City Planners from hell – Quebec’s tongue troopers lash out at business

Posted on June 21, 1997 by urbanrenaissanceinst

The Next City
June 21, 1997

 

QUEBEC’S L’OFFICE DE LA LANGUE française may claim to be making the province’s job market safe for non-English speakers, but in the process it is stifling small businesses and driving capital away from an already floundering economy suffering from 12 per cent unemployment.

Under Sections 135 to 154 of the Charter of the French language, businesses with more than 50 employees must function in French. The arduous process of complying with this regulation begins by registering with l’Office de la langue française within six months of hiring the 51st employee. In the next year, the firm must submit an analysis of its “linguistic situation.” From this report, one of the office’s 200 employees determines if the use of French is sufficiently generalized at all levels: among managers and board members; in internal communication, manuals, and catalogues; in communications with clients, suppliers, shareholders, and the public; in public signs and advertising; in hiring; and in information technologies. If the office is satisfied, it issues a “francization certificate.” If not, the company must adopt a “francization program” to bring it into compliance within a year. But the work doesn’t end there; even after complying, the company must report on its “progression of the use of French” every three years. Firms with 100 or more employees require a francization committee of six or more persons who meet no less than once every six months.

While in theory this law promotes the use of French in business, in reality, it creates almost insurmountable barriers to a successful business. One Montreal software company, a fast-paced business whose main clients are IBM and Hewlett Packard, faced translating every client’s queries, specifications, and comments into French and retranslating every bit of work done for English-speaking clients or face fines of up to $1,400 for an initial infraction and $7,000 for subsequent violations. The time and expense of translation is prohibitive. Although this expanding company has been getting around the legislation by hiring contract workers to keep its payroll under 50, it prefers permanent employees who tend to be more loyal and require less training.

It’s not as if the software company, whose president would divulge his problems with Quebec’s “extremely capricious” government only on condition of anonymity, willfully discriminates against non-English speakers. Three-quarters of its employees are French speakers, and three-quarters of the conversations in the business are held in French. Because of the inferior state of technological education in Quebec, the French-speaking president imports English speakers with graduate degrees from Stanford University and MIT. He wonders why the government is wasting time and almost $17 million annually (the office’s budget) harassing job-creating companies instead of trying to bring the province’s schools to the cutting edge.

The Parti Québécois’s threats to increase the language fines and reduce the cut-off point for its French requirements to 10 employees compounds the company’s insecurity. The president is nearing his breaking point. Despite growing demand for their product software, the company cannot expand its staff. In his fear of government interference and prohibitive costs, he has begun seed companies outside of Quebec — in other provinces and in the United States — where he can move if the province becomes any more inhospitable.

Amy Buskirk

Architects hit a Berlin Wall

I. M. PEI, PHILIP JOHNSON, Norman Foster, Max Dudler, Jean Nouvel, Helmut Jahn, Frank Gehry, Oswald Mathias Ungers, Christoph Mäckler, Dominique Perrault. These and most other architects of international renown have projects underway in Berlin, participating in one of the most breathtaking transformations of an important city this century, one rivalling the rebuilding of Chicago after the Great Fire of 1871. Some 900 projects are now underway.

But add Hans Stimmann to the list, for he’s the most important influence of all — the man and the mind who will shape Berlin at the start of the new millennium. Stimmann is the city’s building director, and he chafes at the thought of losing the city’s architectural traditions due to the whims of property owners.

“A city is not an art collection,” he says of the proposed architectural showcases. “It is an expression of the local identity.”

To prevent the likes of Pei from ruining his city after the fall of the Berlin Wall opened it up to badly needed development, Stimmann and his crack corps have erected a wall of their own, this one comprised of planning ordinances and building codes. Granite and concrete are better than steel and glass, believe the new official guardians of state decor, and why should the new capital of the fatherland be burdened with buildings higher than five or six storeys?

All this, concludes Pei, has turned an unprecedented opportunity for architectural excellence into something “completely uninteresting.” The US$15 billion per year now being spent rebuilding Berlin is resurrecting the grim, low-slung look that prevailed prior to the Second World War. “The huge building site here was unique,” agrees dismayed Los Angeles architect Daniel Libeskind.

Libeskind’s Jewish Museum, an ultramodern zigzagging wonder in West Berlin’s bohemian Kreuzberg district, is now an anomaly — it was approved just before the Wall fell and the rules changed. So ended the creative rebuilding of West Berlin, where 18 months of Allied bombing reduced tens of thousands of buildings to rubble during the Second World War. West Berlin’s postwar renaissance had made it one of the world’s liveliest architectural scenes.

“Postwar Berlin is quite impressive,” says Gehry, who designed a $150-million bank building by the Brandenburg Gate. “Post-Wall Berlin is not too impressive.”

The official at the planning controls, Stimmann, does not oppose all modern buildings. A few here and there can enrich an old city like Berlin, he believes. And innovations do flourish, just not the visible kind: Berlin’s many new sites boast novel techniques in construction site logistics, underwater concrete, and the use of air cushions to move the Kaisersaal — once a grand wing of the famous Hotel Esplanade — 70 metres to its new home in Sony’s European headquarters. How will they keep the tourists away?

Lawrence Solomon

Kobe still quaking under property laws

IN STARK CONTRAST TO THE COUNTRY’S streamlined and highly productive factories, Japan’s real estate laws are a tangled mass of inefficiency. Over two years after Kobe’s devastating earthquake — which registered 7.2 on the Richter scale and took 6,336 lives — 51,000 people live in shelters, and 7 out of every 10 buildings remain damaged or reduced to rubble.

An influx of $30 billion in rebuilding money has helped: Kobe’s port, formerly Japan’s biggest, will return to capacity this year, serviced by a new elevated expressway. But this success is unmatched elsewhere in this city of 1.5 million.

The tangle dates back to the Second World War when legislators enacted tenant-protection laws to save soldiers’ widows from devious landlords threatening eviction. Not only do the laws make eviction almost impossible, they also provide tenants with kamikaze-like rebuilding rights that can be lethal for landlords. When a fire, earthquake, or some other disaster destroys a structure, a tenant can order the landlord to rebuild an identical building. If the landlord doesn’t have the money to rebuild, the tenant can stymie a sale or any other arrangement.

What started as a noble sentiment for the disadvantaged has resulted in a snarl of overlapping and often conflicting rights for tenants, subtenants, landowners, and landlords. In one block of Nagata, Kobe’s worst-hit district, 303 renters, lessees, landowners, and subletters have conflicting claims. Nearby, 30 people jointly own one 200-square-foot plot. In all of Kobe, stakeholders in thousands of garage-size parcels of land vie for control.

Japan’s real estate laws allow just one obstinate stakeholder to halt the reconstruction of an entire building. A Kobe landowner, with a shop on the ground floor of a structurally unsound 31-storey tower, blocked the demolition of the building for six months, claiming his part of the property was still usable — never mind the other owners’ reconstruction plans for their destroyed property. In another part of Kobe, a paper lantern maker, whose small wooden stall escaped the earthquake unscathed, is vetoing his less-fortunate neighbors’ adoption of a city- and resident-financed plan to tear down any remaining shacks to make room for highrise residences with two storeys of retail space.

In keeping with Japan’s cultural codes, city planners are determined to gain consensus before going ahead with any rebuilding. To unravel the mess, they are examining titles and deeds as far back as a century and drawing up color-coded maps outlining the complex property rights. On the parti-colored maps, red represents a building with several landlords; green denotes a resident-owned building on land owned by another party; yellow is for sites with differing tenants, building owners, and landlords; orange represents inherited property; and other colors of the rainbow designate some combination of these relationships. Shortly after the earthquake, the city hired 1,000 arbitrators and created a property rights hot line. Of the 100 construction teams made up of city officials, claimants, and consultants who attempted to satisfy the opposing interests in Kobe’s devastated neighborhoods, only four have actually succeeded in starting the rebuilding process.

Such conflict has stunted the regrowth of retail businesses — one in five hadn’t reopened two years after the quake. The funnelling of public money to large proj-ects like Kobe’s new expressway rather than to small-business owners has contributed to the problem, but the time-consuming and difficult requirement of getting approval from every owner, landlord, and renter of a property before rebuilding is the main culprit.

Although most apparent in Kobe, the inefficiencies of Japan’s real estate laws affect the entire nation. The country’s strong tenants laws, including squatters and debtors rights, have exacerbated Japan’s bad-loan crisis and slowed its clean up.

Legislators are aware of the myriad problems but aren’t about to change any laws. As a Kobe property lawyer put it, “When it comes to tenants rights, Japan is still mobilized for war.” But the real victims are the little people, the ones the original laws were meant to protect. One Kobe beautician, who had her own shop before the quake, now lives and works out of a corrugated-aluminum shack. She’d love to open another salon but worries that with the current property laws and squabbling, her dream may remain just that.

A. B

Posted in Regulation | Leave a comment

Book reviews Libertarians miss holistic nature of society

Posted on June 21, 1997 by urbanrenaissanceinst

Tom Flanagan
David Boaz
June 21, 1997

(Free Press, 1997. 314 pages) $31

POLITICS IN MODERN DEMOCRACY is organized around a left-right axis. Other axes may represent ethnic, religious, or regional cleavages, but the left-right spectrum is always present. Parties on the left, whether called liberal as in North America or social democratic as in Europe, advocate a mixture of economic interventionism and social liberation. Parties on the right, usually called conservative, stand for a reverse mixture of free market economics and social restraint.

Some observers, such as Reform leader Preston Manning, think that the left-right spectrum is out of date and should be discarded. Others criticize it for being internally inconsistent. They find it illogical for liberals or socialists to favor government control of people’s economic decisions (rent control, utility and transit monopolies) while simultaneously extending personal freedom in other spheres (abortion on demand, legalized pornography). Similarly, they find it illogical for conservatives to insist on economic freedom (privatization, deregulation) while also demanding social conformity (school prayer, public decency).

