Hybrid taxis: the crushing burden of the tax break nobody will use?
Today, a handful of business owners showed up to oppose a tax break for themselves because of burdens that the bill won't impose, while other Councilmembers oppose it because they don't think it will work. And thus, in the bizarre land of today's hearing, a completely voluntary tax incentive that nobody will take advantage of will put people out of business who aren't affected at all.
Today, the Council considered the hybrid taxi incentive bill, which would do two things. First, it would give a $2,000 tax credit to any taxi operator incorporated in DC, who lives in DC, for purchasing a hybrid or "alternative fuel vehicle." Second, it calls on the administration to create a plan to gradually convert more DC taxis to hybrids, starting with 5% in 2009 up to 50% in 2017.
Other cities, including New York and Boston, are far ahead of DC. Both of those cities are requiring conversion of all taxis to hybrids by 2012 (NYC) and 2015 (Boston). Taxis are a particularly ripe opportunity for emissions reduction because each vehicle drives far more than other cars (75,000-100,000 miles per year), idle for long periods of time, and drive in stop-and-go traffic most of the rest of the time.
Opposition followed two paths: those who don't think the bill will actually work (led by Jim Graham), and those who object to the burden of a phantom mandate on taxi owners, or who just wanted to vent about meters, led by industry representatives.
The Graham school of thought goes like this: At most 25% of taxi drivers would even be eligible, because many drivers live outside DC and many aren't incorporated. A used Prius costs about twice as much as a used Crown Vic, and a $2,000 tax credit couldn't cover the difference. And finally, most drivers don't even pay $2,000 in taxes, so they couldn't even get the whole credit. Plus, the targets aren't mandates, so that part won't have any force. Why pass a bill that affects very few drivers, might not incentivize any hybrid purchases, and sets targets with no force?
As witnesses (and GGW readers) Ken Archer and Abby Hall argued, that doesn't provide a reason not to pass the bill. If only a few taxis switch to hybrids, that's a few more than we have today. And setting targets, pointed out Jim Dougherty of the Sierra Club, is how most emission reductions take place. Sure, maybe the bill is "wimpy," as Councilmember Tommy Wells put it; that's a reason to improve the bill, not to discard it completely.
Meanwhile, several taxi industry representatives and drivers claimed that the bill will put drivers out of business. They seemed to be testifying against a completely different, imaginary bill, one which requires taxis to switch to hybrids instead of just providing tax breaks.
But as Wells pointed out, the bill is entirely voluntary. "It would be a big strategic mistake for taxi drivers in this city to regard this as an attack," Archer said. "They should jump over this, which is a much better approach than was taken in other cities." The only possibly unfair portion, Wells said, is the one that makes DC residents eligible for the credit but not Maryland or Virginia residents. And that kind of unfairness had few objectors.
Drivers did argue that $2,000 won't be enough to help them buy a hybrid, and that the Prius doesn't have enough trunk or passenger space. Graham and Wells agreed that perhaps we need a greater incentive.
Jim Dougherty of the Sierra Club also raised some valuable technical objections to the language. By naming hybrid technology, the bill ignores plug-in electric vehicles and other technologies we might see in the future. Better, he suggested, to create an incentive for any car that gets 40 mpg or better, and automatically raise that figure over time.
Evans, on the other hand, worried about the fiscal impact of the tax break amid a likely $131 million budget shortfall, or more, and the failure of the federal bailout plan fourteen blocks down Pennsylvania Avenue while this hearing was in progress. I'm sure a few people concerned by other past Evans tax breaks or tax-free bond issues might find a little irony in this.
If it won't break the bank, the Council should pass some sort of hybrid taxicab incentive. This particular bill may not be the one, for a myriad of reasons. But we should fashion an incentive that adequately encourages new environmentally friendly taxis while retaining the purely voluntary nature of the current bill, and one which rewards the ultimate effect on the environment rather than the specific technology we use to get there.
Jim Graham is introducing the bill, which was referred both to his committee, on Public Works and the Environment, and to the Committee on Finance and Revenue, for the tax credit portion. New York is requiring all of its cabs be hybrid by 2012, and Boston by 2015. The first hybrid taxi in Vancouver saved enough on gas to recover its purchase price in only three years.
Graham agrees with the goals of the bill, but doesn't believe it will achieve its purpose of driving higher hybrid taxi adoption. The credit only applies to businesses incorporated in DC, but most taxis are owned by individuals, not businesses. It also requires the owner to live in the District, but most taxi owners do not. And finally, most taxi owners only pay about $1500 in taxes, and would therefore not receive the full credit.
A two-year-old Prius costs about $24,000, compared to a three-year-old Ford Crown Vic which sells for about $11,000. The Prius would save a lot on fuel, but it still took three years for the aforementioned Vancouver cab to recoup its investment.
