizable to the public. It is therefore recommended that respecting vehicle
quality, the characteristics of Ambassador Class Taxicabs include:
_a vehicle that by year, is one model year old and must be replaced by five model years
old as defined in the description of motor vehicle portion of the current Ontario
Ministry of Transportation and Communications passenger motor vehicle permit for
any vehicle;
_a vehicle that is converted to natural gas or a taxicab converted for barrier-free
accessibility is subject to a two year extension to the retirement date; and
_a distinguishable, Ambassador Taxicab insignia visible to potential passengers
(Recommendations 10, 12, 32).
Ambassador Class Taxicabs introduce the appropriate quality of service for Toronto as a
world class city. Recognizing the advanced training with a focus to customer service and
tourism, it would be appropriate for Ambassador Class Taxicabs to greet passengers arriving
at Pearson International Airport. This is currently restricted to airport-plated taxicabs and
limousines only, under the control of the Greater Toronto Airports Authority. It should be
noted that the current arrangements provide a proportionately low number of Toronto licensed
taxicabs serving the airport. It is therefore suggested that Ambassador Class Taxicabs be
given access to service Pearson International Airport if agreements can be reached with the
Greater Toronto Airports Authority (Recommendations 13, 43).
5.2.3Conditions for Existing Licenses
The introduction of the Ambassador Class Taxicabs is done so with consideration of the
impacts on the existing licenses. While Ambassador Class Taxicabs will meet high quality
standards when they are introduced, changes to existing taxicabs must be phased-in over time
to allow stakeholders the opportunity to effectively manage the change. The principles of the
new Ambassador Class Taxicab, however, need to be adopted by existing industry
stakeholders at the outset. The intention of this proposal is to eliminate passive investors,
ensure that all stakeholders are active participants, allow licenses to continue to be transferred
or leased, and encourage a trend to an increase in owner-drivers. It is therefore recommended
that the existing 3480 taxicab licenses be grandfathered and the characteristics of the standard
taxicab licenses include:
(i)transferability of licenses as currently provided for under By-law 20-85 for a period of two
years;
(ii)after two years, licenses may be transferred only to persons holding a valid Toronto
taxicab drivers license who may:
_lease the taxicab;
_drive the taxicab; or
_transfer to a person holding a valid taxicab drivers license
(iii)all standard license owners must participate in the industry by:
_personally attending all three annually scheduled inspections
_file annual documents in person, at Toronto Licensing
_attend all hearings relating to that owner's license or vehicle(Recommendation 14).
The new Ambassador Class licenses must operate in concert with existing licenses that, with
different characteristics, must also adopt a customer service focus. Given that Ambassador
Class Taxicabs are characterized by the quality of vehicle and the advanced quality of driver,
existing standard license owners should be encouraged to operate at the Ambassador Class
level. The existing 3480 grandfathered taxicabs (standard license) may be designated as
Ambassador Class Taxicabs if the vehicles meets the Ambassador Class Taxicab vehicle
quality provisions as defined by the age of vehicle; and the driver successfully completes the
advanced Ambassador Taxicab training program. It is therefore recommended that a taxicab
operating with a standard license may be designated as an Ambassador Class Taxicab where
the standard license holder:
_successfully completes the Advanced Ambassador Class training course
_operates a vehicle that by year is one model year old at the time it enters service as a taxicab
and that is replaced at the end of its fifth model year.
It is further recommended that a taxicab operating with a standard license that is designated as
an Ambassador Taxicab:
_shall be driven by the license holder
_shall not be transferred
_shall not be leased
_shall entitle the taxicab to display a distinguishable Ambassador Taxicab insignia, including
a decal and vehicle stripe, visible to potential passengers; and
_shall entitle the taxicab to pick-up passengers at Pearson International Airport, if agreements
can be reached with the Greater Toronto Airports Authority;.
It is also recommended that a designated Ambassador Class Taxicab may abandon its
Ambassador Taxicab designation and continue to operate as a standard licensed taxicab
(Recommendations 14, 15, 16).
5.2.4Designated Agents
Many industry participants believe that designated agents provide a critical service to the
industry, serving as managers to individuals who do not wish to manage their own plates. In
fact, designated agents were introduced to assist industry widows. They now represent
industry widows and non-participant investors. Designated agents currently must be licensed
as owners or drivers. A number of participants agree that designated agents should be
licensed, which also has support from the former Licensing Commission that previously
recommended such action. This change, to date, is not implemented subject to clear definition
of designated agents.
Various stakeholders provided information to the Task Force that is available to assist
Licensing to develop appropriate licensing requirements. Briefly, submitted materials indicate
that Designated Agents manage the industry. A number of participants raised concerns "about
agents who have no direct interest in the industry and whose behaviour is detrimental to the
public" (Co-op Taxi Associates Committee, Reforming Toronto's Taxi Industry Myth or
Reality/Perception or Fact).
As proposed by some stakeholders, the reference to managers is an appropriate reflection of
the position within the industry and licensing managers will clearly define this role. The
designated agent may control between one and 242 taxicabs with five being the average.
Regular training and testing of all industry participants, including managers, is a key
component to establish a common public service goal and improve overall service quality.
Clearly, such action will ensure that the activities of these key players serve to benefit the
public and support the goals of the industry. It is therefore recommended that Toronto
Licensing in consultation with the City Solicitor, seek to amend By-law 20-85 to license
designated agents as managers, subject to terms of duties and obligations to be developed by
Toronto Licensing (Recommendation 49).
5.2.5Leasing
Leasing is described by many as a negative force in the industry while others feel that it is
essential to ensure service 24 hours a day. Leasing along with the presence of designated
agents, provides the mechanism by which investors can earn returns from a license plate
without participating in the industry. Leasing also provides the means for long-time
participants to retire and continue to make a living from their taxicab license.
When leasing was introduced, concerns were raised that the responsibility for the taxicab and
the quality and safety of service should not be passed from the owner to the driver. For this
reason, the owner is required to provide an insured taxicab and all necessary equipment.
However, this requirement is often not fulfilled in lease situations where the vehicle may, in
fact, be purchased by the driver and transferred to the owner's name to meet the By-law
requirements.
Some propose that to eliminate leasing would resolve many of the problems in the industry,
however, the impact on the existing industry would also be severe if leasing was eliminated
outright, and some stakeholders would suffer significant harm.
Statistics kept by Toronto Licensing indicate that of the current 3480 taxicabs, approximately
75 per cent are leased and 25 per cent are owner-operated. This notes a substantial decline
since 1982 when only 33 per cent of taxicabs were leased (Thomas, Schimski, Report of the
By-law Sub Committee on Taxicab Leasing and Related Matters October 8 1996).
The lessee may lease one more taxicabs, and may work as a driver but is not required to do so.
A lessee must be registered as a driver or an owner with Toronto Licensing. Some plates are
under control of both a designated agent and a lessee. It is difficult to determine rationale for
this practice, however, it is likely that a driver's income is less when revenue is shared with a
lessee, designated agent and an owner. The Thomas Schimski report recommended that it
would be appropriate to allow a designated agent or lessee, and not both. The intention of this
was to reduce the number of participants associated with individual taxicabs. Practically,
however, this change is difficult since the lessee is the party to lease agreements with a
designated agent.
As discussed earlier in this report, the role of designated agents is effectively to manage
taxicabs on behalf of owners. Lessees who lease more than one taxicab or do not drive, also
assume a management role. To eliminate overlap between management functions offered both
by designated agents and lessees, it is proposed that lessees become operators and as such,
must lease one taxicab only that they drive on a full-time basis, with provision for alternate
drivers. As currently provided for within the By-law, it is also proposed that new drivers who
operate standard taxicabs complete the existing driver training offered by Toronto Licensing.
While the existing training program is not as advanced as the training proposed for the
Ambassador Class taxicabs, it provides a reasonable introduction to the Toronto taxicab
industry. It is therefore recommended that leasing of taxicabs continue for standard taxicabs,
as currently provided for under By-law 20-85 with the following amendments:
_a lessee may only be party to one taxicab lease agreement, and the lessee must drive the
taxicab on a full-time basis;
_a lessee can hire up to three alternate drivers; and
_new drivers who drive a standard taxicab, must successfully complete the existing three
week training program offered by Toronto Licensing (Recommendation 14).
The Municipal Act, under s.232(1), gives the city the authority to license, regulate, and govern
owners and drivers of taxicabs. However, the city does not have the authority to become
involved in the business affairs of a taxicab business. Due to this prohibition, the city cannot
set lease rates, even if the setting of lease rates would be for the purpose of putting better cabs
on the road through greater revenue sharing between owners and drivers. At a minimum,
provisions respecting the terms for cancellation of leases should be introduced as a
commitment to drivers who are committing to the industry. It is therefore recommended that
Toronto Licensing investigate with the Municipal Affairs Office of the Province of Ontario,
the possibility of setting limits on lease rates and conditions for lease cancellations
(Recommendation 17).
5.3Improved Driver Training
The service delivered to the taxi riding public is often a reflection of the skills held and
dedication shown by those charged with delivering the service. This principal is not new and
it has been widely expressed in the submissions made to the Task Force by owners, drivers,
and more importantly, customers. Drivers should know how to find any destination in the city,
they are to know the most direct route, and they are to deliver this service in a courteous
manner. However, it was repeatedly made clear to the Task Force that the link between the
skills held by the driver and the service delivered has become disjointed. In effect, the public
service focus in drivers' delivery of service has been lost. In an independent survey on
customers' views on improvements that must be made to the taxi industry, change to the
structure was given some attention, but more than half the comments related to service
delivery concerns.
Although the Task Force had the opportunity to receive public input through various fora, the
message delivered by participants was often the same: the taxi industry has suffered a serious
decline in driver's tourism and geography knowledge. As such, as industry stakeholders
recounted the problems relating to customer service, they were also consistent in their calls for
changes to the driver training program. Indeed, the Toronto Licensing Department has taken
steps to address the weaknesses in driver training; as evidenced in the launching of the new
sixteen-day program in October 1996. While the efforts represent a significant improvement,
there are further refinements that can be made to achieve the goal of putting the more
knowledgeable and courteous drivers on our city streets.
The economic climate has contributed to providing an increased role for taxi transportation to
the city. Tourism - a principle bastion for taxi revenue - has developed into a moneymaking
engine for the city of Toronto. Tourism is the largest and fastest growing industry in the world
and contributes almost five billion dollars annually to the Toronto economy (Tourism Toronto
and the Toronto Board of Trade, May 1998: 2). In 1997, Toronto hosted approximately, 20
million visits by tourists, convention delegates, and business. Add to these figures the active
theatre, restaurants and entertainment complexes enjoyed by local Torontonians, it is clear
that the taxi industry is an important part of transportation and serves thousands of individuals
each day.
Consequently, the lack of confidence in the taxi industry's ability to service customers at a
satisfactory level should be a major concern. Often complaints focus on the lack of driver
knowledge of the city and the unsafe condition of the taxicabs.
The importance of the driver-training program to the improvement of service to tourists and
native Torontonians cannot be minimized. Halifax, Montreal, and Vancouver are just a few of
the jurisdictions that have acknowledged the relationship between outstanding driver training
and service delivery. Most often, reform efforts have focused on making this relationship
more pronounced by injecting substantial tourism training components into training regimes.
The adjustment has proven fruitful for those jurisdictions that have altered their driver training
program to address the tourism deficiency. Toronto is a worldclass city and yet some
estimates quote that there are approximately 10,000 undertrained drivers, with only 250
drivers completing proper training each year and little remedial assistance for those already in
the system. The Task Force and industry participants have come to see the current state of
affairs as unacceptable and detrimental to the promotion of the City of Toronto as a place to
visit and conduct business.
It follows that the revamped driver training program would construct its course content and
method of evaluation around the theme of the relationship of the taxi industry to the larger
context of the public transportation network and tourism industry. The program would retain
such standard industry courses as geography, defensive driving, communication skills, cab
maintenance, and By-law provisions. However, intensive training in the areas of the historical
evolution of the city, identification of major buildings and tourist attractions, proficiency in
English, and an understanding of the cultural nuances of the neighbourhoods that comprise the
city would be necessary additions. From the deputations to the workshops to the general
submissions, the industry expressed support for a driver training program that focused more
on the aforementioned market-relevant skills. Industry representatives also expressed their
approval for retraining for existing drivers, as well as a lengthening of the training program.
By improving driver training in the manner described above, the professionalism of the
industry is given a boost. Drivers can market their skill. A dramatic improvement in the
degree of professionalism and knowledge demonstrated is a key step in courting customers to
take a taxi for preference rather than need. Rather than being a disincentive to tourists and
conventions, the taxi industry could be repositioned in the tourism industry as one of the
positive reasons guests choose to repeat their visit to the city. Ultimately, the improved
prospects for increased industry revenue and benefits to the local economy become clear.
The revamped driver training program is directly in line with the guiding principal that "the
general public has the right to expect and demand courteous, knowledgeable and experienced
drivers." In order to meet this objective, the Task Force recommends the following change.
