Taxi Toolkit v0.6

The Taxi ToolkitVersion 1.0 16 April 2015The Public Administration Help Tank[Type the abstract of the document here. The abstract is typically a short summary of the contentsof the document. Type the abstract of the document here. The abstract is typically a shortsummary of the contents of the document.]

1. What and whom for? The Taxi Toolkit Taxi drivers are officers of the transit system of a city just as lawyers are officers of the court. Taxi fares affect investments and choices in other areas of society. For example poor transit increases health costs and medical facilities to cover road accidents. Price influences behaviour of all the stakeholders of a product: The ‘tariff’ is the price of the taxi service. Hence tariff influences the behaviour of all the stakeholders of the taxi system. It is therefore necessary to ‘design’ the tariff to encourage desired behaviour. The Taxi Toolkit helps ‘design’ such a tariff for the taxi service in a city. It is intended for the stakeholders of a taxi service- regulators, operators, driver unions, passenger associations, citizens groups, manufacturer forums, and government. It lays a foundation for a fare basis that is equitable and transparent to all stakeholders. The first section explains the theory of taxi service, regulation and tariff theory. The second section explains how to structure a fare. The third section is on consultation documents. It also has a model document and examples from around the world. 1

2. Acknowledgements The Taxi Toolkit The International Association of Transport Professionals (UITP) through the Taxi Working Group of UITP Middle East and North Africa triggered the foundation for this manuscript. 2

Table of Contents The Taxi Toolkit1. What and whom for? ......................................................12. Acknowledgements.........................................................23. Glossary ..........................................................................44. Why Regulate Taxis.........................................................65. What can be Regulated...................................................76. Factors of taxi service .....................................................87. Taxi charging (Car picture) .............................................98. Taxi Fares Bases ............................................................109. Effects on Stakeholders.................................................1110. Stakeholders’ Dilemmas.............................................1311. Common failures ........................................................1412. Revenue Model- Data Collection................................1613. The Analyses...............................................................1714. Fare Factors and Model..............................................1815. Usage Sensitive Fare...................................................1916. Fare Heuristic .............................................................2217. Iso Charts Analysis......................................................2318. Current Practice .........................................................2419. Current Traffic ............................................................2520. Current Fare ...............................................................2621. Fare Iteration Charts ..................................................2722. Consultation Document .............................................2823. For Effective Taxi Systems ..........................................34 3

3. GlossaryFHV For Hail Vehicle. Primarily that is hailed on the road. In this book the term taxi includesFlag Drop sea and air; and two, three or four wheels.Meter Drop Commonised Universal Unit. This is theChangeover symbol for all units and currency.Discerns Distance- km, miles Duration- minutes, hours Money- Local currency The Taxi Toolkit Liquid Fuel- litre/ liter Gaseous Fuel- kg, lb Electric fuel- kWh The amount that comes up when the “For Hire” sign or “flag” in the meter is turned on to hire the FHV. This may be the minimum fare. The amount by which the fare increases as the FHV runs, usually in advance. Large meter drops increase meter anxiety in the passenger nears the destination. A small drop makes the meter change quickly and can give a feeling of high charging. This is the method of charging by distance above a certain speed and by duration below that speed. In slow traffic or when stopped at a traffic signal the charge is by time. While running in fast traffic the meter charges by distance. The speed at which it changes is called the Changeover speed. These are surcharges and discounts. They push stakeholders to behave as desired. They also remove hidden subsidies from the 4

Iso Charts various trips. Thus they help modify stakeholder behaviour.Dead Km This is a plot of the occurrences of a factorDead minutes of similar nature. Example is the chart ofLive Km number of trips, trip durations, tripLive minutes distances and total fares during a day or a week or any chosen period. Distance covered by a taxi without payment like in search of a customer or return to shed Duration when the taxi does not get a payment or income The distance paid by a customer. Opposite of dead Km The time when the taxi is paid for as when during a trip-- including when waiting at a traffic sign or heavy traffic or when waiting at customer’s request The Taxi Toolkit 5

4. Why Regulate Taxis The Taxi Toolkit To increase utilisation of buses and rapid transit, last mile must be connected well. A vehicle stopping on the road penalises other road users. Traffic speed must be high to reduce travel time for everyone. Taxis are a part of public transit that are permitted to stop on the carriageway so that some Without taxis, transit stops have to be more frequent reducing speed of public transit. Hence a defined number of vehicles are allowed to stop on the road to alleviate the pain of the last mile. A taxi is not a “free market’: A passenger getting into a taxi does not have time or knowledge to find out if his driver knows the town or the quality of the service or the quality of the vehicle. Taxis are thus ‘natural oligopolies’ that have to perform a service to defined norms in exchange for assured returns. 6

