June 25, 2015

Taxicab Commission: Ridesharing a Want, Not a Need in Saint Louis

uber2

The status of ridesharing companies, like Uber and Lyft, dominated the agenda at this month’s meeting of the Metropolitan Taxicab Commission (MTC). When the commission opened the floor to public commenters, most were supportive of reforms necessary to get ridesharing companies up and running in Saint Louis.

However, despite the public enthusiasm, the commissioners themselves were more critical and directed their criticism mainly at Uber’s business model. They doubted whether Uber’s background checks were up to their standards, they discussed at length the need for initial drug testing, and they questioned Uber’s insurance requirements. As is usual, they claimed that their concerns were only about customer safety.

In their nitpicking about which background check was most thorough, the MTC continued to ignore the fact that most of its for-hire vehicle regulations have nothing to do with safety. How does limiting the number of licensed cabs protect safety? How do pricing regulations determine whether a cab is road worthy? What consumer breathes a sigh of relief knowing that the MTC controls what drivers may wear?

Unfortunately, rather than take an open attitude toward innovation, a regulatory reflex reigns at the MTC. When the commission was asked to reconsider the necessity of its regulations, one commissioner asked, and I’m paraphrasing, “Would you get your hair cut at an unlicensed barber?” (Barbers require licenses in Saint Louis.) He was incredulous to the idea that, yes, many residents would feel perfectly comfortable choosing a barber that did not have the city’s seal of approval, if that barber did a good job. That same commissioner ended the meeting by saying that ridesharing companies were a want, but customer safety was a need. Customer safety as defined by the MTC, not customers themselves.

The MTC would best serve Saint Louis if it takes the demands of its residents seriously and gives up on its instinct to delay and control ridesharing companies. More than anything, Saint Louis needs a welcoming business environment; no one wants the MTC to hold the region back.

June 11, 2015

Saint Louis City Hall Getting Serious About Reducing Regulation

Tomorrow, two Saint Louis aldermen will propose a bill that will slash the city’s business regulations. The Post-Dispatch has reported that the bill will cut more than 300 pages from the city’s business code, reduce archaic categorization, and move the city’s regulatory strategy from one of preemptive control to post-hoc nuisance mitigation. These types of changes are long overdue and could go a long way toward making Saint Louis an easier place to do business.

When entrepreneurs are asked what Saint Louis can do to make itself more competitive, they often point out that navigating city regulations and obtaining business licenses is time consuming and expensive. Too often, start-ups with little capital don’t know what they need to do to start a business and ultimately face regulatory “surprises.” Making regulations understandable and affordable for entrepreneurs can make Saint Louis a place where more businesses set up and survive.

How outdated is Saint Louis’ existing code? As an example, let’s look at the city’s public petition requirements for new business licenses. In Saint Louis, attempting to set up certain types of stores, regardless of zoning, requires the majority consent of local property owners. These “petition requirements” exist to protect neighborhoods from businesses that might be nuisances. These types of businesses include: arcades, billiards and pool rooms, tattoo parlors, bed and breakfasts, pawnshops, museums, junk shops, auction places, shows, theaters, dance halls, exhibitions, used goods stores, retail liquor stores, and (my personal favorite) intelligence offices.

The first thing to point out is that this list of nuisance-creating establishments looks like it was written by the Music Man. Pool halls, arcades, and used goods stores do not seem like businesses that should require majority community approval. As for intelligence offices, that’s not referring to the National Geospatial Intelligence Agency; it’s actually an antiquated way of referring to head hunting offices or temp agencies. It’s not good for business when the city’s code is so outdated that it not only solves problems that no longer exist, but is simply difficult to understand.

Aside from being written for a different time, the very principle of petition requirements harms business formation. City zoning and nuisance ordinances already make it difficult to keep a truly community-damaging operation open. But instead of taking a hands-off approach and solving problems when they crop up, city regulations are attempts to preemptively control start-ups. In doing so, they make the city a less attractive place to set up shop.

