June 16, 2014

Power Play In Southeast Missouri

Ameren is one of the state’s largest electrical utilities. Noranda is an aluminum company in Southeast Missouri that, due to the nature of making aluminum, uses an enormous amount of electricity. This is a tricky post to write because it is certainly complicated stuff and I don’t have a Ph.D. in electrical engineering like my father-in-law does. Noranda and Ameren have several cases before the Public Service Commission (PSC) that are being considered. In an effort to simplify things, it all basically comes down to two issues:

1) Claims that Ameren has been overcharging its customers from what the PSC allows it to receive in profits, and

2) Demands for mandated lower rates for Noranda itself, the state’s largest electricity consumer.

As to claim No. 1, if that is correct, then the PSC will take appropriate action. While rates themselves don’t directly compare to returns, in fairness to Ameren, the most recent annual electricity rate survey just showed Saint Louis as having the second-lowest residential electricity rates in the survey (which included much, but not all, of the country). The same survey showed Ameren having among the lowest commercial rates as well. So, while it may be possible to over-earn while charging comparatively very low rates, Ameren is hardly holding its customers (at least its Saint Louis customers) over the barrel.

As for Noranda’s demands for even lower rates, they already pay the lowest rates in the state. Furthermore, the Missouri General Assembly has already given Noranda the unique right to shop for electrical providers, unlike any other person or business in the state. I don’t begrudge Noranda any of this. As the largest user, I understand why their bulk discount is so high. Also, while I may want to give more customers the same right to shop that Noranda has, I certainly don’t want to take that option away from them.

That said, there has to be a limit on having the state solve Noranda’s electrical cost issues. If they can’t negotiate an even better deal from Ameren, Noranda does have the right to switch providers. Indeed, that is how they switched to Ameren in the first place. That is more than enough special treatment from the state.

Noranda’s efforts to curb its power costs goes back years. Noranda used to purchase electrical power from the rural cooperative by its smelter. But with the help of a law passed solely for its benefit by the Missouri General Assembly, Noranda was allowed to switch electricity providers. As of 2005, it has purchased electricity from Ameren at a cheaper rate than the cooperative had offered.

It is the role of the PSC to regulate private utilities, but it is not the role of the PSC to fix Noranda’s bottom line. We all want Noranda to successfully continue operating in Missouri, but it is not the role of state government to aggressively interfere in an attempt to guarantee that.

 

June 2, 2014

Kansas City’s War On The Future

With all the political rhetoric floating around Kansas City, one would think the city is embracing high technology and forward-looking, well, everything. A closer examination reveals just the opposite. The city is using 19th-century politics and policymaking, and hoping for 21st-century results. It is as anachronistic as those future-looking movies of the past.

width= What old-timey look at the past would be complete without a monorail light trail streetcar? Kansas City politicians are determined to employ 19th-century fixed rail transit, thinking wrongly that it will solve our problems. We’ve written extensively about why rail is bad for Kansas City. You can read about it here.

The most jaw-droppingly insipid claim is that such policies will draw the creative class. Never mind that there is no research to back up this claim — Kansas City already is rapidly becoming a fact-free city. In fact, a vocal proponent of streetcars who claimed to speak for millennials just announced that he is leaving Kansas City for the East Coast to seek greater opportunities. This supports the writings of my Show-Me Institute colleague: the so-called creative class goes where the jobs are, not to streetcars or airports.

Meanwhile, city officials view actual future-looking technologies such as those that Lyft and Uber provide with hostility because officials are mired in 19th-century protectionist cronyism. How are Kansas City officials going to react to the inevitable arrival of driver-less Google cars? Demand that cars undergo a background check? Require that each one contain a detailed street map? This is not forward-thinking; in fact, it’s not thinking.

Speaking of Google, Kansas City Mayor Sly James and others love to extol Google Fiber, as if Kansas City, Mo., won that national bidding war to bring them here a few years ago. We didn’t. We lost to Kansas City, Kan. We were just lucky enough to be next door. Kansas City, Kan., won because they demonstrated small and efficient government, not heavy-handed regulation and federal money.

In looking to create density downtown, city officials are falling over themselves to offer up any sort of taxpayer subsidy, handout, or corporate welfare package to bring density — sometimes just to move jobs two blocks. Yet they are unable or unwilling to deliver basic services to the rest of the city. This is not forward-thinking, it is urban cannibalism.