5. What can be Regulated The Taxi Toolkit Fare is the most visible of the factors that are regulated. – give different factors, 4D’s The Taxi Permit is the next visible. The number of taxis is controlled so ensure The Qualification of the taxi driver is the next visible factor. The Quality of taxis – Example is London- acceleration for traffic speed. Quantity of drivers Area of operation Mode of Operation Fare can be fixed, proportional, maximum or.. 7

6. Factors of taxi servicePer Trip orMinimum Special charge or discountRate Per Km Rate Per minute (Not waiting charge!)Distance and Duration are the twolegs of a taxi serviceChangeover Speed uses both legs, butone at a time The Taxi Toolkit 8

7. Taxi charging (Car The Taxi Toolkit picture) Flag drop: High Flag Drop (minimum charge) encourages drivers to accept short trips. It discourages passengers from short trips. If Flag Drop is low, drivers refuse short trips. If taxis are to be a last mile option, this must be decided judiciously Distance Fare set high will lead to refusal of short trips. Passengers will avoid long trips. Duration fare encourages drivers not to pressurise on time, behave well and obey traffic rules. Meter Drop: This is the amount by which the fare increases. If the amount is low (say 5¢), the meter appears to run fast. Hence passengers get meter stress. If the amount is high (say $1) passengers get meter anxiety as they near the destination. Drivers try to ‘beat the drop’ for the added income. Surcharges/discounts directly shape behaviour of passenger and driver. They influence behaviour of other stakeholders tangentially. 9

8. Taxi Fares Bases The Taxi Toolkit A fare is the ‘price’ for a trip. Fare is a policy, cost is a fact. The fare must be founded on demand, price elasticity, and affordability. Cost-Plus Method of Fares: A fare system based only on the cost of inputs ignores realities such as demand. In cost-plus method the fare is increased to cover cost. There is no incentive to operators, drivers or manufacturers to reduce cost. Hence cost plus rewards inefficiency. Contribution Pricing of Fares: approach to fares is behaviour oriented: It charges by separate factors such as duration, distance and special requests. So drivers and passengers know what behaviour pays. Thus it can be used to influence desired behaviour. The fare is fixed based on total demand at an affordable price. It is left to operators to contain their cost and make a profit. To increase income the taxi might carry water, newspapers, even coffee or deliver goods for a fee and increase the contribution. 10

9. Effects on Stakeholders The Taxi Toolkit Drivers and passengers are the first stake- holders in taxis. Fares impact them directly. Taxi owners, manufacturers and providers of capital form the second level of stakeholders. Fares trickle down the money chain to them. Fellow road users, society and government the third level of stakeholders. Fares influence the behaviour of drivers and passengers directly. The behaviour of drivers affects fellow road users: Aggressive taxi drivers stress out fellow road users. Regulation is to benefit all the stakeholders: It assures passengers of quality service; it ensures trips to drivers and operators, and it provides viable business to capital. This stability retains stakeholder commitment, particularly drivers with good attitude and knowledge of the locality. When a fare basis affects the balance of travel, it distorts expenditure in all areas of society. The first is investment in infrastructure. Healthcare costs can increase due to the effect of pollution. The wellbeing of a populace is affected by poor transit facilities. Commerce and entertainment of the city are retarded by the absence of free movement. When quantity regulation is designed badly the wealth can be cornered by vehicle owners. This is evident in cities where permit costs exceed vehicle cost by many times. 11

Money lenders capture wealth by increasing rate of The Taxi Toolkitinterest. Brokers and middle men capture wealth bycontrolling vehicles, permits, insurance, offers ofprotection.Vehicle specifications are written to protect somemanufacturers. Sometimes enforcement is watereddown to save cost.Government provides the facilities- roads, railway,ferry, bus stops, walk ways etc., If they are notbalanced, it affects the investment in the othermodes.Regulators are charged with maintaining the equityfor the stakeholders. Poorly designed fare movestraffic from desired mode to other modes.Competition contestability alone is not maintaininglevel opportunity.Society is the larger organism at stake. Strainresources: strain the resources such as roads, standsMore taxis is increased pollution. This loads societywith increased medicare costs. 12

10. Stakeholders’ Dilemmas The Taxi Toolkit A fare structure must be equitable to all stakeholders and be perceived to be so. The linkages between various factors must be evident and transparent. The fares of one city cannot be compared with the fares of another city: just as the home rentals cannot be compared between cities. Fares vary between cities depending on the city size, traffic demand, traffic speeds, trip patterns and amortisation. Well-designed micro transit saves investment in mass transit, roads, and maintenance. Regulation enforcement and governance are independent necessities. One cannot compensate the poor design of the other. 13

