Minneapolis Busts Taxi Cartel

Published January 1, 2007

Minneapolis Mayor R.T. Rybak (Democratic-Farmer-Labor) has signed reforms to the city’s taxi ordinance that remove the government-imposed cap on the number of taxis legally operating within city limits.

The new ordinance, signed October 12, will increase the number of taxicabs allowed on the streets of Minneapolis from 343 to 523 by 2010. At that point the cap will be removed entirely, opening the door to all taxi businesses willing and able to serve the public.

The reform law also removes the requirement that applicants for new taxi licenses join an existing taxi service company.

The Institute for Justice Minnesota Chapter (IJ-MN), which had advocated the reforms, hailed passage of the ordinance as a victory for consumers and taxicab entrepreneurs who would rather drive for themselves than pay steep leases to taxicab permit holders.

Cartel Broken

“Minneapolis has finally broken a cartel it created decades ago,” said Lee McGrath, IJ-MN’s executive director. “Transportation entrepreneurs finally have the ability to earn an honest living in the field of their choice without facing ridiculous, discriminatory regulations.

“This reform helps restore the first rung of the economic ladder to Minnesotans of modest means,” McGrath said. “Now, budding entrepreneurs, whether they are long-time residents or new Minnesotans from Ecuador, Egypt, Laos, Somalia, or elsewhere, will be able to realize the American Dream.”

Competition Coming

One who expects to benefit from the reform is Angel Paucar, co-owner of A New Star Taxi and Limousine Services, Inc., in nearby Richfield. He applied for a Minneapolis taxicab license in April 2006 and was denied. He said the secondary market price for a license is $25,000, too much for him and most others to afford. IJ-MN contacted him and offered help.

“Finally, we’ll get new people into the market,” Paucar said. “I think for customers, they’ll have more opportunity to choose, and better service. With more taxis and more competition, we’ll do a better job for the customers.

“Competition will make us do the best job we can do. Our operation is bilingual, with operators 24 hours a day. People are going to be happy with this,” Paucar predicted.

City Council Member Paul Ostrow introduced the ordinance and received strong support from fellow councilmen Don Samuels and Gary Schiff. The final vote for the ordinance was 8 to 4.

Other Successes Cited

IJ-MN campaigned for the reform by highlighting the success of similar taxi reforms enacted by the nearby city of St. Paul and by Indianapolis. Among those who testified for reform were Professor Jerry Fruin of the Center for Transportation Studies at the University of Minnesota and Professor Robert Hardaway of the University of Denver College of Law.

Owners of Blue & White and Rainbow Taxi, which currently serve the city of Minneapolis, oppose the reform and have threatened legal action against the city.

“The Minneapolis taxi industry has no legal right to be a cartel,” McGrath said. “The city’s reforms are constitutionally sound, and no court should allow a private cartel to deprive the public of good taxi service and entrepreneurs the right to enter a market and earn an honest living.

“If the cartel does sue the city,” McGrath said, “we will consider becoming legally involved in support of the reforms.”

Nick Dranias ([email protected]) is staff attorney at the Minnesota Chapter of the Institute for Justice.