Can companies and drivers learn to work together against the common threat of Uber and Lyft?
At the Vongos Event Center in Northeast Austin on July 13, Dave Passmore is speaking to 150 taxicab drivers with his mind set on survival.
"The way the landscape is these days, if we're not taking part in the changes happening now, we'll only be left behind," says the longtime cabbie. "We'll be forced to compete from behind. If we're forced to compete from behind, the process becomes twice as hard."
Passmore drives for Yellow Cab, the largest of Austin's three franchises, but he's talking to drivers from each company, including Austin Cab and Lone Star. Most of these drivers are immigrants: from East Africa, the Caribbean, some Middle Eastern countries. (Passmore is Jamaican.) They're all ages, almost entirely male drivers.
"None of you own a cab," Passmore tells them. "You own a vehicle that is controlled by franchises. If ... you make a left turn when you were supposed to turn right, or a belligerent customer calls and says you were rude to them, what happens? The company removes the permit, and cuts your contract. How is that your business? There's no one at any of the three franchises who's looking out for you. They're only looking out on lease day."
Passmore has been president of the Taxi Drivers Association of Austin (TDAA) since 2012. The group officially became a union one year later. Since, membership has risen to over 500 drivers – roughly two-thirds of the city's cabbies. Publicly, Passmore speaks for all the members. At Council meetings he is humble, yet equally deliberate in his delivery. He's been a driver for eight years; this past year has been his most trying. With Uber, Lyft, and the city's recent changes, it's never been more necessary that drivers get their say – or a seat inside the room. "So while you're getting a foothold," he tells drivers, "barge your body through the door. Somebody will have to meet you at the entrance."
A Rigged Game
Unlike most cities, Austin regulates the cab industry by distributing permits to franchised companies, which in turn lease their permits out to drivers. There are 756 permits currently allocated to cab companies. The city sells permits to companies for $450 a spot.
Drivers in Austin aren't employees; they're independent contractors, which means they are their own small businesses. Commitments are unprotected and each driver pays self-employment taxes, as well as insurance and a variety of maintenance expenses. But they can lose their permits quickly. The system's long lacked due process reviews for disciplinary grievances. Benefits are but pipe dreams. Drivers pay weekly lease fees to their franchises while on vacation, and when their cars are in the shop.
The trade-off often works for drivers: Each one gets to choose when they work, and where. They can clock in when they feel like it and head home early if it's slow out. Some of the immigrants I spoke with said the flexibility helps them raise their children ("I don't have my mother in town to babysit my daughter," explained one driver from Ethiopia). Others – like the American-born driver known as "Captain Scott," who for the past 23 years has driven the Land Yacht, a handicapped-accessible van decked out with blacklights, karaoke, and 30,000 music videos – say the business satisfies their quest for independence.
"I do my best job without oversight," says Scott, who has driven for Yellow Cab throughout his career. "That's why I became a cab driver. The person who works the hardest should make the most money. Showing up should not earn you a paycheck."
For decades, these independent contractors have signed agreements to drive with only one company at a time. They "drive for Yellow" and "drive for Austin." Changing affiliations requires paperwork and tests – not to mention red tape because of permit caps. Even if someone wants to switch, he'd have to wait for space to open up.
Yellow Cab, a subsidiary of Texas Taxi Inc., is the most corporate of the bunch. Under Ed Kargbo, the company leases 467 permits to drivers at $335 a pop every week. Austin, owned by East Austin's Means family since its conversion from Harlem Cab in 1984, lays claim to 187. It takes a $255 weekly cut from each of its drivers. And Lone Star Cab, originally a driver-owned company when it began in 2007 but now a corporation, holds 108 of the city's permits. Solomon Kassa and his six-member board lease their lot for $250 per cab.