_The driver training program should be lengthened from three-weeks to approximately three
months, to recognize the increased skills expectations that the drivers must meet. The length
of the program, as well as the higher standards for completion, would operate as a barrier to
entry into the industry. Those persons who wish to commit to operating a professional small
business operation would be more willing to endure the more stringent qualifications.
The current driver training program covers a broad range of subject matters and thus
establishes a foundation upon which an improved driver training program can be introduced
The restructured and inaugural courses would aim to either address identifiable gaps in the
current courses or they would address absences in drivers' skills that have not yet been dealt
with through formal training.
_Tourism training must include an English as a second language requirement, identification
of tourist locations and neighbourhoods, and in-depth training on the historical evolution of
the city. The tourism industry should have a role in establishing the standards in regards to
those portions of the program that relate either directly or indirectly to their area of expertise.
_The method of administering a grade must include an in-car component, as well as a
combination of in-class tests and self-study evaluation in an effort to increase the drivers
initiative in the learning process.
_All or portions of the training program should be outsourced to a community college, where
resources from the relevant departments, i.e. communication, hospitality and tourism, English
language training, etc., can be pooled to provide comprehensive training. The new training
program would be flexible, respecting the drivers need to continue to earn a living. Classes
would be offered in night school to accommodate many participants who must work during
the day.
_Existing drivers would be subjected to retraining, every two years with provisions for
exemption from training based on passing a test.
_Upon completion of the training program, drivers would be permitted to market their skills
in a five-star rating system. Successful completion of the new driver training program would
be one of the criteria, alongside vehicle maintenance, safety record, (dis)ability training,
second language qualifications, customer's formal recognition of exemplary service etc., that
would contribute to a driver's rating.
It is therefore recommended that Toronto Licensing develop and provide a five-day,
taxicab license owner and Designated Agents certification course that must be taken
annually by all taxicab license owners and Designated Agents and addresses at a
minimum:
(i)changes in By-law 20-85 or other relevant legislation;
(ii)Toronto tourism information;
(iii)Performance statistics respecting the taxicab industry; and
(iv)Workshop to discuss potential improvements to the taxicab industry.
It is also recommended that Toronto Licensing develop and provide a three-day, taxicab
driver retraining program that must be taken every two years by all taxicab drivers and
addresses at a minimum:
(i)changes in By-law 20-85 or other relevant legislation;
(ii)Toronto tourism information;
(iii)Performance statistics respecting the taxicab industry;
(iv)Workshop to discuss potential improvements to the taxicab industry;
(v)Defensive and rough weather driving skills including an in-car driving test; and
(vi)Customer service skills.
It is also recommended that Toronto Licensing, in accordance with City procedures,
prepare terms of reference to contract out to colleges or other appropriate training
institutions, the development and provision of an up to three-month, advanced driver
training program for the new Ambassador Taxicabs, that allows flexibility to registrants
to take the program during the day or in the evening and addresses at a minimum:
(i)Toronto tourism;
(ii)Importance of taxicab drivers to serve as ambassadors to Toronto;
(iii)By-law 20-85 and other relevant legislation;
(iv)Toronto geography and road network;
(v)Taxicab meter/trip records;
(vi)Services for passengers with disabilities;
(vii)Communications and professionalism;
(viii)Cultural and gender sensitivity;
(ix)Passenger and driver safety;
(x)Financial planning;
(xi)Small business practices;
(xii)CPR and first aid; and
(xiii)Defensive and rough weather driving skills including in-car testing
(Recommendations 24, 25, 26).
Further, it is recommended that Toronto Licensing, in consultation with the City
Solicitor, report to the Emergency and Protective Services Committee on the necessary
amendments to the By-law to change the purpose of the current drivers list and owners
list to a mechanism to determine who has access to the advanced Ambassador Class
training for the purpose of obtaining a license. It is also proposed that access to the
Ambassador Class training program for the purpose of obtaining a license, should
continue at a one-to-one ratio from the owners list and the drivers list, as currently
provided for in the By-law. It is also recommended that when an individual's name
reaches the top of the list, they may:
(i)Elect to take the training;
(ii)Defer their training under the following provisions:
_Each individual may only defer two times
_Each individual must notify Toronto Licensing that they elect to defer training to the
next available year or to the bottom of the list.
It is also recommended that drivers and owners from the current list who take the
course and do not pass, be given one opportunity to add their name to the bottom of the
list and retake the training program Finally, it is recommended that the Commissioner
of Urban Planning and Development Services report to the Emergency and Protective
Services Committee within six months on the resource and budget implications
respecting the new training requirements (Recommendations 24, 25, 26, 27, 28, 29, 30 ).
5.3.1Technological Enhancements
Reforms aimed at expanding taxi ridership, and restoring consumer confidence in the
industry, must also include the implementation of technological advancements. Today's taxi
riders are sophisticated consumers who demand convenience and expediency in service
delivery. We live in an age where money and information changes hands at a rapid pace. In
order for the taxi industry to keep pace with the demands of a computer astute society, the
introduction of new technological advancements must be part of the industry reform process.
As evidenced in the many written and verbal comments received by the Task Force, Toronto's
taxis have had their market decreased by the introduction of fax machines and courier
services. The fallout has left the taxi industry to focus on its original client base - people who
use taxis to physically move around the city. It follows that as the industry seeks for new ways
to increase industry revenue, it becomes clear that increasing the frequency with which people
ride in a taxicab is the most reasonable target. Taxis that provide comfort and convenience
through easier and more efficient trips can tap into this potential. The taxi industry must look
to innovative practices in marketing itself as a technologically up-to-date industry, or else it
risks being relegated to the sidelines as an outdated mode of transportation.
The need to implement technological enhancements is not limited to the benefits that are
received directly by the industry. That is, the taxi industry is an integral part of those
businesses that comprise a part of the service sector. Business enterprises, restaurants, and
leisure venues welcome the customer's taxicab transport. It can be reasoned that as customers
have more convenient access to taxis, it facilitates greater use of various downtown venues.
Consequently, the local business, tourism, and entertainment sectors also stand to reap
economic benefits from a technologically improved transportation option.
The research conducted and submissions received by the Task Force uncovered a bevy of
technological innovations that will bring the Toronto taxi industry into the twenty-first
century and make it more competitive. From Paris to Singapore to San Francisco, satellite
tracking systems, point-of-sale transfers, and receipt-issuing meters have become widely used
in the taxi trade. The usefulness of the technology includes improving enforcement of the
By-law, maintaining accurate financial records, improving response times to customer calls,
enhancing the enjoyment of the ride, and ensuring greater convenience for customers in
dealing with taxi service.
It is therefore recommended that all Toronto taxicabs be equipped with a receipt
machine that provides the passenger with a receipt noting the date and time of the trip,
length of the trip, registered number of the taxicab, the fare charged, and the Toronto
taxicab customer service telephone number; and that information from the receipt
equipment be provided to Toronto Licensing for information, training, and review
purposes (Recommendations 5, 6).
There were a number of innovations described in the research and are used successfully in
other jurisdictions. Many of these ideas offer a unique and competitive quality to other
jurisdictions. The suggestions listed below are referred to taxicab industry participants for
information.
_Taxicab operators should be encouraged to install point-of-sale machines in their taxicabs.
The benefits are two-fold. First, customers are afforded an easier method of payment and thus
they are given more opportunity to choose a ride in a taxicab. Second, the introduction of
cashless payment lessens the safety threat posed by those contemplating a robbery attempt.
_Taxicab operators should be encouraged to increase the promotion of a ride in a taxicab by
implementing audiorecordings that contribute to the atmosphere of a pleasant trip. As the
passenger enters and exits the vehicle, the taped messages would carry the voice of local
celebrities who would welcome the passenger to the city, and remind the passenger to buckle
up and not to forget any belongings in the taxicab. This marketing initiative has been widely
successful in other jurisdictions, and would be an added feature to improve the experience of
tourists and locals alike.
_Brokerages should be encouraged to explore the benefits of the satellite tracking method of
dispatch services in the interest of a speedier exchange of information between drivers and
dispatchers. The tracking system provides automatic vehicle location by sending and
receiving satellite signals twenty-four hours a day. In addition to the commercial benefits, the
satellite tracking system would be an added security measure as a dispatcher could always
locate a taxicab with pinpoint accuracy.
5.3.2Issues for Consideration by the Taxicab Advisory Committee
A number of concerns were raised in during the consultation phase that were more relevant to
the business practices and culture of the industry than they are to regulation. As such, it is not
within the mandate of the City of Toronto to impose change in these areas. These concerns
relate to the design for a drivers' code of ethics, driver safety initiatives and benefits plans,
and performance incentives for industry participants. Other issues that the industry could
usefully participate with the City on include improvements to barrier-free accessible taxicabs
and passenger complaints handling. These issues are reasonable concerns but cannot be
mandated by the City. It is therefore proposed that the TAC address these issues within its
mandate.
5.3.3Barrier Free Cabs
As the demographics of the City of Toronto changes, the taxicab industry is confronted by
opportunities for growth and expansion. The population shift in the next ten to fifteen years
will present the transportation system with an aging citizenry that will be looking for available
options for continued mobility. The Toronto taxi industry will be expected to take a more
active role in providing mobility service.
Although some industry participants have taken the initiative in tailoring their service to the
accessible transportation niche, more involvement is needed. Those experts in the field who
contacted the Task Force were clear and direct in their criticism of the industry in its failure to
meet a growing community need. However, more scathing comments were reserved for the
lack of accessible transportation etiquette demonstrated by most drivers. Failing to mount the
sidebars on the vehicle ramp, failing to assist the mobility impaired passenger to and from the
front door, and a general lack of sensitivity to the situation is unacceptable.
In total, there are thirty-four taxis, operating out of seven brokerages, in the Toronto area. The
critical mass in the numbers of accessible taxis must be addressed. Other leading taxi
industries, such as London, England and Halifax, have made their taxis more barrier-free
accessible. The City of Toronto should be another jurisdiction to take a leading role.
The Task Force suggests that the Taxicab Advisory Committee give consideration to the
following positive initiatives:
_Car manufacturers should be contacted for their contribution to lessening the cost of
acquiring a wheelchair accessible vehicle when the purpose of the acquisition is to serve the
public.
_Improvements must be made to the accessibility training portion of the driver training
program in order to improve driver's sensitivity to the dynamics involved in serving the
(dis)abled community. Improvements would include more practical training to compliment
the in-class components, and the involvement of educators, advocacy groups and (dis)abled
persons in the development and implementation of the program.
_Drivers should market their skills as an accessible transportation expert and the industry
should sponsor events that recognize their contribution.
The concept of industry self-management is an initiative introduced by the Province of
Ontario that by partnership, assists businesses to manage themselves. The self-management
practice does not end the regulatory role of government but works in concert to carry out the
responsibilities of the industry with common goals. There are a number of issues that are
identified in this report, as brought forward by industry stakeholders, that are not within the
mandate of the City of Toronto to address by regulatory means. These issues are important to
resolve however, to serve the interests of the industry and its customers. Focus on such
matters will also assist the industry to organize and work with a common voice to achieve
business improvement. The Taxicab Advisory Committee has been the representative body
for the Toronto taxicab industry. The CAO is required to develop terms of reference for the
Taxicab Advisory Committee following the separation of the administrative function (Toronto
Licensing) from the adjudicative function (Toronto Licensing Commission, soon to become
the Licensing Tribunal). The TAC would be an effective mechanism to introduce the concept
of industry self-management to address issues and continuously improve the industry. The
TAC will also provide a forum to coordinate with Toronto Licensing respecting training
programs and other industry priorities.
It is therefore recommended that Council endorse the concept of self-management and
work to create the conditions that will permit it to be implemented over time. It is also
recommended that Council endorse the continuation of the Taxicab Advisory
Committee and that the TAC be structured is such a way to develop the industry
capacity for self-management. To accomplish this, it is recommended that the structure
be amended to include: elected representation from taxi drivers, elected representation
from taxicab license owners, elected representation from industry managers including
Designated Agents and brokerages; and that there be ex officio representatives of
Toronto Licensing, the Board of Trade, the Hotel and Restaurant Association, the
Province of Ontario, the proposed Greater Toronto Services Board, and the Greater
Toronto Marketing Association. It is recommended that the mandate of the TAC
include:
_Drivers code of ethics;
_Drivers safety and benefits;
_Reasonable accessibility to taxicab transportation for the disabled;
_Performance reviews and incentives;
_Passenger complaints handling; and
_Study and make recommendations to Council on the applicability of self-management
to the needs of the industry.
It is also recommended that the Chief Administrative Officer (CAO) address industry
self-management in concert with municipal regulation in the development of the terms
of reference for the Taxicab Advisory Committee (Recommendations 18, 19, 20, 21, 22,
23 ).
