Ten years ago, “ride sharing” was something parents did driving kids to soccer practice. How times have changed. Today, Uber and Lyft are household names for pairing you with strangers who will safely drive wherever you want to go.
But this ongoing transportation revolution is not just the work of Silicon Valley visionaries. An Ecuadorean immigrant in Minneapolis, Luis Paucar, heralded the beginning of this trend.
Ten years ago, Paucar ran a small Twin Cities-area taxicab company serving Richfield and a few other suburbs. He wanted to serve customers in Minneapolis as well. But he couldn’t: At the time, the city capped the number of taxi licenses at 343 vehicles. To go into business, he would have had to purchase a license from an existing owner, at a cost of more than $20,000.
All Paucar wanted to do was give people safe, affordable transportation and employ drivers in the process.
But that was illegal without “buying out” one of his competitors.
Instead of playing along within this monopolistic system, Paucar changed it. In October 2006, he and a coalition successfully convinced the City Council to lift the cap. Over the next five years, more taxi licenses were issued, and then the cap was lifted completely. Anyone with insurance, a safe vehicle, and a clean record could own a taxicab and serve the public.
The result? It has become a lot easier to catch a cab. Now there are 980 Minneapolis taxi licenses, an increase of 185 percent. Back in 2005, there were 10 taxi companies. Today there are 42. Moreover, in 2005, none of the taxi companies offered Spanish-language dispatch. Now several — including Paucar’s — can take calls from Spanish-speaking customers.
Despite these changes, the established taxi owners weren’t going to take losing their monopoly lying down. In 2007, they sued the city, arguing that by offering more competition, the city committed a constitutional “taking,” because it didn’t pay off Paucar’s formerly protected competitors. Ending the monopoly without compensation, they astoundingly argued, was unconstitutional.
To be clear, no one had “taken” their licenses. Instead, the incumbent owners no longer had the monopoly they formerly enjoyed.
Partnering with our law firm, the Institute for Justice, Paucar intervened in the lawsuit, helping the city defend the new reforms in court. Ultimately, Paucar and Minneapolis won. In a landmark decision, the 8th U.S. Circuit Court of Appeals ruled that allowing more competition is — shockingly! — completely constitutional.
A contrary result would have made a terrible precedent, requiring cities to pay off established providers before allowing more competition. Reform would have become all but impossible. But thanks to the precedent Paucar secured, overhauling taxi laws became easier. Years later, when Uber and Lyft came to Minneapolis, although there was some wrangling between taxis and the new ride-sharing companies, the transition was smoother, because taxis were not the monopoly they once had been.
The same adaptation has been harder elsewhere. And that’s where the biggest impact of Minneapolis’ trailblazing reforms has been — and is still being — felt.
In Chicago, New York, Milwaukee, San Diego, Boston, Miami and other large cities, local governments have tried to reform their long-antiquated transportation markets by variously lifting taxicab caps and legalizing ride sharing. And in just about all of these cities, the existing, formerly protected, taxicab industry has sued, arguing that by offering more competition the city has “taken” the old taxi owner’s “property.”
Many of these cases are still being fought in court, and in each of them, the leading judicial opinion that cities and new entrepreneurs point to is Paucar’s case from Minneapolis. Two of these lawsuits — from Milwaukee and Chicago — were decided last week by a federal appeals court judge who ruled in favor of the cities and entrepreneurs. The Minneapolis precedent was a big reason why.
So the next time you hop over to Milwaukee and ride in one of its new taxicabs or travel to Chicago and grab an Uber, think of the Minneapolis visionary, Luis Paucar, who changed his city and made America freer.
Lee McGrath and Anthony Sanders are attorneys at the Institute for Justice, which represented Luis Paucar in court and clients in similar cases in Milwaukee and Chicago.