The permits afford drivers the city rights to roll, as well as certain services from the companies; in Yellow Cab's contractual terms, "reasonable efforts" to provide each driver radio-receiving and -transmitting equipment, a computer terminal, a surveillance camera, and access to the company's dispatch services. Drivers kick in fees for gas, paint jobs, and the cost of payment processing. They also, according to Yellow, "acknowledge there is a level of skill and commitment required for success as a taxicab driver that exceeds that necessary for success as a person engaged in some other profession" and that a "[l]icensee could realize a profit or suffer a loss as a result of operating a taxicab under this agreement." Cabbing is a gamble. One can work eight hours and still come away with nothing. In fact, they might even finish in the red.
To many drivers, the game has long been rigged. In the hole $250 or more before starting work each week, they head out onto the city's increasingly dangerous streets in hopes that they can pocket enough money to pay their rents. That subject bubbled to a boil in Feb. 2010, when Texas RioGrande Legal Aid, a nonprofit organization that provides free legal services to those who can't afford it, surveyed 66 drivers and found that drivers work 12 hours a day, 6.5 days a week to make an average of $200 per week, or $2.75 per hour, before taxes. The city took issue with the survey's methodology: In a report commissioned by the city, Ray Mundy and the Tennessee Transportation & Logistics Foundation argued that 66 drivers (and only 25 of those "in depth") was a small proportion of Austin's cabbies, and all of those 66 worked traditionally less remunerative daytime shifts.
No matter the specifics, it's obvious a disparity exists. Franchises can map out their weekly grossings before Monday's scheduled lunch break. There are expenses that they must cover – insurance payouts, dispatch upgrades, commercial rents, and other operating costs – but each knows how much it's making.
"Guaranteed income for five years, protected by the law," explains Hassan Aruri, a TDAA member who's driven for the past five years with Yellow. "Even Apple and Microsoft couldn't get that [financial security]. And what they have to pay the city is extremely minimal: $450 permits, per year. Turn around and charge me $18,000? A lucrative business even a drug dealer couldn't dream up."
The franchises' three principles – Ron Means, Kassa, and Kargbo – consider the weekly fees fair prices for the services. "The drivers don't realize what the expenses are," says Means. "The expenses don't change [for drivers], but they do change for the company. When the city comes in and says you have to buy a new dispatch system, how does that get paid for? When we have insurance issues because some driver goes out and does something stupid, how does that get covered? Or the rent goes up, because we don't own this building.
"What the drivers are complaining about is bullshit. They've always said, 'There are too many cabs. We need more money.' I'm not listening to them, and the city shouldn't, either. The city needs to worry about how long it's going to take for a consumer to get a taxi."
New Kids in Town
In the mid-Eighties, when the Means family purchased and rebranded Harlem Cab as Austin, the city had two other franchises: Roy's Taxi and American Cab Company. The former was found by Roy Velasquez Sr. in 1931. The latter debuted in 1985 and is what's known today as Yellow Cab. American purchased the Yellow franchise in the Nineties, got purchased in 2003 by Texas Taxi, and after the purchase went through, rebranded itself in 2005, reclaiming the iconic taxicab color. (Kargbo was hired as Yellow Cab's general manager in 2007.) In 2006, Roy's, owned at the time by Velasquez's kids, decided it wanted out of the business. It approached Yellow about a sale – rumored to be in the range of $4 and $5 million – and went before Council for approval.
Council wanted to approve the sale, but balked at the implications. City standards stipulate that no franchise can control more than 60% of the city's permits. Yellow, at the time, had about that many permits. Acquiring 155 from Roy's would give the company 80% of the market. Council approved the sale in spite of the Urban Transportation Board's unanimous rejection. Yellow would become ineligible for new permits until 2010.
Council also decided to mitigate Yellow's looming monopoly by flooding the market with 75 new permits – more than the Transportation Department suggested the city needed, but the city rationalized that it would have to give out more in the future. Twenty new permits went to Austin Cab, and 55 were to be given to a new company. City staff developed a scoring matrix, and three choices emerged for that new franchise: Capital City, Longhorn, and Lone Star Cab, a proposed driver-owned company that lost a previous bid to become a franchise in 2003.