5.3.4Fare Structure
In considering the course of action for improvements to the industry, due diligence was given
to the possibility of lowering the fare charged. Some industry stakeholders suggested that the
lowering of the fare would be an effective gesture to increase ridership. However, the research
conducted by the staff resource did not support this position.
The elasticity of demand as it relates to fare structures did not confirm that the cost of a taxi
ride was a key determinant for whether an individual would choose to take a taxi. Instead,
other features such as the safety of the car and the quality of service provided were stronger
factors.
Of significance, a decrease in the fare charged could have the negative effect of decreasing a
driver's revenue further. In effect, the operator of a taxicab would have to pick up more fares,
than is presently the case, in order to preserve their current market revenue. The driver's
work- day would be significantly lengthened for little gain.
The Task Force, however, recognizes the increased dangers that drivers constantly face as
they serve the public at night. Any changes to the fare structure would aim at addressing the
dangers drivers expose themselves to when they faithfully provide service to the public during
the evening hours.
A premium fare should be charged during the evening shift. The purpose of the premium
would be to encourage drivers to provide service during the evening hours and to
acknowledge the role of the driver has assumed in helping to provide twenty-four hour
coverage to the city. It is therefore recommended that an evening surcharge, in the amount of
$2 per trip, be introduced between the hours of 9:00 p.m. to 6:00 a.m. (Recommendation 46)
5.4Improve Taxicabs
The impact of the quality of the taxicab fleet on the image of the City is obvious and was
discussed earlier in the report. Taxicab passengers expect safety and comfort while riding in a
taxicab, and with a progressively aging fleet, service is not meeting expectations. Many
vehicles take advantage of the age extension that was initially introduced to accommodate
classic and higher quality luxury vehicles. The outcome is a fleet of vehicles, many over ten
years old that are deteriorating in quality. Given that many taxicabs operate 24 hours a day,
the abuse on the vehicle is excessive and is evident by physical appearance. For many
passengers, physical appearance reflects on the mechanical reliability and safety of the
vehicle. Continued use of these vehicles also leads to increase maintenance costs.
It is critical that all Toronto taxicabs are safe from a mechanical perspective and comfortable
from a physical perspective. Passengers must not only be safe but they must feel safe as
reflected by the interior and exterior condition of the vehicle. As raised earlier in the Taxicab
Passenger Bill of Rights, a number of requirements need to be imposed including cleanliness
of the vehicle and easy access to safety belts.
Recognizing the influence that the Toronto taxicab fleet has on the environment, conversions
to natural gas is encouraged. Also, as discussed earlier, taxicabs form part of the
transportation system and as such, particular sensitivity should be given to transportation for
the disabled. This issue is also addressed with respect to training initiatives and efforts that
can be made by the Taxicab Advisory Committee.
Therefore, it is recommended that the proposed quality improvements be introduced
immediately for Ambassador Taxicabs and phased-in for grandfather taxicabs such
that:
(i)by the year 2002, a vehicle that by year, is one model year old and must be replaced
by five model years old as defined in the description of motor vehicle portion of the
current Ontario Ministry of Transportation and Communications passenger motor
vehicle permit for any vehicle and that the upgrade to vehicle quality be phased-in as
follows:
(iii)in the year 1999, no motor vehicle that, by model year, is more than eight years old
(1992 model or newer) shall be used as a taxicab by the time of the second mechanical
inspection of such taxicab; and no motor vehicle used as a taxicab may be replaced by a
motor vehicle that, by model year, is more than three years old;
(iii)in the year 2000, no motor vehicle that, by model year, is more than seven years old
(1994 model or newer) shall be used as a taxicab by the time of the second mechanical
inspection of such taxicab; and no motor vehicle used as a taxicab may be replaced by a
motor vehicle that, by model year, is more than two years old;
(iv)in the year 2001, no motor vehicle that, by model year, is more than six years old
(1996 model or newer) shall be used as a taxicab by the time of the second mechanical
inspection of such taxicab; and no motor vehicle used as a taxicab may be replaced by a
motor vehicle that, by model year, is more than two years old;
(v)in the year 2002, no motor vehicle that, by model year, is more than five years old
(1998 model or newer) shall be used as a taxicab by the time of the second mechanical
inspection of such taxicab; and no motor vehicle used as a taxicab may be replaced by a
motor vehicle that, by model year, is more than two years old;
(vi)in 2003, no motor vehicle that, by model year, is more than five years old (1999
model or newer) shall be used as a taxicab by the time of the second mechanical
inspection of such taxicab; and no motor vehicle used as a taxicab may be replaced by a
motor vehicle that, by model year, is more than one year old; and
(vii)a vehicle that is converted to natural gas or a taxicab converted for barrier-free
accessibility is subject to a two year extension to the retirement date (Recommendations
31, 32).
In order to ensure that taxicab owners participate in the management of their vehicles it is also
recommended that all taxicab license owners must participate in the industry by:
_personally attending all three annually scheduled inspections;
_file annual documents in person at Toronto Licensing; and
_attend all hearings relating to that owner's license or vehicle in person (Recommendation 14
).
5.5Regulation and the By-law
The principle that the City has the right to expect and demand that its By-law will be obeyed
recognizes numerous reports that realities within the industry do not act within nor reflect the
intention of the By-law. Focus on this principle leads to the realization that contravention of
the By-law within the taxicab industry occurs for two reasons:
(i)the ability of the regulator to enforce and impose meaningful penalties; and
(ii)the complexity of the By-law that is difficult for many to understand.
5.5.1Enforcement
By-law 20-85 is a challenge to enforce, in part, due to a continued decline in enforcement staff
with increased responsibilities over recent years. In part, increased demand for enforcement
results from the decline in the quality of taxicabs and the commitment to enforce other
licensees, including body rub parlours and strip clubs. The number of enforcement officers
over the period from 1993 to present has declined from 48 to 42 staff. Recognizing the
deterioration of the taxicab fleet, the demand for enforcement has increased over the same
period. Although Toronto Licensing advise that improved efficiency and reassignment of
clerical duties allows enforcement officers to do more work, they concede that increased
offenses in the taxicab and other industries results in a need for more staff. Presence of
enforcement officers has declined in real numbers and in proportion to level of responsibility.
As a result, confidence that little or no penalty will result has increased and a number of
taxicab operators do not conform to the By-law.
It is critical for the City of Toronto to commit to meaningful enforcement within the taxicab
industry. The perception by many is that ineffective enforcement allows individuals to operate
inferior and unlicensed taxicabs in contravention of the By-law to the detriment of those who
are providing good service in accordance with the By-law. In addition, the result of a
proportionate reduction in enforcement combined with aging taxicabs is an unacceptable
number of dangerous and unsafe taxicabs serving the streets of Toronto. One key component
of that commitment is the dedication of additional enforcement staff to the taxicab industry,
particularly during the period of transition. It is expected that once changes are implemented,
the improved taxicab industry will have much less demand for enforcement services. It is
therefore recommended that Toronto Licensing increase the commitment to enforcement of
the taxicab industry by 25 per cent, requiring additional enforcement staff of ten full-time
equivalents (Recommendation 33)
Recent taxicab safety inspection blitzes prove the dangerous and unsafe condition of many
Toronto taxicabs. In fact, a summer inspection blitz involving Toronto Police and Licensing
and the Ministry of Transportation of the Province of Ontario resulted in removing plates
from 14 out of 21 vehicles inspected. This is supported by Toronto Licensing inspection
records, that show 2 per cent of taxicabs fail scheduled inspections on dangerous and unsafe
grounds. In other words, at any one time, 70 taxicabs are providing service to customers under
dangerous and unsafe conditions. This is clearly unacceptable and must be remedied
immediately. A program of random taxicab inspections will effectively augment the three
annually scheduled mechanical inspections. It is therefore recommended that Toronto
Licensing work with the Ministry of Transportation of the Province of Ontario to develop an
inspection program to provide regular taxicab safety blitzes (Recommendation 39 ).
5.5.2Taxicab License Fees
Current practices require that Toronto Licensing recover operating costs from fees paid
proportionately by licensed industries. The proposed fees for 1999 have been reported by
Toronto Licensing in Clause No. xx of Report No. xx, considered by Council on October 1,
1998. Although the report noted that potential changes to licensing fees for the taxicab
industry could result from the recommendations of the Task Force, timing did not allow them
to hold the report pending release of the report of the Task Force. The report did suggest that
any changes be addressed in the form of an adjustment of fees to taxicab licensees. It is
therefore recommended that the appropriate adjustment, reported by Licensing in the amount
of $800,000, be made to the 1999 Toronto Licensing operating budget submission and the
increase in license fees be calculated for the next license renewal period (Recommendation
34). Also, it is recommended that Toronto Licensing report to the Emergency and Protective
Services Committee, Budget Committee and Council, on the resource and budget implications
respecting other recommendations in this report related to training requirements and the
customer complaints process. (Recommendation 35).
5.5.3Unlicensed Taxicabs
Perhaps the most common concern among industry participants is the presence of unlicensed
taxicabs be hailed and used by passengers from the streets of Toronto. Some in the industry
claim that pirates drain as much as 25 per cent of the monthly taxicab revenues from Toronto
taxicab licensees.
For obvious reasons, it is in the interests of the taxicab industry for unlicensed taxicabs to be
eliminated so that the full benefit of the taxicab market within the City of Toronto serves to
benefit Toronto licensees. It is also in the best interests of the City to remove poachers as they
provide service to residents and visitors outside of regulatory control, and as such, may offer
lower rates and may be unsafe. Many passengers who use pirate taxicabs are unaware that the
vehicle and driver are not licensed to operate in the City of Toronto. The focus for customers
is availability, safety, and quality of taxicab services.
For enforcement staff, charging unlicensed taxicabs is difficult due to the definition of the
offense. As claimed by Toronto Licensing, they are required to witness money exchange
hands to be successful in prosecuting such offenses. It is also clearly difficult for a passenger
to agree to attend a hearing as a witness on such matters. Solutions have been found to similar
problems by amending the offense such that enforcement and prosecution are more
successful. For example, charges can be laid for solicitation for purposes of prostitution
without witnessing the act. A similar change in this circumstance could greatly assist in the
reduction of unlicensed taxicabs. It is therefore recommended that Toronto Licensing, in
consultation with the City Solicitor, report to the Emergency and Protective Services
Committee, on recommendations for changes to By-law 20-85 or other legislation to enhance
enforcement of licensing By-law offenses within the taxicab industry (Recommendation 36 ).
A number of deputants indicate that hotel employees sometimes take payment to guide
departing guests, particularly those leaving for a big fare trip to the airport, to taxicabs
unlicensed in the City of Toronto. The Hotel and Restaurant Association is aware of this
situation and would support a solution that ensures good quality service that reflects a positive
image for hotels and Toronto. From their perspective, it is important that the departing
impression for their guests is not tainted by an insecure ride in an inferior taxicab. In fact, the
Hotel and Restaurant Association indicated that in their view, the most effective solution is to
clean up the Toronto taxicab service and the propensity to use cleaner and newer, albeit
unlicensed, taxicabs would greatly diminish. While this may be true, it is suggested that
ongoing discussions between industry participants and the hotel industry to develop
guidelines for hotel staff, along with quality improvements in the industry, will resolve this
problem. It is therefore recommended that Taxicab Advisory Committee and Toronto
Licensing work with the Toronto hotel industry to develop guidelines to ensure that hotel
employees hail only Toronto licensed taxicabs for guests (Recommendation 40)
It is difficult for enforcement officers to discern between licensed and unlicensed taxicabs as
they most often hold similar plates. Limousines are particularly difficult to identify,
recognizing that discreet transportation is a characteristic of the business such that there are no
visible markings on vehicles. Introduction of a distinctive and easily identified feature on
Toronto taxicabs and limousines would be useful to assist enforcement staff in tackling this
problem. This could be achieved through development of a coordinated license plate program
with the Ministry of Transportation of the Province of Ontario. Preliminary discussions
indicate that the Ministry is willing to work with the City in this regard. It is therefore
recommended that the City of Toronto, in cooperation with the Ministry of Transportation of
the Province of Ontario, implement a coordinated taxicab license identification program to
provide:
(i)Ontario license plates attached to taxicabs identified as such by a vertical "TAXI"
wordmark that clearly identifies the vehicle as a taxicab; and
(ii)a coordinated numbering system that provides for matching numbers for Ontario License
plates and Toronto taxicab plates (Recommendation 37 ).
It is also recommended that Toronto Licensing investigate the possibility of identifying
limousines by a vertical "LIVERY" wordmark on the Ontario license plate that clearly
identifies the vehicle as a limousine (Recommendation 38).
Another key to the ability for unlicensed taxicabs to operate relates to provisions of the
Municipal Act. Generally, taxicabs may only pick up fares in the jurisdiction in which they are
licensed. The By-law requires that only Toronto Licensing licensed taxicabs may pick up
fares in Toronto. Similar by-laws in other jurisdictions prevent Toronto taxicabs from picking
up fares in neighbouring regions.