The consistency critics seem to have a point. If we distinguish between economic and social policy, there are not just two but four possible ideologies: liberalism, conservatism, libertarianism, and authoritarianism. Authoritarians and libertarians are consistent: an authoritarian would favor more government intervention in social and economic affairs, while a libertarian would oppose government intervention in both.

In the table below, the current political spectrum of muddled alternatives (liberalism versus conservatism) lies along one diagonal, while the different spectrum of internally consistent alternatives (libertarianism versus authoritarianism) lies along the other.

Eloquent new books by American think tankers Charles Murray of the American Enterprise Institute and David Boaz of the Cato Institute expound the libertarian alternative. As both authors freely admit, libertarianism is but a new label for the so-called classical liberalism of philosophers like John Stuart Mill. The starting point for both Murray and Boaz is the “one very simple principle” that Mill asserted in On Liberty, “That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.” Or, as Boaz paraphrases Herbert Spencer’s law of equal freedom, “Individuals have the right to do whatever they want to, so long as they respect the equal rights of others.”

Murray and Boaz apply this principle relentlessly to the issues crowding the American public policy agenda. They would do away with virtually all government programs and services except for law enforcement and national defence, which would also be substantially trimmed back. They are at their best in showing the welfare state to be inefficient, ineffectual, and even counterproductive. Public education has become steadily more expensive as scores on standardized tests have fallen. Massive increases in public spending on health care haven’t affected the trend for improvements in longevity. The rising economic opportunities for racial minorities didn’t accelerate with the creation of a heavy-handed human-rights apparatus.

As an alternative to government services, libertarians put their faith in nonprofit organizations to channel people’s charitable impulses, in profit-seeking ventures in the economy, and in greater mutual care among family and friends — what their hero, economist Friedrich Hayek, called the “spontaneous order” of civil society. We will all take greater personal responsibility for supporting ourselves and our families, raising and educating our children, looking after aging relatives, helping friends in their time of need, contributing to community projects. To Murray, this is “the stuff of life.” To replace passive consumption of impersonal government services with personal production is not a burden but an opportunity.

Indeed, personal responsibility is a key theme in all of this. People will not rise to the challenge of civil society if government removes the challenge. They will not save to educate their children or to support their own retirement if they expect government to offer free public education and pay universal pensions. It is telling that Murray, who favors the legalization of all drugs, would not carry out that policy until the welfare state withers away, making it impossible for people to avoid the consequences of their own choices.

Although I consider myself a conservative, I like to read a libertarian book every year or two; and whenever I do, I find myself teetering on the brink of libertarianism. But I always catch myself before I jump. While I endorse completely the libertarian critique of economic interventionism, I find libertarian social theory, though tempting and persuasive in parts, ultimately unconvincing.

First, the persuasive bits. I agree wholeheartedly with Murray and Boaz, as well as other libertarians such as Milton Friedman and Thomas Szasz, with legalizing drugs; the war on drugs, like the prohibition of alcohol earlier in the century, has been a costly fiasco. And I further agree that conservative preoccupations would disappear if government stopped providing services. Questions about school prayer or the moral content of the curriculum would hardly arise without a public monopoly on education that prevents parents from picking the type of school they want for their children.

But how far can we push freedom of contract? Boaz wants to resolve the debate about homosexual marriage by getting the state out of marriage altogether, except for enforcing whatever contracts of cohabitation people choose to sign with each other. Men and women, gays and straights, would draw up their own agreements and call themselves whatever they wished. Appealing? Perhaps. But are we ready for polygamy, plus assorted varieties of group cohabitation? And what about support for children and discarded mates?

The libertarian emphasis on self-ownership, property rights, and freedom of contract misses the holistic nature of society, which Edmund Burke called “a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born.” Libertarians typically (mis)conceive society as the result of conscious choice — hence the great metaphor of the social contract — rather than as the ongoing network of relationships transcending the generations. Individuals do not create society; more accurately, a certain course of social evolution has created the individual. Though Hayek wrote at length on this issue, contemporary libertarians never cite those parts of his work.

AT THE HEART OF THE DEBATE is the concept of public goods, and who should pay for them. Libertarians rightly argue that many so-called public goods can be, and have been, supplied perfectly well by the market or by the nonprofit sector of civil society. Lighthouses —- the economics textbooks’ most beloved example of a public good because the light shines on all ships within the line of sight — were built and maintained by both private entrepreneurs and philanthropic organizations long before government got into the act, the necessary revenues easily raised by collecting harbor tolls. But the fact that liberals and authoritarians have exaggerated the number and extent of public goods does not mean that no public goods exist — a point that both Murray and Boaz admit, at least in theory.

The moral code and social fabric of a community have the characteristics of public goods. They are valuable because they guide us on how to act in ways both large and small. They are intrinsically public because they involve imitation; thus our actions always “spill over” (to use the jargon of economics) onto others, even if they do not cause the sort of assignable harm that John Stuart Mill had in mind.

Like libertarians, many conservatives see the social order as largely self-generating and view the need to keep government from undermining it as the single most important priority. Nonetheless, governments are at times necessary to uphold essential social norms. It is not “social engineering” to use tax policy to reinforce the role of the natural family in the social order or to use police power to prevent public displays of degrading sexual practices. Even Mill took the concept of public decency for granted. He would never have tolerated, to take a current Ontario example, topless women on public streets, though he certainly would have defended private clubs for nudists.

Though libertarianism is a fascinating intellectual construction, it ultimately fails by basing everything on the single value of individual freedom. Perhaps that is why consistent libertarianism has never become the ideology of a successful political party: The small libertarian parties in Canada and the United States are nowhere near coming to power, or even electing legislative representatives.

Boaz foresees the liberal-conservative axis replaced by a libertarian-authoritarian axis in which “the statist conservatives will find themselves aligned with the social democrats as defenders of political society against civil society, a trend that has already begun with the protectionist Buchanan movement and the growing tendency among conservatives not to limit government but to use it to impose conservative values.” Time will tell, but I remain skeptical. I see Patrick Buchanan as a temporary, albeit irritating, phenomenon rather than as the harbinger of powerful mass movements to come.

Political conservatism — the alliance between free marketers and social traditionalists — and political liberalism — the alliance between economic interventionists and social liberationists — are not as logically inconsistent as libertarians and other critics believe. A recent book by the linguist George Lakoff, Moral Politics: What Conservatives Know That Liberals Don’t, shows the deep coherence of both conservatism and liberalism. Each has its own vision of the family, which it generalizes to the society and state. The conservative worldview is based on the “strict father” model, the liberal worldview on the “nurturant parent,” and each elaborates a moral code supported by public policies consistent with that code. The free market and traditional morality go together as ways of life, as do economic interventionism and personal liberation through self-fulfilment.

Libertarianism can never be more than an intellectual system, appealing to the few who value logical consistency above everything else. Libertarians who want to have any influence on the real world will have to throw in their lot with either liberals or conservatives. At the end of the day, most libertarians will see they have much more in common with conservatives than with liberals.

Responses to Tom Flanagan’s review

Nate Hendley, North York, Ontario, responds: July 17, 1997

While I enjoyed your well-written article, “Libertarians miss holistic nature of society,” I thought I would point out what appeared to be one error in your piece.

You stated: “The small libertarian parties in Canada and the United States are nowhere near coming to power, or even electing legislative representatives.”

In Canada, both the former and latter are true.

In the United States, only the former is correct.

I offer this paragraph of a July 6, 1997, article in the Washington Post:

“The Libertarian Party is the third-largest political party in the United States. Since it was founded 25 years ago, it has fielded a presidential and vice-presidential candidate in every presidential election. In 1992 and in 1996, Libertarian candidates for president and vice-president were on the ballot in all 50 states. Libertarians have been elected to state legislatures in Alaska and New Hampshire, and more than 190 are serving in public office in the United States.”

Otherwise, a finely written review.

Terry D. Klarr responds: August 16, 1997

It was with much interest that I read your book review: I’m a self-identified libertarian.

One passage gave me sufficient pause to write: “Nonetheless, governments are at times necessary to uphold essential norms. It is not ‘social engineering’ to use tax policy to reinforce the natural family in the social order . . .”

It sure looks to me like “social engineering” — presumably you call it “upholding essential norms.” If taxpayer A is subject to a higher tax rate than taxpayer B in the name of reinforcing the natural family, A is being socially engineered out of an inordinate proportion of his earnings. As a libertarian, I would reduce A’s tax rate to the level of B’s tax rate. Apparently you offer no remedy to A, although I suppose some conservative, in the name of reinforcing the natural family, might propose a government subsidy of matrimonial agency for A and similarly situated taxpayers.

Also, whom do you propose be the arbiter: Who is to determine which norms are truly essential and which are merely desirable? Many things which are desirable have been elevated in the individual and the collective consciousness to the level of needs: Where do we draw the line, and how do we prevent the process from running amok?

Andrei Kreptul, Edmonton, responds: October 16, 1997

Professor Tom Flanagan’s book review (Summer 1997) shows how conservatives constantly misinterpret libertarians. Many conservatives reject libertarians’ belief that government should not protect and enforce social norms, and they see libertarian political parties as failures in North America. Unfortunately, these misguided criticisms scare off many thoughtful Canadian conservatives like Professor Flanagan from the libertarian camp.

Libertarians and conservatives primarily disagree over social freedoms. While Professor Flanagan “endorses completely” libertarian views on economics, he finds the social theory “ultimately unconvincing,” pointing to various cohabitation arrangements and public indecency that can result from libertarianism. He wants government to enforce social norms through public policies that “reinforce the role of the natural family” and “prevent public displays of degrading sexual practices.”

