Running Boston's Bureaucratic Marathon
By Dana Berliner [Economic Liberty]
It is said that Boston is the only city where the streets can run parallel and perpendicular at the same time. Boston's business climate presents a similar study in contradictions. One survey rates it the nation's 15th best city for entrepreneurs;1 another finds it's the sixth costliest city in which to do business.2 In a sense, both are true: Boston welcomes entrepreneurs, but it also makes life difficult for them. It is toward harmonizing the City's pro-entrepreneurial philosophy with its regulatory reality that this report is directed.
Most businesspeople appear resigned to the notoriously high level of red tape and bureaucracy in Boston. Both the State and the City have made some efforts to diminish this reputation, but the efforts have been directed primarily to speeding the bureaucratic process, rather than actually eliminating unnecessary requirements. Thus, both the State and City have created offices to help guide prospective entrepreneurs through the requisite maze; yet both continue to maintain complex and cumbersome processes and requirements. One businessperson's comment captures well the dichotomy: "Streamlining the process is a great idea. Now if only the city could rewrite some of those ancient zoning laws."3 Similarly, Governor William Weld's administration has pledged to reduce the number of regulations, but primarily has focused on outdated or duplicative regulation, rather than barriers to entrepreneurship.4
"The City of Boston does not have a good reputation of being an easy place to do business," confessed the director of the Boston Office of Business Services, which was established in 1993.5 Mayor Thomas Menino helped to establish the Boston Empowerment Center, with a Small Business Administration-funded "one stop" information center. Both of these offices offer "walk-ins" or appointments and gear themselves toward helping small businesses. They provide information and assistance in finding capital and sponsor entrepreneurship classes. Massachusetts also will guarantee small business loans through the Capital Access Program and supports lending with its "LowDoc" (low documentation) small business loan program. It also provides guides to writing a business plan from the Massachusetts Office of Business Development and the Small Business Assistance Packet.
A new small business seeking assistance can contact the Mayor's Office of Business Services, the Department of Consumer Affairs, the Office of Minority and Women's Business, the Boston Empowerment Center, the U.S. Small Business Administration, the Department of Inspectional Services, the City Clerk and City Council members. Explains Mark Stevens, of the Boston Empowerment Center, "We bend over backwards to help businesses meet requirements." It is typical of Boston that there are eight different offices that might be able to offer assistance. That's a lot of people to visit, and it can take trips to a number of offices before an entrepreneur can find the right person to provide help.
But the real problem is that no matter how hard government workers try to help, start-up businesses are often faced with a convoluted, onerous, and expensive regulatory process. Starting even a one-person business can require visits to multiple offices and a significant amount of money.6 Starting a small business often turns into a regulatory endurance test. The only help for that is cutting back on the regulations themselves.
Boston operates on the principle that more is better: more regulations, more separate requirements, more fees, more agencies reviewing an application, more hearings, more paperwork. Caught up in the process, Boston seems to have lost track of the purpose of their regulations: ensuring public health and safety and then allowing people to pursue their chosen professions. The regulations, and the processes for conforming with them, have taken on a life of their own. Instead, Boston needs to take a step back and ask whether each regulation is narrowly tailored to serve public health and safety.
Vehicles for Hire
It is a difficult and dangerous occupation,7 but driving a taxicab traditionally has been one of the ways that low-income persons earn money for themselves and their families. However, taxi driving is becoming a less accessible form of self-employment, and the City of Boston certainly does its part to keep low-income residents out of this occupation.
Taxi drivers must comply with a number of regulatory requirements. They must obtain a hackney license, which costs $50, a copy of the required driving record ($5), annual taxi plates ($45), and an annual license renewal ($12). To acquire a license, cabbies must also receive 12 hours of training (over three nights). Taxi owners also pay for insurance, which runs about $6,000 a year, airport fees, and the price of their cab. Finally, taxis are inspected twice per year.8
But the most formidable barrier is the limit Boston has placed on the number of taxi permits (known as medallions.) The Police Commissioner issues the medallions, which are necessary to operate taxis in Boston. There are 1,565 medallions issued to date in Boston. This number has remained virtually unchanged since 1934. Despite orders from the Department and a court to increase the number of medallions, the Commissioner has declined to issue more. A statutory change in 1990 increased the limit on the number of medallions from 1,525 to 1,825. The Commissioner has only issued 40 new permits, all for handicapped accessible cabs. (Anonymous reports indicate that the handicapped-accessible cabs have been refusing to pick up handicapped passengers.)