Section 232(1)(b) of the Municipal Act, however, allows for all airport-plated taxicabs to pick
up passengers in the City of Toronto for conveyance to the airport. This provision has created
a situation where out-of-town cabbies, entering the city under the guise of picking up a
prearranged fair for transport to the airport, have fallen into the practice to picking up hailed
fares. Of the roughly 600 airport-plated vehicles, only 70 are Toronto Licensing licensed. It
follows that some 530 taxicabs operate within Toronto boundaries, to the detriment of
Toronto taxicabs.
While the By-law provides for unlicensed vehicles to be penalized, such prosecutions are
rendered impractical by the Municipal Act provisions; quite simply, it is almost impossible to
prove in a court that the infringing taxicab is not engaging in airport business as authorized by
the Act. In effect, the provision paves the way for over 500 airport-plated vehicles to operate
in Toronto without fear of penalty.
The Task Force feels that the most effective remedy for the problem would be to amend
s.232(1)(b) to expressly prohibit out-of-town cabbies from picking up fares within the
boundary of Toronto thereby removing the current exemption. It is therefore recommended
that the City of Toronto work with the Ministry of Municipal Affairs and Housing of the
Province of Ontario, to amend the Municipal Act and remove the exemption for non-Toronto,
Airport plated taxicabs and limousines that permits them to pick up fares within the
boundaries of the City of Toronto (Recommendation 41 ).
The taxicab industry, historically, provided reasonable incomes for drivers. Over recent years,
a complex system has emerged that has eroded earning ability for many drivers. A number of
drivers indicate that they need to work extremely long hours in order to make a decent wage.
This practice should not be condoned as public safety is at risk if the driver is tired. The
Highway Traffic Act provides for restricted driving hours for truck drivers in the interests of
public safety. It is therefore recommended that the City Solicitor and Toronto Licensing staff
report to the Emergency and Protective Services Committee within six months, on possible
By-law amendments that would limit the hours that a taxicab driver can drive a taxicab to 60
hours per week (Recommendation 45 ).
5.5.4Penalties
One of the issues that became evident through various discussions is the lack of consistency in
the enforcement and adjudicative process. The Licensing Tribunal is responsible to consider
each case individually within the context of By-law 20-85 and render decisions respecting
penalties. Depending on the type of offense, it may also be heard at the provincial court level
as a punitive process. There have been cases where a provincial court has rendered a guilty
decision that was not supported by the former Commission. It is essential that the By-law
penalties be granted in a firm consistent manner by the Commission to protect the interests of
the public. The success of the reforms proposed in this report relies on industry participants
working in accordance with the By-law. Therefore, participants who contravene the By-law
should be strongly penalized by the Commission for the benefit of participants who obey the
By-law and for the protection of the public. As such, the Commission must serve as a
disincentive for industry participants to contravene the By-law. It is therefore recommended
that this report be referred to the Licensing Commission (the Tribunal) for
information(Recommendation 44).
To assist the Commission, it would also be useful to identify minimum penalties for certain
offenses. This action would also to inform industry participant of penalties that will be
imposed if they violate certain provisions in the By-law, particularly actions that put the
public at risk. The Municipal Act does not currently provide for minimum penalties
recognizing that municipal licensing is a regulatory and not a punitive process. It is therefore
recommended that Toronto Licensing discuss the possibility of amending the Municipal Act
with the Ministry of Municipal Affairs and Housing of the Province of Ontario to allow for
the introduction of minimum penalties for offenses under By-law 20-85, and report back to
the Emergency and Protective Services Committee on the actions that can be taken
(Recommendation 47 ).
5.5.5Implementation Plan
It is expected that the improvement to the industry will be evident almost immediately with an
estimated 50 per cent of the taxicab fleet being replaced in 1999. Implementation of the
complete plan will take approximately five years and continuous improvement will be
ongoing. The first Ambassador Class Taxicab licenses should be issued late in 1999 or early
in the year 2000, recognizing the time required to develop the program along with the
three-month training requirement. Once improvements are implemented, Toronto Licensing
should monitor progress with respect to quality as measured by complaints and mechanical
inspection statistics. It is also critical for Toronto Licensing to inform the industry on the
status of the reform plan and its impact on the Toronto taxicab industry.
The details of timing and areas for responsibility should be further detailed and designed by
Toronto Licensing staff. It is therefore recommended that Toronto Licensing develop an
implementation plan that defines the schedule for change and includes provisions for:
_implementation and management plan for each recommendation requiring action by
Toronto Licensing;
_performance review to measure the success of these initiatives; and
_a communications plan to inform stakeholders of the reforms and status of
implementation. It is also recommended that Toronto Legal Services be directed to
consult with Toronto Licensing and make the appropriate changes to By-law 20-85.
It is also recommended that this report be referred to the City Solicitor for the purposes
of developing specific instructions to amend By-law 20-85, as required by the
recommendations in this report (Recommendation 48, 49).
5.6Conclusions
In conclusion, over the past 30 years, the Toronto taxicab industry has suffered a gradual
decline in service quality. The reasons for this trend are attributed to the structure of the
industry and the regulations that govern it.
The results of this study have led to over 50 recommendations that address the introduction of
a Taxicab Passenger's Bill of Rights, improved training, better vehicles, Ambassador Class
Taxicabs, and better enforcement. These solutions will, over time, adjust the structure and
culture of the industry and introduce changes that will almost immediately, substantially
improve the quality of Toronto's taxicab fleet. This action will greatly diminish the risk of any
taxicab serving the public and tourists, while in dangerous and unsafe condition.
This plan is developed to be sensitive to existing stakeholders and has provided for a five year
transition period. Once implemented, these reforms will meet the goals of the Task Force and
the expectations of the public. The result is a quality taxicab service for Toronto that will
support its image as a world class city.
FINANCIAL ANALYSIS
Overview
The objective of the financial analysis was threefold: (i) to review existing financial models
respecting the supply and demand relationship for taxi services; (ii) to provide an analysis of
the viability of various taxi industry reform options; and (iii) to provide an analysis of the
impact on plate values, lease rates, driver income, and operating costs for these various
options.
The demand for taxi services (trips) is a function of demographic influences, economic
influences, competitive forces, as well as other influences. Various predictor models have
been suggested for taxi services, however, the combination of measurable quantitative
impacts, immeasurable qualitative issues, and the lack of industry data makes the
development of a model very difficult. Nevertheless, various demand predictor models were
evaluated against a surrogate measure of observed demand. None of the existing models
proved to be adequate. Several alternate models are presented in this analysis which provided
a significantly better fit to the surrogate measure of observed demand.
Applied historically, the demand model suggests that demand for taxi services had doubled
during the period from 1981 to 1989. It is observed that plate values had also doubled over
this period reaching $81,600 in 1989. The model further suggests that demand fell during the
recession of the early 1990's by about 36 per cent with plate values hitting a low of $49,976
in 1993. This estimate of decline in demand is consistent with industry consensus. Finally, the
model also suggests that the losses in demand were largely erased over succeeding years and
plate values are now estimated at $85,000. The model forecasts a more moderate growth rate
in demand over the next decade.
The demand model was integrated with a pro forma financial model to predict the impacts of
changing various parameters such as the supply of plates and fare pricing on a taxicab's
potential income, lease rates, and plate values. Lease rates and plate values are largely driven
by a taxicab's income potential and what a person is willing to pay as a lease in order to
derive a certain level of personal income. There are only two significant variables affected in
the short run by changes in supply and demand: lease rates and a driver's required level of
personal income. Numerous models were considered that attempted to explain the relationship
between income and lease rates. The best explanation that could be derived, given the
available information, is that both drivers and plate owners will revise their expectations of
income in response to changes in the income potential of a taxicab. The relative change in
lease rates in response to changes in demand per plate, fare, and expenses, however, would
appear to be greater than the changes in driver income. The financial model tracked
reasonably well when applied to historical financial data.
The financial model was used to determine the impact of policy decisions respecting plate
supply and fare increases on potential income, plate values and lease rates. Several scenarios
were examined. The first was a status quo scenario involving no new plates and no fare
increases. The model suggests plate values would appreciate to approximately $134,000 to
$190,000 over the next ten years.
Other scenarios were examined. The financial model suggests that a supply increase of 100 to
110 new plates per year would be necessary to meet the projected increase in demand. In
conjunction with a fare increase of 1.0 to 1.5 per cent, such an action would result in plate
value stabilization. Generally, the model suggested that the issuance of anything less than 100
plates per year would result in plate value and lease rate appreciation, while the issuance of
more than 100 new plates per year would result in plate value and lease rate depreciation. The
impacts could however be tailored by varying the number of plates issued and fare increases.
For example, 200 plates may be issued per year for four years beginning in the year 2000
followed by 100 plates per year which would result in a plate value $40,000 to $80,000 by the
year 2009. Various other outcomes are plausible through the control of the supply of plates
and fares.
Rational expectations may play a role in the determination of plate value depending on
information dissemination. If all industry participants were made aware of intentions affecting
supply and fares over a specific period of time, it would be reasonable to assume that a
rational participant would discount the anticipated lease income cash flows accordingly, and
as such a more immediate impact on plate value would be expected.
Policy decisions regarding supply of plates and fare pricing may adversely affect the various
industry participants. The modeling suggests that increases in the supply of plates at a rate
greater than the change in demand will reduce the income potential of a taxicab that would
otherwise exist, and consequently, plate values, lease rates, as well as driver income would
decline.
The feasibility of the "Ambassador Class" licenses from the perspective of a potential industry
participant was compared vis-à-vis existing alternatives that are available such as leasing an
existing plate or purchasing an existing plate on the open market. Analysis suggests that all
three options would be financially viable to the participant. A direct comparison of the three
alternatives is difficult due to a number of intangibles embodied in the various options, and as
such, distinction as to which option would be best is subjective, and would depend on one's
personal preference and financial ability.
This analysis presents the impacts of policy decisions respecting supply and fare pricing,
based on certain projected parameters, which were developed from historical trends. Past
historical trends may not necessarily be indicative of future trends. Deviations from the
demand and expenditure projections, as well as changes in the behavior of participants, may
affect the analysis. The impacts of scenarios involving a hypothetical recession similar to that
experienced during the early 1990's was considered. A decline in the growth in demand for
taxicab services would have negative implications for driver income, lease rates and plate
values. A decline in the supply of drivers may change the relative bargaining positions of
drivers vis-à-vis plate owners, and be reflected in changes in expectations of income by both
lessee and lessor, however, such impacts are beyond the scope of this analysis. The impact of
regulatory changes to existing plates is also beyond the scope of this analysis.
Demand Model for Taxicab Services
Review of Existing Predictor Models
The demand for taxi services (trips) is a function of demographic influences, economic
influences, competitive forces, as well as other less quantifiable elements. Demographic
influences would include, but is not limited to, such things as population and population
demographics, tourism and conventions, and traffic through the city by air, rail and bus.
Economic influences would include such things as employment (or unemployment), retail
spending, occupied office space and income. Generally, growth in these variables would
likely be reflected in an increase in demand for taxi services. Competitive forces would
include such things as the availability of substitutes for taxi services, such as rapid transit,
limousine services, shuttle buses, courier services, fax machines and e-mail. For the most
part, growth in these competitive forces would likely impact negatively on the demand for
taxi services. There are also other less quantifiable factors that may impact upon the
demand for taxi services. These factors can include such things as weather, changes in
legislation such as drunk driving laws or the extension of the closing time for food and
beverage establishments, and the price elasticity of fares.
Various predictor models have been suggested for taxi services. Prior to 1982, the MLC
utilized a taxicab-to-population ratio in order to issue licenses to meet the growth in demand
for taxi services. Currie, Coopers & Lybrand Ltd., in their 1982 review of the TLC method for
the issuance of new plates, acknowledged that the ratio measure did not take into account the
following important trends: the expanding municipalities contiguous to Metro Toronto act as
reservoirs of commuter traffic to Toronto, creating additional demand for taxi services; the
number of visitors had increased more rapidly than the population, and the demand for taxi
services is frequently higher from such a transient group; and that there was a trend to greater
use of public transportation, which would result in a secondary demand to supplement mass
transit. The 1982 predictor model utilized changes in GTA population, GO Transit ridership,
airline passengers, and the number of convention delegates, according to a certain weighting,
as a surrogate measure for changes in demand for taxi services.
In their subsequent review of taxicab license issuance in 1987, Coopers & Lybrand
acknowledged that the objective of the stabilization of plate prices and lease rates had not
been realized as demand outstripped the supply of plates. The report recommended changing
the weighting of the predictor model to give greater weight to the impact of visitor-related
elements (airline passengers and convention delegates) on the demand for taxicab services.
The model was further revised in 1988 to exclude the effects of GO ridership, as it was felt
that its impact was already reflected by changes in the surrounding population.
Also in 1988, the Laventhol & Horwath report was prepared on behalf of concerned taxicab
owners for submission to the MLC. This report concluded that a change to the inputs and
weightings was required, and that such a model indicated, at that time, there was no need for
additional licenses beyond those already issued.
