The UTA is a monopoly. Rates are high despite large subsidies, and there are many complaints about the routes and the frequency of travel. Free competition should be allowed but isn’t due to state law. Taxi service in Salt Lake is a three-way monopoly (also called an oligopoly), with the number of cars limited and the number of companies capped to three lucky winners. These transportation monopolies have been created by our state and local governments and the taxpayers are paying the price with poor service at a higher cost than would otherwise exist in a competitive market.
Prior to being bought out by local cities, UTA began as a group of private busing companies. Ironically, one of the companies in its charter was National City Lines, the same National City Lines that bought out and scrapped the former Salt Lake trolley system, which was privately run for 88 years. In 1970, the government-financed UTA was formally created, although sales tax revenues weren’t added to the budget until later.
In recent years, UTA has expanded in the rail business, forming TRAX in 1999. In the effort to build out the rail system (including TRAX, Frontrunner, and the Sugar House streetcar), Salt Lake County’s bus system has been significantly cut back. Many would rather drive than spend up to an hour waiting for a bus. Try to imagine what it would be like to catch a bus without waiting more than a few minutes and without having to drive to the destination first? This is possible today, provided the monopoly status of the UTA can be removed.
A new company that is taking the cab industry by storm is Uber. It has come out with an ingenious app for your smartphone that hails a cab with the click of one button. Minutes later, the closest cab shows up at your location. There is one problem: It is not allowed by many city councils. “Unfair competition,” they say, will drive local taxi companies out of business. This is a distortion.
In our current system, local taxi drivers have to pay in excess of $300 per week just for the privilege to be hailed in Salt Lake City boundaries. The oligopoly licensing scheme that makes this possible, granted to only three companies, hurts everyone but the taxi company. It hurts the drivers because of the excessive fees. It hurts the passengers because they have to pay for those fees. Hailing a cab is more difficult than it would otherwise be because the city limits the number of cars.
In April 1994, the Colorado Legislature enacted Senate Bill 113 to end the three-way taxi oligopoly in Denver and allow market competition. This action was spurred by four cab drivers, represented in a lawsuit by the Institute for Justice, a D.C.-based, philanthropic, libertarian law firm. Freedom Cabs (the company started by the cab drivers) began employing nearly 100 drivers in August 1995, exerting their right to earn an honest living in the local economy. This was the first time an additional competitor was allowed in the Denver cab market since 1947.
Salt Lake City should follow Denver’s lead and free the taxis as well as apply pressure at the state level to repeal the UTA busing monopoly law. If done, a new field would be added to the local economy and the creative energies of entrepreneurs would be unleashed in the transportation of the city, providing better service at no added cost to taxpayers.
Kevin Paulson is a mechanical engineer and candidate for Salt Lake City Council District 7.
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