In 1988, entrepreneur Robert K. M. Lynch applied for a medallion. The application was denied because the Hackney Division of the Boston Police Department had already distributed the maximum of 1,525 medallions. Lynch appealed, and after 20 days of hearings, the Department concluded that 300 to 500 additional medallions would be an absolute minimum number to meet the public convenience and necessity standard. Accordingly, the Department ordered that the maximum number of medallions be raised to 1,825 effective immediately, to 1,925 within the following 18 months, and to 2,025 a year after that. The increase was opposed by the Boston Neighborhood Taxi Association and the City of Boston Cab Association, both of which urged the courts to adopt a farfetched reading of the statute which contradicted its plain language and to keep the 1,525 cap. The appeals court agreed that the Department had the authority to increase the statutory limit, but it rejected its plan of incremental raises. Lynch never got his medallion, and the Boston residents never got the new cabs they need. In June of 1996, the Commission was ordered by the Massachusetts Superior Court to issue the remaining 260 medallions;9 as of this writing, it has yet to comply.
The artificially low number of cab medallions has a number of ill effects: It drives up the cost of medallions, forces drivers to work too many hours to make a living, causes service gaps in poor and minority areas, and reduces the friendliness of service. Because there are only 1,565 licenses available, it is expensive to obtain the right to own a taxi. New taxi owners cannot purchase licenses from the City and instead must buy them from previous owners. Despite the fact that the City of Boston today would charge $175 to issue a new medallion, the street cost of a medallion is around $105,000,10 well outside the means of most entrepreneurs, especially those of modest means. That is one main reason why only about 300 drivers actually own their medallions. Instead of driving for themselves, most drivers must lease a medallion, at a cost of up to $545 per week.11 Prices vary slightly depending on the cab company, individual owner, or radio equipment.
Usually, cab drivers who lease their vehicles and medallions must work extremely long hours to make any profit at all. "More than 100 drivers live out of their trunks. . . . And hundreds, perhaps thousands, work around the clock, napping in their taxis during the wee hours of the morning in order to cover the high cost of renting a medallion." The Committee to Restore the Boston Taxi Industry estimated in 1992 that about 1,500 cabbies work around the clock. Recognizing the conditions under which medallion renters subsist, the City has proposed delaying a scheduled increase in rental rates.14
In addition to the poor treatment of drivers, certain neighborhoods continue to receive substandard cab service. When black City Councillor Bruce Bolling was refused a ride to predominantly minority Roxbury in 1992 by a white cab driver, the Globe did an investigation into taxi-driving practices and exposed a dual system of service. One company in particular was blatant about setting up separate and unequal service for such minority neighborhoods as Roxbury, Dorchester and Mattapan. Apparently, the company had two customer phone numbers--one for "Black Boston" and one for the rest of the City.15 The Globe investigation found that calls to the black line frequently went unanswered, and response times, especially during rush hour, were considerably longer than for the other line.16 Because they have a lock on the market with no fear of competition, existing companies find no need to improve their service. And would-be minority drivers who might like to start up a cab service in communities that are now ignored must wait indefinitely. The Police Department did not seem to investigate response times or the availability of cabs for those calls.
Illegal taxis fill a gap in service left by the legal taxis. In Roxbury and Dorchester, gypsy cabs have operated as a common and accepted means of transportation for at least 15 years. They enjoy great popularity at grocery stores and neighborhood shopping areas. For the most part, the operators are retired men who use their own cars and who need the extra cash to get by. Some drivers have other jobs and then drive part-time to increase their families' income. They often know their clients and develop long-standing relationships with them. The shopkeepers often know the drivers and will recommend them to customers. Gypsy cabs service neighborhoods that other cab drivers refuse, and without the pressure to make up for the cost of leasing a medallion, they can take more time with their customers as well. One customer explained, "They do things like help you in your home with your bags, especially if you're elderly. That's something cabs just don't do anymore."17 Fares seem to vary; sometimes they cost roughly the same as licensed taxis, and sometimes less.
Operation of an illegal taxi is a misdemeanor punishable by arrest and a $50 fine. Usually, the police do not issue tickets unless there is a complaint. And stores and customers usually do not complain, because the gypsy cabs offer a service that is otherwise unavailable. Nevertheless, there are serious disadvantages to operating an illegal business. Drivers cannot advertise or secure loans, and there is always the risk of criminal enforcement. One driver admitted that he would prefer to be licensed but could not come close to affording the cost of leasing or purchasing a medallion.
Other transportation services in the Boston area operate without any government-imposed ceiling on their numbers of cars or vans. Instead, the public need for service determines the number of operators. By this standard, more taxis certainly are needed. In fact, the only people who seem to believe that taxi service is adequate are the medallion owners. Once they have invested in the system, they do not want to see the value of the medallion go down or lose fares to other drivers. The impulse to squelch competition seems to be a common reaction once businesses become established. During London's first recorded taxi war, in 1636, taxi owners routinely got the State to limit their competition. "Sparked by the resentment of Thames water taxis at growing competition from coaches on land, it led to a proclamation from King Charles I restricting the number of coaches to 50. Lucky coachmen were happy. Watermen were happy. Customers got gypped."18 Keeping out newcomers is bad for entrepreneurs and bad for consumers. And Boston should not wield its power to advance private anti-competitive interests.