In 1994, the Chapman report on taxicab regulation in Metropolitan Toronto was completed for
the MLC. The review included, among other things, features of demand and supply in the
market for taxi services, as well as earnings in the industry. The recession of the early 1990's,
and its affect on demand had seen a fall in plate value from a high of $89,000 in 1998 to
$50,000 by the end of 1993, lease rates from a high of $807 per month (average) in 1990 to
$610 in 1993, and driver income by 10 per cent on a gross basis and 22 per cent on a net basis.
Various reasons were offered to explain the decrease in demand: the affect of the recession on
unemployment and consumer and commercial spending; the shift of commerce from
downtown to the suburbs; a decrease in tourism; and the increase in competition from couriers
and electronic communication. The research estimated that the demand for taxi services fell
by 30-40 per cent during this period.
The Chapman report acknowledges that it is very difficult to measure overall demand without
accurate records of daily activity by drivers. Although the by-law requires drivers to keep trip
sheets, this is not strictly enforced, and computerized records are generally not publicly
available for proprietary reasons. Nevertheless, the report provided a rough estimate of annual
demand in terms of gross revenue of about $345 million (1994). While Chapman does not
directly address the predictor model, he does comment on the absence of a public transit
measure in the model. The industry is still somewhat unsettled as to whether such use is
complementary to, or a substitute for taxicabs. He does, however, suggest that the MLC may
want to look more closely at this relationship in the future as some empirical evidence does
indicate that public transit use is a good indicator of overall demand for taxis.
In 1997, the Economic Planning Group of Canada was retained by the MLC to determine if
the model, developed by the Coopers & Lybrand Consulting group in 1987 was valid, and to
make recommendations for changes that should be made to the model, if any. Research of the
various licensing authorities in North America and Europe found no model that has been
uniformly adopted, as each municipality has a differing population, economic and
infrastructure influences on taxi demand. The report suggests that demand is a factor of both
qualitative and quantitative issues. Qualitative issues such as customer satisfaction, waiting
times and vehicle quality is not scientifically measurable but does influence the public's
predisposition to use cabs. The report reasons that the combination of measurable quantitative
impacts and the immeasurable qualitative issues is problematic, and furthermore, the lack of
industry data hinders the ability to apply measurable data to a model. The report concludes,
however, that the predictor model was no longer valid due to changes in demographic,
economic and social factors since its inception in 1987. The report further recommends
changes not only to the inputs for the model, but also the weighting applied to the inputs.
Additional inputs such as employment, Via rail passengers, per capita income, occupied office
space, and the consumer confidence index was suggested.
Table 3 below provides a summary of the predictor models developed thus far for the MLC.
Table 3 - Predictor Models for Taxicab Service
Demand Indicator |
Coopers & Lybrand 1982
|
Coopers & Lybrand 1987
|
Economic Planning Group 1997
|
% Change in |
Weighting |
Weighting |
ImpOrtance*Weighting |
Metro Population |
NA |
NA |
0.350 |
Metro & Surrounding Pop. |
0.840 |
0.714 |
NA |
Go Ridership |
0.125 |
0.106 |
NA |
Airline Passengers |
0.025 |
0.129 |
0.035 |
Convention Delegates |
0.010 |
0.051 |
NA |
Surrounding Population |
NA |
NA |
0.070 |
Employment |
NA |
NA |
0.140 |
Via Rail |
NA |
NA |
0.035 |
Visitors |
NA |
NA |
0.070 |
Avg. per capital income |
NA |
NA |
0.105 |
Occupied Office Space |
NA |
NA |
0.075 |
Retail Spending |
NA |
NA |
0.090 |
Consumer Confidence Index |
NA |
NA |
0.030 |
|
|
|
|
Total |
1.0 |
1.0 |
1.0 |
Model Inputs and Forecasts
Data of the various demand measure inputs was collected for the period 1978 to 1996 (and
1997 where available). In addition to the above variables, additional variables such as TTC
ridership were also collected. Forecasts of each variable were made using a variety of
statistical models. Numerous forecasting models were analyzed for each variable, and the
best model was selected based on minimization of the root mean square in conjunction with
maximizing the regression coefficient (R-squared) and statistical significance ratio
(T-ratio). Actual and forecast data is shown in Appendix 1. The year-over-year percentage
changes in each variable are shown in Appendix 2.
Demographic Influences
Metro Population
The population of Toronto has been steadily growing at an average rate of 0.5 per cent per
year from 2.1 million residents in 1982 to 2.3 million residents in 1996. Population
correlates positively with the demand for taxi service and is a significant factor used in all
three predictor models. The forecast for the population of Toronto is for continued
conservative growth at a rate of approximately 0.5 per cent annually. It should be noted
that Statistics Canada takes the census only every five years, with the last being in 1996.
Data between census dates is from statistical interpolation. The projected data is based on
historic trends, and this projection is slightly lower than the most recent Statistics Canada
projection, however, other industry observers have recently suggested that the Statistics
Canada projection may be too high.
Population Surrounding Area
This measure includes all cities in the three Regions of York, Peel and Durham that are
immediately contiguous to the City of Toronto, as well as the Town of Oakville. The
population of the surrounding areas has grown consistently over the last 20 years at a rate
of approximately 4 per cent annually, to 2.2 million residents in 1996. Continued
population growth in the surrounding suburban areas is expected at a moderate rate of
approximately 2.5 per cent per year.
Although each region is separately serviced by a local taxi industry, a significant portion of
the regional population is active, economically or otherwise, in Toronto. It is unfortunately
not possible to accurately measure only that portion of the population which constitutes a
user base for taxi services, therefore population growth has been combined with certain
more precise indicators. The Economic Planning Group 1997 Importance Weighting
assigned a lower weighting to population in surrounding areas on the grounds that it has a
lower influence on the demand for taxi service in Toronto.
Population GTA
Population change within the GTA is an essential component in determining the demand
for the number of licensed taxicabs within Metro. The suburban areas surrounding the
City of Toronto have experienced a greater rate of growth over the past twenty years
relative to the population of Toronto. The proportion of the area population that pertains to
Toronto has decreased from 70 per cent of the GTA in the late 1970's to 50 per cent in the
late 1990's. Growth in GTA population has been steady at an average rate of 2 per cent
annually with moderate growth forecasted at 1.5 per cent annually over the next decade.
Airline Passengers
Passengers arriving and departing from airports are frequent users of taxicab services and
this is suggested to be a surrogate measure of transient demand for taxi services. The
number of airport passengers has been growing, although decreases in airline passengers
were experienced through the recession in the early 1980's and the early 1990's. A 1.5 per
cent annual growth rate in airline passenger activity is projected for the future.
Via Rail
Since Via Rail passengers entering and leaving Toronto at Union Station potentially impact
the demand for taxi service, this indicator was included in the Economic Planning Group
1997 model. A low importance weighting was applied to this indicator due to the proximity
of the TTC system and GO Transit. From a high of 3.7 million passengers in 1982, VIA
Rail ridership has experienced a significant decline through the 1980's. Ridership has been
stable over the last five years at 2.0 million passengers annually. It is projected that
passenger growth will continue at 0.4 per cent per year.
GO Transit Ridership
This provides a measure of the trend to greater use of public transportation as used by the
Coopers 1982 and 1987 demand models. The low weighting was intended to offset the
co-influence with the population growth of the surrounding areas. GO ridership has
steadily grown from 15 million riders in 1977 to a high of 35.6 million riders in 1991. Since
then, GO Transit has been experiencing a slow decline in ridership continuing from the
recession of the early 1990's. A modest growth rate of 1.6 per cent annually is used as a
forecast in the model.
TTC Ridership
It has been a subject of debate whether TTC ridership is a measure of demand for taxi
service since it is both a complementary and an alternative mode of transportation to
taxicabs. Ridership has grown from 350 million users in 1976 to the high of 460 million
passengers in 1988. Since then, TTC ridership has been steadily declining to the current
level of 370 million riders per year.
Convention Delegates
This measure in combination with growth in airline passenger traffic is thought to be a
surrogate indicator of transient demand. The number of convention delegates visiting
Metro has leveled off in the last 5 years from the period of high growth that immediately
followed the recession in the early 1980's. The forecast for the convention delegates is for
moderate growth over the next 10 years at a rate of approximately 3.5 per cent per year.
Tourist Visitors
Intuitively, growth in the number of tourist visitors to Metro is thought to correlate
positively with demand for taxicab service. In 1997, 21.7 million tourists visited
Metropolitan Toronto. It is difficult to compare the current number of tourist visitors to the
past as tabulation and data collection methods have changed over the past couple of years.
The large change in 1992 was a result of a change in determination method used by the
MTCVA, whereby an economic impact factor was subsequently added.
Total Visitors
This measure represents a combination of the total number of tourist visitors and the
number of convention delegates that visit Toronto on an annual basis. The Economic
Planning Group 1997 model assigned a 0.070 importance weighting to this measure.
Employment Toronto
The Economic Planning Group 1997 model included this measure as an indicator of the
effects of the economy on the labour force and a representation of the "business" side of
demographics. Applying a relatively low weighting factor was intended to minimize the
effect of co-linearity between this measure and the population data. The state of the
economy highly influences employment levels in Metro as reflected by the decrease in
employment during the recession in the early 1980's and 1990's. Over the past five years,
Metro employment has decreased at an average rate of 2 per cent per year. Much of the
decrease is attributable to the loss of business base to the surrounding 905 areas.
Employment Surrounding Areas
Employment growth in the areas surrounding Toronto has been steady with an average
annual increase of 6 per cent over the past 10 years. Employment growth in the
surrounding areas is expected to be positive over the next decade.
Employment GTA
The GTA has experienced moderate growth in employment over the past 20 years at a rate
of 2.5 per cent annually. Employment is impacted by various economic factors such as the
recession in the 1980's and the 1990's that showed a corresponding decrease in
employment.
Economic Influences
Average Per Capita Income
Average per capita income is a surrogate measure of the population's ability to spend money
on discretionary items, such as taxi services, and is a general indicator of economic health.
One would expect a positive correlation between per capita income and demand for taxi
service. The Economic Planning Group assigned an importance weighting of 0.105 to this
measure. Over the last 20 years, an average per capita income growth was experienced at
approximately 2.5 per cent annually. The forecast is for an average growth of 1.4 per cent
over the next decade.
Occupied Office Space
The Economic Planning Group uses this measure as an indication of economic activity and a
general indicator of business activity in Metropolitan Toronto. In general, the amount of
occupied office space grew at a rate of 5 per cent through the 1980's and is now relatively
constant through the 1990's. The forecast predicts the occupied office space to increase
conservatively at 1 per cent per annum.
Retail Spending
Retail spending is thought to be positively correlated with demand for taxi service since it
provides an indication of people's willingness to spend on retail items. In general, retail
spending growth has been positively increasing since 1976 with a slight decline in the 1990's
due to the recession. Retail spending growth is expected to increase over the next decade at a
rate of 3 per cent annually.
Consumer Confidence Index
As a measure of confidence in short term earning ability, the Economic Planning Group uses
the consumer confidence index in its 1997 Importance Weighting. It is thought to correlate
positively with demand for taxi service and is given a 0.030 weighting in the model. The
consumer confidence index has remained relatively stable over the last five years at
approximately 100. The consumer confidence index is a qualitative measure of consumer
confidence as surveyed by the Conference Board of Canada. The data is an aggregate
measure for Ontario.
Unemployment
The unemployment rate, as a measure of the state of the economy, is thought to be negatively
correlated to the demand for taxi service. High unemployment lends to lower consumer
spending and a decrease in business activity which results in a corresponding decrease in the
propensity to use taxis. The unemployment rate for Metro, the surrounding areas and the GTA
shows a similar trend. Generally, unemployment has been high during times of economic
recession and lower during periods of economic growth.
Sources of Historical Statistical Information:
Population Statistics - Statistics Canada Census
GO Transit Ridership - Government of Ontario Transit
Visitor Information including tourist visitors and convention delegates - Metro Toronto
Convention Visitors Association
Airline Passengers - Transport Canada, Aviation Statistics Centre
Via Rail - Via Rail Canada
Employment, Unemployment - Metropolitan Toronto Planning Department
TTC Ridership - Toronto Transit Commission
Average Per Capita Income - Statistics Canada Strategic Projections Inc.
Occupied Office Space - Royal LePage Real Estate Services Ltd.
Retail Spending - Statistics Canada Industry Division
Consumer Confidence Index - Conference Board of Canada
Note: Projections are based on statistical projections of historical data, rather than external
sources.
Fares
Taxicab fares are set by the TLC on an industry cost index formula initially developed by
Coopers & Lybrand in the 1982 review. Six major categories of operating costs are included
in the index: automobile and equipment, finance and leasing, maintenance and repair, fuel,
insurance, and other costs. Fare increases are based on relative changes in these cost
elements. In summary, it is observed that fares have increased in proportion to the CPI index,
as shown in Figure 7.