Other cities limit their number of cabs, making it easier to require . Each taxi gets driven more and makes more money; the city can more easily place restrictions on medallions, and the company can use that medallion as collateral for a hybrid loan.
If we're serious, Graham argues, we should give a higher tax credit to get the job done.
Evans, the chairman of the Commitee on Finance and Revenue, is speaking next. He is also concerned about the criticisms Graham raised, but also about the financial impact due to the city's estimated $131 million budget shortfall announced last week. The financial crisis will surely reduce our tax revenue, forcing difficult budget cuts.
Tommy Wells: We introduced this bill a year ago this week, with seven co-introducers [Cheh, Wells, Alexander, Barry, Brown, Catania, and Evans] and three cosponsors [Gray, Bowser and Mendelson]. Other cities are far ahead of DC in converting their fleets to environmentally friendly vehicles. NYC faced steep opposition and the Taxi & Limousine Commission intiially ignored the law, but now the city is converting all of its cabs to hybrids. This bill is only an incentive.
With the stop and go of taxis in urban settings, hybrids get 30 mph compared to about 13 for a Crown Victoria. Most taxis save about $10,000 in fuel costs per year; NYC's T&LC estimated their taxis saved $13,800 per year. This is far more than the difference in cost, and it's very shortsighted. Yes, our fleet is different, but this bill only requires the Mayor to devise a strategy to create incentives and gradually convert the fleet. And, "even those goals put us way behind other cities in America."
Wells calls on his colleagues to help "refashion" the bill to accomplish its goals while addressing their concerns, because the effect on air quality and fuel savings are too great to ignore.
Graham adds that NYC also allowed alternative fuel vehicles to stay in service longer than other cars, and Boston raised fares to enable taxi owners to pay for the hybrids.
On to the witnesses...
William Wright, DC Taxicab Industry Group: We understand the desire to minimize pollution, but haven't forced auto manufacturers to make changes in cars to achieve these goals. The credit is a drop in the bucket compared to the cost of a $30,000 car. We have been forced to put meters in our taxicabs; have lost revenue. A $30K car will put the independent drivers out of business. We don't even know how the government will decide which drivers will be forced to drive the car. We hope you will not impose this high priced car on citizens of DC.
Nathan Price, Chairman, DC Professional Taxicab Drivers Association: Why was the taxicab industry selected instead of other industries? You are imposing a significant investment on individuals. Did you notify any cab owners about this economic impact? Price is going on to complain about the meter changeover, and then about how he's lived in DC all his life. "We don't need a cost incentive of $2,000. We need a chance to make money. ... We have a system that gives you more cabs per capita than anywhere else in the world."
DC has 4 times the cabs of similarly-sized San Francisco. We'd like to decrease emissions as well, but need a way to make money. Many of DC's cabs are Town Cars, which do burn gas but are comfortable to passengers. Let the market drive demand instead of the Council deciding.
Wright and Price both seem to be testifying in opposition to a different bill than this one, one that mandates hybrids instead of simply providing a tax credit. Have they even read the bill?
Jim Dougherty, Conservation Chair, DC Sierra Club: This bill should have two goals: 1) to reduce emissions on our streets, and 2) to reduce greenhouse gases. Recent reports show greenhouse gas emissions skyrocketing beyond previous estimates. This is a win for the environment and will save drivers money.
The bill talks about "alternative fuel vehicles", which is not defined, but may mean ethanol coming from corn. That's a mistake. Ethanol from corn takes more energy to grow than you get back, and the industry is only viable because of massive federal subsidies.
Second, the bill is technology-based. It talks about hybrids, but that technology is constantly evolving. We should ultimately go to battery-operated electric vehicles. In future years, we may not be using hybrids. Instead, provide an incentive based on the miles per gallon of the vehicle. We could start with 40 mpg, then, say, 1.5 mpg more each year, meaning 55 in ten years, etc.
We should also have a minimum fuel economy for taxicabs. The national average is 27.5 mpg. Every cab should get at least 20. Also, let's improve the fuel economy of the city's own fleet. I agree with Price that we shouldn't just target taxis. Let's convert the entire fleet to compressed natural gas, like WMATA did.
How can we incentivize electric cars? Those produce zero emissions on the city streets. How about charging stations outside every hotel?
Ken Archer, GGW regular reader: "My wife and I really want a cleaner city for our family." Taxis drive ten times more than other cars, averaging 85,000 to 100,000 miles per year. "This isn't cutting-edge legislation." This builds on what NYC, Boston and San Francisco have done.
In NYC, forcing hybrids jeopardized safety. There aren't enough aftermarket parts of taxis, making it harder to maintain hybrids. This legislation instead subsidizes the taxi drivers. That will require a significant investment. "It would be a big strategic mistake for taxi drivers in this city to regard this as an attack. ... They should jump over this, which is a much better approach than was taken in other cities."
Time for Councilmembers to ask questions...