If Kansas City officials are serious about building a brighter future, they need to shed the city’s knee-jerk tax-and-regulate policies and start doing the few things a city can do well: maintain the streets and parks, fight crime, provide quality education, and do so while keeping taxes low. Then the city won’t need to pick winners — because the winners will come to the city on their own.

May 20, 2014

Useless Taxi Regulation In Saint Louis

The recent conflict between Lyft and the St. Louis Metropolitan Taxicab Commission (MTC) adds even more credence to the argument that the MTC should not exist. Under the guise of protecting public safety, the MTC controls market entry for taxis in Saint Louis, sets prices, and needlessly regulates the for-hire vehicle market in favor of large taxi companies. There are many examples of these types of competition stifling regulations in the MTC’s For Hire Vehicle Code, including:

Regulations that restrict market entry:

  • Section 203: All For Hire Vehicle Owners require a Certificate of Convenience and Necessity (CCN) from the MTC. The MTC, staffed by taxi industry players, gets to decide if there is enough demand for more cabs. (The MTC has frozen CCN issuances for taxis until they finish a study on taxi demand, because apparently the job of the MTC should be to centrally plan taxi supply).
  • 202: Transfer or sale of a CCN must be accompanied by a $2,500 application fee.
  • 210: All CCNs must retain and maintain a non-residential office address with a business telephone number that is staffed 24 hours a day.
  • 301: All for-hire vehicles require a permit (airport taxi, premium sedan, etc.). Vehicles can only receive one type of permit.
  • 602: Taxis cannot be older than nine model years and premium sedans cannot be older than five model years. Taxis that are more than six model years cannot enter service and premium sedans more than two model years cannot enter service.
  • 604: All new premium sedan CCNs require at least three sedans at the time of permit issuance.

Regulations that restrict competition:

  • 501: Taxi meter rates are controlled.
  • 301: For-hire vehicles can only receive one type of permit; hence, airport cabs cannot compete with normal taxis which cannot become premium sedans.
  • 604: Premium sedans cannot be stationed within 2,500 feet of a hotel or business property.
  • 604: Premium sedans must contract for passengers at least 60 minutes before pickup.

Regulations that are needless or simply ridiculous:

  • 501: Taxis must have printed, in colors contrasting to that of the vehicle surface to which affixed, on the outside of one door, the name of the vehicle license holder in letters at least 2.5 inches high.
  • 504: Drivers are required to wear a uniform of black slacks and a solid, button-up shirt.
  • 701: All on-call taxicabs should arrive at a hotel with heat or air conditioning running, set between 65-75 degrees.
  • 304: Vehicles cannot have spinning wheels or covers.
  • 304: Bumper paint must match vehicle paint unless paint is not required, then it must be factory black.

You are free to believe these and many other MTC regulations have some tangential connection to keeping passengers safe. But the simplest explanation is that the purpose of these rules is the same as their result: to limit market entry and control competition. Equally simple is the method for improving taxi service in Saint Louis: shutting down the Metropolitan Taxicab Commission.

May 19, 2014

Useless Taxi Regulation In Kansas City

Kansas City’s attack on Lyft has been a reminder to many residents of the city’s excessively regulated for-hire vehicle market. City officials have long claimed that these regulations are all about safety. But any cursory inspection of Kansas City taxicab code reveals provisions that are clearly designed to limit competition and have nothing to do with passenger safety. Here are just some examples from the city’s taxicab code:

Ordinances that limit market entry:

  • Section 76-43 prohibits jitneys (private vehicles operating fixed routes within the city).
  • 76-73 (a). Caps taxi permits to 500.
  • 76-73 (b). All new applicants to operate taxicabs must permit at least 10 vehicles.
  • 76-75: Cab and livery vehicle owners must pay $300 per year for every permitted vehicle (in addition to a $50 application fee, driver’s fees, and inspections fees).
  • 76-191 Holder of taxicab permits have to provide on demand service 24 hours a day, seven days a week.
  • 76-191 (b). All taxicab companies must maintain a non-residential place of business that is staffed 24 hours a day.
  • 76-212 Taxis cannot be more than eight years old and must have a luggage capacity of 15 cubic feet or greater.

Ordinances that set prices and reduce competition:

  • 76-192 (a) requires all taxis to use a meter.
  • Section 76-43 prohibits jitneys (private vehicles operating fixed routes within the city).
  • 76-192 (b) sets fares for meters.
  • 76-236 Livery vehicles cannot solicit passengers on any public way or airport or cruise in search of patronage. They cannot park for any time longer than picking up passengers and cannot accept any fare that has not been previously arranged.