Some city leaders finally appear ready to take a more market-friendly regulatory approach. That’s good news for Saint Louis.

May 28, 2015

Ridesharing: Game Changing for Carpooling and Transit?

As we’ve discussed before, carpooling is the second most popular way of getting to work in Missouri (behind driving alone). However, the use of carpooling has been in steady decline over the last couple decades. Today, 9 percent of workers use carpooling to get to work; in 1980 that number was almost 20 percent.

Transportation experts speculate that slow changes in the way people live and work have driven the decline. More Missourians once lived and worked in centralized geographic areas, reflecting the needs of a manufacturing-based economy and the means of the working class. The dispersal of jobs, residences, and increased ability to afford personal vehicles has made carpooling less attractive. While the decline in carpooling in Missouri may be primarily due to structural changes in the U.S. economy, its renaissance may come in the form of app-based technology created by ridesharing companies like Uber and Lyft.

Services like UberPool and Lyft Line, now offered in test markets around the country, promise to create instant app-based carpooling. Riders request the service (at a steeply discounted price) and may end up sharing their ride with others heading in roughly the same direction. This means that riders do not need to find people to share the ride with or do not need to be going to and from the exact same locations as someone else in a carpool; it can be set up automatically.

uberpool

If this type of technology were to roll out in Missouri cities, it’s possible to imagine tremendous benefits for residents. On-demand carpooling could allow Uber and Lyft to operate like super-efficient jitneys (small private buses with ad-hoc routes) rather than traditional taxis or carpools. Ridesharing companies have been accused of being yuppie-based transportation, but app-based carpooling (with its much lower pricing) has the possibility of greatly increasing mobility for the disadvantaged, especially those who live in areas where reliable mass transit is difficult, if not impossible, to access. In essence, app-based carpooling has the possibility of boosting not only carpooling, but transit (albeit privately operated) usage as well.

UberPool and Lyft Line represent just some opportunities that new business models can provide for Missouri cities. Yet, in Saint Louis and Kansas City, the attitude toward new ridesharing companies has been and continues to be reflexively hostile. If both cities can remove regulatory barriers, residents will be able to benefit from these new services, and ones as yet undeveloped.

May 21, 2015

Next Gen Event: The Uber Effects of Ridesharing

When it comes to ridesharing companies like Uber and Lyft, too often our policymakers and the media highlight conflict: fights with existing cab companies, battles over regulation and deregulation, disruption between ridesharing companies and drivers, and safety and privacy issues for consumers.

The immense opportunity that ridesharing, as a technology for transportation, provides for cities both in terms of added mobility and new employment, however, gets short shrift in these conversations. In cities that allow ridesharing, getting around town has become significantly easier (and in some cases cheaper). Plus, ridesharing has provided hundreds (if not thousands) of new jobs in these cities, all by making better use of the resource most Americans already own: a personal vehicle.

On June 18, I’ll detail the current impact of ridesharing companies on urban transportation, their future potential, and some of the roadblocks preventing Missourians, and Saint Louisans in particular, from taking advantage. Come for the talk, stay for the BBQ:

Next Gen Invite

May 19, 2015

CEO Says Lack of Ridesharing in Saint Louis Is Embarrassing

Recently, Gabe Lozano, the CEO of a local tech company, called the lack of ridesharing (like Uber and Lyft) in Saint Louis “embarrassing.” In fact, he claimed that it cost his company a potential hire. While anecdotal, this story underlines what is increasingly clear: Saint Louis is forgoing significant advantages by regulating away ridesharing companies.