City staff, the Urban Transportation Board, three Council members, and the United Cab Drivers Association (an early iteration of the TDAA) believed Cap City to be the best option, and the scoring matrix ruled Capital superior by one point. But then-Council Member Mike Martinez advocated for Lone Star's unique business model (at least 51% of the company's shareholders must drive 30 hours per week), saying in April 2007: "It empowers drivers and incentivizes them to provide better service." Lone Star won a Council vote over Capital City, 4-3.
Yellow Cab and Austin Cab had their franchises renewed for another five years in May 2010. In Nov. 2012, when Lone Star's renewal agreement came to the dais, company shareholders requested that it be allowed to convert to a corporation. Council ordered no review of the business before approving Lone Star for the restructuring. Council also approved another 30 permits (20 to Lone Star, and 10 to Austin Cab), four months after adding 45 different permits (a decision many cab drivers suggest negated 2006's hedge against the future). This all despite the release of an Oct. 2012 study from the Transportation Department noting that between April and July 2012, the city saw a 6% increase in cabs, 1% decrease in trips, and a 13% increase in hours worked by the cab drivers. The TDAA accused Council of severe negligence: "It would indicate that the Council does not care for the well-being of a majority minority workforce that serves the city tirelessly."
Eighteen months later, in June 2014, Uber and Lyft rolled into town. Their first mission was reminding Austinites how lacking the three franchises could be at providing the actual service of getting a cab to pick you up.
Cabbies and their operators will contest causation on this issue. Drivers allege the franchises failed to offer useful dispatch systems, and would favor certain drivers with their requests; franchise heads maintain that drivers would ignore unappealing dispatched rides and cherry-pick their fares. Whatever the reason, cab service in Austin hadn't been a pillar of expediency. An industry predicated on supply-and-demand had trouble keeping up with the latter.
Uber and Lyft prided themselves on pick-up splits. Their apps specifically told riders how long they would be waiting. The companies flooded the city during festival weekends and offered big discounts to offset surging. Together, thanks to an assist from former Council Member Chris Riley, they pushed their presence on City Council, and operated full-tilt despite their illegality, paying for citations given to individual drivers and telling each to get back out there. Transportation network companies (TNCs) such as Uber and Lyft received approval to operate – with far fewer regulations than those imposed on cab companies – by the middle of October. Still barred from servicing Austin-Bergstrom International Airport, which holds its own set of regulations for taxicabs in addition to those laid out by city management, they provided drivers with helpful hints on how to best work below that radar.
Cabbie incomes plummeted, as damn near everybody with a credit card and smartphone took to Lyft and Uber. TNCs didn't deal with city permits, so they could trot out an endless supply of drivers. Those who liked to go cashless welcomed the apps' one-touch payments. Cab drivers were getting battered, with many reporting significant losses in business – more hours for less money. Even those who thrived on specials (personal requests for rides) have seen a drastic decrease in wages.
"Before Uber, I could count on staying busy on Thursday, Friday, and Saturday nights with very little downtime," says Scott, one of the best at creating repeat business. "In the last six weeks, I've had one or two personal customers a night, and on average have been idling 45 minutes between trips. Regular customers have stopped taking cabs altogether."
Official meter figures from the franchises are no longer available. Like the TNCs, they have classified those numbers as proprietary – no longer open record.
An Uneasy Coexistence
There's an intuition among taxicab drivers in Austin that their industry is now in peril. Kargbo's assertion that drivers can still afford lease fees may be true for the moment, but the status quo won't work. "At some point, the number of drivers is going to drop, drastically," warns Scott. He says he'd have jumped ship by now if he didn't have an unbreakable lease agreement on the Land Yacht. "In six years, [Kargbo] will have 60 permits that he's paying the city for, and he won't be able to put people in the [drivers'] seats. He'll be stuck with those permits, which is where I'm at right now. I've got a cab that is essentially not paying for itself."