Fortunately, the Boston Hackney Division does not license or cap the number of limousines. The limousine business is therefore flourishing in the Boston area. The number of companies offering limousine or sedan service at Logan International Airport has skyrocketed from 30 a decade ago to almost 700 today. Limos can be reserved ahead of time, but cannot be hailed from the curb or airport. Predictably, the taxicab industry's first response, rather than calling for their own deregulation, was to demand that regulators quash the upstarts by controlling their numbers, rates and airport pickups.19
Although the regulatory requirements for limousines are somewhat costly, they are dwarfed by the cost of owning and operating a taxi. Limousine operators must obtain livery license plates from the Massachusetts Registry of Motor Vehicles, and drivers must obtain a "class three" public driver's license. If a limousine driver intends to pick up customers at the airport, he must secure a permit from MassPort, which includes a fairly complicated set of forms and a monthly fee. Insurance of $1 million per car is required to obtain the livery license. The total cost comes to more than $5,300, but since no certificate of public convenience and necessity is required, it is still nearly $100,000 less than the cost of owning a taxi. According to the owner of one smaller limousine company, owners and drivers don't get rich in the limousine business; the cars and the insurance are expensive. But you can still make a living. "You just gotta get out there and hustle," he explained.
The move is on to privatize Boston's costly bus system. A recent study by public transportation consultants found that the MBTA bus system is the second most costly bus operation in the country. Massachusetts Transportation Secretary James Kerasiotes said privatization could cut the costs of running a bus from $95 to $65 an hour. San Diego, Baltimore, Denver, Dallas, Phoenix, Las Vegas and Indianapolis have all privatized parts of their bus systems. Private bus services, fares, and routes will still be regulated by the City.20 The City is accepting bids but has encountered significant resistance from the public bus system and unionized drivers.21
To prevent private companies from competing with the public bus monopoly, van services are more tightly regulated than limousines. Van services are licensed primarily by Massachusetts, although some shuttle services must also obtain a jitney license from the City. Obtaining the Massachusetts license requires numerous fees, a public hearing, and a lot of time and energy. A potential company must get its route approved and have its license approved by the City Council and signed by the Mayor. Tourist buses must get a charter license with a "sightseeing endorsement." As with limousines, the airport requires a special permit to pick up passengers there.
City of Boston jitney licenses are issued to shuttle buses which have a set route and do not pick up passengers en route. Applications are filed in the City Clerk's office and must be approved by the City Council. The cost of a jitney license is $250, with a $100 renewal fee each year. Most jitney licenses are given to shuttle bus companies transporting people to and from the airport. A niche in the business has grown from transporting hotel maids to and from work. Jitneys are prohibited from competing with buses.
The owner of one new service found this process exhausting. She had an idea for a tour bus service with an original theme. She wanted to offer both charter tours and scheduled tours starting from a fixed location. To obtain her license, she was required to have a hearing, with sponsors. At the hearing, she declared the purpose of her business and identified other businesses with the same routes or type of tour. An opportunity was given for other businesses to object. She received a charter license with a sightseeing endorsement. Although she had believed the hearing would result in both a charter license and a license to have a regular route, she discovered that she would have to go through a second hearing to have the regular route. There was a fee for the application and a separate fee for the hearing.
Rather than go through the process again, she decided to make further inquiries. After a year, she is still unable to determine exactly what she needs to do to provide her service, and she often gets contradictory information. She has asked the police, the City Council, and the Massachusetts Department of Public Utilities. The police do not know if she needs a sightseeing license from them or if she needs a permit from the City Council. They appear not to know about the jitney license at all, and she is not certain if she needs one. Because she could not figure out the procedure, she simply does not offer scheduled service. "It's so convoluted. There's so many different variables." To have the charter service, she has a charter license with a sightseeing endorsement, a livery license, a bond for $1 million (approximate cost $1,000), insurance for $1 million (approximately $5,000 per vehicle), Department of Public Utilities licenses for drivers, special training for the drivers, psychological examination for drivers, and a special endorsement from the airport. "Licensing at Massport is a maze," she added.
Licensing for van services requires approval by so many different agencies that there are inevitable problems. Depending on the service, approval must come from the Massachusetts Department of Public Utilities, competitor companies, the City Council, the Police Department, the City Clerk, and the Mayor. A system with fewer requirements, as well as the elimination of the need for a public hearing, would be a big improvement.
Low-income residents historically have been able to vend goods on the street as a first step on the economic ladder. Vending does not require formal education and should not require large financial resources. An entrepreneur can earn a living simply by working hard. Or at least it used to be that way.
It is relatively easy to become a peddler in Massachusetts, but the strict regulations mean that successful peddlers usually violate the law in some way. The would-be seller must obtain a character reference from the Police Department and pay $62 to obtain a Massachusetts Hawkers and Peddlers License. Boston, however, is not happy with the State licensing procedure and tries to limit vending as much as possible. Technically, they must move 200 yards after each sale. Peddlers may operate only in business areas, and only between the hours of 8 p.m. and midnight when downtown.22 Several peddlers of clothing accessories in Roxbury found that selling hats and shoes out of their cars served as a means to earn enough money to open a retail store. They also found that the limited hours and the requirement of moving after each sale were rarely enforced.