Model Evaluation
The combination of measurable quantitative impacts and the immeasurable qualitative
issues affecting the demand for taxi services, as well as the lack of industry data, makes
it very difficult to apply measurable data to any model. This problem was highlighted in
the Economic Planning Group report.
Nevertheless, surrogate measures of demand may be used to provide a relative
comparison of various proposed models. One such measure is gross fare revenue. Gross
fare revenue is expected to be a function of demand for taxi services, fare price, and the
number of plates in service. That is, all else being constant, gross fare revenue would be
expected to increase proportionate to demand. However, fare price and the number of
plates in service would also have an influence. Gross revenue will increase if fare price
increases, all else being constant, and gross revenue will decrease as the number of
plates in service increases and a greater number of taxicabs compete for the same
demand. Analytically:
More specifically:
And therefore the surrogate measure of demand to which the models may be compared
to would be:
The surrogate measure of observed demand was estimated using driver gross revenue
data obtained from the statutory declaration of income, which is required to be filed
with the TLC. After excluding for outliers, more than 4,000 records of driver gross
revenues were obtained spanning the period 1979 to 1996. The number of plates
outstanding in each year, and fare price was also obtained from the TLC. A graphical
representation of the surrogate measure of observed demand is shown in Figure 8.
A number of observations can be made from the data and figure. First, demand for taxi
services, as estimated from the surrogate, had increased steadily by an average of 8.9 per
cent per annum over the period 1981-1989. Total demand is estimated to have doubled
over this period. It should be noted that plate value also had doubled over this period,
increasing from an average of $40,134 in 1980 to $81,600 in 1989. Second, the estimate
suggests that demand fell by 36.7 per cent from 1990 to 1992. The Chapman report
indicates that industry consensus was that demand had decreased between 30 and 40 per
cent over this period. Third, since 1992, the estimate suggests that the losses in demand
were largely erased over succeeding periods, and by 1996 were just shy of the 1989 high.
It should be noted that average plate value had increased from its low of $49,976 in 1993
to $74,363 in 1996. In conclusion, the surrogate demand measure would appear to be
reasonable.
Figure 8 - Surrogate Observed Demand Measure
Coopers & Lybrand Model
The estimate of demand from the Coopers & Lybrand (C&L) predictor models (both the
1982 and 1987 weightings) is shown in Figure 9. The surrogate demand model is overlaid
for comparison. From the figure, it can be observed that both of the C&L models had
understated the growth in demand, particularly through to 1990. Consequentially, plate
values would be expected to rise as demand outstripped supply, as was the actual case.
Neither of these predictor models followed the surrogate demand measure during the
recession of the early 90's. The model shows an average increase in demand of
approximately 6.1 per cent during the period 1981 to 1989, or an 80 - 82 per cent increase
over 1989. The surrogate measure suggests and 8.9 per cent per annum increase. The
model shows a 9-15 per cent increase during the period 1990-1992, during the recession
when demand likely fell. The surrogate measure suggests a 36.8 per cent decline in demand
during the same period. The model forecasts a 2.61 - 2.63 per cent per annum increase in
demand for the period 1998 to 2008. There is a poor statistical correlation with the model
when regressed with the surrogate measure.
Figure 9 - Actual & Projected Demand - Coopers & Lybrand Models
Although Council directed no new plates be issued after 1993, an additional 233 plates would
have been issued to 1998 had the Coopers & Lybrand (1987) formula been followed, and by
the year 2000, a total of 317 new plates would have been projected. Table 4 shows the number
of new plates predicted by the formula.
Table 4 - New Plate Issuance per Coopers & Lybrand Model
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
Plates Outstanding |
3,480 |
3,561 |
3,578 |
3,595 |
3,675 |
3,713 |
3,757 |
3,797 |
3,837 |
3,877 |
3,916 |
3,955 |
3,994 |
4,033 |
4,071 |
4,109 |
4,146 |
% Change in Demand |
2.33 |
0.47 |
0.49 |
2.21 |
1.05 |
1.17 |
1.06 |
1.07 |
1.03 |
1.02 |
1.00 |
0.98 |
0.96 |
0.95 |
0.93 |
0.92 |
0.90 |
New Issuance based
on Formula |
|
81 |
17 |
18 |
79 |
39 |
44 |
40 |
41 |
39 |
40 |
39 |
39 |
38 |
38 |
38 |
38 |
Cumulative New
Plates |
|
81 |
98 |
115 |
195 |
233 |
277 |
317 |
357 |
397 |
436 |
475 |
514 |
553 |
591 |
629 |
666 |
Economic Planning Group Model
The estimate of demand from the Economic Planning Group (EPG) 1997 model is shown
in Figure 10. The surrogate demand is overlaid for comparison. From the figure, it can be
observed that this model under estimates the changes in demand for taxicab services. For
the period 1981 to 1989, this model suggests a 2.4 per cent per annum growth in demand
compared to the 8.9 per cent suggested by the surrogate. The model also suggests a 6.2 per
cent increase in demand during the period 1992 to 1994, compared to the 36.8 per cent
decline in the surrogate. This model forecasts a growth rate for the period 1998 to 2008 of
1.15 per cent. There is no correlation with the surrogate measure.
Given that the Coopers & Lybrand model allowed for a greater growth rate in demand, yet
demand still outstripped supply as indicated by rising plate values and lease rates, then it
may be concluded this model is less superior. It should be noted that the TLC never utilized
this model, however, had the model been utilized, an additional 258 plates would have been
issued by 1998, with the total of new plates being 355 by the year 2000.
Table 5 - New Plate Issuance per Economic Planning Group Model
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
Plates Outstanding |
3,480 |
3,520 |
3,506 |
3,562 |
3,634 |
3,728 |
3,782 |
3,832 |
3,881 |
3,927 |
3,972 |
4,016 |
4,060 |
4,102 |
4,144 |
4,185 |
4,226 |
% Change in Demand |
1.15 |
-0.40 |
1.61 |
2.02 |
2.59 |
1.43 |
1.34 |
1.25 |
1.20 |
1.15 |
1.11 |
1.08 |
1.05 |
1.02 |
1.00 |
0.98 |
0.96 |
New Issuance based
on Formula |
|
-14 |
57 |
71 |
92 |
52 |
50 |
47 |
46 |
45 |
44 |
43 |
42 |
41 |
41 |
40 |
40 |
Cumulative New
Plates |
|
-14 |
43 |
114 |
206 |
258 |
308 |
355 |
401 |
446 |
489 |
532 |
574 |
616 |
657 |
697 |
737 |
Alternate Models
To the extent that the above models were deemed to be inadequate for predicting changes in
demand, alternate models were explored. To this extent, correlation between the surrogate
measure and all the input variables were examined. Several of the input variables showed a
promising correlation. These included: Toronto's surrounding population, delegation
visitors, Toronto employment and TTC ridership. Coincidentally, the latter variable was
suggested for further exploration in the Chapman report.
Multi-Variate regression analyses were performed on these variables against the surrogate
demand measure to develop alternate models. Statistical tests of these alternate models
suggest that the percentage changes in the model explain approximately 60 of the change
in demand. For comparison, the other models explained zero (Economic Planning Group)
to 19 per cent (Coopers & Lybrand 1987) of the changes in demand. An alternate models is
presented below:
Table 4 - Alternate Models
Demand Indicator |
Alternate demand Model
|
Relative Weighting % |
% Change in |
Coefficient Multiple |
|
Convention Delegates |
0.1556 |
8.2 |
Surrounding Population |
0.6498 |
34.2 |
Toronto Employment |
0.2979 |
15.7 |
TTC Ridership |
0.7989 |
42.0 |
|
|
|
Total |
1.9022 |
100.0 |
Unlike the previous models, which used the term of "weighting", the above model is the
multiplier to be applied to the percent change in each variable. It can be thought of as a
relative weighting. For example, the model suggest changes in TTC ridership as having the
most influence on changes in demand, followed by changes in surrounding population.
A graphical representation of the model, overlaid with the surrogate demand measure, is
shown in Figure 11. The model suggests an average 8.5 per cent growth in demand over the
period 1981 to 1989, compared to the 8.9 per cent of the surrogate. The model suggest a 23
per cent decline in demand from 1992 to 1994, while the surrogate, 36.8 per cent. The model
forecast a 2.5 per cent per annum growth in demand from 1998 to 2008. The model suggest
that 259 new plates (518 single-shift equivalents) should have been issued to keep up with
demand by 1998, with the total being 458 new plates by the year 2000.
Table 7 - New Plate Issuance per Alternate Model Option 4B
|
1993 |
1994 |
1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
Plates Outstanding |
3,480 |
3,616 |
3,611 |
3,626 |
3,615 |
3,739 |
3,838 |
3,938 |
4,047 |
4,156 |
4,267 |
4,378 |
4,490 |
4,602 |
4,714 |
4,826 |
4,938 |
% Change in Demand |
3.91 |
-0.14 |
0.42 |
-0.31 |
3.42 |
2.67 |
2.59 |
2.77 |
2.69 |
2.68 |
2.60 |
2.55 |
2.49 |
2.43 |
2.38 |
2.32 |
2.27 |
New Issuance based
on Formula |
|
136 |
-5 |
15 |
-11 |
124 |
100 |
99 |
109 |
109 |
111 |
111 |
112 |
112 |
112 |
112 |
112 |
Cumulative New
Plates |
|
136 |
131 |
146 |
135 |
259 |
358 |
458 |
567 |
676 |
787 |
898 |
1,010 |
1,122 |
1,234 |
1,346 |
1,458 |
Integrated Financial Model
The previous section reviewed the demand characteristics for taxicab services and provided a
rationale for the development of a revised demand model. This section develops an integrated
pro forma financial model as a tool to facilitate the analysis of the impact of policy decisions
respecting plate supply and fare pricing on taxicab potential income, plate value and lease
rates.
The basis of the pro forma model is that there are only two significant variables affected in the
short-run by changes in supply and demand: lease rate and net income before tax to the driver.
The gross potential income of a taxicab is determined by the changes in demand (from the
demand model), the supply of plates, fare price, and costs. Supply of plates and fare prices are
matters of policy. The fixed cost items (i.e., insurance, maintenance, etc.) are outside the
control of individuals and are predominantly inflationary influenced. Fuel, although a variable
cost, is a function of demand per plate. Thus, the only remaining variables to which changes
in gross potential revenue can flow to are the lease rates and net income distribution to the
driver. Other details of the pro forma financial model are as follows:
Revenues
Generally, a taxicab's revenue potential arises from three sources: fare revenue, tips, and
second-shift rental revenue. While individual taxicab revenue may be affected by the specific
position and relationship within the industry chain, as well as an individual drivers skill and
experience, it is believed that the income potential of the average cab is the predominant
driving force behind lease rates.
Although there does not appear to be consensus amongst the various industry participants
respecting the income potential of a taxicab, the submissions received by the task force
suggest that 10 to 15 fares per shift may not be atypical, with the average fare being
approximately 10 kilometers. As such, the 1997 base position of the pro forma financial
statement assumes a revenue potential of $131.00 per shift at the lower end (10 trips per shift,
10 km per trip, 5 days per week, 50 weeks per year) and $197.00 per shift at the higher end
(15 trips per shift, 10 km per trip, 6 days per week, 50 weeks per year). Tips are assumed at 10
per cent of fare revenue, and the income derived from the second-shift rental is assumed at the
1997 average shift cash-in rate of $65.00 per shift.
The financial model then predicts year-over-year changes in revenue as a function of changes
in demand per plate and changes in fare.
Fixed Costs
Fixed costs, in the short-run, consist of insurance, dispatch fees, maintenance, plate renewal,
meter rental and license renewal. There does appear to be consensus respecting these fixed
costs. The 1997 estimates of these costs were previously shown in Table 2. The financial
model assumes that changes in fixed costs are a function of changes in the CPI. Historically,
these fixed costs have been affected by inflationary pressures.
Fuel Costs: Fuel cost is a function of distance driven and fuel price. The pro forma predicts
fuel costs based on actual and projected gasoline price (propane was not considered), fuel
consumption (17-18 miles per U.S. gallon, or 0.15 L/km), and changes in distance based on
changes in demand per plate.
Financing Costs
Financing costs include principal and interest payments for the vehicle. Vehicle costs were
obtained from the "red-book", which suggests the arms-length private sale price of a
three-year old high-mileage Caprice Classic or Crown Victoria at $14,200 (including PST). A
one-year old and two-year old similar vehicle is suggested at $16,300 and $21,200,
respectively. For comparison, a similar new vehicle today costs approximately $32,000
(including freight, PDI, GST and PST). The pro forma financial model assumes that the
vehicle is 75 per cent bank financed, at an interest rate of prime-plus-two. For historic
purposes, the actual annual average prime rate is used. For 1998 and beyond, a prime rate of
7.0 per cent is assumed. Furthermore, the pro forma financial model assumes a more stringent
age requirement for vehicles over the next several years. Up to and including the year 1999,
the model assumes entering vehicles may be three-years of age, with retirement at nine-years
of age (grandfathered vehicles). For the years 2000 to 2002, the model assumes that vehicles
must not be not more than two-years of age when entering the industry. For the years 2003
and beyond, the model assumes that all vehicles entering must not be more than one-year old,
to be retired at five-years of age or less. A four-year financing term is assumed for all
vehicles.