We’ve gone over many times how a local regulatory body, the Metropolitan Taxicab Commission (MTC), blocks companies like Uber and Lyft from freely operating in Saint Louis. To simplify a complicated regulatory story, the MTC only allows ridesharing companies to operate using licensed premium sedans, which the MTC has made scarce. This means that only expensive types of ridesharing, like Uber Black, can operate in Saint Louis, and even then not effectively.

uberSo while many cities across the United States, including Kansas City, have altered their regulations to allow cheap forms of ridesharing (like UberX) to operate, Saint Louis remains a closed market. In many of those cities, ridesharing has provided drastically improved mobility for urban dwellers (a ridesharing vehicle will purportedly show up faster than an ambulance in New York City). In midsized metropolitan areas like Saint Louis, ridesharing companies have created hundreds, if not thousands, of new jobs.

The MTC’s reaction to all this, along with Lozano’s latest critique, has been to claim there is no problem. According to one MTC member, Lozano’s claim that he lost a hire is “a lot of hoo-hah.” Instead of opening up the for-hire vehicle market to competition and letting residents vote over what kind and how many taxis they want with their wallets, the MTC is reviving their on-again, off-again efforts to study the supply and demand for taxis. Unfortunately for Saint Louisans, the commission (which has taxi company owners as commissioners) does not have the expertise or incentives to divine the number and kind of taxis Saint Louis needs.

It should come as no surprise that talented and mobile workers would want to live and work in a city where a cheap ride is available on demand. But more than that, what does it say about how a city is run, when, at the same time local officials want to spend hundreds of millions of public dollars on stadiums and light rail and bar districts to attract residents, they are willing to allow a regulatory body to block an innovative business model that makes urban life better at no public cost whatsoever. Saint Louis should be embarrassed that its leadership simultaneously adopts failed policies out of the 1990s and stamps out fresh ideas.

April 27, 2015

More Progress on Ridesharing in Kansas City

In the last year, Kansas City has been slowly but surely opening up to ridesharing companies. The city government’s initial response to the entry of Lyft last March was negative, with officials acting almost offended at the idea that: 1) existing taxi regulations were not up to date, and 2) a company would dare to start operating without their prior approval.

LyftSince that time, the city has made progress. Officials have given up the pretense that ridesharing companies like Uber and Lyft need only apply for a permit; the city has now overhauled their entire for-hire vehicle code. When Uber and others argued that some new regulations needlessly required city-managed background checks and yearly driver registration fees, the city recently amended the code once more.

This is not to say that the city would not be served by further reductions in regulation. While ridesharing regulations are much improved, existing taxi regulations have been left largely untouched. If Kansas City persists with a lightly regulated ridesharing market and heavily regulated taxi market, it risks the destruction of the traditional taxi business model. However, some taxi industry leaders are behind the most recent compromise, which could mean that taxi companies feel they can compete with Uber given the current regulatory setup. (Alternatively, it could mean that new ridesharing regulations will turn out more restrictive than they now appear.)

These caveats notwithstanding, Kansas City officials deserve credit for their progress on this issue. Their efforts certainly contrast favorably with policies in place at the other end of I-70, where regulators seem committed to keeping ridesharing expensive and unavailable in Saint Louis.

April 24, 2015

Missouri Bureaucracy Seeks to Tie Yoga in Regulatory Knots

warrior-pose

The Missouri Department of Higher Education is seeking to regulate yoga teacher training programs (YTTs) as “vocational schools” under its Postsecondary School Certification Program. From the Yoga Alliance:

Regulation under this program means that YTTs must comply with extensive requirements and pay expensive fees. We share the concerns of Missouri yogis that regulation of YTTs in this manner is not only unnecessary, but harmful to the yoga community and small businesses in this state.

Other states, including New York and Minnesota, have attempted to license yoga teachers as well.

Yoga is an old practice, and it has done just fine without state occupational licensing. I don’t think we need the state to start tinkering with it now.

I hope Missouri government bodies have the common sense not to butt in here—like they have with African hair braiding and massage therapy.

April 17, 2015

Blame It On the MTC

Traveling can be stressful. I’m usually comforted when the airplane safely touches down at my final destination, especially when it’s at Lambert International Airport. Unfortunately, Saint Louis cabs can add to the stress and deplete the pocketbook.