Police enforcement of vending laws happens rarely, but when it does it can result in substantial fines or arrest, and it can be devastating to business. One employee at the Boston Department of Public Works stated, "we are on a constant vigil" against illegal vending and also noted that much of the problem stemmed from immigrants who think they can sell in Boston just because they can in their own countries. In some places, fines are imposed to protect established businesses. For example, there are six storefront florists in East Boston. Street flower peddlers crop up to compete on the big flower holidays: Mother's Day, Valentines' Day, Easter, and Christmas. Because these sellers cannot obtain legal permits, they are fined, usually at the behest of their fee-remitting, non-transient counterparts.
Most pushcarts, newsstands, and flower vendors therefore find it preferable to be classified as stationary vendors. Unfortunately, it is much more difficult to obtain a stationary vending permit. Stationary vending requires a permit by Boston's Public Works Department, for the storage or sale of merchandise on a city street. The cost of the permit is $15 per square foot in the downtown area, $11 per square foot outside of downtown. Public Works issues the permit because the stands are actually occupying the sidewalk, which is within the purview of Public Works. If the stand is located in front of anyone's property, the vendor needs yearly written consent to occupy the space by the owner of the property and the store or entity which occupies the first floor of the property. Stationary vendors also need a recommendation by a community relations police officer and then approval of the captain of the district police precinct. Finally, they are required to carry $500,000 in insurance, which costs between $200 and $350 per year.
The vending regulations can cause major problems for a small business. One woman decided she wanted to become a flower vendor to be more independent and improve her quality of life. She picked up her peddler's license form, took it to the police headquarters and the local police station, then back to the State office for the license. For a few years, she operated without problem. Then, a new flower shop moved into the neighborhood. This flower shop began calling the police, who would then issue tickets ($50 each) because she did not move her cart after every sale. Refusing to pay the tickets, she collected 1,000 signatures of customers and local businesses supporting her right to remain on that corner and presented it to the City Council. After another period of quiet, the problems began again. Eventually, one of the businesses agreed to sign for her to operate in front of the business. She picked up her form from the Department of Public Works, presented her pictures of the cart and space, went to the local police station to secure a signature, then to the downtown police headquarters, then to get the business signature and insurance, then back to Public Works. Each year, she had to get each of these signatures again. Yet she continued to have problems. One year, the City issued the license, then called her back to say that it was considering revoking it, because she was operating on City property. She agreed to pay a higher license fee and was able to continue. Another year, the personnel changed at the local police department, and they refused to sign her form. Again, she was able to argue them into it. Although she continued operating for 12 years, putting herself through school and earning a reasonable income, she says of the process, "it was a constant battle."
Additional requirements apply depending on the type of goods sold and the location. A $100 health permit from the Health Division of the Inspectional Services Department is needed if food will be sold. The base of operations for the production of the food, if it is not prepared on premises, must also have a separate permit. In addition, if food, including hot dogs, will be prepared on the premises, a vendor is required to take a 15 hour "food managers" course under the approval of ISD and the National Restaurant Association. The cost of the course is $120 (plus $50 for the book and $20 for the test). That's nearly $300 in addition to at least $300 for licensing fees and insurance. For an entrepreneur, the expense can be prohibitive.
During the summers, retail stores in Roxbury often set up tables in front of their shops. During the summer of 1995, however, inspectors forced everyone on the street to remove their tables, because they did not have the proper permits. What goal was accomplished by this action? Consumers were not protected. Streets had not been blocked. One shop owner decided to get a permit for vending outside her shop. She wished to sell hot dogs and snow cones. In order to sell the hot dogs, she was required to take the food handlers course and pay approximately $300 in various fees. Finally, an inspector examined her cart. Although she was able to comply with all of these regulations, the process was costly and time-consuming. Most of the other stores that had set up tables did not bother to go through the approval process and simply stopped selling goods outside. But selling tennis shoes or purses presents no potential health hazard to the public. A simple requirement that the sidewalks be clear could suffice for the regulation of vending in front of stores.
There are further rules and fees in certain areas of the City. Vending is prohibited in certain areas. For example, no food pushcarts are permitted by the waterfront. Other areas have pushcart "programs" administered by private associations. For example, the Downtown Crossing Association (DCA) administers pushcart permits for the downtown area and also controls the number of permits issued in this area. Permits are given for certain spots within Downtown, and the number of spots and their locations are controlled by the Association. Currently the DCA is issuing between 75-80 locational permits. Pushcart vendors still need a permit from public works but, in addition, must pay various fees to the DCA. The DCA charges a management fee between $100 and 1,000 a month depending on the location of the pushcart. The DCA also charges a $2 per day promotion fee and a $1 storage fee.
