Crony Capitalism

Anchorage to Consider Weakening the City's Taxi Cartel

|

Assembly members in Anchorage, Alaska are considering legislation that would open the city's taxi market up to more competition by adding 10 permits a year for the next 10 years. Those permits now cost $150,000 on the secondary market—a steep barrier to entry that current permit holders enjoy.

Residents and policymakers say it's difficult to catch a cab in neighborhoods like Eagle River and Chugiak and that wheelchair-accessible cabs are too scarce. Moreover, there aren't enough cabs to go at closing time, tempting downtown bargoers to drive drunk.

Via the Anchorage Daily News:

If passed, the ordinance could result in the taxi permit owners filing a lawsuit against the city for something close to $20 million for that loss in value, said Jim Brennan, a lawyer and spokesman for the Anchorage Taxicab Permit Owners Association.

But Debbie Ossiander, a former Assembly member who stayed on the project after her term expired, said her interest in making the changes lies with customers of taxicabs, not with the permit owners.

"The long-range goal is to open up the market. I really don't see that we're served by controlling those and limiting those," Ossiander said. "It seems to me, particularly because there is a demand in specific markets, the best way to address that is to allow more."

Opponents of Ossiander's plan have called the rewrite yet another move to "deregulate" the taxi industry. In 2008, Anchorage voters rejected a ballot initiative that would have made permits cheaper and easier to get, with roughly 65 percent voting against the proposal.

It took a ruling from the Alaska Supreme Court to get that initiative on the ballot. Reason covered that story in 2007:

Ryan Kennedy was an undergraduate at the University of Alaska-Anchorage when he learned about the city's cab cartel. His microeconomics professor had intended it to be a simple lesson in fettered markets. Kennedy decided to try to unfetter them. He roped his professor, a few fellow students, and some members of the local Libertarian Party into a coalition he calls Anchorage Citizens for Taxi Reform. The group says any qualified person should be able to get a permit for the $875 application fee. It has collected thousands of signatures to force a vote on the issue.

Current permit owners, many of whom live out of state and lease their rights to cab operators, are not pleased. They say their livelihoods depend on keeping competition to a minimum, and they argue that allowing freer entry would constitute a "taking" because the value of their permits would plummet. "We paid top dollar," one complained to the Fairbanks Daily News-Miner. For his trouble, Kennedy says he has had his tires slashed and his car windows smashed and been shadowed by "some guy dressed like something out of The Sopranos."

The city initially refused to put the taxi initiative on the ballot, convinced it would have to compensate the permit owners for whatever hit they took when competition increased. Kennedy and his pro bono legal team sued. The state Superior Court bought the permit owners' takings argument, but the Alaska Supreme Court rejected it on appeal.

According to the Anchorage Press, the city has only added 15 permits since 1994, when Assembly members last changed the city's taxi regulations.