But why agonize over gay marriage and public indecency? Some communities within civil society may allow them, while others wouldn’t. It would all depend on the rules every individual member of these communities consents to. As a result, taking personal responsibility for one’s actions and being able to trust other people becomes vitally important. Regardless of what it may think, the government’s only true role is to protect the rights of individuals to pursue their ends without violating the same rights of others.

The conservative desire to protect against a creeping, anything-goes morality is certainly admirable. However, it denies the abilities of communities to develop rules and traditions, enforced by governments based on the consent of free individuals. Unlike conservatives, libertarians distinguish between the ideas of government (formed by voluntary consent) and those of the state (formed by the threat of force). Some of the most radical, cutting-edge libertarian work today involves thinking about concepts like law, morality, government, and justice without the involvement of the state. Sound crazy? In today’s political discourse, absolutely! But there was a time when the fall of communism and the reduction of the federal deficit sounded pretty off-the-wall, too.

Professor Flanagan contends that “the libertarian emphasis on self-ownership, property rights, and freedom of contract misses the holistic nature of society.” What holistic nature? The whole theme of the 20th century was to work toward achieving a holistic nature of society. Look how miserably the Nazis and the Soviet Union failed to meet this challenge (not to mention countries like Great Britain, Sweden, New Zealand, the United States, and Canada, albeit to a much smaller degree!).

A holistic society would, by its very nature, involve state planning to define exactly what it should look like. Without self-ownership, property rights, and freedom of contract, human beings do not have much left to protect themselves against the arbitrary power of the state. A society based on liberty is merely a flexible and adaptable framework that promises only to provide people with the opportunity to achieve their own ends by any lawful means.

Professor Flanagan describes society as an “ongoing network of relationships transcending the generations,” quoting Edmund Burke, the 18th-century philosopher that both libertarians and conservatives claim as their intellectual hero. But the real question is: How did this network emerge in the first place?

Libertarians realize that civil society comes of individuals needing to interact with, and depend on, others for their own survival and development. These voluntary interactions lead to the creation of many diverse communities with their own rules of conduct. In his book, David Boaz argues that “as individuals combine in countless ways, community emerges . . . of free individuals in voluntary chosen associations . . . not because anyone plans it . . . but because it must. To fulfill their needs and desires, individuals must combine with others.” Boaz sees the idea of community as “a series of intersecting circles, with myriad complex connections among them.” In other words, civil society functions in a multidirectional way, not in a holistic way.

Professor Flanagan believes that a political philosophy must have “its own vision of the family, which it generalizes to the society and state,” along with a “moral code supported by public policies consistent with that code.” Just because libertarians favor living in a society without a moral code enforced by the state does not mean that libertarians favor rampant immorality or chaos. After all, what influence do individuals have if their visions of family, society, and state are not consistent with the moral code as determined by the state? Unlike all types of statist thinkers (modern liberals, socialists, and yes, even conservatives), libertarians neither claim that there is one, unified, harmoniously functioning society nor that there should be. The focus for society should not be to what end, but rather, by what process or by what means.

Professor Flanagan dislikes libertarians’ focus on ideological consistency. Libertarians do not harp on consistency for the sake of being consistent but because modern liberals, conservatives, and authoritarians, in varying degrees, favor state action to arbitrarily determine just how economically or personally free every individual in society ought to be. Although libertarians desire more personal freedoms and freer markets, they don’t make freedom an absolute value. But, libertarians do believe that individuals should give up their freedom voluntarily, by consenting to obey the rules that govern them.

Conservatives complain that libertarians don’t win elections. On a moral level, this might be because libertarians are all too aware of Lord Acton’s great statement: “Power tends to corrupt and absolute power corrupts absolutely.” By getting too immersed in the political game, maybe libertarians are afraid of compromising their core philosophical principles.

Clearly, the Libertarian party has failed to gain any serious political support, largely because the Republican party in the U.S. and the Reform party in Canada stole libertarian ideas for their economic platforms. However, as any good political operative knows, selling a party’s ideas to voters takes time. It took conservatives 50 years of political commentary, punditry, and think-tank building before their influence as a political force peaked with the election of Ronald Reagan in the 1980 U.S. presidential election (with a little help from libertarians, of course!). For Professor Flanagan to say that libertarians should “throw in their lot with either liberals or conservatives” if they want any influence on shaping public policies is a little premature.

Given the divisions with conservatives on social issues and technology’s role in making government programs more obsolete by the minute, libertarians could soon be inspired to ditch the coalition process and build a more ideologically cohesive political movement. The fact is that libertarian ideas have not been put through the tough political ringer yet. As the 21st century approaches, Generation Xers will continue to take over positions of political power. If the opinion polls are any indication, they will be much more receptive to libertarian thinking than their ’60s generation parents.

Perhaps the best way to illustrate the real differences in conservative and libertarian philosophy is to hear the opinion of a Nobel Prize winner. In his essay “Why I Am Not a Conservative,” the late Austrian economist and social philosopher, Friedrich Hayek, observed that the conservative “has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the co-existence of different sets of values that makes it possible to build a peaceful society with a minimum of force. The acceptance of such principles means that we agree to tolerate much that we dislike.” No one could have said it any better.

Tom Flanagan replies

I can’t hope to deal with all of Mr. Kreptul’s comments, which make up an essay at least as long as my original book review. Let me simply clarify what I mean by the phrase “holistic nature of society,” to which he takes exception.

Human society has a double character. In one sense, it is a multidirectional network of voluntary associations, exactly as Mr. Kreptul describes. That’s what is usually meant by the phrase “civil society,” and I heartily endorse it. But human beings also perceive society as an entity possessing both territorial and social boundaries, as well as a directing authority. Working from the natural family as a template, we construct larger political communities such as the tribe and nation. Let me call this phenomenon “political society,” to distinguish it from Mr. Kreptul’s “civil society.” Whereas civil society institutionalizes exchange and voluntary association, political society institutionalizes authority and compulsory membership.

Libertarians find political society unattractive, and indeed it is in many respects. But it is an irrepressible outgrowth of human nature. As social animals, we evolved within societies based on hierarchy, authority, obedience, and boundary formation.

Those who are genuinely concerned about freedom and individualism must come to terms with this aspect of our nature; it cannot be wished away. Even though I share all of Hayek’s reservations about conservatism, I still think it expresses a dimension of human nature that libertarianism overlooks. That is why I prefer to call myself a conservative rather than a libertarian.

Mr. Hendley is correct in that the Libertarian party has had some modest success in state and local elections in the United States. However, that does not affect my point that libertarians everywhere in North America are a very long way from real political power and have no real likelihood of obtaining it.

In response to Mr. Klarr, today’s income tax regime in Canada is clearly weighted against the natural family. Two illustrations will suffice. First, except at low income levels, it gives no consideration to children. A married couple with four children and an income of $100,000 a year will pay the same income tax as a married couple with the same income and no children. This obviously discriminates against those who undertake the expense of having children, without which society will not continue. Second, the tax system treats single-income families less favorably than two-income families. A family with one breadwinner earning $100,000 a year will pay substantially more income tax than a family with two breadwinners earning $50,000 each. This obviously works against families in which one parent wants to stay home with the children. I hope that Mr. Klarr and I could agree that, in the present Canadian context, using tax policy “to reinforce the natural family in the social order” would mean nothing except levelling the playing field — something he should want to support.

Posted in City states, Culture | Leave a comment

Presentation to Metro Licensing Commission

Posted on June 6, 1997 by urbanrenaissanceinst

Lawrence Solomon

June 6, 1997

Thank you for giving me the opportunity to address you this morning.

I am Lawrence Solomon, Executive Director of Consumer Policy Institute, a division of Energy Probe Research Foundation. Our foundation is a federally registered charity with some 40,000 supporters, a quarter of them in Metro. We receive no funds from any interests associated with the taxi industry; the bulk of our funding comes from our supporters and other charitable grant-giving bodies.

This commission finds itself in a very difficult position. The actions of previous commissions have created a system in which the public suffers because there are too few taxis on the road, and those that do exist are often in poor repair and able to charge customers the same amount as a well maintained taxi.

In this system, taxi drivers also suffer because the shortage of vehicles creates a relative surplus of taxi drivers. This artificial surplus drives down the compensation that taxi drivers earn.

Under the current system, even the plate holders suffer — not so much from immediate hardships but from insecurity. Owners know they’re living on borrowed time, that they’re operating in a grey area of the law, and that their business could come crashing down on them.

They also know that your decision to tighten or relax the number of plates in circulation can cause large swings in the value of a plate, and those who bought high and sold low have been burned.

The Metro Toronto Taxi Drivers Association believes that the owners are profiting unfairly from the current system, and it points to the very large return on capital that the owners get for their investment in plates.

But I disagree with the claim that the owners’ return is unfair. For the same reason that an investor in a very risky bond demands a high return to compensate him for the risk that the bond may be devalued or even become worthless, plate holders require a very high return because the plate may be devalued or even become worthless. Plate holders are high risk players with a large upside and a large downside. This commission is the source both of their potential upside and of their potential downside.

The commission can take several steps to change the game by reducing the costly risks involved. The beneficiaries of doing so will ultimately be not just the public but the entire taxi industry, although companies that are not competitive may well be losers in the transition.

The commission should adopt a firm and transparent policy of greatly expanding the number of taxis in Metro, perhaps at the rate of 5 to 10 per cent per year for 5 years, following which the commission should grant, as of right, a taxi license to any qualified driver. At the same time, the commission should encourage taxis to advertise fares other than the posted fare, to foster competition within the taxi business on the basis of price and service.

If these recommendations are adopted, the public will be an immediate winner through the availability of more cabs on the road, and through a better choice of services delivered at differing prices.

Drivers will also be immediate winners. Because there will be extra cabs on the road, the cost to rent a cab will drop. And because consumers will have additional options, including lower fares, people will take cabs more often, greatly increasing the volume of business in the taxi industry.