Selling merchandise on City park property is a whole different story. The pushcart program for the Public Garden and Common (two downtown parks) is administered by the Boys and Girls Club under a contract with the City's Parks Department. Apparently, a trust was created for the maintenance of the parks when the parks were constructed around 100 years ago which stipulated that any proceeds from the sale of goods within the park must benefit youth activity. Each space's value is assessed and the price of the permit is based on this value. Permit prices range from $200 to $1,000 per month. The assessment includes what will be sold at the location and where the space is located.
The increasing demand for child care makes it an ideal career for a budding entrepreneur. Moreover, caring for children requires kindness and common sense, but not higher education. These qualities should make it one of the easier fields to enter. It also permits parents to combine caring for their own children with caring for a few others. Intense regulation of child care, however, makes it a difficult field to enter. Mothers with limited resources, who should be in a good position to work as day-care providers, find it difficult to meet all the requirements.
The Massachusetts Office of Children issues the permits for day-care centers. Day-care centers are divided into two types: family day care and group day care. Licenses must be renewed every three years. Violation of the licensing requirements can result in a fine of $1,000 and six months in prison. Providers are required to take a three-hour State orientation class covering topics such as business management. At the time of yearly renewal, youth providers must have taken at least five hours of training in caring for young children. There also are several health and reference requirements.
Family Day Care
Family day care is provided in a private home and has a number of advantages over larger day-care environments. It is usually less expensive and tends to be open on federal and State holidays, while group day care often closes. Furthermore, family day-care providers are often more lenient about parents picking up their children late or having variations in their schedules. Although less extensive than those governing group day care, the regulations governing family day care are still quite detailed. No more than six children and not more than two children who are under two years old can be cared for at any one time.23 The limits on the numbers include the provider's own children. The home must be owner-occupied. There must be 225 square feet, two exits, and approved ventilation and heating. There is no building safety inspection by the Department of Inspectional Services, but there is an inspection by the Office of Children. A licensee may be subject to inspection at any time by someone from the Office for Children "with or without notice to the program." The house must also be properly zoned for such a use and, unlike many cities, family day care is permitted as an accessory use of a home in residential areas. Providers must submit a written plan to the Office of Children outlining how they will provide for the developmental needs of the children. The activities provided must contain "a range of learning experiences for the child." The permit costs a steep $175.
There are ongoing training requirements and an assortment of other detailed rules as well. One family day-care provider explained, "They keep throwing new things at us. I could see if it was for benefits to the children, but it's not. It's just more red tape to get the same answers." Both the cost and the sheer number of requirements and paperwork can be daunting. The director of one community program stated bluntly, "Basically, the English-speaking day cares comply with the requirements. The others, the newcomers, don't."
In 1995, Governor Weld proposed an ambitious program designed to encourage young mothers to operate small day-care facilities out of their homes. Unfortunately the program failed and has been mostly canceled. The problem was in finding welfare mothers both eligible and eager to enter the highly-regulated child-care industry.24
"It's very disappointing," said Linda Marshall, a 36-year-old mother who had hoped to join the program before it was canceled in Bristol County. "This would be perfect for me. I could get off welfare, and I wouldn't need child care. It would fit my needs all around." "We were excited about this," said Constance Doty, director of the jobs and community service for the City of Boston. "But the more we looked at it, the more we said, 'Hmmmm. Day care is a tough, tough business.'"
In some ways, the regulation of family day care in Boston is better than other cities. Unlike some states, the educational requirements for providers are not steep: Massachusetts requires only about 15 hours of class. And unlike some cities, Boston does not require a zoning hearing for family day-care business. The main problems for family day-care providers are the costs-starting up runs around $400 in fees-and meeting the building requirements.
Group Day Care
Educational requirements for day-care providers and building requirements become more stringent for group day care than family day care. There is a limit on the number of children depending on the space available, as well a child-to-teacher ratio that must be satisfied. Group providers must be at least 18; assistants must be 16 or older. Teachers must have three credits in child development and nine months of experience. Lead teachers must have 12 credits and between nine and 36 months of experience, depending on the amount of college. The State may require a director, with higher educational requirements, depending on the size of the center.
Extensive regulations detail staff ratios, educational requirements, child-care experience, building layout, plumbing, program activities, materials, snacks, and, of course, paperwork. There are separate regulations for before- and after-school programs. Group day care must be zoned properly, and, unlike family day care, it is usually a conditional use. The would-be provider must go through a public notice and hearing, which can cost between $100 and $150. And the City's Inspectional Services Department will inspect for compliance with a variety of building codes. Group day-care licenses cost $150 for centers with less than 39 children, $250 for more than 39 children.
The most difficult problem, by all accounts, is the extensive requirements for the building facilities in which child care is held. The housing stock in Boston is relatively old and often does not conform to the building requirements, in terms of exits, stairs, and plumbing. "It's hard if you are poor, live in a poor neighborhood, and live in poor housing stock," explains Alma Finneran, Director of Day Care Services at Action for Boston Community Development. Many providers cannot afford the costs of renovating their house; one estimated it would cost her $75,000 to change from a family day-care home to a group day-care center. After a year of meetings and hearings, she abandoned the plan.
