3. review of taxi cost index and industry request for TAxi fare increase

EXAMEN DE L’INDICE DES COÛTS DES TAXIS ET DEMANDE DE L’INDUSTRIE VISANT À AUGMENTER LES TARIFS DE TAXI

COMMITTEE RECOMMENDATIONS AS AMENDED

That Council approve the following amendments to the Taxi By-law (By-law No. 2005-481, as amended):

1. A 0% taxi meter rate increase for 2011; and

2. An adjustment to the Taxi Cost Index, as proposed in Document 2.

RecommandationS MODIFIÉES DU Comité

Que le Conseil approuve les modifications suivantes au Règlement sur les services de taxi (Règlement n^o 2005-481, dans sa version modifiée) :

1. une hausse de 0% de taximètre pour 2011; et

2. un réajustement à l’indice des coûts du taxi, comme il est proposé dans le document 2.

Documentation

1. Deputy City Manager, City Operations report dated 6 September 2011 (ACS2011-COS-EPS-0034).

2. Extract of Draft Minutes, 15 September 2011.

Report to/Rapport au:

Community and Protective Services Committee

Comité des services communautaires et de protection

and Council / et au Conseil

6 September 2011 / le 6 septembre 2011

Submitted by/Soumis par : Steve Kanellakos, Deputy City Manager/Directeur municipal adjoint, City Operations/Opérations municipales

Contact Person/Personne ressource : Linda Anderson, Chief, By-law and Regulatory Services

Emergency and Protective Services/Services de protection et d'urgence

(613) 580-2424 x29257, Linda.Anderson@ottawa.ca

City Wide/à l'échelle de la Ville

Ref N°: ACS2011-COS-EPS-0034

SUBJECT:

review of taxi cost index and industry request for TAxi fare increase

OBJET :

EXAMEN DE L’INDICE DES COÛTS DES TAXIS ET DEMANDE DE L’INDUSTRIE VISANT À AUGMENTER LES TARIFS DE TAXI

REPORT RECOMMENDATIONS

That the Community and Protective Services Committee recommend that Council approve the following amendments to the Taxi By-law (By-law No. 2005-481, as amended):

1. An approximate 2.5% taxi meter rate increase to take effect October 1, 2011, as detailed in Document 1; and,

2. An adjustment to the Taxi Cost Index, as proposed in Document 2.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services communautaires et de protection recommande au Conseil d’approuver les modifications suivantes au Règlement sur les services de taxi (Règlement n^o 2005-481, dans sa version modifiée):

1. une hausse d’environ 2,5 % du tarif de taximètre qui entrerait en vigueur le 1^er octobre 2011, comme le précise le document 1;

2. un réajustement à l’indice des coûts du taxi, comme il est proposé dans le document 2.

BACKGROUND

Section 151 of the Municipal Act, 2001, as amended, empowers municipalities to license and regulate any business wholly or partly carried on within the municipality even if the business is being carried on from a location outside the municipality and includes the sale or hire of goods or services on an intermittent or one-time basis. Section 156(1) of the Act relating the taxicab licensing, empowers a municipality to establish the rates or fares to be charged for the conveyance or property or passengers; provide for the collection of the rates or fares charged for the conveyance; and limit the number of taxicabs or any class of them.

In June 2010, as a result of its consideration of a staff report concerning amendments to the Taxi By-law, the Community and Protective Services Committee recommended an 8% increase in taxicab fares to reflect the Harmonized Sales Tax (HST) introduced on July 1, 2010, which Council subsequently approved. At that time, Committee requested that staff undertake a study over the year to determine the impacts and benefits of the HST on the taxi industry. Hara Associates was retained to review its original Taxi Cost Index in its entirety as well as to analyze the effects of the HST. Results of this review are provided in Document 3 (report distributed separately and held on file with the City Clerk).

Further, Section 55(3) of Ottawa’s Taxi By-law provides that applications for an adjustment to the taxi meter rate shall be submitted to the Chief Licence Inspector (CLI) on or before June 1^st of the year in which the adjustment is to take effect. By letter to the CLI dated May 4, 2011, the President of the Ontario Taxi Union, Local 1688, requested a meter rate increase of 10%. Any adjustment to this rate would take effect on October 1, 2011, in accordance with the Taxi By-law.

DISCUSSION

Taxi Cost Index

Municipalities regulate meter rates primarily to protect consumers. In the absence of regulations, passengers would often not be in a position to assess a fair price given the variable nature of the service in terms of both distance and quality of vehicle and driver. The concerns of the industry must also be considered with prices set high enough to allow drivers the opportunity to make a fair and reasonable rate of return on their investment. The cost conditions of the industry must be considered and municipalities typically change taximeter rates in response to changes in industry costs. The structure of the industry is such that it is the driver, not the plate-holder, who bears the burden and benefit of cost changes. Adjusting meter rates to reflect changes in cost conditions helps stabilize driver incomes which in turn influences the quality of driver retained by the industry and the consequent quality of service to the passenger.

