San Diego’s partial deregulation of local taxis three years ago came with optimism about higher incomes for drivers and better customer service, but instead the industry is facing possible extinction because of competitors Uber and Lyft.
Ridesharing apps have decreased local demand for cabs so sharply since 2014 that there’s no way to tell whether partial deregulation — eliminating a cap on the number of local taxi medallions — was a smart or dumb idea, industry leaders say.
Those who controlled the scarce medallions before the cap was lifted warned that the new policy would flood the streets with too many cabs, stressing that a previous experiment with deregulation in 1979 was a disaster.
The drivers working for those medallion owners lobbied city officials to lift the cap so that they could rise up from poverty and become small business owners, instead of low-income employees forced to work long hours at low wages.
Neither of those things has come close to happening, and neither side in the debate anticipated that Uber and Lyft would make both of their stances moot.
“We were so busy fighting each other that we missed the real enemy,” said Michel Anderson, a longtime consultant to the local taxi industry.
Instead of what the two sides predicted, the industry is in freefall.
Predictions that lifting the cap would lead to a sharp rise in the number of medallions have proven false.
More than 270 drivers did apply for new medallions when the Metropolitan Transit System began making them available in June 2015, but many abandoned the process within a few months because of decreased demand for cabs.
And some who owned medallions before the cap was lifted also gave up theirs, even though many had spent as much as $140,000 on their medallions back when the cap made them scarce and valuable.
Data provided this week by Metropolitan Transit System shows the number of medallions in San Diego since the cap was lifted has increased from 993 to 996.
“For the most part, permit holders have been surrendering their permits due to lack of business, a shortage of licensed drivers and overall adverse market conditions,” an MTS spokesman said.
Meanwhile, the number of local cab drivers has plummeted from about 3,500 to an estimated 1,700, with many former cab drivers now working for Uber and Lyft.
And dispatch centers for taxis, which handle the calls the cabs respond to, are also struggling with decreased demand.
One bright spot was San Diego Yellow Cab launching a competing app called “ride yellow” in spring 2016, but industry leaders say a more aggressive campaign is needed.
Anderson says the focus must become lobbying for regulations to help taxis compete with Uber and Lyft, which they say are subject to significantly fewer rules, fees and other expenses.
The United Taxi Workers of San Diego, which spearheaded the efforts in 2014 to lift the cap, has shifted its focus to ridesharing services.
“Rideshares are our common enemy, not each other,” said Mikaiil Hussein, the organization’s president. “We have to unite to save our industry.”
Tony Hueso, owner of USA Cab, said San Diego needs a “transportation czar” to figure out how to cope with ridesharing, which also threatens buses, trolleys and other transit in the region.
“We need some entity to be created that works with SANDAG and all of the transportation companies and networks on the future,” he said.
Hueso said among the key differences between cabs and rideshare services are that cabs pay an annual fee to MTS, must get a city business license and must get special licenses from the state for their vehicles.
In addition, cabs in San Diego are required to get commercial insurance policies with $1 million in coverage, undergo background checks and have federally-sanctioned radios in their vehicles.
“We have made taxicab service too expensive with all of the regulatory schemes,” Hueso said.
Most taxis in San Diego charge customers a $2.80 base fare, $3 a mile and $24 an hour for waiting time. Uber and Lyft charge about 10 cents per minute and 90 cents per mile.
Another key difference for drivers is that cabs must take passengers wherever they request, unlike Uber and Lyft drivers who see the destination in the app before deciding to take the fare.
And San Diego cabs typically can’t pick up passengers in other cities, such as Coronado or El Cajon, unless they have a business license there, while Uber and Lyft face no such challenges.
A spokeswoman for Lyft said having more transportation choices is good for San Diego.
“San Diegans benefit when there are more options and having more options is good for consumers,” said the spokeswoman, Darcy Nenni. “Our goal is to always bring safe, reliable, and affordable rides to people in San Diego and to work with great local partners and companies.”
Two spokespeople for Uber contacted by the Union-Tribune declined to comment on how rideshare services are affecting San Diego’s taxi industry.
Hueso said a key change would be reducing San Diego’s requirement that each cab driver have a $1 million insurance policy, which costs them about $350 per month. Los Angeles only requires $350,000 in insurance, he said.
Anderson said other cities have leveled the playing field in ways San Diego could follow. For example, Uber drivers must now undergo background checks in Austin, Tex.
He said local government agencies are losing the revenue they’ve been getting for years from the taxi industry to ridesharing, but haven’t seemed to notice.
“They really don’t care about how they are hurting and putting at an economic disadvantage an industry that’s been part and parcel of San Diego for decades and that they themselves benefit from because of the fees it generates,” he said.
Most of the changes sought by the taxi industry would need approval from the San Diego City Council.
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