Ordinances that are ridiculous, needless, and/or outdated:

  • 76-203 Taxi drivers cannot sleep in their vehicles or play loud music.
  • 76-203 (1) Taxi drivers cannot wear jogging suits or shorts from October 1 to April 30.
  • 76-207 All taxis are required to have at all times detailed street map.
  • 76-210 Taxicabs must have a top light visible from all directions.
  • 76-210 Taxis must have the company name of vehicle written in letters not less than two inches or more than six inches in height.

These are just a few of the many questionable regulations that have nothing to do with customer safety and everything to do with controlling the market and reducing competition for large taxi companies. Needless to say, transportation options in Kansas City would greatly improve if these and other sections of the taxicab code were repealed.

May 14, 2014

Lyft And Kansas City’s Stifling Taxicab Regulations

This week, Kansas City officials have been hard at work trying to keep ridesharing out of the city of fountains. First, the city rushed through an ordinance requiring permits for vehicles taking “donations” (as Lyft does) for travel. Then, the city pursued an injunction against Lyft for operating in Kansas City.

Some city officials, like Assistant City Manager Rick Usher, have argued that Lyft simply needs to apply for the proper permits. Why didn’t Lyft think of that? Its drivers go through background checks, have insurance, and get their vehicles inspected. Why not go one step further and get permits? The reason Lyft has not done so is that Kansas City’s Livery and Taxicab regulations prohibit Lyft’s business model.

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According to Kansas City ordinances, the definition of a livery vehicle is:

. . . a public six-passenger or less motor vehicle with driver included, for hire only by written agreement for exclusive use at a charge fixed in advance.

The livery classification was designed to encompass pre-arranged limo and premium sedan services. Lyft charges by both time and distance (not a fixed charge) and, of course, has no advance written agreements. In addition, the Kansas City taxicab code states that livery vehicles cannot:

. . . solicit passengers for transportation in a livery vehicle on any public way or at any public airport or operate a livery vehicle so as to cruise in search of patronage . . . no passenger shall be accepted for any trip in such vehicle without previous engagement for such trip at a fixed charge through the business office from which the vehicle is operated.

If Lyft’s drivers received livery permits, they could not drive around town for passengers, pick up passengers without existing agreements, or charge distance-based fares. Lyft’s business model would be impossible. Lyft’s drivers actually act more like taxis than livery vehicles, aside from the fact that they don’t use a taxi meter.

Unfortunately, taxicab regulations in Kansas City prohibit ridesharing companies’ drivers, such as Lyft’s, from obtaining taxi permits. These regulations include (but are not limited to):

  • Permits are only given to cab companies with a minimum of 10 cars, not individuals with one car.
  • The city has reached its 500 taxi permit limit, and will not issue more.
  • Taxis must use meters with prices that the city sets.

The bottom line is that if Lyft drivers receive livery permits, they cannot operate as Lyft drivers, and if they are to be considered taxis, they cannot get permits, period. Telling Lyft that it can operate if its drivers just apply for licenses is like telling someone he or she can join a football game as long as he or she doesn’t step on the field. I’ll leave it to the reader to decide whether the rules of the game are designed to protect public safety, or whether they are meant to keep newcomers out.

May 13, 2014

Op-ed: Excessive Regulation, Not Lyft, Needs To Stop Operating in Kansas City

Last Friday, my op-ed about Lyft and Kansas City’s absurd taxicab ordinances appeared in the Kansas City Business Journal. For many years, Kansas City’s livery and cab industry has been needlessly regulated for the benefit of large taxi companies at the expense of residents and entrepreneurs. As the op-ed pointed out:

City ordinances set fares, require potential cab owners to start with a fleet of 10 cabs, limit cabs to less than 600 city-wide, and require cab companies to provide 24-hour service.

Market controls such as these and others are not justified and Kansas City should lift these ordinances so that new business models can thrive in the city. Read the entire op-ed here.

May 12, 2014

Tesla, Car Dealers and Milton Friedman: The Problem of Protectionism and Cronyism

Last week at Forbes, I wrote about an attempt by Missouri car dealers to prevent electric car manufacturer Tesla from selling its cars directly to customers. Although the amendment in question quietly passed the state Senate, I do expect that free market advocates in the House will loudly reject this attempted protectionism and cronyism.

