The Big Easy Needlessly Burdens Taxi Cab Drivers

A federal appeals court recently upheld a swath of new taxi ordinances passed by New Orleans. In New Orleans, anyone who wants to drive for-hire can only do so with a certificate of public necessity and convenience (CPNC), Crescent City’s name for a taxi medallion. A taxi cab owner who drives without a permission slip could face up to five months in prison.

On top of that, New Orleans caps the number of CPNCs at 1,600, creating artificial scarcity and a lucrative grey market. CPNCs can cost upwards of $67,000, with the average price around $26,000. The city has made almost $120,000 in transfer fees since 2009. As The Times-Picayune reported in April, one man even owns 13% of all CPNCs.

In April, the city passed a multitude of new ordinances. One of the most controversial renders CPNCs privileges, and not actual property. This means CPNCs are now revocable at will and nontransferable, so taxi cab drivers can no longer sell them or use them as a security when seeking loans. In August, a federal judge ruled against New Orleans on this ordinance, but this decision was vacated on appeal. Indeed, as the lower federal judge warned, now that CPNCs are privileges, “the city has reduced the property value of the CPNC to zero,” rendering “an entire industry gutted of a large amount of its capital and deprived of a means of funding needed upgrades.”

Both courts have also upheld new ordinances (under rational basis) that mandate all taxis come equipped with cameras, credit card machines, air conditioning, and GPSs. Starting in 2014, no cabs can be older than 7 years (the previous limit was 11). Mandated upgrades could cost a cab owner anywhere from $2,000 to $40,000. Of course, if there were a truly freed market and no cap on CPNCs, there would be far more competition, giving taxi cab drivers a potent incentive to better compete by refurbishing their cabs.

The Institute for Justice has battled taxi cartels in Denver, Cincinnati, and Indianapolis, and is currently fighting for free market transportation in Portland, Milwaukee, and Nashville. IJ’s Jeanette Petersen explains why it’s so hard to get a cab.

-- Nick Sibilla

Nick Sibilla is a writer at the Institute for Justice

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