Vehicle Age Requirements used in Model
Year |
Vehicle Entry Age |
Vehicle Retirement Age |
1999 or earlier |
3 |
9 |
2000 |
2 |
8 |
2001 |
2 |
7 |
2002 |
2 |
6 |
2003+ |
1 |
5 |
Lease Rate and Driver Income
Given the preceding, the only variables impacted by changes in supply and demand are lease
rates and the net incomes of the driver (before taxes).
Numerous models were considered that attempted to explain the relationship between the net
income potential of a taxicab and lease rates. One of the simplest assumptions would be that a
driver's real net income does not change significantly over time. However, such an
assumption would result in greater swings in lease rates than is actually observed, suggesting
a more complex relationship. More complex models were examined and compared with
historical observations. The best explanation that could be derived, given the available
information, is that both lease rates and driver net income respond to changes in the income
potential of a taxicab. Specifically, changes in the income potential of a taxicab, resulting
from changes in demand per plate, fares, and expenses, would be observed by the driver as
well as recognized by the plate owner. The response by the plate owner, however, appears to
lag the period of observation by one or two periods.
As both the driver and plate owner recognize the changes, their respective expectations of
income will change. For example, in periods of rising taxicab income potential, the plate
owner, who has a relatively higher bargaining power (due to the excess supply of drivers - the
TLC records show more than 10,000 active drivers), will raise his or her expectations of lease
income. The amount of the increase, however, will be resisted or constrained by the driver,
who will also raise his or her expectations of income. Other qualitative, unquantifiable factors
may also influence the ability of both parties to fully realize their expectations. On a
period-to-period basis, the pro forma financial model revises these expectations of income as
a function of the relative change in earnings (as a result of changes in demand per plate, fares
and expenditures). The relative changes used in the model are an average of the current and
preceding periods. Such a model relaxes the constraints of the simple assumption that driver
real income doesn't change significantly over time and the corresponding implication that
income is not affected by economic and industry influences.
Model Validation
The financial model was applied to historic data for the preceding 10 years in order to
compare predicted lease rates against actual observed lease rates. Figure 12 shows this
comparison. The model would appear to track changes in lease rate reasonably well,
particularly given the wide fluctuations in lease rates experienced during the 1990 to 1992
recession. From a statistical perspective, the model explains 50 per cent, or R-squared, of
changes in actual lease rates, and the statistical relationship is significant. This is reasonable
given the combination of measurable quantitative influences and immeasurable qualitative
influences.
Model Forecast and Impact of Supply and Fare Changes
The model as previously described was utilized to forecast the impact on revenues and
income, lease rates and plate values over a 10-year period. All the preceding assumptions
remain the same for this analysis. The average discount rate of 12.6 per cent was used to
determine plate value. All new plate issued are assumed to be double-shift plates. If new
plates are to restricted to single-shift use, then one may assume twice as many single-shift
equivalent plates. Beyond the forecast period, the model assumes supply matches demand,
resulting in a constant lease rate beyond the year 2009.
It should be noted that, from Table 7, the demand model suggests that approximately 100 to
110 new plates will be required in each year during 1999 to 2009 in order to match demand.
In conjunction with appropriate fare level increase (estimated at 1.0 to 1.5 per cent per annum
to offset increases in expenditures), such would result in plate value stabilization. Generally,
plate issuance less than this would result in lease rate and plate value appreciation.
Several scenarios were run, including a status quo scenario, and scenarios that considered the
issuance of 50, 100, 150 and 200 plates per year, with and without fare increases. Other
scenarios were also considered where the number of plates issued varied in order to stabilize
plate values after a certain period (i.e., 200 plates per year for four years, followed by 100
plates per year thereafter).
Status Quo Scenario
The status quo scenario assumes no new plates are issued and that there would be no fare
increase over the next decade. Under the status quo scenario, lease rates and thus plate values
are projected to rise in nominal terms from approximately $90,000 in 1998 to between
$134,000 and $190,000 by 2009. These plate values assume that industry participants have no
expectations of intentions respecting supply and fares over a specific period of time, and is
derived strictly from capitalizing the observed lease rate in any given period. If industry
participants were made aware of intentions affecting supply and fares over a specific period of
time, it would be reasonable to assume that a rational participant would discount the
anticipated lease income cash flows accordingly. The effects of expectations are discussed in a
subsequent section. Lease rates would similarly be projected to rise from approximately
$11,000 in 1998 to between $17,000 and $24,000 by 2009 ($1,330 to $2,000 per month). The
financial pro forma for this scenario is shown in Appendix 3. Plate values and lease rates are
expected to rise since growth in driver revenues and income is greater than the growth in
expenses. Driver income is also projected to increase by approximately 11 to 12 per cent over
the same period. Figure 13 shows the impact of this scenario on plate values.
Issuance of 50 Plates per Year
No Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 50 new plates
per year (100 single-shift equivalents) in the absence of fare increases. Plate issuance is
assumed to commence in the year 2000. Under this scenario, the model projects plate
values in the range of $68,000 to $113,000 by the year 2009, assuming industry participants
form no expectations of future issuance. If the supply intentions are fully known, rational
participants would discount expected future cash flows accordingly, and while the terminal
value would be the same, intermediate plate values would differ as shown in the pro forma.
The model projects lease rates in the range of $8,500 to $14,000 per year ($700 to $1,170
per month). While driver nominal income is projected to grow by approximately 4 per cent
over this period, it should be noted that real income would actually fall by approximately 17
per cent over the next decade. Figure 14 shows the impact on plate values, while Appendix
4 shows the pro forma and additional details.
1.5 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 50 new plates per
year (100 single-shift equivalents) in conjunction with a 1.5 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. Under this scenario,
the model projects plate values in the range of $146,000 to $207,000 by the year 2009, and
lease rates in the range of $18,000 to $26,000 per year ($1,500 to $21,200 per month). Driver
nominal income is projected to grow by approximately 12 per cent over this period. Figure 15
shows the impact on plate values, while Appendix 5 shows the pro forma and additional
details.
Issuance of 100 Plates per Year
No Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 100 new plates
per year (200 single-shift equivalents) in the absence of fare increases. Plate issuance is
assumed to commence in the year 2000. Under this scenario, the model projects plate
values in the range of $16,000 to $55,000 by the year 2009, and lease rates in the range of
$2,000 to $7,000 per year ($170 to $600 per month). Driver nominal income is projected to
fall by approximately 3 per cent over this period. Figure 16 shows the impact on plate
values, while Appendix 6 shows the pro forma and additional details.
1.5 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 100 new plates
per year (200 single-shift equivalents) in conjunction with a 1.5 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. This scenario more or
less resembles plate issuance based on the demand predictor model. Under this scenario, the
model projects plate values in the range of $86,000 to $137,000 by the year 2009, and lease
rates in the range of $10,800 to $17,000 per year ($900 to $1,400 per month). Driver nominal
income is projected to grow by approximately 6 per cent over this period. Figure 17 shows the
impact on plate values, while Appendix 7 shows the pro forma and additional details.
Issuance of 150 Plates per Year
1.5 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 150 new plates
per year (300 single-shift equivalents) in conjunction with a 1.5 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. Under this scenario,
the model projects plate values in the range of $38,000 to $81,000 by the year 2009, and lease
rates in the range of $4,700 to $10,200 per year ($400 to $850 per month). Driver nominal
income is projected to remain constant over this period. Figure 18 shows the impact on plate
values, while Appendix 8 shows the pro forma and additional details.
2.0 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 150 new plates
per year (300 single-shift equivalents) in conjunction with a 2.0 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. Under this scenario,
the model projects plate values in the range of $61,000 to $108,000 by the year 2009, and
lease rates in the range of $7,600 to $13,600 per year ($630 to $1,100 per month). Driver
nominal income is projected to grow by approximately 2.5 per cent over this period. Figure 19
shows the impact on plate values, while Appendix 9 shows the pro forma and additional
details.
Issuance of 200 Plates per Year
1.5 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 200 new
plates per year (400 single-shift equivalents) in conjunction with a 1.5 per cent fare
increases. Plate issuance and fare increases are assumed to commence in the year 2000.
Under this scenario, the model projects plate values in the range of zero to $37,000 by
the year 2009, and lease rates in the range of zero to $4,700 per year (zero to $400 per
month). Driver nominal income is projected to fall by approximately 5 per cent over this
period. Figure 20 shows the impact on plate values, while Appendix 10 shows the pro
forma and additional details.
2.0 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 200 new plates
per year (400 single-shift equivalents) in conjunction with a 2.0 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. Under this scenario,
the model projects plate values in the range of $19,000 to $61,000 by the year 2009, and lease
rates in the range of $2,300 to $7,600 per year ($200 to $630 per month). Driver nominal
income is projected to fall by approximately 2.5 per cent over this period. Figure 21 shows the
impact on plate values, while Appendix 11 shows the pro forma and additional details.
2.5 Per cent Fare Increase
This scenario provides an estimate of the potential impact of the issuance of 200 new plates
per year (400 single-shift equivalents) in conjunction with a 2.5 per cent fare increases. Plate
issuance and fare increases are assumed to commence in the year 2000. Under this scenario,
the model projects plate values in the range of $41,000 to $85,000 by the year 2009, and lease
rates in the range of $5,100 to $10,800 per year ($425 to $900 per month). Driver nominal
income is projected to remain approximately constant over this period. Figure 22 shows the
impact on plate values, while Appendix 12 shows the pro forma and additional details.
Varying Number of Plates
Numerous other scenarios are plausible. For example, one may wish to front load the number
of plates being issued, say for example 200 plates per year for four years, followed by an
appropriate number of plates per year to subsequently stabilize plate values. This scenario
assumes 200 plates per year for four years, beginning in the year 2000, followed by 100 plates
per year in the year 2005 and subsequent years, in conjunction with a 1.5 per cent fare
increase beginning the year 2000. Under this scenario, plate values are expected to fall to
approximately $38,000 to $82,000 by 2009. Lease rates are expected to fall to between $4,700
and $10,300 ($400 to $850 per month). Driver nominal income is not expected to change over
this period. Figure 23 shows the impact on plate values, and additional details are found in
Appendix 13.
1.5 per cent fare increase 2000+ scenario, beginning in year 2000
Plate Values and Expectations
Historical evidence suggests that industry participants consistently value a plate on the open
market by capitalizing the lease income/rate. There did not appear to be any regularity with
respect to plate issuance and/or fare increases. However, if the industry participants were
made aware of intentions affecting supply and fares over a specific period of time, it would be
reasonable to assume that a rational participant would discount the anticipated lease income
cash flows accordingly. The model and figures above, as well as the pro formas in the
appendices, provide an estimate of the impact to plate values resulting from rational
expectations. For example, under the scenario of 100 plates per year with no fare increase,
rational expectation would anticipate the lower lease income cash flows over the forecast
period which would be discounted accordingly, thus, if an announcement was made tomorrow
that 100 plates per year would be issued, with no fare increases, plate value could drop by as
much as $25,000 to $65,000 from its current estimated value of $90,000. The impact is
anticipated to be the same under the scenario where 200 plates are issued for four years
followed by 100 plates per year, with a 1.5 per cent fare increase.
Impact on Industry Participants
Policy decisions respecting supply of plates and fare pricing directed to achieve a certain
objective for one group of industry participants (i.e., plate lessees and plate owners) may
adversely affect other industry participant groups as well as in the ultimate delivery of
services to the public. Other industry participants include owner-operators, designated agents,
and daily and weekly renters ("cash-in").
Every new plate issued would reduce the demand per plate that would otherwise exist for all
participants. The impact on the plate owner was previously discussed. The owner-operator,
while not affected by changes in lease rates, will experience a loss in revenue which will
directly impact his or her real net earnings (depending on the policy implemented, nominal
earnings may rise, but after inflation, would actually be lower in real terms). Designated
agents would probably be affected as the margin they receive on plates decline with lease
rates. Cash-in drivers, while they probably would be affected in the short-run due to the
"stickiness" of rental rates, would put downward pressure on rental rates, and in the long-run
be no worse off in real term.
Addressing the issues arising from policy changes without segregating the industry would be
problematic. One solution may be differential fare structures for leased-vehicles and
owner-operated vehicles, while another option may be regulatory constraints on lease rates,
however, these are not considered in this report.