That said, it must be noted that although Tesla is being wronged by the proposed amendment, policymakers would do well not to proclaim the heavily-subsidized company to be some spirit animal of the free market. Indeed, many businesses are quick to proclaim their love of the market while simultaneously marshaling special protections and subsidies to themselves. Tesla fits that description to a T; hit up that last link for a list of examples.

The Tesla episode reminds me of an old video featuring famed economist Milton Friedman. Asked some decades ago about who can save the free market, Friedman framed his response this way:

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. … You must separate out being pro-free enterprise from being pro-business.

The short video, which I commend to all of our readers, is below:

There is a difference between being pro-business and being pro-market. Clearly the proposed legislation would be pro-dealers; it would not, however, be pro-Tesla or pro-consumer.

April 24, 2014

Lyft, The Taxicab Commission, And The Level Playing Field

Lyft, a ride share app, has caused quite the stir in Saint Louis. Because Lyft passengers make donations, not set payments, to drivers, the company does not believe the Metropolitan Taxicab Commission (MTC) has the authority to regulate its operations the same way it regulates cab service. MTC and the City of Saint Louis think differently. The MTC has filed and won an injunction against Lyft to halt its Saint Louis operations.

MTC officials claim Lyft is not competing with cabs on a level playing field and that its unregulated drivers endanger public safety. However, Lyft drivers have to pass background checks, have vehicle inspections, and carry insurance (MTC requires cabs to have $200,000 of insurance while Lyft requires $1,000,000). If it is true that cabs are disadvantaged when competing with Lyft, it may have something to do with the competition stifling regulations that the MTC itself imposes. Just a few of these include:

  • To receive a license, a person or company requires a Certificate of Convenience and Necessity (CCN). This means the MTC (where existing cab companies are represented) can decide whether the demands of the public require the additional cab service. They also can decide that more cabs will increase traffic congestion or parking demand too much to grant a CCN.
  • A CCN holder must have and maintain a non-residential office address, telephone, and email. The phones must be answered at all times of the day. (Obviously, this essentially prohibits most individuals from obtaining a CCN.)
  • If someone meets the first two hurdles, it does not matter because the MTC has issued a moratorium on applications for CCNs for airport taxis, on-call taxis, and premium sedans until a study on demand is completed.
  • Drivers have to pass MTC-approved courses, in addition to obtaining a state chauffeur license.
  • A for-hire car either can be an airport cab, an on-call cab, a handicap-accessible vehicle, a non-emergency medical transport vehicle, or premium sedan. A car cannot receive more than one type of registration or perform the activities allowed by more than one type.
  • Cabs must use taxi meters with set fare maximums.
  • Cabs can be no older than nine years and will not receive a permit if they are older than six model years.
  • Drivers must wear a uniform (black baseball caps, no writing on it, bill forward).

If Lyft is allowed to operate in the Saint Louis area, traditional cab drivers may find it difficult to compete. But the answer to that problem is to eliminate the ability of the MTC to control entry, restrict how cabs operate, and set prices. That would put Lyft and traditional cab companies on a level playing field and provide more options to Saint Louis residents, if that is truly what the MTC wishes to accomplish. But we all know that the taxi commission, which is dominated by the larger taxi companies, is far more about limiting competition than actually protecting consumers.

April 22, 2014

Missouri Needs The Sunrise Act

Missouri Rep. Eric Burlison (R-Dist. 133) has proposed legislation tightening the requirements for licensing new occupations in Missouri. It is called the Sunrise Act, and I think it would be an important public policy change for our state. (The legislation has been added to another bill at this point.)

This legislation is not radical. It does not ban new licenses. It does not implement extraordinary new requirements for a new license law, such as a greater than 51 percent vote like some tax increases have. It simply requires that attempts to institute a new statewide occupational license actually provide some evidence for the need and benefit of the license. Right now, there is none. The state legislature could wake up tomorrow, agree that every dog walker in the state needs a license to walk dogs for a fee, and pass that law without any supporting evidence. That is not an exaggeration (leaving aside the fact that the bill introductory period has passed).

The legislation further requires that if a license is proposed, the lowest level of licensing necessary to accomplish the public good will be applied. In other words, if you successfully demonstrate that the public will benefit from some level of licensing of dog walkers, you can’t impose heart surgeon-type standards to accomplish that goal. If the necessary public good is served by simply requiring dog walkers to register with the local government and undergo a background check, then you cannot add educational requirements, training hour minimums, continuing education rules, insurance or bond mandates, uniforms, and a host of other rules, all of which are common in licensing laws. For more strict licensing requirements, the Sunrise Act would require some level of additional evidence that those tighter laws are needed.

