MAYOR RYBAK BUSTS OPEN MINNEAPOLIS’ TAXI CARTEL

Taxi Reform Will Be Good for Consumers & Entrepreneurs
Growing conflict may include involvement of the Institute for Justice

Minneapolis—In a triumph of liberty over entrenched private interests, yesterday Mayor R.T. Rybak signed reforms to Minneapolis’ taxi ordinance and removed the artificial government imposed cap on the number of taxis legally operating within city limits. 

The new ordinance, originally proposed by City Council Member Paul Ostrow, will increase the number of taxicabs on the streets of Minneapolis from 343 to a maximum of 523 by 2010, and then lift the cap entirely, opening the door to all taxi businesses that are fit, willing and able to serve the public. 

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

“Minneapolis has finally broken a cartel it created decades ago,” IJ-MN Staff Attorney Nick Dranias said.  “Transportation entrepreneurs finally have the ability to earn an honest living in the field of their choice without facing ridiculous, discriminatory regulations.” 

“We applaud Mayor Rybak and the City Council for trusting their instincts that freedom and opportunity are the basis for sound public policy,” added Lee McGrath, IJ-MN’s Executive Director.  “This reform helps restore the first rung of the economic ladder to Minnesotans of modest means.  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.” 

IJ-MN worked hard to support the leadership of City Council Members Paul Ostrow, Don Samuels, and Gary Schiff.  IJ-MN mounted a sustained campaign in the court of public opinion promoting reform efforts, spotlighted the success of similar taxi reforms enacted by the City of St. Paul, Indianapolis, and the Metropolitan Airport Commission, and assisted entrepreneur immigrants from Ecuador, Egypt, Laos and Somalia who sought to navigate and overcome the City’s anti-competitive regulatory and political processes. 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. 

These reforms come in the face of threats by owners of Blue & White and Rainbow Taxi of legal action against the City if the Mayor approved these reforms. 

“The Mayor and City Council should be applauded for their decision to open the taxi market in Minneapolis,” Dranias said.  “It is unfortunate and unwise for the taxi cartel to resort to the much more familiar tactic of threatening litigation, as it did in 1985, 1993 and 1995, to preserve their ill gotten cartel.”

“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, we will consider becoming legally involved in support of the reforms.”

This legislative victory is the fourth success in IJ-MN’s campaign to restore constitutional protections for economic liberty—the right to earn an honest living free from excessive government regulation—as a basic civil right under both the Minnesota State and U.S. Constitutions. 

The first victory was Anderson v. Minnesota Board of Barber and Cosmetologist Examiners, in which IJ-MN successfully freed African hairbraiders from the State of Minnesota’s onerous cosmetology licensing regime.  The second was Crockett v. Minnesota Department of Public Safety, in which IJ-MN successfully stopped the government from enforcing a blanket ban on advertising, soliciting or using the Internet to conduct lawful direct sales of wine. The third was Dahlen v. City of Minneapolis, which vindicated the constitutional principle that procedural due process requires notice, an opportunity to be heard and a timely decision based on knowable standards.

As part of its advocacy for economic liberty, IJ-MN also published a 21 page paper titled The Land Of 10,000 Lakes Drowns Entrepreneurs in Regulations, which exposed the shocking state of Minneapolis’ Taxi Code, among other occupational regulations.  The report is available at www.ij.org/publications/city_study/index.html.

Until the law’s passage, three nearly insurmountable government imposed hurdles stood in the way of operating any taxi business in the City of Minneapolis:

1. the “taxi vehicle” license cap through which the City arbitrarily limited the number of cabs that could provide service to 343;
   
2. the requirement to join an existing taxi company as a precondition of holding any existing taxi vehicle license; and
   
3. the restricted issuance of new, reissued or temporary taxi vehicle licenses to existing taxi service companies. 
   

The first hurdle completely blocked entry to anyone who could not afford to pay $25,000 for a taxicab vehicle license from an existing license holder on the secondary market. 

The second and third hurdles blocked competition because they were interpreted by the City to require entrepreneurs to first join with existing taxi companies before they could obtain a taxi vehicle license. 

The newly enacted taxi reforms not only gradually eliminate the license cap, but they also make the second and third hurdles much easier to cross by allowing entrepreneurs to apply for taxi vehicle licenses without being required first to join an existing taxi company.

“Our legislative and litigation successes should serve as a wake up call to governments throughout Minnesota,” concluded McGrath. “We invite other entrepreneurs to join us in challenging irrational barriers to entry, and we urge the legislative, executive and judicial branches to protect economic liberty by reviewing new and existing occupational licensing schemes with an appropriately skeptical eye.”

Opened in 2005, the Minnesota Chapter is one of three state chapters of the Institute for Justice, a public interest law firm founded in 1991 to advance free speech, property rights, educational choice and economic liberty.  Headquartered in Arlington, Va., the Institute for Justice has a long record of success in representing entrepreneurial Davids against governmental Goliaths.

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