The need for affordable day care will become particularly acute as welfare reform laws take effect. Women seeking work will need day care for their children, and day care also may provide a good business opportunity for women with children. Although the State has a legitimate interest in protecting children, it could also relax some of the regulations without having a negative impact. The educational and training requirements for providers seem excessive, as do the limits on the number of children under 10. And a change in the zoning code would eliminate the need for a costly and daunting hearing.
Cosmetology and Hairbraiding
Natural hairstyles are becoming increasingly popular among African-American women. Weaving natural or synthetic hair with the client's own hair, African hairbraiders braid, lock, and twist hair into artistic and often elaborate styles. Braiders shun the use of chemical and electrical processing. Most braiders started learning to braid as children and acquire more skills from family and friends. For a number of reasons, braiders often choose to operate professionally out of their homes. Because braiding takes a long time, it is often more comfortable to work at home.26 Also the licensing requirements for performing African hairbraiding and for operating a salon can be prohibitively expensive--staying at home is necessary to avoid regulatory scrutiny.
African hairbraiders in Massachusetts must have a cosmetology license that requires 1,000 hours of training. (Compare this to Massachusetts' requirement that armed security guards must take only 160 hours of classes.) Someone who completes the six-month beauty school course and then passes oral, written, and practical exams may become registered as an "operator." (Cosmetology school in Boston costs between $5,000 and $8,000;27 the state board test costs $89; and the Type 2 license costs $50, renewable every two years.) Operators are beauty interns, who may become fully licensed cosmetologists after two years of practice under a registered "Type 1" cosmetologist. Although manicuring and skin aestheticians have separate, less onerous, licensing requirements, African hairbraiding still requires a general cosmetology license.28
Thus, a hairbraider must learn manicuring, skin and makeup, permanent waves, "finger waves," "iron curls," haircuts, and haircoloring, even though she will never use these skills as a hairbraider. On the other hand, not a single hour of hairbraiding is taught during the 1,000 hours of class. Of the 1,000 required hours, at most 225 might be useful to a braider.29
To operate a hair salon, the cosmetologist is required to have a Type 1 license which means that she already has had an operator's license for two years, and during that time she has been under the supervision full-time of a person who already has a Type 1 license. The cost is $30 for a Type 1 license, and it is renewable every two years. Salons must have their electrical wiring and plumbing approved by a wires and plumbing inspector. The owner of one hair salon successfully navigated the process but says that "dealing with the inspection people was the hardest part." They missed appointments, forced her to change the type of toilet three times, and required various minor changes to give her a permit for occupancy of the building.
For at-home salons, a cosmetologist must own the residence in which the shop is located. She is required as well to have a Type 1 license. The street or area must be zoned properly for this type of business and the shop must be located in either the first floor or the basement. The shop may not be located in a portion of the house where it is necessary to walk through other portions of the house to get to the shop. Entrance to the shop can only be located in the front or side of the house and must be visible to whomever is dropping someone off for an appointment. Any doors from the salon to the house must be locked and not used. There must be a shampoo sink and one lavatory (in or near the salon room). An in-home shop license is $50, renewable every two years.
Zoning, of course, can be a major obstacle for opening a hair salon or operating an in-home one. Unless the former occupant was also a hair salon, the salon will have to go through a change of occupancy hearing. In-home salons will almost certainly require a variance hearing, since barbering and beauty businesses are generally prohibited in residential areas. At the very least, a conditional use hearing will be necessary. Hearings are time-consuming, expensive, and can be capricious. A would-be hairdresser or braider could endure the entire process and easily be denied.
At one point, Governor Weld's administration proposed a radical downsizing of the number of State professional registration boards, including the elimination of the Board of Cosmetology. No downsizing has been implemented, and the Board of Cosmetology continues to impose senseless rules on the haircare providers of Massachusetts. The licensing requirements for African hairbraiders bear no relationship to public health or safety and serve only to limit competition. As one licensed braider explains, "If you have to get a license, it will control the number of braiding shops. If you don't, then anyone can open up a braiding shop."
Massachusetts' rules have almost no relationship to public health or safety. These concerns could be answered by a sanitation inspection and an insurance requirement. At the very most, the State could require a braider to pass a competency exam, without regard to how the competency was obtained. Elaborate plumbing and building design requirements are unnecessary, and expensive educational requirements serve only to protect already-licensed cosmetologists from competition. Finally, hairbraiders should not be required to spend 800 hours studying services they will not use.
Take-out Restaurants and Catering
Most entrepreneurs find the licensing requirements for take-out restaurants and catering to be difficult. For the inexperienced, a successful journey through the approval process depends on luck-luck in finding the right building and luck in finding a helpful official as a guide. A comparison of the recent experiences of two entrepreneurs shows how this process works.