Under our proposal, owners would have 5 years to adjust to change, during which the value of plates would steadily drop and then become worthless. To soften the transition for them, I recommend that all, or virtually all new licenses go to the existing plate holders.

I also recommend that the MLC establish a compensation fund to be used in cases involving hardship or inequity. Our study, which I believe you all have, describes the inefficiencies caused by taxi stands. To reduce these inefficiencies and further help owners adjust, the MLC could meter taxi stands over the next five years, and then after this transition period sell the taxi stands. All proceeds from the metering and the sale could help compensate owners.

But no one should assume that the taxi companies operating in Metro today will necessarily lose out once the taxi industry becomes fully deregulated. I have studied the history of many regulated industries, including electricity, gas, water, and public transit, and in every instance, following deregulation the industry expanded dramatically, with the newly deregulated companies often prospering to a much greater extent than before.

Toronto has a serious problem today in the taxi business, and any transition to an open taxi system will be thorny. But for the benefit of all the stakeholders in the taxi industry, not least of all the consumers, the sooner that clear and unambiguous rules are laid out, and the sooner the industry deregulates, the better.

Thank you.

Posted in Transportation | Leave a comment

PUTTING CUSTOMERS FIRST – Taxicab Reform in the Greater Toronto Area (GTA)

Posted on March 31, 1997 by urbanrenaissanceinst

David Carr

March 31, 1997

PUTTING CUSTOMERS FIRST

Taxicab Reform in the Greater Toronto Area (GTA)

PART ONE

Analysis of the Problems

I. Introduction

Urban transportation is one of the last transport monopolies to confront the customer-driven challenges of a competitive marketplace. In most cities, the public’s flexibility to move freely on a competitive urban transit system has been compromised by the inefficiencies of the local government’s monopoly service provider, and by a complex regulatory framework that discourages innovation and prevents safe private sector alternatives.

Freedom of movement, and the freedom to pursue a respectable living in a chosen field, should be the right of every individual, yet these freedoms have been limited by self-interest and obliging government bureaucracies since the turn of the century. Authorized jitney transport, for example, has been all but banned in North America since the mid- to late 1920s. Jitneys are taxicabs that run on fixed routes and can be hailed by passengers. They often accommodate up to 10 people as opposed to the six that regular taxicabs are allowed to carry. Jitneys are so named because the fare was at one time a “jitney,” which was slang for a 5-cent piece. Jitneys operate today in at least one Canadian city, several small American cities and a number of European cities.(1)

Unfortunately, the regulatory process is gradually taking the freedom of movement and the right to pursue a respectable living away from society’s most vulnerable people, through restrictions in their choice and opportunity. W.T. Stanbury, an economist specializing in the impact of co-redistribution through regulation, estimates that approximately 20 per cent of Canada’s economic output, including taxicabs, is subject to some form of direct economic regulation.(2) For the United States, Inc. magazine points out that approximately 10 per cent of all jobs requires some form of licence, and that many of those jobs are low-skill, entry-level occupations such as taxicab driving, working as a street vendor, cosmetology, trash hauling, and recycling.(3) A similar analysis has not been done in Canada, but given our tendency to regulate coupled with the fact that all of the industries in Canada listed in the Inc. article are either regulated or government owned, it is reasonable to conclude that the number of regulations that are a barrier to low- income and unemployed Canadians is equal to, if not greater than, the number in the U.S. Nothing illustrates that point more than the taxicab business in Metropolitan Toronto and surrounding communities that, together, make up the Greater Toronto Area (GTA).

In most Canadian cities, a competitive taxicab industry remains a local or provincial government sanctioned illusion. The business, whose customers are disproportionately those less well off (because limited financial resources often prevent the ownership and operation of a motor vehicle), is one of the last transportation industries to be opened up to a deregulated environment. Tight control on taxicab supply and government-set tariffs have resulted in consumers paying an exaggerated price for a stale and uninspired service. In his 1982 paper, The Taxi Industry and Its Regulation in Canada, Benoit-Mario Papillon points out that most regulations governing the taxicab industry “pushes up the cost of taxi service in Canadian cities [studied] by 30 to 50 per cent.”(4)

By 1987, in Metropolitan Toronto specifically, taxicab regulation (which includes tight controls on supply and price) had resulted in a price for service approximately 25 per cent higher than if the market was unregulated.(5)

Taxicab regulation discriminates against single mothers, low- and fixed-income wage earners and the physically disadvantaged by reducing supply in their neighbourhoods and making the product uncompetitive and unaffordable. Taxi regulation also acts as a barrier for displaced workers, recently arrived immigrants, and people on welfare who would prefer a hand-up rather than a handout to become economically self-sufficient in an easy-entry, low-cost business. Although government is cutting back on the handout in the form of reduced unemployment insurance and welfare pay-outs, it is hindering the hand-up by retaining unnecessary regulations that only serve to absorb tax dollars and act as a barrier to individual entrepreneurship.

Finally, current restrictions on vehicle supply is limiting the number of opportunities that postsecondary students have in order to pay for rising tuition fees during a period of high youth unemployment and tighter control and eligibility requirements for student loans.

A truly competitive taxicab industry that promoted the use of jitneys and other alternative transportation services would give all members of society greater public transportation options and business opportunities in an age of slashed government budgets, urban transit service cuts, and congested city roads.

This study, while commenting on the economic effects of regulation on the taxicab industry in general, primarily focuses on the Greater Toronto Area (GTA), with particular emphasis being placed on the Corporation of Metropolitan Toronto and the proposed amalgamation of the five cities and one borough that will make up the new City of Toronto.

II. Evolution of taxi regulation

The taxicab is the most immediate and flexible of the so-called paratransit vehicles. Paratransit is a term given to small passenger transport vehicles that operate informally on a fare-paying basis. Paratransit vehicles represent the median between the personal convenience of the private automobile and the dedicated route structure of public transit.

In most cities, taxicabs cruised the streets in an unregulated, free market until the 1930s, when car prices and wages tumbled, and transit systems and established taxicab companies were confronted by cutthroat competition from struggling, unemployed workers who saw the low capital, easy-entry characteristics of taxicab driving as a way of maintaining a livelihood.

According to a report by the U.S. Federal Trade Commission, pressure to regulate the taxicab industry was not stimulated by the public interest, but by limited self-interests. “Pressure for restrictions on the taxi industry came from the American Transit Association, public transit firms, established taxi fleets, and the National Association of Taxicab Owners (which passed a resolution favouring entry and minimum fare controls).”(6) According to figures released by the Federal Trade Commission, an estimated 43 out of 93 U.S. cities with a population of more than 100,000 had restricted entry into the taxi industry by 1934.

Taxicab regulation in Toronto and other Canadian cities

In major Canadian centres, taxicab regulation has evolved much as in the United States. In the 1920s, privately owned streetcar companies, fearful of increased competition, successfully pressured Toronto city council to ban jitneys, arguing that such form of transportation would worsen congestion on already inadequate roads. Existing taxicab owners were also successful in eliminating competition from new entrants by convincing council to regulate the supply of taxicabs on city streets. Council said that regulation was necessary because taxicabs were a public service.

A proliferation of regulation took place in the 1930s and was based on the same economic and anticompetitive arguments. The Manitoba Legislature argued that taxi transport was a public service similar to electricity, telephone, and mass transit monopolies when it limited the supply of taxicabs in Winnipeg in 1935.(7)

In 1937, Montreal city council based the need for taxi regulation on congestion caused by an unnecessarily high number of taxis. Regulation would also address the low incomes of taxi operators, which city council believed was caused by excessive competition. But Montreal relaxed its restriction on supply in 1946, following complaints by taxi users “tired of being unable to obtain a taxi by telephone,” and a subsequent report by J.O. Asselin, chairman of the city’s executive committee, that disputed the earlier rationale. Asselin reported that complaints about an excessive number of taxis came “primarily from those working in the industry,” while low wages were a product of the Depression.(8)

Immediately after council relaxed regulations on supply, the number of Montreal taxicab licences exploded from 765 to 4,280. Council restored limits on taxicabs in 1952, and taxi regulation in Quebec became a provincial government responsibility in 1973.

Creation of the Metropolitan Licensing Commission

In 1956, the recently created Metropolitan Toronto regional government set up the Metropolitan Licensing Commission. The Commission has licensing authority over a wide range of local businesses, including local taxicab supply and tariffs.

The taxicab industry is a public service insofar as its function is to pick up members of the public at the customers’ point of convenience and transport them to their destination of choice in exchange for payment. Therefore, a limited amount of regulation is necessary to ensure the safety of the passenger, and to protect surrounding vehicular and pedestrian traffic. Such regulation should cover driver qualifications, vehicle insurance requirements, and vehicle maintenance standards (including compulsory equipment for the purpose of safety). A licensing commission must have the power to revoke a licence if a driver or taxi company is in violation of basic regulations. But most municipal and provincial (or U.S. state) licensing commissions have extended their authority by imposing regulations on taxicab supply, boundaries of operation, driver behaviour, and price.

Excessive regulation has benefitted existing participants in Canada’s taxicab industry. Fixed pricing, jurisdictional restrictions, and closed entry have resulted in a transfer of wealth from the customer to the producers in the industry.

III. Protecting a stale industry

The shape, size, and mechanics of the Toronto taxicab have altered significantly since the early 1900s when established taxi companies used a willing city council to discourage competition. Market potential — although weakened by the economic downturn of the early 1900s — has flourished over the last 10 years. Public awareness and tougher enforcement of drinking and driving legislation, higher automobile operating costs (including insurance), congestion, increased tourism (who, along with business travellers, make up the so-called “floating population”), and greater use of the taxicab as an intercity courier service by the business community have increased demand and created new opportunities for entrepreneurial cabbies prepared to seize the initiative. Little else, except for the fortunes of established taxi companies, has changed since the Metropolitan Licensing Commission took control of the industry in 1956. As a result, consumers are overpaying for an underperforming industry characterized by lengthy waits for unclean vehicles, operated by substandard drivers.