In 2003, Hara Associates was retained to formulate a Taxi Cost Index for the new City of Ottawa, taking into consideration both urban and suburban taxicab operations and to be reflective of costs specific to Ottawa. Based on the finding of that report, Council set a new meter rate and instituted the current cost index to manage year-to-year adjustments. Thus, 2003 is a reference year. The Taxi Cost Index uses publicly available numbers from Statistics Canada rather than costs collected directly from the industry. This is a common approach in regulated industries in which no one wishes to bear the burden of expensive regulatory cost inquiries. Directly monitoring costs of the taxi industry is difficult because of the cash nature of the industry and the need to protect against conflict of interest by those providing the data.

A cost index consists of three parts:

· a list of commodities and services the industry must purchase to operate;

· price indicators for each of these items; and

· the proportion of total operating costs represented by each item (the “weights”). These weights add up to 100%.

Taximeter Rate Adjustment

Currently, prior to applying the Taxi Cost Index, it is necessary to make adjustment for the fact that the Harmonized Sales Tax (HST), introduced in 2010, allows taxi operators to claim new tax rebates from the HST that were not previously available under the Ontario Provincial Sales Tax. For example, part of the increases on fuel and vehicle repair costs can be claimed back by drivers as credits on income tax resulting in reduced net costs for taxi operators. Therefore, while fuel costs rose 27.3% since the previous rate adjustment, part of that increase can be claimed back as a Goods & Service Tax (GST) credit resulting in an increase of 18.3%. Similarly, although the cost of repairs rose 2%, now an additional 8% of the tax can be reclaimed so the net cost has actually fallen 5.3%.

In 2010, had the only change to the taxi fare been the HST, the 8% increase would have been too much as it did not account for the off-setting tax credits once the former Provincial Sales Tax (PST) became refundable as HST credits. However, costs of operation rose considerably over and above the impact of HST, especially in gas and insurance. Overall, the cost of taxi operation rose 11.3%, including HST adjustments.

As well in 2010, Council approved an 8% increase in the taxi fare, in anticipation of the HST increase alone. The net result is that a 4.0% increase would now be required for the industry to “catch-up” on recent cost increases and bring meter rates in line with the benchmark established in 2003.

Recognizing however that the Taxi Cost Index was established to preserve the benchmark set for meter rates by Council in 2003, and that it is intended to protect consumers while at the same time ensuring operators have the opportunity to earn a just and reasonable rate of return, it must be noted that on three occasions, the industry did not request a fare increase as provided by the by-law. Further, on several other occasions, Council approved fare increases that exceeded the Taxi Cost Index-calculated percentages. These circumstances have resulted in the current taxi fare being almost 17% ahead of the total percentage changes as calculated by the Taxi Cost Index since 2003. Table 1 summarizes the foregoing.

Table 1: Taxi Fare Adjustments since 2003

Year	Council Approved Meter Rate Increase	Taxi Cost Index Annual Change	% over/(under)
2003	10.0%	3.4%
2004	7.0%	3.8%
2005	7.5%	3.2%
2006	No request	5.8%
2007	No request	3.9%
2008	10.0%	3.7%
2009	No request	-4.8%
2010	8%	6.6%
Totals	42.5%	25.6%	16.9%

Further, Ottawa’s current meter rate is very comparable with fares in other major cities, as outlined by Table 2 which shows the rates for each of a 5 kilometre, a 10 kilometre and a 35 kilometre trip at the current taxi fares charged in the cities identified. A 4% rate increase – as suggested by a recent report by Hara Associates (discussed below) – would make Ottawa’s taxicabs the most expensive in Canada.

Table 2: Taxi Metre Rates – Canadian Cities (June 2011)

City	5 km	10 km	35 km
Toronto	$12.74	$21.48	$65.00
Mississauga	$12.87	$21.73	$66.06
Vancouver	$12.66	$22.13	$69.40
Calgary	$10.61	$18.01	$55.00
Winnipeg	$10.30	$17.90	$51.60
Halifax	$10.42	$17.92	$55.32
Ottawa (current rate)	$12.47	$21.78	$68.25
Ottawa (4% increase)	$12.97	$22.65	$71.02
Ottawa (recommended 2.5% increase)	$12.79	$22.32	$69.99

Recognizing that OC Transpo fare increases in 2011 were 2.5% and are anticipated to be the same for 2012, it is recommended that an approximate 2.5% taxi meter rate increase be approved to take effect October 1, 2011. This percentage increase will keep Ottawa on par with other Canadian municipalities. Further protection for the Ottawa taxi industry is provided by the City through the control on the number of plates issued and through its efforts with respect to addressing issues associated with illegal (bandit) taxicabs.