This issue happens regularly. For example, why are lawyers more stringently regulated than accountants? If you practice law without a license (except representing yourself), that is a crime. But accountants can do many things without a particular license, they just cannot hold themselves out as a CPA (certified public accountant) unless they have met those requirements. People without the CPA license still can be paid to keep company books, prepare tax returns, and much more. They can still do a job they want to do without calling themselves a CPA, and that is what is important.

The point is not to debate lawyers versus accountants. The point is that imposing burdens on people’s jobs and occupations should be more difficult than it is. That is all the Sunrise Act really does. Instead of imposing new burdens on someone’s job, it actually imposes a burden on the person who wants to license that job. That is where the burden should be.

April 20, 2014

But Tomorrow Will Rain, So I’ll License The Sun

Saint Louis County officials are considering licensing landlords who are within the county’s jurisdiction (Bill No. 73). You read that right. If you want to rent out apartments, duplexes, your own home, whatever, you’ll need a county license to do that within the unincorporated parts, which includes 320,000 residents. This is completely unnecessary. Why someone would try to further restrict the housing market anywhere in Saint Louis in 2014 is beyond me.

This will drive up rental unit costs within the county. Not because of the license fee itself, which is very low ($15), but because anything that limits supply will drive up prices. Now, some prospective landlords will not invest within the county because of this new fee and, more importantly, the accompanying regulations. Is that what the county wants? If landlords are allowing renters to do criminal activity within their homes, the county police simply should use existing law to hold people responsible. A general new license on every landlord in the county will do nothing but increase government interference with property rights and decrease the overall supply of housing.

Landlords are to modern politicians what Christians were to Roman Emperors; a quick and easy group to place blame on and abuse whenever they wanted. A study of a very similar proposal in Milwaukee found no evidence for benefits from these programs. You know why? Because there aren’t any. This is another terrible licensing idea from Saint Louis County.

April 18, 2014

Saint Louis Taxi Commission Takes Consumers For A Ride

The only nice thing I can say about the St. Louis Metropolitan Taxicab Commission (MTC) is that at least there is only one taxi licensing agency doing a terrible job for Saint Louis. We used to have two (city and county), and they did a really terrible job.

Short of that, the MTC has made it plain for all to see that its role is to protect incumbent cab companies from competition. Who cares what changes technology brings? They are going to operate the same way no matter what. Mobile phones, GPS, Internet maps, new phone apps, who cares? They have a job to do, and limiting new entrants into the market is job No. 1.

Why does the new technology matter? It matters because it has dramatically evened out the information advantage that taxi drivers used to have over customers. Now, even a first-time visitor to Saint Louis arriving at Lambert-St. Louis International Airport can check out in just a few minutes on their phone: 1) online reviews of cab companies, 2) the clearest route to the destination, 3) estimated fares for the trip, and more information if needed. Consumers are ready and able to negotiate for themselves, and most cab or mobile app-based drivers know that.

We do not need the MTC protecting us. Just as important, by restricting competition, the MTC is actively hurting taxi consumers in Saint Louis (and Kansas City as well).

Bring back the crooked assessor.

March 11, 2014

Lust For Licensure

I honestly think that one of these days someone is going to propose requiring a Missouri license to hypnotize chickens. During this year’s legislative session in Jefferson City, the quest to unnecessarily license new occupations continues. Next up: home health care agencies, electricians statewide, and expanded licensing rules for landscape workers. None of these new or expanded regulations are justified.

Did you know that areas with stricter electrician licensing actually have higher rates of electrocution? It’s true. Licensing increases costs, increased costs lead to more do-it-yourself work, and that leads to more accidents. Similarly, is there a current crisis in Missouri regarding landscaping that I am oblivious to?

Missouri has fewer licensed occupations than other states. We should be proud of that. Simply put, all of the occupations that have some sort of legitimate role for licensing are already licensed at the state or local level. We need to be removing unnecessary licenses and making it more difficult to implement new ones. When it comes to licensing rules in Missouri, we need to pass rules setting demonstrated needs and benefits before new occupations can be licensed. We don’t need to add new occupations to an already too-long list.

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