Commandeering a taxicab is a universal practice, where the customer is given three basic choices:

  1. To telephone an order;
  2. To secure a taxicab at a nearby taxi stand; or,
  3. To hail a cruising taxicab on the street. 

The following describes the three options for securing a taxicab in the GTA, and how excessive regulation has severely compromised the distinct competitive advantages of each practice.

Telephone orders

The telephone gives a customer the greatest advantage in terms of convenience, flexibility and competition. The vehicle is requested to show up at a precise location 24 hours a day. The customer has exclusive control over the company he will patronize. The percentage of on-time arrivals will vary according to the time of day, weather conditions, and location, but the option of cancelling an order and contacting a rival taxicab service rests with the customer.

The telephone order already gives a customer the convenience to preselect a taxicab based on personal criteria and past experience (on-time performance, knowledgeable drivers, cleanliness of vehicle), although service even among operators driving for a specific cab company is not consistent. Because of price controls, the telephone user is denied the added value of shopping the market on the basis of price.

Taxi stands

Taxi stands originated in 17th-century London as spots where customers could find horse-drawn hansom cabs bidding for their business based on price and service. If competition at the stand was too fierce, the cabbie would patrol the streets of London for custom.

Properly managed, a taxi stand should be a model of efficiency in the taxicab business, resulting in fast turnarounds, with clean vehicles and price competitive rates attracting customers, and, to a certain extent, helping to set spot-market rates for nearby cruising cabs (see Cruising taxicabs). Instead, most taxi stands are a subsidized haven for the most inefficient taxicab operators.

There are three key reasons taxi stands in an overregulated and protected environment such as Metropolitan Toronto do not work:

Lack of incentive: Metropolitan Toronto provides arterial roadway to the taxi industry free of charge for the purpose of maintaining taxi stands. Unlike a private car owner who must pay a meter in advance of parking time estimated (and risks a fine if the time parked exceeds time available on the meter), the taxicab operator pays nothing for taxi stand space, thus eliminating the incentive for fast fare turnarounds. The City of Toronto has reserved three prime taxi stand locations (including the stand in front of Union Station, the city’s VIA and commute rail hub), for drivers who are veterans of the Second World War. These spots are now being used by drivers who did not serve in the Second World War, but maintain ownership of those spots through informal arrangements with veterans.

Industry intimidation and unwritten rules: Most customers approach a taxi stand under the misconception that they must take the first vehicle in line. In reality, customers may select any taxicab they chose, although the linear design and approach to the stand makes vehicle exiting difficult, and too many drivers are more interested in preserving an unwritten rule of first in, first out, through intimidation and outright refusal to transport a customer. Neither the industry nor the Metropolitan Licensing Commission that regulates it have shown much interest in protecting the customer’s right of choice through information and enforcement.

System weighted to promote inefficiency: The first two reasons have conspired to create a third; a network of inefficient taxicab operators who use the taxi stand as an opportunity to sit in their vehicles and wait for business to come to them. By encouraging such abuse, the current system of no charge taxi stands permits an oversupply of poor drivers, thus forcing more ambitious drivers, who would likely use a taxi stand as a competitive tool of business, out of the industry.

Cruising taxicabs

 

The cruising taxicab participates in a fluctuating market, in which the customer’s decision to take a cab is often impulsive, and in which the main concern (particularly when weather or time is a factor) is availability of supply rather than price, age, or cleanliness of the vehicle. Price regulation that enforces a flat fee fails to recognize the full asset value of a service at certain times of the day. Regulatory authorities such as the Metropolitan Licensing Commission claim that unregulated tariffs will lead to price gouging, and to congested city streets cluttered with taxicabs and customers bartering and arguing over fares. The criticism is reminiscent of earlier claims that city streets were not wide enough to support jitney traffic.

Cruising, which has been banned in several North American cities, has also become something of a red herring by opponents of taxicab deregulation in general, and unregulated pricing in particular. Many economists who specialize in price regulation dismiss the prospect of fare reductions, since customers who hail taxicabs tend to take the first available vehicle, meaning that drivers who discount fares are cutting into the revenues unnecessarily.(9)

Both criticisms reflect conventional thinking on the part of the taxicab industry and its regulators. There are, however, innovative methods to introducing price competition while giving customers upfront pricing information and guaranteed discounts. Such voluntary innovations could include posting a standard rate on the side of the door (compulsory in cities such as Washington, New York, and others), using a system of roof lights to indicate when standard, discounted, or premium pricing are in effect, and upgrading the taxi meter to allow the driver to enter an agreed upon per kilometre tariff or flat fare. In a deregulated market, such suggestions should be implemented at the discretion of the taxicab or fleet owner to attract new business.

IV. Licences

For two legitimate reasons, the bulk of the taxicab industry (fleet owners and independent taxicab operators) opposed open entry and increased competition; price controls have artificially shrunk the market below its full potential and inflated the value of the licence (referred to in this study as the plate) that authorize a holder to provide a taxicab service.

The Metropolitan Licensing Commission charges $4,500 for a plate, which has a current open market value of approximately $85,000. The open market value of the plate reflects the conditions of the market compared with the number of licensed taxicabs on the road. In 1979, for example, the market value for a Metro plate was $30,000, compared with a market value for that same plate in 1987 (the height of 1980s mass consumption and consumerism) of $105,000.

For a first time applicant and potential entrepreneur who wants to invest time and money in the Metropolitan Toronto taxi industry, the average waiting period for a plate is approximately nine years. A successful applicant must purchase any additional plates on the open market.

Taxicabs, as previously noted, should be a low-cost, easy-entry business. But because of control on supply and the resulting waiting list, the potential entrepreneur is left with two immediate options:

  1. To rent a vehicle, thereby increasing the capital value of a plate for the cartel of current owners; or,
  2. To purchase a plate on the open market. 

The rental of a vehicle further demonstrates the inconsistency of price regulation, and how fleet owners and lessees stand to benefit from regulation. While Metro sets tariffs, it has no corresponding regulation on what an owner may charge an operator to rent his vehicle, thereby ensuring that what limited deregulation exists in the industry benefits the taxicab owner at the expense of both the vehicle contractor and the customer. (Although this study identified Metropolitan Toronto’s uneven pricing structure of regulated pricing versus unregulated vehicle leasing charges as a problem for both the customer and the lessee under current market conditions, it does not recommend that the Metropolitan Licensing Commission should attempt to adjust the imbalance by introducing price caps on what a lessor may charge for his vehicle.)

Drivers who purchase a plate on the open market do so with the approval of the Metropolitan Licensing Commission (which makes an additional $4,500 per transfer). These drivers are investing in an artificial market where a capital gain (in addition to the estimated annual return of 15 per cent on the value of a plate) relies on the issuance of new plates not keeping pace with increases in the fixed and floating population (tourists, business travellers, and so on), and other changes in the marketplace. Price and supply restrictions mean that prosperity in the industry can only come from substandard and costly service to the customer.

If Metro were to switch to an open-entry system, the open market value of the plate would disappear almost overnight, resulting in financial hardship for those who had purchased a plate on the open market as a consequence to the licensing commission’s control over supply.

In any attempt to change the status of the GTA from a closed market to an open-entry system, the plate and the compensation for owners will be the biggest obstacle. The issue must be discussed thoroughly and handled appropriately to ensure a smooth overnight transition.

The plate is, in fact, the property of Metropolitan Toronto, and the Metropolitan Licensing Commission reserves the right to revoke it. Those who purchase a plate on the open market, do so with the knowledge that possession does not equal ownership in this instance. But because of controlled entry, the plate has evolved into a necessary business investment for many taxicab owners, similar to capital assets in a fixed business location.

By controlling supply while allowing for an open market resale of existing plates, the Metropolitan Licensing Commission has developed an uneven playing field among plate holders that greatly benefits owners who purchase their plate from the commission, while exposing those purchasing plates on the open market to great risk. Based on a $4,500 licence fee and a current open market value of $85,000, a taxicab owner who purchases a plate from the commission has a no-risk opportunity to realize a 1,800 per cent return on his asset if he sells the plate at market value after an obligatory three-year holding period. The owner who purchases that same plate on the open market, assumes all the risk since control of the market and ownership of the plate rests exclusively in the hands of the Metropolitan Licensing Commission.

In a normal business environment, risk would often be assumed by the investor. But regulation has made the taxicab industry anything but normal, and control over supply has created an environment where exposure to high risk over the plate is unavoidable if the owner wants to be in business or expand his business to include more vehicles. The commission can decide to increase vehicle supply, introduce an open-entry policy (as is being recommended in this study), or ban the practice of open market resale without compensating the investment made by the open market plate holder.

Most Toronto plate owners bought their plates in good faith based on rules established by the Metropolitan Licensing Commission, and with the confidence that the current system would at least protect the value of their investment. For many owners, the value of the plate is security for retirement. It would be unfair for the City of Toronto to implement any new system that would significantly devalue the worth of a plate without offering appropriate compensation.

V. Discrimination through regulation

Canada’s overregulated taxicab system discriminates against women (who are frequent users of taxicabs as a safety precaution when travelling alone), the poor, and entry-level entrepreneurs who lack investment capital or a formal education. The regulations favour those with the most influence, in this case the taxi fleet owners and brokers. In his paper, The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto, Professor D. Wayne Taylor describes Metro’s regulated environment as a “producer protection hypothesis.”