Graham: Are these "goals" like New Year's resolutions, which we hope to accomplish but don't create an actual mandate? This bill doesn't provide incentives to most drivers and doesn't mandate anything, so maybe we need a different approach.
Dougherty: Most emission reduction programs are about goals.
Price: The industry will fail unless we change the industry. Wright: The meters have really destroyed this industry.
Evans: Maybe we should just withdraw this bill and start over.
Archer: No, this bill has some good elements learning from the other cities. It's not a mandate. It doesn't matter if most taxi drivers aren't eligible; what matters is if this gets a couple dozen taxi drivers to make this investment.
Dougherty: Let's build on this and produce a better bill. Concerned that tabling this would put it in the trash heap, but it makes sense to step back and try to make it better.
Price: Have to give drivers a way to make money. He's sounding like a broken record.
Evans: If it's a voluntary basis? Wright: "I'm always in favor of people volunteering." Evans: We have to keep stressing that this is voluntary. The theme keeps being that this is a mandate; we have to be clear that it is not.
Wells: The government fleets have moved substantially toward more efficient fleets. Agree with Jim Dougherty's point about incentives for efficiency rather than technology.
Appreciate that the taxi industry isn't saying absolutely not, but that they're independent businesses and have to make business decisions. But you're smart businessmen, and should not that the market is continually changing. There's now a 100% electric car service during baseball games, eCruisers, shuttling people between the stadium and Eastern Market. Now it's running during lunch hours too.
It's a profitable business, but the ride is free. Now there's basically a free electric taxi service on Capitol Hill. As we bring in new cars, new hybrids, larger ones than the Prius, the question is, do we have a model that provides a sustainable business model and improves our environment?
What elements do we need in a bill that would create incentives that would work?
Wright: In Hamburg, the government helps secure the kind of vehicles they need, then disposes of them at the end of their life.
Next panel of witnesses...
Carolyn Robinson, taxi driver: "I have serious and troubling concerns." Councilmembers introduced this bill without concern for the financial impact it will cause for the drivers.
Will DC also establish standards for passenger and trunk space? NYC is in litigation about safety for hybrid taxis.
Abby Hall: This bill will make a difference locally, and "creating incentives will have national and global implications as well." DC-Baltimore is in the top ten regions for ground level ozone. We got an F for high ozone days. According to the American Lung Associations, the automobile is still the greatest source of emissions.
This is a "simple tax incentive, not a regulation." It's a carrot and not a stick. "Don't let the perfect be the enemy of the good." A lot of details still need to be worked out. Also agree with Dougherty about plug-in vehicles, which moves the pollution away from the population.
Abdul Kamuz, African Resource Center: His group works to improve employment opportunities for African immigrants. They support this bill but question if the credit is enough. DC is highly polluted and any effort on this area would be a benefit. But would this legislation work?
People take the first cab that comes, regardless of the age of the car or the impact on the environment. Since there is no cap on the number of cars, that keeps a lot of cabs on the street but the income of each driver stays low. The credit should be $5,000 to $10,000 and add low-interest loans for drivers to purchase cars. The Council should consider an exception to the ban on new companies for companies that promise to operate at least ten hybrids.
Wegan Tadesse (sp?), driver: Care about the environment, but have a wife and kids. Repeats many of the arguments others have brought up.
Graham repeats again that this applies to few people. Hall: Maybe it's just a pilot, a start for now, and can expand later.
Robinson: $2,000 would not be an incentive to purchase a hybrid vehicle. It costs too much.
Kamuz: Son has asthma, really care about the environment. But most drivers are from Maryland and Virginia.
Evans: How do we move forward with all the issues around this?
Wells: Want to reiterate that this is not a requirement. Drivers will not be required to do anything new. Can't understand why they oppose incentives for those that want cars that burn cleaner fuel. Explain how this is unfair, other than that DC residents get the only incentive. I don't mind giving DC residents an edge. "20% is a lot better than none."
In 5 months, EnviroCab operators [in Arlington] have saved $5,000 for gas bills. Trying to match something folks should have a competitive advantage controlling the cost of gas.
Maybe the incentive is not enough. This is a wimpy bill, but that was an attempt at compromise.
Robinson: Aware that this is not a requirement. It should be a much greater incentive. Have no problem with advantage for DC residents. Prius is small, doesn't have a lot of trunk space, and not much room to maneuver in the back. Would prefer to have an SUV, but that's $40,000.
George Hawkins, Director, District Department of the Environment: The executive hasn't taken a formal position on this bill. In general, reducing gasoline use in vehicles is a good thing. DC already has an incentive, waiving the excise tax for any driver (including taxis) who purchase a car that exceeds 40 mpg.
12% of DC children have asthma, vs. 9% of national average. Transportation is second only to building energy use in generating greenhouse gas. His personal work vehicle is a MetroCard and his feet.
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