It's an issue of coexistence: Uber and Lyft aren't going anywhere (in fact, it's likely the TNC army will grow with new companies in the near future), but it can't be allowed to swallow the taxi industry whole. Cabs provide a service TNCs can't; look no further than anyone without a smartphone. But TNCs and cabbies aren't equally regulated. Cab driver background checks are more stringent than those for TNCs, as are restrictions on vehicle operating lives and insurance structures. Most obvious is the lack of equality regarding the number of vehicles on the road. Cab companies have long been restricted in how many drivers they can dispatch. TNCs can deploy as many as they want.
Council will reconsider TNCs sometime this November. For now, the focus remains on taxis. All three franchises entered into the year with expiring contracts. City Council Mobility Committee Chair Ann Kitchen made clear before opening an April discussion that changes were forthcoming.
Born from two months of discussion both at Council and the committee are a series of changes that bring necessary rights to cab drivers. Barring a change of heart, when Council approves the new franchise agreements on third reading, drivers will now hold the chauffeurs' permits. They will no longer be sponsored by a franchise. Due process will become a thing, the ordinance states, to give drivers an "opportunity ... to contest suspension, termination, or other disciplinary action through independent mediation," and Council will expect more explicit explanations in franchise/driver contract language. Vehicles, once limited to seven years of operation, will now be allowed to be used so long as they "meet existing inspection requirements." The way that permits will be distributed is set to change (the system will be based on merit); each franchise will receive another 50 at the onset.
Council also passed a resolution directing city staff to recommend a new, fourth franchise: a cooperative, to be owned and operated entirely by drivers. The size of that cooperative will be determined soon by Council.
The Co-op Option
Back at Vongos, after Passmore concedes the floor, Carlos Pérez, co-founder of Cooperation Texas, is standing alongside one of the members' fellow drivers trying to parse out just exactly what a driver does each day. Pérez's intention is obvious: He wants to demonstrate to TDAA members that they're working too hard for their earnings. "Many of these guys have no clue what a co-op is," says one member of the association during a brief break from the action. "They have to learn what they should be focused on." Those in attendance who do understand the nuts and bolts of a cooperative business seem all about the opportunity. Split duties, split profits, every driver owns one share. When business is good, driver pay rates go up a little. When business stumbles, everybody deals with it together.
Conversation concerning a driver-owned co-op began in earnest back in January. This spring, Passmore told the Mobility Committee that the TDAA was seeking 405 permits to start one. (Drivers say certain Council members have suggested the TDAA request no limit on permits.) In May, Kargbo countered by creating a petition that opposed the proposition under the guise that more permits on the streets would mean smaller earnings for the drivers. But the TDAA held firm, advocating for their own franchise and using examples around the country – specifically the Union Cab of Madison Cooperative in Madison – to support their argument. The co-op's been in business since 1979 and maintains the largest fleet and customer base throughout the Wisconsin capital. Paul Bittorf, now president of the co-op, says the UCMC's been able to weather the storm of TNCs by creating equality throughout the company.
"If you can do something close to what we have, where our mechanics, dispatchers, billing office – all those people are included as member-owners and have the same stake in operations," said Bittorf. "That big of a democracy can be hard to run, but it's a saving grace. When times get tough, you can go to the numbers and say, 'Hey, we all know we're not making so much money right now, so we're going to cut back payroll for a little.' When the recovery comes, everybody gets a bump. We've gone through our share of ups and downs, but we're still here. That's because of the flat-wage structure. We pay people fairly and provide an equal opportunity to run the business."
The three franchise principals don't believe the co-op is a sustainable option. Kargbo said he doesn't think the market demands the city create more drivers. Kassa, whose driver-owned foundation looked somewhat similar, noted the expenses that come with running a company, and questioned where the drivers would get resources. Means, too, questions the TDAA's financial fortitude. "These guys ain't got no money," he explained. "They don't know about the expenses. They don't know about the liabilities. They just know what they pay [in lease fees], and they think it's too much. And they know what they make, and they think it's not enough."