When Glynn Lloyd and his partners decided to open City Fresh catering company, they found a location and then began to acquire their permits. They were lucky. Without realizing they were avoiding the usual need to go through a change of occupancy hearing, they happened to pick a location that had been a deli. Because they were on a certain time-frame, and they were already paying rent, the hearing could have posed a real problem. Their location was located below a residential unit, which did not meet the fire code. In order to obtain their permits, the whole building needed to be brought up to code. Again, they were lucky. The other inhabitant of the building complied with the fire code within the time that was necessary for their company to start operations. A supervisor from Inspectional Services walked through the facility and told them everything they needed to correct. After that, their plumbing, electrical, building structure, health, and fire inspections went without a hitch. They obtained the appropriate food permits, and they opened for business. Although Lloyd believes it would be easier the second time around, he found City and State officials to be "accessible" throughout the process.
When Bonnie Steele decided to open a small restaurant, and catering and take-out establishment, she also found a location and then began to acquire permits. However, unlike Lloyd, she was not lucky. She did not happen to find a location that had been a food establishment before. She therefore applied for a change of occupancy. In practice, change of occupancy permits are automatically denied for take-out restaurants downtown, so a public hearing was required. Since the change of occupancy is not always granted, she hired a lawyer at a cost of $2,500 to assist at the hearing. Architectural plans for the application cost another $1,000. In comparison, the cost of the application and hearing (around $100) was minor. Although her permit was granted, it took four months, during which time she had to pay rent, before her change of occupancy came through. She had to wait for the occupancy permit to even begin applying for the building permits. She had no trouble with the plumbing, electrical, fire, and building safety inspections. However, there was an issue between the department dealing with handicap access and the historical preservation board. Her building is classified as historical, and it has a small step at the entrance. Another hearing was required. And yet a third hearing was required to obtain her "common victualler's license," permitting her to serve food. Each hearing and application involved a fee, but the cost in time and stress was much greater. Ultimately, she obtained her occupancy and building permits, health department approval, common victualler's license, food handling permit, and entertainment license to play a radio at the business. She opened eight months ago and business is booming. Of the process, however, she says, "It was just awful."
As a practical matter, approval for home-based businesses is almost impossible to obtain, due not to the fault of the owner, but to concern over things like traffic and noise, said a spokesperson for the Boston Chamber of Commerce. "If your business hasn't been around since like 1920, forget it." Zoning permits are often denied because of fear of the effect on parking. To obtain a permit for an in-home business, one must appear before the neighborhood council. Appeals are made before the Boston Zoning Commission, which invariably follows the recommendation of the local council. To accommodate the coming interest in home businesses, Boston will have to modify its zoning policies.
Although in-home businesses currently make up a relatively small percentage of businesses in Boston, their number and popularity are on the rise. The Boston Empowerment Center (BEC) caters to just such business people. The average visitor at the new BEC is a single mother who wants to open a home-based business and take care of her children at home. With the expense of day care, and the schedule flexibility of working at home, home businesses are "the wave of the future," according to Mark Stevens, program manager for the BEC.
Boston is trying to accommodate this change, but not entirely succeeding. Home professional offices and businesses with no non-resident employees and no "merchandise trading" are generally permitted. However, every other type of business requires a zoning hearing, either for a conditional use permit or a variance. Conditional uses are easier to obtain and less expensive. Both are time-consuming and often denied.
Boston and Massachusetts have been making efforts in recent years to become more hospitable to small business. But up until now, the changes have been in assisting small businesses with the regulatory process and with obtaining capital. However, to allow entrepreneurs to flourish, government must actually remove some of the regulatory barriers. As in many cities, the worst problems for businesses come in the form of building requirements and approval processes. Obtaining proper zoning, building permits, and permits to occupy public property cause the greatest cost and difficulty for would-be entrepreneurs. The other major barrier lies in the sheer number of regulatory approvals necessary to start businesses. Many businesspeople interviewed in the course of this study were not accurately or fully informed about the requirements that applied to their business, simply because there were so many different regulations to consider. Some timely and appropriate reforms would be:
1. Remove excessive educational and training requirements from the field of cosmetology.
2. Remove arbitrary cap on taxi medallions and phase in a market system similar to limousines.
3. Remove extra layers of bureaucracy. Van services and vending require approvals from too many sources.
4. Dramatically reform the zoning process to reduce the need for hearings. Changes of occupancy within a commercial zone should be routinely approved, and the number of commercial and accessory uses permitted as of right should be increased.
5. Remove pointless licenses, permits, and requirements. There is no need for a fortuneteller's license, a billiard license, a non-live entertainment license, a milk permit, or a separate entrance to a home hair salon, to name a few.
6. Evaluate all regulations and remove or reform any that are not narrowly tailored to fulfill a legitimate governmental objective without unduly hampering enterprise.
In order to allow entrepreneurs to thrive in Boston, City officials need to shift to a presumption in favor of economic liberty, instead of a presumption in favor of regulation. Now, the City often appears to regulate just for the sake of regulating, and there is little connection between the goal of public health and safety and the exhaustive occupational and building rules. Only a close fit between health and safety ends and the means chosen by government justifies erecting regulatory barriers to entrepreneurship.