Revised Taxi Cost Index

Hara Associates was retained to review its original Taxi Cost Index in its entirety as well as to analyze the effects of the HST. Results of this review are provided in Document 3 (report distributed separately and held on file with the City Clerk). Hara Associates’ review of Ottawa’s current Taxi Cost Index has resulted in a recommendation that the Taxi Cost Index be updated to reflect the new 2011 cost profile. These proposed amendments are outlined in Document 2.

The change in fuel costs between the proposed or new profile and the current one is actually only 1 percent point for 2011. This suggests that the majority of the change in fuel costs came from price changes and not from increased physical consumption of fuel. Although insurance costs have risen in absolute terms, they have fallen as a percentage of costs because other costs (eg. fuel) have risen more markedly. The most notable proportionate change is the cost of vehicle maintenance which changes from 3.9% to 6.8% of costs. This may reflect a more reasonable view of fleet management costs by industry stakeholders in the present round of consultation with Hara Associates. It also may reflect higher maintenance costs of an aging fleet. The 2003 index was undertaken shortly after vehicle age limits were imposed which may have resulted in a round of new car purchases and lower annual maintenance in 2003.

It is further recommended that revisions of the cost profile and associated adjustments to the Taxi Cost Index be undertaken no later than every ten (10) years or in the event of a major change in the vehicle technology used by the industry.

RURAL IMPLICATIONS

There are no specific rural implications associated with the recommendations.

CONSULTATION

The consultant has met with City of Ottawa Taxicab Brokers and with members of the Taxi Union for input into the development of the revised Taxi Cost Index. The General Manager of Emergency and Protective Services and the Chief of By-law and Regulatory Services held discussions with the Taxi Union concerning the request for a taxi meter rate increase. Notification of the report was also posted on the City’s website in accordance with the Notice By-law, as amended.

LEGAL IMPLICATIONS

There are no legal impediments to the implementation of the recommendations of this report.

RISK MANAGEMENT IMPLICATIONS

There are no risk management implications associated with the recommendation.

FINANCIAL IMPLICATIONS

There are no financial implications associated with this recommendation as the costs, if any, are included in the current budget for By-Law & Regulatory Services. No incremental costs are anticipated.

TECHNOLOGY IMPLICATIONS

There are no technological implications associated with the recommendation.

CITY STRATEGIC PLAN

This report has no direct impact on the City Strategic Directions.

SUPPORTING DOCUMENTATION

Document 1 – Proposed Taxi Meter Rate Increase – 2011

Document 2 – Taxi Cost Index Update

Document 3 – Ottawa Taxi Cost Index – 2011 Update – Hara Associates Inc. (Report distributed separately and held on file with the City Clerk)

DISPOSITION

Legal Services, in consultation with By-law and Regulatory Services, to process the necessary by-law amendments to Council for enactment. By-law and Regulatory Services to implement the new rate, if approved.

Document 1

( Note: Document 1 was rendered redundant

by CPS Motion 9/1 of 15 September 2011 )

~~Proposed Taxi Meter Rate Increase – 2011~~

~~(amend part of Schedule “B” to the Taxi By-law, By-law No. 2005-481, as amended)~~

1. ~~One to Six Passengers~~

~~For the first 150 metres or part thereof…………………..…$3.55~~

~~For each additional 84 metres or part thereof………………$0.16~~

~~For each twenty-four (24) seconds waiting time~~

or ~~part thereof while under engagement……………….……$0.16~~

Document 2

Taxi Cost Index Update

(amend Schedule “E” to the Taxi By-law, By-law No. 2005-481, as amended)

Component Series % of Index

Proposed (Current)

1. Stand Rent, Licenses, CPI Ottawa; All-items (v737251) 9.9 (11.3)

Union Dues, Other

2. Insurance CPI Ontario; Automotive vehicle 6.2 (7.5) insurance premiums (v736366)

3. Fuel CPI Ontario: Gasoline (v736363) 23.0 (17.1)

4. Routine Repairs and CPI Ontario: Automotive vehicle 6.8 (4.5)

Maintenance parts, maintenance and repairs

(v736364)

5. Amortized cost of CPI Ontario; Purchase of automotive 3.4 (7.7)

vehicle, Radio and vehicles (v736361)

Equipment

6. Earnings-all drivers Ontario; Average hourly wage rate; 50.7 (52.0)

Full-time employees; Transportation and

Warehousing (v2153229)

TOTAL 100% (100%)