Drivers, however, remain excited about the opportunity, and believe that the co-op is the industry's only chance at survival. "Uber is not really [the companies'] competition. Uber is the drivers' competition," explained Aruri. "Uber is killing the drivers. The companies make the same amount of money. It doesn't matter whether my meter rose or didn't. At the end of the week, I have to go and pay Yellow.
"If they regulate the TNCs the same way they regulate the cab industry, and we get the co-op, I can guarantee you one thing: Some very happy customers will come from this. You will finally have an open competition."
No Free Rides
The purpose of a taxicab is to pick people up and take them somewhere else. That is their utility. A franchise's job is to get a taxicab to a requesting rider as quickly as it can.
The problem that arises with this is that Austin's three franchises don't have authoritarian power over drivers. Yellow Cab can dispatch a requested trip, but the company can't make a driver service it. It's one difference between independent contractors and employees. Cabbies pay franchises for the right to drive a cab; that right can be exercised in any way the driver chooses. They may reject rides; they can consider that fare bad for their business.
Independent they may be, all taxicab drivers drive cars adorned with franchise paint jobs. To that extent, they represent the franchises even if they're not protected by them. A rejected trip reflects poorly on the franchise. An ignored request may drive someone to Uber.
The city's method for handling this issue has been the implementation of a new policy – Part 14 of this year's update to the ground transportation code – which states that any taxicab driver shall accept a service request from the driver's dispatch when his taxicab is determined by the franchise's GPS to be closest to the pickup location. (See "Drivers Are Pissed," July 24.) Failure to comply with this request will result in a citation for a Class C misdemeanor: a court date, mark on your record, and a fine of up to $500. No potential fines exist for the three franchises.
The city expects franchises to acclimate drivers to the new policy by Oct. 1 and start reporting rejections for citations on that date. But confusion has already arisen out of Austin Cab. There, Means has distributed notice to his drivers that Austin Cab drivers must start complying with the policy immediately. Carlton Thomas of the Transportation Department has been in contact with Means about the letter. In short, Thomas says, Means is jumping the gun on enforcement.
Means doesn't actually agree with city policy. If he had it his way, it wouldn't become enacted. "It takes away their right to choose," says Means, who also brings about a good point about pending policy. "You're going to write tickets for my drivers, expect me to fire them [for too many tickets], pay an attorney under the new due process rule to represent us in arbitration, and pay for past pay if I lose – based on some ticket you wrote?"
Not surprisingly, the strongest opposers of the policy are the loner types of drivers; the ones who don't want to join a co-op and succeed on personal requests and specials. Two drivers in particular – Geoff Rohde and Joseph Beers – have decided to go the legal route. Three weeks ago, they met with an attorney, Rain Minns, who specializes in civil trials and litigation. On July 17, Minns submitted a letter to Mayor Adler and City Manager Marc Ott imploring them to retract Part 14 of the ordinance. Minns' two main points concerned her clients' employment status and income potential.
Kargbo, the principal with the largest fleet and highest profile in the city, looks forward to the way the policy changes may shape the industry. "Cities have to step in and implement rules to make sure that the customer gets taken care of," he pleads. "Drivers are [refusing trips]. Is that in the best interest of the consumer?" He speaks of the cab industry as a traditional business where workers fill certain roles for a greater good. "I literally cannot sit behind the wheel of every cab," he says. "I cannot greet every consumer, open the door, be nice, keep my vehicle clean. They have a role they have to play. We talk about what it is that the customer is looking for.
"You're your own boss, but when you have an interaction with a customer that leaves them unhappy, you're not just impacting yourself. There are other drivers in the fleet that they associate with. If you provide [riders] with a bad experience, they might not use the fleet again."
But Yellow's drivers are independent contractors. They pay Kargbo for the right to drive a cab and work for no one but themselves. And little do they care about the strength of one man's fleet.