Proposed new Fargo taxi laws could shut out Uber, Lyft

FARGO – The rise of tech-fueled taxi companies such as Uber and Lyft is prompting the city here to rewrite its taxi regulations.

“It’s one of those ordinances that haven’t been updated in a long time,” said Jason Loos, the assistant city attorney who drafted the new laws. “The industry’s changed so much that you almost had to start from scratch.”

City commissioners recently voted to throw out the old taxi regulations and adopt new ones. A second vote Monday could put the laws on the books.

Uber, Lyft and other ride-hailing companies have yet to enter the Fargo market, though Uber earlier told The Forum it’s considering coming here. But in the markets where the companies do operate, they’ve often resisted regulations, arguing that they aren’t bound by taxi laws because they aren’t taxi companies.

Fargo’s new laws would sidestep such arguments. Instead of regulating companies that own taxi cabs, such as traditional taxi companies, the laws would regulate companies that dispatch vehicles serving as taxis, such as ride-hailing companies.

But that doesn’t mean the city would embrace the free-market model on which ride-hailing is based.

For example, the laws wouldn’t allow so-called “surge pricing,” big increases in fares during periods of high demand. They would also require each company to have at least one vehicle be available for service 24/7 anywhere in the city.

Ride-hailing companies would have to change how they do business to enter the Fargo market if the laws pass, but Loos said they weren’t written to help or hinder ride-hailing companies. He said city leaders could easily change the laws if these companies come to town.

The local taxi industry has yet to weigh in but plans to do so at the next commission meeting, said Laurie Dodd, an owner of Lucky 7 Taxi Service.

She said one of her concerns is ride-hailing companies would ignore laws and practices taxi companies have to follow, a common complaint taxi companies have made in markets served by Uber and Lyft.

Routes to rides differ

Traditionally, the taxi industry has been treated by cities as if it were a kind of public transportation. Fares are fixed so that a ride from the bars at 2 a.m. on New Year’s Day is the same as for a ride to church at 10 a.m. Sunday. Drivers are screened for felonies and vehicles are inspected for safety.

Current Fargo taxi laws require all of the above.

Ride-hailing companies, though, see each ride as a private agreement between a passenger and an independent driver. Drivers decide whether they want to serve a passenger, so it’s possible to avoid less-profitable routes or inconvenient times. When there aren’t enough drivers to meet passenger demand, such as after bar closing on New Year’s Day, fares may increase to encourage drivers to go back on duty.

The companies say they also screen drivers, but they’ve also opposed laws requiring the same level of screening required of taxi companies.

The laissez-faire approach has gotten Uber and, to some extent, other ride-hailing companies a bad reputation. Last month, the city of New Delhi, India, banned Uber after one of its drivers, who had a criminal record, allegedly raped a passenger. The same month in Sydney, Australia, Uber sparked outrage after it started surge pricing during a hostage crisis to respond to heightened demand for rides away from the scene.

Fargo city officials are looking at using a little of both the public-transportation and the free-market approaches.

Current laws require the Police Department to check the background of all taxi drivers for felony and drunken-driving convictions. But it hasn’t, in practice, due to a lack of resources, Loos said. Taxi companies previously told The Forum they weren’t screening drivers either, relying on the city to do so.

The laws also require taxi companies to have their cabs inspected, but the city has not checked to make sure that’s happening.

Loos said screening drivers and inspecting vehicles are issues for taxi companies and their insurers, not the city. Those requirements aren’t in the new laws, though companies would be required to pay for criminal-background checks of drivers. What the companies do with that information is up to them, Loos said.

City Auditor Steve Sprague said the city doesn’t require background checks for bus drivers, so it’s hard to justify the same for taxi drivers.

He defended the requirement that fares must be the same for all taxi companies, noting that the companies get a say in how the fare schedule is set. He said passengers shouldn’t have to be surprised by sudden price increases or even price gouging.

Sprague also defended the requirement that taxi license holders carry liability insurance, which is in the current and proposed laws. He pointed to an accident in California a year ago in which an Uber driver in between fares killed a 6-year-old girl.

Uber, which insures its drivers, said it wasn’t liable because the driver wasn’t using its app and wasn’t carrying a passenger. The proposed city laws are not specific about this kind of argument. They simply say the dispatch company must insure vehicles that it dispatches.

Market forces

Dodd, the taxi owner, said she favors many of the regulations Fargo has in place and worries about deregulation. “They feel like, ‘We don’t regulate bus drivers and bus companies.’ That’s a cop-out to me. It’s an easy way to say we don’t want to deal with this.”

Existing taxi companies provide rides around the clock throughout the city, she said, expressing her pride in the level of service. Deregulation could allow drivers to cherry-pick the most profitable routes and times and leave the rest unserved, she said.

Cherry-picking already happens in Fargo.

Typically, drivers not licensed with any taxi company would troll for passengers on Friday and Saturday nights when there are lots of bar patrons looking for rides, Sprague said. “You can go out on the Web and buy a little sign that you plug into your cigarette lighter that says ‘taxi’ and you throw that on the dash.”

Though the city has cracked down on unlicensed taxis, their presence suggests there aren’t enough licensed taxis to meet peak demand.

Dodd said she believes the Fargo market is actually oversaturated. There might be a lot of business on the weekends, she said, but taxi companies struggle to survive in the quiet times in between.

City records show there were two taxi companies in 2008 with 44 registered cabs. Today, there are five companies with 91 cabs.

Sprague said a Bismarck taxi driver, who had brought a passenger to Fargo, stopped by his office recently to explore starting a service here. The driver walked away when he was told there are already five companies in town, complaining that’s just too many, Sprague said.

Dodd said she fears the effect of Uber and Lyft coming to town. “Basically, what they’re going to do is they come in and they squeeze out the companies that are willing to be responsible 24 hours a day seven days a week, take the good and the bad.”

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