The City of Detroit is looking to raise cab fares and possibly block new Uber and Lyft ride services from charging higher rates as part of the first overhaul of city's taxi regulations in a generation.
The result could be pricier meter rates, but it would also provide an incentive for cab drivers to follow the rules and not charge exorbitant flat rates for short rides, an illegal practice and common complaint among Detroit cab passengers. Drivers face a misdemeanor ticket if caught charging over the city's official rate of $1.60 per mile with a $2.50 base fare.
"I had somebody one time quote me a price to go from MGM Grand (Detroit) to Nemo's, which is not even a mile, and the guy wanted $20," said Vaughn Derderian, 37, who works downtown and lives in Madison Heights. "My buddy and I said 'That's ridiculous, we'd rather walk.' And so he pulled over right at the corner of Michigan and Third and we got out and walked."
Cab drivers say the current rates, last set in 2001, are too low to make a decent living without charging illegal, off-the-meter flat rates. "Every time we're hitting that meter, we're cheating ourselves," said Detroit cab driver William Harold Davis, 60.
Drivers are also angry over the city's current policy which allows Uber and Lyft to do business in Detroit without paying any registration fees or requiring their drivers to buy the same pricey commercial-grade auto insurance that traditional taxi drivers do.
Detroit also permits Uber and Lyft drivers to charge fare rates based on fluctuating demand, which Uber calls 'surge pricing.' But some consumers and city officials say this practice amounts to unregulated price gouging.
Uber and Lyft disclose surge pricing rates, but the size of the final bill can still startle passengers.
Nick Norton, 20, and a group of friends took an Uber black car this August from Westland to Comerica Park for the Eminem concert. He said the trip cost $65, which a coupon reduced to $35. After the concert, surge pricing was in effect at 2.5 times the normal cost. The cost of his return trip home was $189, said Norton, a student at Wayne State University. After he e-mailed Uber to complain, he said the company reduced his total fare to $140.
"Uber kind of presents themselves to be this really cheap and affordable alternative to cabs, but when you use them in these situations where you want them to be a cheap alternative to a cab, they're not," Norton said. "In this instance I wished I just used a cab."
In interviews, Uber and Lyft representatives said that changes in fare rates are always disclosed on their apps and that surge pricing allows the supply of Uber or Lyft cars to quickly respond to changes in demand for rides.
Detroit taxi drivers are seeking higher rates and similiar fees and city regulations on Uber and Lyft ride services. JC Reindl/Detroit Free Press
The complaints from traditional taxi drivers and municipal regulators are echoed throughout the nation as traditional on-the-ground commerce clashes with digital innovation and businesses conducted in real-time through smartphones.
Uber and Lyft are currently operating under a temporary two-year operating agreement signed in the spring with the city's legal department.
Detroit's traditional cab drivers responded by reorganizing their dormant trade association, Metro Detroit Cab Drivers Association, and pressing city officials for a fare increase and more consistent regulations on vehicles for hire that apply to Uber and Lyft. The cab drivers association is seeking a new $20 flat rate for taxi trips within Detroit's central business district and an increase in the regular fare to $2.50 per mile.
"Frankly, I am not proud of the state of where we are in terms of taxi cab service," said Melvin Butch Hollowell, the city's top lawyer. "We are going to clean up our act as it relates to the taxi cab and ride-sharing industries in this city."
Raising the official fare requires a vote from City Council and review by a taxi commission, among other steps. Council has yet to unveil any rate change proposals. Once finished, and if approved by the full council, the new taxi regulations would replace the two-year operating agreement that Detroit reached last spring with Uber and Lyft. That agreement, which did not go before council, also rescinded a cease and desist order that Detroit issued to Uber in February.
Local and state governments across the U.S. have completed similar updates to their taxi laws to reflect the advent of ride service companies. In Michigan, Uber now operates in the Detroit, Ann Arbor, Flint, Grand Rapids, Kalamazoo and Lansing metro markets. Lyft runs in Detroit and Ann Arbor.
Detroit's taxi laws were last revised in 1995 in the wake of embarrassing public criticism by consumer advocate Ralph Nader, who after several unpleasant rides summed up Detroit taxis as "the kind that you'd see in the Third World."
Two decades later, the arrival of a new breed of car dispatch companies whose business model is based on smartphone apps has revealed deficiencies in old economy transportation laws and spotlighted a continued dissatisfaction among some passengers with traditional Detroit taxis, whose drivers and owners are losing business to the high-tech newcomers.
Currently Detroit has a different set of operating rules for ride service companies Uber and Lyft, which don't own cab or limo fleets, and instead function as coordinators between fare-seeking drivers and would-be passengers using smartphone apps to find a ride.
Those rules were set with a temporary operating agreement that the city's legal department reached last spring with both California-based firms.
Drivers for Lyft and Uber's cheapest service, UberX, use their own personal vehicles and aren't required by the companies to carry regular taxi or chauffeur licenses. Also unlike traditional cabs, the city allows these drivers to charge different fares than the city's official taxi rate, so long as the rate is disclosed on Lyft or Uber's smartphone app.
That flexibility allows Lyft and Uber to charge more than its normal fares during periods of high demand. Uber fares have been spotted at highs of three times normal rates in Detroit on New Year's Eve and 3½ times normal rates in Ann Arbor during a recent football game.
Some proponents have applauded surge pricing for opening taxi rates to the free market. And Uber and Lyft say it provides drivers an extra incentive to work during peak hours of customer need, such as weekend nights and big game days.
But critics call it price gouging. As the new regulations take shape, there is a desire among some Detroit City Council members to apply the same rules to all driver-for-hire businesses.
"My goal is not to allow them to gouge people," Councilman George Cushingberry Jr., chairman of the Budget, Finance and Audit Committee, said last week.
"But I'm not sure if we have the votes for that ... some of my colleagues say that if people are willing to pay, then why should we prohibit them,?" Cushingberry said.
Detroit cabbies say it's tougher than ever for them to make a living because along with outdated rates Uber and Lyft drivers are exempted from regulations and fees that still apply to cab drivers.
Cab owners are currently required to buy a $2,000 bond plate from the city and pay a $312 yearly renewal fee, plus a $70 annual inspection fee. The owners also must carry commercial-grade auto insurance, which costs about $6,000 a year or more in Detroit. The city collected just under $400,000 in revenue from taxi fees during the last fiscal year, ending June 30.
Taxi drivers pay for their own gas and a daily vehicle rental fee that varies by cab company but is commonly $75. They usually get to keep all of their fares.
Uber and Lyft drivers pay no fees to the city. The ride services allow drivers to use their personal auto insurance, even though most personal policies prohibit providing livery service. The companies each have $1-million liability policies for drivers and passengers, in addition to separate vehicle collision policies, that activate in the event of a crash.
"We're seeing preferential treatment for the ride-sharing companies," said Kenneth Reynolds, president of the Metro Detroit Cab Drivers Association.
Cabbies also feel that Detroit police are cracking down and issuing misdemeanor tickets for what drivers claim are minor infractions, such as writing "MGM" in their trip log and not the full address for the casino, which is 1777 3rd St. Officers issued 574 taxi cab and limo citations in the first half of 2014, up from 159 during the same period last year, according to a memo from Detroit Police Chief James Craig.
A department spokesman attributed the increase in tickets to stepped-up enforcement of all motor vehicle offenses and disputed claims that cabbies were targeted.
Cushingberry said the new regulations would likely require ride service drivers to buy a decal from the city, just like taxis do. "I'm looking to Uber and Lyft to pay their fair share."