"Ambassador Plate" Proposal
The "Ambassador Plate" proposal contemplates the issuance of a new class of taxicab licenses
with certain conditional provisions. First, these new licenses would not be transferable. That
is, it would not be permissible for the original owner to sell or otherwise transfer the plate to
any other person, and thus the plate would have no open market value. If the owner wishes to
exit the industry, the plate must be returned to the TLC. Second, as a condition of operating a
taxicab under this license, the taxicab vehicle must be one year old or newer upon entry, and
retired at or before five years of age. Third, such a new license would only be issued to drivers
that have successfully completed an extensive driver training program at a recognized college
approved by the TLC. Fourth, the vehicle must be operated solely by the license owner. That
is, the vehicle cannot be rented out to a shift driver or leased to a second driver
Table 8 - Comparison of Ambassador Plate Proposal with Existing Alternatives
|
Ambassador Plate Proposal |
Alternatives |
Vehicle |
Entry 1 year old or less
Exit 5 years old or less |
Entry 3 years old or less
Exit 6 years old or less |
Shift Revenues |
Single Shift |
May be utilized for 2 shifts |
Driver Training |
2 Month Program ? |
1 Week Program |
Operation |
Owner-Driver |
Any TLC Licensed Driver |
Analysis - Static Conditions
The following presents a simple analysis of the potential earnings of an owner of one of these
new class taxicab licenses. Such an analysis is premised on existing conditions in the industry
respecting revenues and expenditures, and does not consider the supply and demand
interrelation and its potential effect on revenues and expenditures in future periods. For
example, the static analysis does not consider potential changes in lease rates, nor the
potential for capital appreciation or depreciation of plate value.
Table 9 compares the potential net earnings of a participant of the new taxicab licenses
vis-à-vis alternative arrangements for operating a taxicab. Under static conditions, all three
options available to a new participant would be considered as financially viable.
A direct comparison of the three alternatives is difficult due to a number of intangibles
embodied in the various options, and as such, distinction as to which option would be
preferable is subjective, and would depend on one's personal preference and financial ability.
A potential driver must consider several issues. Firstly, the financial analysis of the
"Ambassador Plate" proposal gives no consideration to the possibility and economic benefit
of the owner-driver utilizing the taxicab as a personal vehicle off-shift. The Commercial
Travelers Association of Canada, in their Car Cost and Policy Survey, suggest the value of a
corporate vehicle at $400 per month, or $4800 per annum. Including such a benefit would
make the "Ambassador Plate" proposal even more attractive. Secondly, the "Ambassador
Plate" proposal requires potential drivers attend and complete a rigorous training program
from an approved college. The form and content of such a program has yet to be developed. A
course duration of two months has been suggested. The cost of such a program is not known
at this time. No attempt has been made to quantify this cost in this analysis. Thirdly, the static
analysis does not consider the potential for capital gain or loss in plate value under the plate
purchase option. The dynamic analysis provides some insight into the latter issue.
Table 9 - Comparison of Potential Earnings of New License
|
Ambassador Plate Proposal |
Plate Lease Scenario |
Plate Purchase Scenario |
|
Low Estimate |
High Estimate |
Low Estimate |
High Estimate |
Low Estimate |
High
Estimate |
Initial Investment: |
|
|
|
|
|
|
Vehicle |
21,600 |
21,600 |
14,200 |
14,200 |
14,200 |
14,200 |
Plate License |
5,681 |
5,681 |
- |
- |
5,681 |
5,681 |
Plate |
- |
- |
- |
- |
90,000 |
90,000 |
Other (receipt machine) |
400 |
400 |
- |
- |
- |
- |
Total Investment |
27,681 |
27,681 |
14,200 |
14,200 |
109,881 |
109,881 |
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
Vehicle @25% |
5,400 |
5,400 |
3,550 |
3,550 |
3,550 |
3,550 |
Plate License @100% |
5,681 |
5,681 |
- |
- |
5,681 |
5,681 |
Plate @100% |
- |
- |
- |
- |
90,000 |
90,000 |
Other @100% |
400 |
400 |
- |
- |
- |
- |
Total Equity |
11,481 |
11,481 |
3,550 |
3,550 |
99,231 |
99,231 |
|
|
|
|
|
|
|
Debt: |
|
|
|
|
|
|
Vehicle @75% |
16,200 |
16,200 |
10,650 |
10,650 |
10,650 |
10,650 |
Plate License |
- |
- |
- |
- |
- |
- |
Plate License |
- |
- |
- |
- |
- |
- |
Other |
- |
- |
- |
- |
- |
- |
Total Debt |
16,200 |
16,200 |
10,650 |
10,650 |
10,650 |
10,650 |
|
|
|
|
|
|
|
Total Investment |
27,681 |
27,681 |
14,200 |
14,200 |
109,881 |
109,881 |
|
|
|
|
|
|
|
Cost of Debt |
7.0% |
7.0% |
7.0% |
7.0% |
7.0% |
7.0% |
Cost of Equity |
13.0% |
13.0% |
13.0% |
13.0% |
13.0% |
13.0% |
Weighted Cost of Capital |
9.5% |
9.5% |
8.5% |
8.5% |
12.4% |
12.4% |
|
|
|
|
|
|
|
Sales (annual) |
|
|
|
|
|
|
Fares |
32,870 |
59,166 |
32,870 |
59,166 |
32,870 |
59,166 |
Tips |
3,287 |
5,917 |
3,287 |
5,917 |
3,287 |
5,917 |
Rental - 2nd Driver |
- |
- |
16,250 |
19,500 |
16,250 |
19,500 |
Total Revenues |
36,157 |
65,083 |
52,407 |
84,583 |
52,407 |
84,583 |
|
|
|
|
|
|
|
Expenditure Cash Flows |
|
|
|
|
|
|
Fuel |
2,743 |
4,937 |
2,743 |
4,937 |
2,743 |
4,937 |
Insurance |
4,200 |
4,200 |
4,800 |
4,800 |
4,800 |
4,800 |
Dispatch |
4,800 |
4,800 |
4,800 |
4,800 |
4,800 |
4,800 |
Maintenance |
3,600 |
3,600 |
4,800 |
4,800 |
4,800 |
4,800 |
Plate Renewal |
826 |
826 |
826 |
826 |
826 |
826 |
Meter Rental |
600 |
600 |
600 |
600 |
600 |
600 |
License Renewal |
90 |
90 |
90 |
90 |
90 |
90 |
Plate Lease |
- |
- |
10,800 |
10,800 |
- |
- |
Principle & Interest |
4,778 |
4,778 |
3,141 |
3,141 |
3,141 |
3,141 |
Total Expenditures |
21,637 |
23,831 |
32,600 |
34,794 |
21,800 |
23,994 |
|
|
|
|
|
|
|
Net Earnings |
14,520 |
41,251 |
19,807 |
49,788 |
30,607 |
60,588 |
|
|
|
|
|
|
|
NPV (Perpetuity) |
125,720 |
408,141 |
219,645 |
573,619 |
136,657 |
378,160 |
|
|
|
|
|
|
|
Other Costs: |
|
|
|
|
|
|
Opportunity Cost of Equity @13% |
(1,493) |
(1,493) |
(462) |
(462) |
(12,900) |
(12,900) |
Intangible Benefits |
4,800 |
4,800 |
- |
|
- |
|
|
|
|
|
|
|
|
Net Earnings After Opportunity Cost &
Intangibles |
17,827 |
44,559 |
19,345 |
49,327 |
17,707 |
47,688 |
NPV (Perpetuity) w/ intangible benefits |
188,344 |
470,766 |
228,396 |
582,370 |
142,628 |
384,131 |
Analysis - Dynamic Conditions
The previous sections of this report highlight the complex interaction between supply and
demand, and the effects on potential income, lease rates and plate values. This section applies
those models to evaluate the feasibility of the "ambassador plate" proposal vis-à-vis other
options in a dynamic state.
The policy considerations respecting supply and fares are boundless. As such, the subsequent
analysis is based the results of two plausible scenarios: under the 150 plate per year (300
single-shift equivalent) condition; and, under the 200 plate per year condition, both with a 1.5
per cent per year fare increase.
The three alternatives (leasing an existing plate, purchasing an existing plate, and acquiring an
"ambassador plate") were compared as in the static case. Several additional assumptions are
made: (I) the plate purchase was valued at the higher "no-expectations" value in the year 2000
(the first year such an option would be available); (ii) a 10-year term or horizon time in the
industry was used; (iii) the plate salvage value of $60,196 in the year 2000 was used; (iv)
where the investment cycle did end in the final year, a pro-rated salvage value was used; and
(iv) insurance and maintenance costs would be lower under the single-shift "Ambassador
Plate" proposal. Appendix 14 provides the net present value analysis of the 150 plate scenario,
and Appendix 15 provides the analysis of the 200 plate per year scenario.
2000-2009 Horizon
|
150 Plates Per Year |
200 Plates Per Year |
|
Low Estimate |
High Estimate |
Low Estimate |
High Estimate |
"Ambassador Plate Proposal: |
|
|
|
|
NPV |
$59,000 |
$187,000 |
$51,000 |
$172,000 |
NPV w/Intangible Benefits |
$88,000 |
$216.000 |
$80,000 |
$201,000 |
Lease Existing Plate Option: |
|
|
|
|
NPV |
$91,000 |
$229,000 |
$90,000 |
$222,000 |
Purchase Existing Plate Option: |
|
|
|
|
NPV |
$42,000 |
$178,000 |
$23,000 |
$151,000 |
Risk and Sensitivity Analysis
The previous section described the impacts of various policy decisions respecting new plate
issuance and fare pricing on plate values, lease rates and driver income. These impacts were
based on certain projected parameters, which were developed from historical trends. Past
historical trends may not necessarily be indicative of future trends. This section provides a
risk and sensitivity analysis of the modeled impacts should the parameters be different than
that projected.
There are three key areas that may affect the model results: (1) changes in the demand
projection; (2) changes in the expenditure projections; and (3) changes in the behavior of
participants or some other intervention in the industry. While the model is capable of varying
the first two parameters, the latter represents subjective influences and is beyond the scope of
this report. Changes in behavior may arise from many influences and may include such
behavior as willingness to accept a lower lease rate than that exhibited by previous behavior,
perhaps due to a shrinkage in supply of drivers. Interventions may include such things as
regulatory constraints on lease rates.
Changes in the demand projection are the most likely concern. The demand model, based on
historical trends, suggests that demand for taxi services had grown by approximately 8.5 per
cent per year over the period 1981 to 1989, fallen by approximately 36 per cent during 1990
to 1992 recession, followed by a recovery phase of approximately 5.8 per cent growth per
annum from 1992 to 1996. Based on historical data, the demand model projected a
conservative 2.5 per cent per annum growth in demand for the period 1998 to 2009.
Changes in the expenditure projection are less likely of a concern. Historically, expenditures
have been observed increasing at a rate consistent with the CPI, and the CPI trend has been
relatively consistent over many years, averaging approximately 2.5 per cent per annum. The
pro forma projects growth in expenditures in line with the projected changes in the CPI.
With respect to changes in the demand projection, if demand growth is greater than that
projected, plate values, lease rates and income would be expected to be greater than that
described in the previous section, while the converse would be true if demand growth is less
than that projected.
While various alternate demand projections may be considered, the following describes the
impact on plate values, lease rates and income of the 200 new plate per year scenario under a
hypothetical recessionary condition. For this example, demand is assumed to follow the actual
pattern that occurred during the 1990 to 1996 recession and recovery for the period 2000 to
2006. The demand projection under this example is shown in Figure 24.
Status Quo Scenario Under Recessionary Conditions 2000-2006
This scenario provides an estimate of the potential impact of a recession similar to that
experienced during 1990 to 1992 under the status quo scenario (no new plates and no fare
increases). Under this scenario, the model projects plate values to fall from a high of $96,000
to $103,000 in 1999 to approximately $50,000 by 2002, and then finding a range somewhere
in between $20,000 and $60,000 by 2009. Figure 25 shows the impact on plate values, while
Appendix 16 shows the pro forma and additional details.
Issuance of 200 Plates per year (and 1.5 per cent fare increase) Under Recessionary
Conditions 2000-2006
This scenario provides an estimate of the potential impact of a recession similar to that
experienced during 1990 to 1992 under a 200 plate per year issuance scenario, in
conjunctions with a 1.5 per cent per year fare increase beginning in 2000. Under this
scenario, the model projects plate values to fall from a high of $96,000 to $103,000 in 1999
to approximately $78,000 to $86,000 in 2000, dropping rapidly to $37,000 to $44,000 by
2001. At this point, presumably all participants would be aware of the recession, as driver
income would have fallen by approximately 6 per cent. This scenario assumes no new
plates would be issued beyond 2001, or else driver income would be further eroded, and
plate values and lease rates would be driven to zero.
Figure 26 shows the impact on plate values, while Appendix 17 shows the pro forma and
additional details.
Figure 26 - Impact on Plate Values - 200 plates per Year
Under Recessionary Conditions, 1.5 per cent Fare Increase
(Note: 200 plates are issued in each of 2000 and 2001, subsequent issuance is deferred)
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