“The producer protection hypothesis,” Professor Taylor wrote, “calls for regulation to be provided either to offset or prevent the effects of a competitive market situation, or to redistribute income from consumers to producers. The expected effects of this hypothesis are controlled or closed entry, inflated prices above marginal cost, price discrimination, lower quantities of goods produced, production inefficiencies and economic profits.”(10)

Because the Metropolitan Licensing Commission artificially limits the supply of taxicabs through a controlled-entry policy, consumers paid an estimated 13.5 per cent more for services in 1977 than they should have in an open-entry market. That represents a transfer of $8.1 million from the consumer to the producer. Ten years later, the situation worsened for the consumer. Metro taxicab users were paying 24.8 per cent, or $39.1 million, more than was necessary because of controlled entry. Had Metropolitan Toronto not controlled entry in 1987, a standard trip would have cost $4.90 instead of $6.52, and an additional 730 taxicabs would have been competing for business.(11)

Because low-income households often lack the resources to support a private automobile, they spend a larger proportion of their disposable income on taxis than high-income households, thereby bearing the brunt of the inflated price and the lower availability of vehicles. The underprivileged in Canada’s urban population are becoming increasingly dependent on taxicabs as cities sprawl and urban transit systems such as the Toronto Transit Commission (TTC) scale back operations in the downtown core to spread limited resources across a broader area.(12)

The traditional taxicab fare meter has been designed primarily for price-regulated markets where the tariff is set by the distance travelled. In Metropolitan Toronto, as with most jurisdictions, drivers are only permitted to negotiate a flat fare on trips that take them where the vehicle is licensed outside the Metro area, or to the airport. Once outside the licensed jurisdiction, drivers cannot legally pick up fares. The meter is a licensing authority’s preferred method of securing a price for service, and enforcing pre-set pricing regulations.

Metropolitan Toronto cannot have a competitive cruising market because there are not enough taxicabs to hail. Three thousand four hundred taxicabs, or approximately 1.6 vehicles per 1,000 residents, ply Metro streets.

U.S. experiences in taxicab deregulation show that cities with open entry have more than three times the number of cabs per capital than regulated cities.(13) And supply helps to control cost to the customer. For example, in New York City the number of so-called medallion cabs is limited to approximately 1.7 vehicles per 1,000 residents. The medallion refers to the metal numbered shield that is attached to the outside of each of New York City’s landmark, the yellow taxicab. (In Canada, the medallion is referred to as the licence.) An average four-mile fare in a licensed New York City cab costs approximately US$5.70. In Washington, D.C., where there is unrestricted market entry and approximately 13 taxicabs per 1,000 residents (the highest ratio in the country), the average four-mile fare costs approximately US$3.30.

New York City restricted open entry in 1937, but did not increase the original supply of 11,737 medallioned cabs for another 59 years. New York’s Taxi and Limousine Commission auctioned off 400 new medallions in 1996 as part of regulatory reforms that included a fare increase of 20 per cent (the first since 1990), and the banning of second-hand vehicles (wiping out the benefit of the increase for many New York City cabbies). As a result of demand greatly outstripping supply, a thriving, underground gypsy cab industry developed in the 1940s. The commission was forced to officially recognize gypsy cabs in 1987, as legitimate vehicles for hire. In theory, vehicles for hire cannot cruise for hailers, must rely solely on the radio dispatch, and cannot place taxi signs on the car roof except in Staten Island. But as writer Thomas G. Donland observes in Barron’s, rules governing vehicles for hire are observed mostly in the breach.(14)

Drivers of vehicles for hire can negotiate fares with the passenger, which makes them a favourite source of transportation for the telephone market and street smart, frequent cab users searching for the lowest price.

Ignoring the environment

Taxicab regulation too often works at cross-purposes from the environmental and conservation interests that various governments claim to support and promote. While governments encourage the use of car pools to reduce vehicle emissions and relieve pressure on crowded roads and highways, they refuse to re-introduce the car pool concept to taxicabs by allowing for shared-ride services. A shared ride allows a driver to realize greater efficiencies in his vehicle by picking up and dropping off passengers along a loosely defined route. Passengers willing to share a taxicab and accommodate a slight deviation from their route to drop off customers would benefit from a lower fare than if they used a taxicab exclusively. During the Second World War, drivers in Washington, D.C., created a hybrid between the exclusive cab and the jitney by displaying destination signs in their front window for passengers to hail a cab that was going in their direction.

In Metropolitan Toronto, the shared-ride concept is available for the disabled and seniors who qualify through the Toronto Transit Commission’s (TTC) Wheel-Trans service. But the curb to curb Wheel-Trans service, with its high labour and capital costs, is being reduced through government budget cuts at the same time that demand is increasing. Experiments in the U.S. have demonstrated that shared-ride taxicab service with vouchers for the disabled and low-income users (including seniors) will result in more people being transported at a lower cost.(15)

A shared-ride policy would also promote local transit and intercity commuter systems by feeding passengers into railway and subway stations and main bus lines — ironic, given that in the 1930s, private streetcar operators and public transit commissions pressured city councils to ban jitneys and shared-ride services. The shared-ride service also relieves peak demand on local transit systems. Not surprisingly, neither the TTC nor GO Transit have conducted studies into how their monopoly approach to service cutbacks could be softened by encouraging a more efficient and competitive taxicab industry in the GTA.

A second regulatory cause of vehicle inefficiency with an unnecessary consequence to the environment are jurisdictional boundaries that only permit a driver to transport a passenger from one city to another. The driver is prevented from picking up passengers while making the return trip, resulting in an empty vehicle releasing emissions into the environment, occupying road space, and resulting in a personal cost to the driver.

In Metropolitan Toronto, the biggest promoter of waste through jurisdictional restriction has been Lester B. Pearson International Airport, which is located in the City of Mississauga, but whose licences for fare pickups at Terminals One, Two, and Three (privately operated) have traditionally been issued by Transport Canada. Metro’s taxicabs can take fares into the airport, but cannot bring fares back into the city without risking a $100 fine. There are, however, no restrictions on airport licensed taxicabs (which are limousines) that transport passengers in and out of the airport.

The airport system, which encourages inefficiency through its taxi stand approach to business, serves neither the non-Transport Canada licensed taxicab operator, nor the airline passenger. The increase in licensed vehicles at Canada’s busiest airport has not kept pace with the increase in passenger volume. In cases where airport ground transportation managers (commissionaires) are confronted by a shortage of airport licensed vehicles, calls for non-airport licensed cabs are largely ignored because those vehicles must join the taxi stand queue and are forced to yield their place in line to any airport licensed cab that shows up.(16)

VI. The impact of proposed Metro amalgamation and the GTA

The January 1996 Report of the GTA Task Force (Golden Report) and the Ontario government’s proposal to amalgamate the five cities and one borough that form the Metropolitan Toronto Corporation will negatively affect urban transportation if reform is not a part of the amalgamation package.

The Report of the GTA Task Force has failed in areas such as urban transportation to recommend a market-driven model to break the supply and price barriers that presently separate the customer from competitive local transportation options. For example, the report recommends the consolidation of taxicab licensing by recommending that licensing for taxicabs, limousines, and tow trucks be assigned to a Greater Toronto Area council representing 29 cities and regions in the GTA.

If, as appears likely, the provincial government follows the recommendation of the Golden Report and appoints an unelected Greater Toronto Area council to coordinate services across the broader Greater Toronto Area, and that the council becomes responsible for taxicab licensing without the deregulation of entry and price, three things will occur:

  1. The inefficient jurisdictional barriers outlined in this study will have been eliminated, except for cities and regions outside of the GTA;
  2. Consumers in cities that neighbour Metro will start to see a decline in taxicab service levels; and,
  3. Approximately 3,400 Metropolitan Toronto taxicab plate holders will see a combined $170 million investment in plates (based on all available plates realizing full value at current market prices) diluted almost overnight by the increase in supply from neighbour-ing GTA vehicles. Open entry would wipe out the market value of the plate entirely. 

Jurisdictional barriers

 

Without an increase in vehicle supply, a Greater Toronto Area council would try to meet the public transportation requirements of 4.5 million people with a single pool of GTA taxicabs. From a driver-customer standpoint, the benefits are apparent. A Burlington taxicab driver transporting a fare to Scarborough (which is expected to become part of the amalgamated City of Toronto as of January 1, 1998) will not have to make the return trip empty. Instead, the operators can pick up and drop off fares over a wider territory.

Unfortunately, without reforms that end jurisdictional territory altogether, the same Burlington operator who transports a fare to neighbouring Hamilton will have to either continue to make the return trip with an empty vehicle or break the law to cover the extra cost of transporting a passenger across jurisdictional lines.

Increase in taxicab vehicles within the amalgamated City of Toronto

 

Because communities in the GTA outside of Metro are both low density and heavy users of personal motor vehicles, taxicab drivers in cities such as Mississauga, Brampton, Markham, and so on, will be inclined to desert their home market for high density areas such as downtown Toronto.

While the segment of the Toronto market that hails taxicabs would immediately benefit from an increased supply of vehicles, the overall benefit will be limited if price deregulation is not part of a reform package. (Taxicabs in the GTA, but outside of the Metropolitan Toronto boundaries, are unlikely to join a Metro-based dispatch service. What is more likely, is that existing dispatch services in Metro and surrounding communities will be expanded to cover the entire GTA area.)

Immediate devaluation of taxicab licences

Even without free entry, the elimination of jurisdictional boundaries will result in a substantial depreciation of the $170 million in plate value of Metropolitan Toronto licence holders. As previously noted, the open market value of a taxicab plate in Metropolitan Toronto is approximately $85,000 (20 times the administrative cost for the region to have issued the original plate). By comparison, the open market value of a taxicab plate in neighbouring Mississauga is approximately $12,000 and will likely see the market value of the plate increase to reflect market and supply. The increase in a Mississauga plate, however, will be limited by the downward pressure coming from increased competition by taxicab owners in smaller communities. In its final report, the GTA Task Force entirely ignored the financial hardship that a recommendation to amalgamate taxicab and limousine licensing would have on the owners of vehicles.

