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December 3, 2009
Media Release - Christmas Comes Early for Winnipeg Taxi License Owners
Values rise at a trend average of $44/day for the last decade.
Winnipeg: The Frontier Centre for Public Policy today released a one-page summary of what is wrong with taxi regulation and the latest fare increase decision in the city of Winnipeg.
The summary includes data provided by two University of Manitoba professors, used in their submission yesterday to the Taxicab Board. It shows that the resale value of licences has increased from around $100,000 to almost $400,000 over the past decade.
The professors had predicted that a $0.30 increase in the charge for beginning a trip would lead to a further $24,620 being capitalised into the average licence value. This figure sets up a stark contrast against the $1,500 cost of new cameras that was used to justify the raise of $0.20.
“I’ll be surprised if their prediction doesn’t materialize,” says Frontier Centre senior policy analyst David Seymour, who has authored two papers on taxi regulation this year. “Across Canada, a set number of licences means limited competition and very organized lobbying for higher fare rates. The result is excess profits above what would be expected in a properly competitive market. These profits are reaped when the incumbent license holders on-sell the privilege of working in this market in the form of a $400,000 license.”
“This captured value is good for no one except those who happen to hold a license. High licence values create a barrier to new drivers entering the business, an incentive for licence holders to lobby against the public interest, and a cost for drivers that has to be passed on to the public.”
“This episode should make policy makers at the highest levels consider whether the current model of limited entry to the market and centrally-controlled prices can indeed serve the long term public interest. The results over the past ten years suggest they haven’t and never will.”
For more information and to arrange an interview with the study's author, media (only) should contact:
The Frontier Centre for Public Policy
is an independent public policy think tank whose mission is "to broaden the debate on our future through public policy research and education and to explore positive changes within our public institutions that support economic growth and opportunity."