This past week, when my flight into Saint Louis was over an hour and a half delayed, I realized I would have to catch a cab home. I usually can persuade my friends to pick me up by offering them Starbucks, but since my flight landed at 1:00 a.m. no one was able to pick me up. With MetroLink stopping service at 12:57 p.m., I was left with no other choice than to get a cab ride back to my apartment in Midtown. After collecting my bags, I went to the taxi stand to find only one company offering cab services. After a 15-mile ride to my apartment, I was stuck with a $44.14 cab fare.

Ride_RequestRidesharing companies like Uber and Lyft operate out of cities like San Francisco and Chicago at much more competitive rates. San Francisco even offers UberPool, which matches you with other riders heading in the same direction with the fare split among several riders.

However, since I live in Saint Louis, a city that is inhospitable to innovative and competitive ridesharing companies, I was unable to seek an affordable option.

The Metropolitan Taxicab Commission (MTC) is a regulatory body meant to protect the consumer. Instead, they protect the cab companies who profit from anti-competitive regulations, while consumers are left without options that are prevalent in a competitive market.

Looking through the ridiculous regulations of the MTC’s code, cab companies picking up customers from the airport must obtain a permit and give one dollar for every fare to the MTC. At this time, the MTC has only granted permits to seven cab companies. With limits on the number of permits made available, cab companies are shielded from meaningful competition and can set prices that would be too high in a market with free entry.

I hope the next time I fly into Saint Louis, UberX or Lyft will be an option because I cannot afford many more $45 cab rides.

March 30, 2015

How Dangerous Is an Unlicensed Music Therapist?

800px-Musicoterapia_lmidiman_flickr

Legislators will ask themselves this question tomorrow when they consider House Bill 189. Music therapy is a type of treatment that involves creating, singing, moving, or listening to music. It is often used to treat children with developmental disabilities such as Autism. While groups like the American Music Therapy Association seek to elevate the status of music therapists, it is unclear whether or not obtaining a license would actually help a music therapist become more effective.

The Southeast Missourian reported that supporters of music therapy say that untrained music therapists are harming clients. The article did not discuss what kind of harm was being inflicted. It’s difficult to imagine that the creation of music could ever be harmful. Still, Missouri legislators are considering a bill that will make people obtain a special certification to practice music therapy.

As Show-Me Institute analysts have pointed out, certifications create unnecessary barriers to entry, ultimately limiting access for consumers to important services. Studies on occupational licensing have shown that when the government institutes a program like the one House Bill 189 is proposing, the cost of services increases.

March 27, 2015

New Kansas City Rideshare Rules Need a Rethink

Kansas City has proposed new for-hire vehicle regulations that are designed to allow ridesharing companies like Uber and Lyft (also known as Transportation Network Companies [TNCs]) to operate. Uber has cried foul over the new rules and threatened to pull out of the Kansas City area altogether. Lyft has expressed guarded optimism. The city holds that revised regulations are fair and designed to protect the public.

The draft ordinance allows TNCs to apply to operate, free of charge, in Kansas City. Drivers for the TNCs must have insurance, pay a $250 annual permit fee, a $44 inspection fee, and get the medical permission to drive. If the TNC agrees to pay $10,000 to the city, individual drivers need only pay $150 annually, and they do not have to pay an inspection fee if they can provide proof of a state inspection.

Paying $294 to drive for Uber or Lyft may not sound like a lot, but the majority of ridesharing partners drive less than 15 hours a week. The higher the permit costs and ancillary requirements, the fewer drivers will be available. One might ask why, if Kansas City permits the overarching ridesharing company (who is required to perform background checks and carry insurance), the individual drivers need city permits at all? At a hearing on possible state regulation of TNCs, a representative from Kansas City’s Regulated Industries Division gave an answer to that question. The representative stated that even though the city could enforce existing safety laws it could take considerable time and effort. It is more effective for the city to be able to pull a driver permit at will. The representative worried that without the permits, the city “won’t have anything to regulate.”