PUTTING CUSTOMERS FIRST

Taxicab Reform in the Greater Toronto Area (GTA)

PART TWO

Solutions

I. Introduction

The current laws regulating the taxicab industry have overtaken the delivery of a convenient cost-efficient service to the public. Metropolitan Toronto’s city mayors, elected representatives, and the Metropolitan Licensing Commission only appear interested in finding solutions to the region’s transportation challenges within the existing regulatory and bureaucratic framework and, in accordance to the interests of public funded services, within the monopoly of urban transit and intercity commuter service providers. Governments and government agencies are not prepared to improve transportation service to the public at large, or increase the quality of life for low-income households, recipients of government programs, and other dependents on taxicabs if those improvements will result in the reduction or removal of government influence in certain areas of the urban transportation industry.

A province-wide, deregulated taxicab industry would transfer the cost advantage from the producer to the customer where it belongs, by increasing supply, reducing fares, and improving service. A truly competitive industry would also create new opportunities, particularly in niche markets such as low-income users and intercity commuters who could take advantage of shared-ride services across previously restricted jurisdictions.

Deregulation, a U.S. experience

Taxicab competition creates new inner-city jobs. A study by the U.S. Department of Transportation has found that taxicab restrictions cost consumers nearly US$800 million a year. Also, removing those restrictions would also create 38,000 new jobs in the taxi industry.(17)

Unlike the recent Canadian practice of using publicly funded infrastructure projects for short-term job creation, taxi jobs would likely be permanent additions to the labour force, offering the independent owners or drivers new opportunities in a previously depressed and underserviced industry.

In U.S. cities that have deregulated the taxicab industry to allow open entry, the size of the industry has grown between 18 and 33 per cent with substantial industry turnover among small companies and independent drivers, slight turnover among medium and large companies and no detectable turnover inside the largest taxicab firms.(18)

The City of Indianapolis deregulated its taxicab industry in May 1994 as part of the city’s comprehensive deregulation effort. “Bad local regulations hinder job creation, stifle healthy neighbourhood development, and chill business expansion,” said Mayor Stephen Goldsmith after announcing a Regulatory Study Commission to eliminate unnecessary and bad local regulation. “In nearly every survey of local businesses, regulation appears at the top of the list of barriers to growth.”(19)

Prior to deregulation, it was illegal for a cab driver to cruise the streets or for a customer to hail a cab, resulting in waits of up to 90 minutes for telephone orders. The Indianapolis Department of Metropolitan Development benefitted established taxicab owners by allowing only 392 taxi licences in this city, the 12th largest in the U.S.

By eliminating most taxicab regulations (a driver still requires a licence, a US$100,000 insurance policy, a photograph, and a US$102 licence fee), the number of Indianapolis taxi companies has almost doubled from 28 to 52. Fares have dropped nearly 7 per cent and waiting times have fallen dramatically. All of the new companies are owned either by minorities or women, and an industry that was legendary for its poor service and large volume of customer complaints has not had a single customer complaint registered since deregulation.(20)

Where open entry has not resulted in improved service and lower fares (or increases no greater than the Consumer Price Index), the culprit is often a dependence on first in, first out taxi stands and airport queues by new drivers and owners without radios. As long as a municipality or airport operator does not seek time-based compensation for taxi stands, and measures are not introduced to free the customer from the industry imposed first in, first out rule, those features of the taxicab industry will preserve inefficiency, poor service, and artificially high prices.

II. Benefits of taxicab deregulation

As noted in the previous section, if deregulation had been in place in Metropolitan Toronto in 1987, the fare, at the time, on a standard trip would have been $1.62 lower (resulting in a $39.1-million transfer of wealth from the producer to the customer), and there would have been an additional 730 taxicabs on the streets.

Telephone orders

The telephone gives a customer the greatest advantage in terms of convenience and flexibility. Because of price regulation, however, the telephone user is denied an opportunity to shop the market on the basis of price. If the Metropolitan Licensing Commission did not control price, operators would likely stimulate the market and provide the customer with added information through promotions such as printing tariff schedules (including discount periods), or by taking out ads in newspapers and on billboards.

Customers could telephone in advance and get the best price on a specific trip. Dispatchers could relay the price over the radio network and return to the customer with a confirmation number from the driver who was willing to accept the business. The convenience that computers and management systems have brought to the service industry (guaranteed delivery times by Pizza Pizza and Swiss Chalet or frequent flyer points or customer rewards by Air Canada and Zellers) are missing in the taxicab industry because the Metropolitan Licensing Commission has built protective barriers around the suppliers that exclude benefits to the customers.

There are concerns, for example, based on interviews with the Metropolitan Licensing Commission that the City of Toronto (which would become the geographic core of the proposed amalgamated city) is evolving into a hail or taxi stand industry because of changing demographics and customer attitude, and a growing realization among drivers that “a live customer on the sidewalk is a bird in hand (while a dispatch order may turn into a wild goose chase).”(21) The current trend to a dedicated hail or taxi stand approach to the marketplace would result in inconvenience and hardship for seniors, and the physically disabled, who are less capable of going onto the street to commandeer a vehicle. In contrast, increased competition through open entry would preserve and enhance the telephone market as a niche service.

Taxi stands

The taxicab industry would become more efficient and offer customers a higher level of service at a competitive price if cities such as Toronto were to organize taxi stands on a user-pay basis, either by selling existing and new taxi stands to private operators (the preferred option), or by having municipal parking authorities install parking meters. User-pay taxi stands would encourage drivers to attract business while increasing revenue to the city from a direct sale of taxi stands or revenue from the meter.

Cruising taxicabs

The advantages of a price-deregulated taxicab industry are best illustrated by the cruising segment of the market. As with long distance telephone services, a driver’s rates should reflect demand. For example, drivers could charge premium fares during times of shortages such as periods of inclement weather, peak rush hour, and the late evening, and lower fares at other times. Cruising in a price-deregulated market requires trust between the driver and the passenger. Both are obligated to honour the fare already negotiated (much the same way that the customer is obligated to pay the amount that appears on the meter at the end of a trip).

Taxi meters

 

Deregulation of the taxicab industry will result in new investment in additional vehicles to increase supply and to lower the price, and in improvement to industry staples such as the taxi meter. For example, in a deregulated industry, tariffs negotiated on the spot between a driver and a customer could be secured through an upgrade in meter technology. A driver would either program an agreed upon per kilometre rate into the meter, or set a fixed rate and issue a receipt that the passenger would pay in full upon arrival at his destination.

III. Conclusion and recommendations

Abolition of all restrictions on the taxicab industry, except for those that govern public safety and environmental standards, will result in an immediate increase in taxicab supply, an overall reduction in taxi fares, and improved service, while reducing pressure on urban transit systems, and creating new business and employment opportunities in a low-cost, easy-entry industry.

With an increased market for taxi services, the use of private automobiles would decrease, alleviating traffic congestion and air pollution while contributing to a smoother functioning economy. While almost all citizens would benefit from these reforms, they would especially benefit those less well off (low-skilled entrants and consumers who cannot afford an automobile), students looking for employment, and women who use taxi services the most.

But the road to revitalizing urban and intercity transportation through taxicab reform is an all-or-nothing proposition. Metropolitan Toronto cannot afford to do nothing. Open entry will not work without price deregulation. And price deregulation (and other customer service benefits) would be ineffective if the existing inadequate supply of taxicabs in Metropolitan Toronto and the surrounding area was preserved. It is therefore recommended that the province and local governments take immediate steps to develop a safe, competitive, cost-efficient, and environmentally responsible urban and intercity transportation policy by:

1. Creating an open market for taxicab operators

The government of Ontario should immediately create a province-wide open market for the taxi industry by ending price controls, restrictions on taxicab supply and on shared-ride services, and jurisdictional boundaries. Open jurisdiction would include airports owned either by local airport authorities such as the Greater Toronto Airport Authority or Transport Canada.

2. The return of competitive jitney services

The amalgamated City of Toronto and surrounding GTA communities should end restrictions on shared rides and jitney services. Owners of multipassenger vans and minibuses with safety certificates should be able to provide local and intercity transportation services in competition with transit companies (TAC) and GO Transit.

3. Taxicab driver re-testing

To ensure the safety of the passenger, and to protect surrounding vehicular and pedestrian traffic, the Ministry of Transportation should require that a driver must hold a chauffeur’s licence to operate a taxicab. The ministry should also make regular driver re-testing compulsory.

4. Ensuring safety and environmental standards through vehicle certification

Each taxicab or multipassenger van used for taxi purposes should be subject to an annual inspection by a certified agent of the Ministry of Transportation. The cost of vehicle certification would be paid for by the vehicle owners.

5. Greater efficiency through user-pay taxi stands

Municipalities should set up taxi stands on a user-pay basis either by selling stands to private operators or setting up meters. Transit companies and hoteliers would be able to sell or lease space in front of subway stations, bus stops, and hotels. Airports could charge for space allotted to the taxi pool.

6. Compensation for plate holders

Municipalities should develop criteria to compensate plate holders.

1. The Economic Effects of the Direct Regulations of the Taxicab Industry (Logistics and Transportation Review, Vol. 25, No. 2, September 1989), p. 181.

2. Studies on Regulation in Canada, Executive Summary (Logistics and Transportation Review, Vol. 15, No. 1), p. 2.

3. Inc., May 1994.

4. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, March 1982), p. 85.

5. The Economic Effects of the Direct Regulation of the Taxicab Industry in Metropolitan Toronto (D. Wayne Taylor, Logistics and Transportation Review, Vol. 25, September 1989), p. 169.

6. An Economic Analysis of Taxicab Regulation (Federal Trade Commission Bureau of Economics Staff Report, May 1984), p. 75.

7. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, Working Paper No. 30, March 1982), p. 21.

8. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, Working Paper No. 30, March 1982), p. 22.

9. Call a Taxi: Cab Drivers in Pursuit of Liberty and Profit (Barron’s, July 12, 1993).

10. Logistics and Transportation Review, (Vol. 25, September 1989), p. 173.

11. The Economic Effects of the Direct Regulation of the Taxicab Industry (Logistics and Transportation Review, Vol. 25, No. 2, September 1989) p. 179.

12. The Taxi Industry and Its Regulation in Canada (Economic Council of Canada, March 1982), p. 31.

13. Private Innovations in Public Transit (John C. Weicher, American Enterprise Institute for Public Policy Research, Washington, D.C., 1988), p. 73.

14. Call a Taxi. Cab Drivers in Pursuit of Liberty and Profit (Barron’s, July 12, 1993).

15. Revitalizing Urban Transit (Robert Cervero, American Enterprise Institute for Public Policy Research, Washington, D.C., 1988), p. 75.

16. Okay, You’re a Taxi (Metropolitan Toronto Business Journal, July/August 1989), p. 22.

17. Wall Street Journal, February 1, 1993.

18. Impact of Taxicab Deregulation in the USA (R.F. Teal and M. Berglund), p. 40.

19. Proposal 72 Would Free the Cabs, Help the City (Indianapolis Business Journal, April 18-24, 1994).

20. Revolution at the Roots: Making Our Government Smaller, Better, and Closer to Home (William D. Eggers and John O’Leary, Free Press, New York, New York, 1995).

21. Okay, You’re a Taxi (Metropolitan Toronto Business Journal, July/August 1989), p. 21.


 
Posted in Transportation | Leave a comment

Planners from hell – The second suppression of Saigon

Posted on March 21, 1997 by urbanrenaissanceinst

The Next City
March 21, 1997

The second suppression of Saigon

IMMEDIATELY AFTER THE END OF THE Vietnam War in 1975, the victorious communists renamed Saigon after their leader, Ho Chi Minh, purged it of discos, luxury shops and other Western excesses, moved part of the populace to the countryside and brought the city to a listless calm.

Then came economic liberation: In 1986, the government opened the country to foreign investment, and in 1992 the country began to trade with the United States. The city — with its large literate population, strong work ethic and prior experience in a market economy exploded — with growth. Dubbed the next likely “Asian tiger,” Ho Chi Minh City became a hive of development activity, revelling in its newfound freedom: Cafés and dance clubs opened to meet the yearnings of urban sophisticates, Western T-shirts and designer dresses adorn fashionable young women; Doi Moi square in the centre of the city jumps with activity Saturday nights, and downtown streets throng day and night. The Saigon name also made a comeback: Because the city’s residents stubbornly refused to put a pall over their home town by accepting its leader’s name, the authorities compromised, grudgingly naming the city centre Saigon while keeping Ho Chi Minh City as the metropolitan area’s moniker. With Ho Chi Minh City a magnet for people in the rest of the country seeking a better life, its official population has climbed back to match its Vietnam War high of 4.5 million. Rural folk who come to the city in search of casual work or to hawk their wares swell the population figure to 6.5 million.

In its rapid resuscitation, Ho Chi Minh City has been struggling to keep pace with development demands. Developers from Japan, Taiwan, Hong Kong and Singapore, teamed up with Vietnamese landowning companies, have been erecting apartment blocks, office towers and highrise hotels, and individuals have been redeveloping their own single-storey dwellings on narrow lots into four, five and even six-storey buildings. But these haven’t been enough. Most of the unofficial residents live on the street or in illegally constructed dwellings — some 24,000 of which are concentrated along the drainage canals, contaminating the water (one estimate claims two cubic metres of rubbish lurk beneath every square metre of water surface). While the city has been filled to incredible densities — with buildings rising out of courtyards, spanning watercourses and clambering alongside walls — the average amount of housing space per resident is now only 5.8 square metres.

DEVELOPERS ARE HAMSTRUNG by the Ho Chi Minh City development plan, an unwieldy straightjacket that was out of date even before its approval in 1993. To compensate for the plan’s shortcomings, Ho Chi Minh City planners published still more detailed plans in 1995 for each of the city’s 18 districts. These plans prescribe existing and proposed land uses, specifying building lines for every street, desired activities, target population and floor space densities, public utility requirements and lists of public and private projects. These more detailed plans also failed to cope with Ho Chi Minh City’s burgeoning growth. Planners went back to the drawing board, where they devised a series of yet more detailed land-use plans at the ward level.

To assess the impact of new buildings, planners use a 1:1000 scale model of the city centre. Would-be developers produced a miniature model to insert into the available spaces in the master plan — at one point last year they had 80 highrises of up to 37 storeys in the queue. A larger 1:250 model aids more detailed discussions.

The municipal regulators — including 80 professionals specializing in urban planning — have also failed to keep up with increased demands for mobility. To the regulators’ chagrin, the city’s increasingly affluent citizens have been trading in their bicycles for motorized two-wheelers to navigate the narrow and maze-like routes through city neighborhoods: 70 per cent of households now own at least one motorbike. City streets remain in disrepair, yet planners are still mapping out public transit strategies.

Less hardened municipal bureaucrats might have thrown their hands up in the air, admitted defeat against this tide of human energy and initiative and loosened their planning restrictions, letting developers build the housing and provide the services that the public so clearly clamors for.

But not these veterans of guerrilla wars. Instead, they have stepped in with the same ruthlessness of the military planners almost a quarter century ago. To settle the issue of urban congestion, the government has adopted a draconian population decentralization policy — one that will expropriate large tracts of city lands, clear them for development and expel 70 per cent of the urban population to the suburbs. To provide breathing room for the remaining city centre inhabitants, the planners opted for two megaprojects: an 800-hectare development across the Saigon river to the east and a 2,600-hectare site to the south. By fiat, the government will limit the total population of this greater Ho Chi Minh region to 7.5 million by the year 2010. And to solve traffic congestion, bulldozers will widen roads to suit large public transit vehicles.

In this Pol Pot with-a-kinder-face policy, the planners call for 12 CIPs — consolidated industrial parks — to be built on the city’s outskirts, each with its own housing and infrastructure. Six existing towns within a 100-kilometre radius are slated for expansion, becoming satellite cities of 200,000 to 700,000 people.

Lawrence Solomon

Winnipeg: the urban planners’ failed conceit

ON THE SILVER ANNIVERSARY OF WINNIPEG’S amalgamation, the evidence is in: The amalgamation of Winnipeg’s 13 urban municipalities into one unified city has been an abject failure.

The grand scheme, officially called “Winnipeg Unicity,” was implemented in 1972. As envisaged, it did create a large regional government endowed with exclusive taxing authority and monopoly power over vital services. The rationale behind consolidation was plausible to many at the time: Increased efficiency resulting from the elimination of duplication would reduce costs and improve services. But the planners did not anticipate the consequences. Instead of the hoped-for administrative savings and improvements in service levels, amalgamation created a Byzantine administrative tangle and high-cost government that debilitated the city’s economy.

Winnipeg’s unified service-delivery systems now have all the classic problems of traditional municipal governments, only magnified. They focus on the needs of providers first, those of taxpayers last, and they disproportionately spend on administration to the detriment of front-line services. They reward process rather than result and encourage a spend-it-or-lose-it behavior.

Winnipeg’s financial position has deteriorated substantially due to Unicity governance:

  • A recent independent review into a spectacular $210-million assessment demonstrates a staggering lack of accountability and a deep malaise within Winnipeg’s municipal government.
  • Interest payments on the sizable debt run-up during the civic building binge of the late ’70s and early ’80s are crowding out funds for long-standing municipal services.
  • The streets and operations department opened the “Taj Mahal,” its swank new $5.6-million headquarters, in the spring of 1994. A year and a half later, officials came to City Council with a proposal to spend $530,000 more on renovating it to “save the city money.” Departments were being consolidated, they said, and the 40 employees now moving in needed new walls, lighting, heating and mechanical systems.
  • In 1994, the civic employees’ union secured a five-year, “no layoff” contract, although internal estimates, where done, show that in-house provision of services costs up to 60 per cent more than alternatives readily available in the marketplace.In late 1996, Moody’s confirmed the magnitude of the problems by cutting the city’s top-notch credit rating.

    With the Unicity in place, citizens could no longer vote with their feet against government extravagance, for the informal and healthy tax competition that had formerly existed between municipalities in the Winnipeg region was gone. The monopoly behaved like a monopoly.

    Statistics tell the story. Municipal staffing in Winnipeg stood slightly below 10,000 in 1995. Compare this with an efficient city like London, Ontario, where a staff of about 3,200 serves a city of 325,000 — roughly half of Winnipeg’s size of 642,000. On a rough per capita basis, Winnipeg taxpayers employ proportionately 1.6 times the staff to do roughly the same work.

    That is one of the main reasons for Winnipeg’s slow growth rate, its downtown troubles, and the consequent social problems and crime. Surveys show Winnipeg comes out consistently at or near the top of the scale in terms of property tax burden.

    Winnipeg’s high property tax rates are also propelling a silent tax revolt that chips away relentlessly at the tax base. In the past, Winnipeg could expect almost ten times as many housing starts as the surrounding municipalities. Now the balance is even. With outlying communities on the edge of the city offering a more humane tax regime, less red tape and lower all-round operating and living costs, moving beyond the perimeter offers obvious financial rewards.

    Yet, too many in Winnipeg’s urban planning community haven’t twigged to the problem of municipal government gone awry. Their response to the problem of amalgamation is more amalgamation. The province, they say, should force nearby bedroom communities to raise taxes to level the playing field with Winnipeg, or better yet, the city should annex these low-property tax areas.

    Peter Holle

Posted in Culture | Leave a comment