1 Karen Axelton, et al., "30 Best Cities for Small Business," Entrepreneur, Oct. 1996, at 129-131.
2 Suzanne Oliver, "It's the Costs, Stupid," Forbes, Oct. 21, 1996, at 252.
3 Quoted in Richard Chacon, "City Leaders Discuss Plan to Simplify Zoning Code," Boston Globe, Oct. 12, 1995, at 33.
4 Michael Grunwald, "Quietly, Weld Aides Rewrite the State's Rulebook," Boston Globe, Oct. 3, 1996, at A1.
5 Quoted in Connie Law, "It's All Business with Hub Agency," Boston Herald, May 6, 1994, at 32.
6 Robin Lawson, "Oh! The Headache of Starting Up," Boston Herald, Aug. 28, 1996, at 24.
7 The National Institute for Occupational Safety and Health recently found that driving a taxi is the most dangerous occupation in the country. "Cab Driving Termed Riskiest Job in U.S.," The New York Times, July 9, 1996, at A14.
8 This report attempts to document the costs and procedures for licenses and permits in late 1996. However, both prices and procedures change frequently. Thus, dollar figures and regulations are subject to change.
9 Laura Brown, "Judge Orders Hub to License More Taxis," Boston Herald, June 22, 1996, at 5.
10 Interview with Paula Geoghan, Boston Police Dept., Hackney Carriage Unit, Oct. 10, 1996; Thomas Palmer, "Taxi Turmoil: Limousines' increase worries cabbies," Boston Globe, January 17, 1995, p. 1 ($95,000 in early 1995).
11 Drivers also can lease in smaller increments ($70 for 12 hours and $115 for 24 hours). Laura Brown and Jason Johnson, "Officials Mulling Fare Hike for Boston Cabs," Boston Herald, Sept. 18, 1996, at 23. Under a new proposal, meter fares will rise, and lease fares will rise also.
12 Peter Canellos, "Life's No Fare for Struggling Cabdrivers," Boston Globe, Dec. 14, 1992, at B1.
13 Ibid. More recently, a report by the City notes that the lease rates encourage drivers to work extremely long hours. Laura Brown and Jason Johnson, "Officials Mulling Fare Hike for Boston Cabs," Boston Herald, Sept. 18, 1996, at 23.
14 Interview with David Bent, Boston Police Dept., Hackney Carriage Unit, Oct. 9, 1996. The City also has proposed a fare increase that is proportionately higher than the lease rate increase. Laura Brown and Dave Falcone, "Taxi Cab Companies Argue Rate Increase Would Not Be Fair," Boston Herald, Sept. 20, 1996, at 8.
15 Adrian Walker, "Police eyeing taxi firm's logs for bias Citywide scrutiny likely; Red & White predicts vindication," Boston Globe, Wednesday, March 1, 1995, at 17.
16 Ann Scales and Charles Sennott, "Cab Firm's Policy May Mean Separate, Unequal Service," Boston Globe, Feb. 28, 1995, at B1. The investigation did not find the system discriminatory, however, based on the fact that an overwhelming number of calls (70%) came from Roxbury, Dorchester, and Mattapan. Adrian Walker, "Police Probe Finds Cab Company's Policies Fair," Boston Globe, March 24, 1995, at 29. The police department did not seem to investigate response times or the availability of cabs for those calls.
17 Quoted in Luz Delgado, "Gypsy Cabs Fill a Need in Neighborhood," Boston Globe, Jan. 10, 1993, at A1.
18 Jeff Jacoby, "Break open the taxicab monopoly," Boston Globe, Tuesday, December 5, 1995, quoting The Economist.
19 Janet Novack, "Regulation at its Worst," Forbes, July 11, 1988, at 48.
20 Associated Press, "T Bus Privatization in Works: All 159 Routes to be Auctioned," Patriot Ledger, April 1, 1996, at 5.
21 "T Union Ads Blast Privatization," Boston Globe, Oct. 12, 1996, at B7.
22 Interview with Anne McNeil, Department of Public Works, Oct. 10, 1996.
23 Under the current rules, three children under the age of two can be provided for at one time provided that one of them can walk unassisted. New rules will permit certain family day-care services to provide care for up to ten children. The requirements for these services have not been established yet.
24 Michael Grunwald, "Day-care program falls short of goals; Few welfare mothers starting own firms," Boston Globe, Feb. 26, 1996, at 1.
25 Quoted in Ibid.
26 Pamela Reynolds, "Homespun Hair; Kitchen salons surge in popularity as black women seek out natural look," Boston Globe, Oct. 25, 1995, at 71.
27 Free cosmetology training is available at the local community college part-time, but the course takes two years.
28 Manicurists study for 100 hours, and aestheticians (skin and makeup specialists) for 300.
29 These include Sanitation (25 hours), Ethics (25), Wigs and Scalp Treatments (50), Tests, Sterilization, Hygiene and Anatomy (125). However, since hairbraiders generally do not use wigs and since most of the testing hours pertain to skills not used by braiders, the number of useful hours is probably closer to 150.