TNCs aside, the proposed taxi regulatory changes are completely disappointing. Taxi permits are still capped at 500 (applicants must have at least 10 cabs to apply). Prices are still regulated, private bus routes are still illegal, and apparently Kansas City is still protecting customers from drivers wearing jogging suits. How long do Kansas City officials think that highly regulated segment of the market will last in competition with (even hampered) TNCs?

The horror!

The horror!

While Kansas City may be changing the name of its taxi code to “for hire vehicle code,” they are a long way from a holistic, safety-driven approach to transportation regulation. Control is still paramount for city officials, and balkanized market controls pervade the code. If officials go forward with changes as they are, they will likely cause instability and a need for further changes in the future.

March 26, 2015

Low Alcohol Regulations Benefit Missouri Business

photo by Caitlin Hartsell

photo by Caitlin Hartsell

Over the weekend, I visited a whiskey distillery, StilL 630, in downtown Saint Louis. The owner and operator of the company talked about why he chose to set up in the city. Missouri’s reasonable alcohol regulations were one factor that made his business possible. In Missouri, unlike many other states, a brewer or distiller of any size can produce, sell, and distribute their own product.

The ability of a company to sell and distribute its own product seems like common sense, but that right is under attack in neighboring states. For example, just last Friday, Kentucky enacted a law that bans breweries from distributing their own products. This law, which legally protects three-tiered beer sales, was a blatant attempt to protect independent alcohol distributors and may force companies like Anheuser-Busch to sell its Kentucky distributors. Missouri has flirted with these types of regulations in the last couple years. As Director of Development (and former Policy Analyst) David Stokes wrote in 2013 regarding SB 412:

I recognize that the rules for alcohol distribution have been in place for a long time, but that is not a justification in 2013 for new rules that prevent a maker of alcohol from simply having an ownership interest in a distributor of alcohol. . . . I can imagine no market failure or public good problem that this proposed law would address. The point here seems to be the preservation of existing distributorships and the limiting of competition. . . . Simply put, the government should not mandate the use of a middleman.

Missouri’s reasonable alcohol regulations promote small-business creation, helps large companies operate efficiently, and can ultimately benefit the consumer. Missouri should hold onto that advantage and resist any temptation to move in the direction of Kentucky’s legally enforced three-tiered system.

March 3, 2015

Uber, Education, and Barriers to Entry

ubertaxi

What do taxicab cartels and traditional education groups have in common? This is a question I contemplated on a car ride from my hotel to the Association for Education Finance and Policy’s annual conference in Washington, D.C., last week. Instead of taking the Metro, I decided to use Uber. Joe Miller has written a bunch on Show-Me Daily about Uber and Saint Louis’ and Kansas City’s taxicab commissions’ fight against the ridesharing service. On my short ride, I realized that many education groups are a lot like the taxicab cartels—they have attempted to place incredible barriers to entering the profession/industry.

My driver, Majid, was an English teacher in his home country. Majid moved to the United States for a better life and would like to begin teaching here. To do so, he has to obtain certification, which means he has to pass a licensure exam. Of course, to take the exam he has to pay for the exam. Majid recently took the necessary tests and passed the math exam but failed the language arts exam. He now has to pick up more Uber fares to pay for another test, which he may or may not pass.

Like the regulations that have blocked Uber from entering the market in many cities, licensure exams are a barrier to entry. Barriers to entry are not a problem if they perfectly block the people/problems that we don’t want in a profession. That is, if a barrier screened out every potentially bad teacher, it would be a good barrier. Unfortunately, licensure exams are very loosely related to teacher quality. This means many bad teachers pass the exam and become teachers, while individuals who may be great teachers fail the exam and do not enter the profession.

When we look at the success that Uber is having and how it is revolutionizing the industry, it is easy to see why we need to be wary of unnecessary regulations that have nothing to do with quality. Education would be wise to follow suit and remove unnecessary barriers to entry.

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