(June 12, 2015) As anticipated, the arrival of Uber cab service in the resort is not going over uber-well with Ocean City’s traditional taxi companies.
At least one of the resort’s large-scale medallion holders is making an effort to have local government pull back on some of the regulatory burdens it has historically put on cabbies, warning that continuing the current un-level playing field will likely cause the industry to implode, sooner rather than later.
“I’d take it either way,” said Ralph DeAngelus, co-owner of Taxi Taxi. “Either they find some way to come down a little harder on Uber, or lighten up on some of the things they put us through.”
Earlier this year, legislation was passed in Annapolis to create a new class of “common carrier” transit provider in the state. The so-called Transportation Network Service classification covers services that provide a digital network to connect passengers with contract drivers.
This definition is tailored to services such as Uber and Lyft, which do not operate taxi themselves, except for a limited number of premier services. Rather, such services provide a smartphone app that independent drivers can contract to use.
The app links drivers with prospective customers, guiding them via their phone’s GPS to the pickup and drop-off locations. The drivers also subscribe to Uber’s uniform pricing system and share the profits with the company. All financial transactions between drivers and customers are done via credit or debit on Uber’s app.
Subsequent to the legislative decision, the Maryland Public Service Commission promulgated a detailed set of step-by-step regulations governing so-called TNS providers.
The issue, as expected, is that these state regulations are far looser than the regulations that cities and counties have previously placed on traditional taxi services, thus creating what would appear to be an unequal competitive circumstance.
Further, the state language expressly prohibits local jurisdictions from placing additional restrictions on TNS services.
One of the biggest discrepancies, DeAngelus said, is that the state commission allows Uber drivers to use their personal vehicles without any additional inspection. In Maryland, this means that once a car is purchased and inspected, the owner need not have it re-inspected as long as he or she owns it.
However, the city requires that medallion-holding taxi cabs get an annual state inspection, which must be submitted to the Ocean City Police Department, which then inspects the cab again and verifies the fare meter’s accuracy.
“We have to have our cars inspected on an annual basis, and after we’re inspected by the state, we have to take our certificate to the OCPD,” DeAngelus said.
“I have 28 medallions. It takes me a full month of work to drive each car up to Baltimore, pay $70 to have it inspected, drive it back, and pay the OCPD another $150 to check the meter. Uber drivers don’t have to do any of that.”
Additionally, the PSC requires TNS drivers to obtain a state license but this license is subject to much less stringent renewal criteria. Conversely, Ocean City requires medallion drivers to re-submit everything, every year.
“Every year, I have to get my guys a new FBI background check, and a new drug screening, which is $120,” DeAngelus said. “Plus a city business license, which is $300, and a renewal of the medallion itself, which is another $500.”
In Ocean City, and many other jurisdictions, the traditional taxi system works like this: the city issues a certain number of taxi medallions, which cab owners initially purchase from the city and, following that, buy and sell amongst each other.
These medallions give cabs the right to conduct business on city streets, soliciting customers on sidewalks outside bars and nightclubs being a particularly common summertime activity. The medallions also come with a multitude of fees and restrictions, as mentioned.
But the fact that Uber drivers are able to circumvent the entire medallion system flies in the face of why medallion were introduced in the first place, DeAngelus said.
“The city doesn’t do a single pushup for that $500 I pay them per medallion every year. They just get it” DeAngelus said. “That money is supposed to be used by the city to regulate taxis and make sure our investment in this industry is safe. The taxis are the pocket that pays the city $500 per car to make sure these kind of shenanigans don’t happen.”
The other rationale for the medallion system is to protect customers from price gouging, as the city sets maximum rates for medallion fares.
But, again, Uber has completely avoided this at the state level. The PSC has no restriction on Uber’s “surge-pricing” system, which raises rates when demand is high and the number of available drivers is low.
“I followed a friend, who hailed an Uber, in one of our taxis the day before Memorial Day,” DeAngelus said. “My city-controlled meter rang $8. The Uber ride was $22. They were allowed, on Memorial Day Sunday, to raise their rate 2.9 times due to high volume. And the PSC basically says they can do that whenever they want.”
Currently, 170 city medallions are on the street and are frequently traded between drivers, some of whom are fleet holders, such as DeAngelus, and some of which are single-owner cab operators.
The latter are rapidly figuring out they can sell their medallions, use Uber, and avoid all the city fees.
“Earlier this year, I tried to buy three medallions off three guys, and I offered them $10,000 each,” DeAngelus said. “They said ‘No, we’re good.’ Then we see in the paper about the Uber laws, and a week later I bought two of them for $6,000.”
This devaluation not only hits the medallion holders, but also the taxpayer. The city collects a 25 percent surcharge on the price of any medallion sale, again with the justification that the money is needed to help offset the cost of administering the taxi regulations.
“The prices are dropping. That means the city didn’t protect my investment, and they didn’t protect their own either,” DeAngelus said.
As it stands now, there’s no reason larger fleet owners couldn’t ditch their city medallions and jump ship to the TNS system as well. All it would take would be to set up a digital system, where customers hailed and paid for taxis online. The only loss would be the inability to do street hails.
“That’s the only way it would affect me. My cabs could no longer wait in taxi lines at Seacrets or Fager’s,” DeAngelus said. “I could just set up a website and say I’m a PSC-defined dispatch software company. I wouldn’t have to pay the city anything and I could change my meter whenever I want.”