11. Common failures The Taxi Toolkit Refusal: Perhaps most common complaint against drivers is refusal of trips, usually a result of fare structures that do not compensate trips equitably. Rogue taxis: Unlicensed taxis, limos Negotiation: Drivers negotiate with passenger’s need of the moment- the best time to sell water is when your neighbour’s house is on fire. Skimming: Drivers in shared revenue models will not report all earnings. Sometime regular passengers can make cosy arrangements with the driver. Truancy: In salaried models, drivers will take a break during busy time. Satiation: In ownership, drivers stop plying after reaching their target revenue for the period. In this case passenger waiting time will increase. They will not get a taxi when they need or where they need. The public gets a lower quality of service. Theft: Drivers steal parts, and fuel Exploitation: Owners raise rents, capital increases interest rates, manufacturers increase prices, and enforcement agencies demand bribes. Skipping: Drivers will not engage the meter during the trip or will claim faulty meter and negotiate after they reach the destination. 14

Meter padding is done by changing the tyres after The Taxi Toolkitcalibration or by reducing the air in the meteringwheel.Poor quality vehicles are common wherespecification is poor or enforcement is lax or evenwhen specifications are not enforceable. 15

12. Revenue Model- Data The Taxi Toolkit Collection Current fares and heuristic, number of taxis, transit alternatives, traffic speeds. Statistics of demand and service. If data is not available, a sampling study is advised. Synoptic date usually leads to dissatisfaction and conflict. Costs of the service, investments, maintenance, consumption, salaries and incidentals are identified and collected by the regulator. Stakeholders must bring in their figures. Topography of the area influences the fare greatly. Multi-cities (twin cities) present vastly different dynamics. Electronic meters have trip logs. The transmission to the collecting agency may be continuous through wireless or periodic batch mode. 16

13. The Analyses The Taxi Toolkit The Revenue Model is determined from the analysis of trips or the topography of the city. Small towns can use a fixed fare. Mid-size towns can use a duration fare. Large cities use distance and duration. Intercity taxis can use a distance fare. The tariff for a factor can be a fixed rate or proportional to the usage. This is determined by the distribution of the distances and traffic speed of the city. A taxi is to run a certain number of trips, certain live kilometres and certain hours a day. Iso charts show the distribution of the demand of trips, durations and distances. They help determine the demand heuristic. Airport trips are usually one way trips that may not have equal return traffic. They are better treated by a surcharge. Using a special “Airport Taxi” kills the heuristic and encourages roguism. Night fares, holiday fares and special events fares are treated like a variation. In tourist places taxis are busy only few days in a year. So the analysis varies. 17

14. Fare Factors and Model The Taxi Toolkit The factors of taxi service are distance and duration. Taxis charge by one factor or both. A size of a city and the traffic speed gives the foundation. In a small town the trips will all be of similar time and distance: say 2 miles and 20 minutes. The fare is charged as a flat fare per trip. Medium sized towns usually have small variation in distances. But the duration of travel varies between trips depending on traffic. The fare can therefore be based on only time. The charge will be by only time: The passenger can pay by his wrist watch. In larger cities trips vary by distance and duration. The fare is a combination of travel and the duration of the trip. Taxi meters are required to manage the fare. 18

15. Usage Sensitive Fare The fare can be a flat charge or proportional to usage. In a flat fare short trip passengers pay more. In effect they subsidise passengers who go longer trips. Passengers do not mind this difference if the variation is not much. Common examples are postage (same stamp for a letter in town or across the country).Fare 4 6 8 10 12 14 16 18 20 22 24 26 28Trips 166 17 5 10 15 20 25 30 356543210-1 0 The Taxi Toolkit 19

Kms 0.5 1 1.5 2 2.5 3 3.5 4Trips 0 01 66 10 08 The Taxi Toolkit6420 012345678-2 Trips If the curve is sharp and pointed (a), it means the trips fall very close to each other. Hence most people are at same level: Say if two standard deviations (σ) of trips are within 1km and 3 km as it will be in a smaller town, then distance may be a fixed factor. If the curve it wide (b) then it means a wide variety of trips (Low fares to high fares, short distance and long distance, short duration trips (say 15 minutes) and long duration) and people are using the service. The factor can then be usage sensitive. For example, very small towns have a flat fare is for all trips. Airport trips may also come under this treatment as the distance is too large compared to the normal trip average. Hence passengers will not mind a fixed fare. It also reduces meter anxiety. If a plot has multiple peaks it shows a multiple aggregation, example: twin city or cities with satellite population. In this case, the fares can be 20

clumped for these two factors with a surcharge The Taxi Toolkitbetween the humps. 21

16. Fare Heuristic The Taxi Toolkit The principle of regulation assures a viable return to the taxi stake holders. A taxi is expected to run get a for a fare 22

17. Iso Charts Analysis The Taxi Toolkit 200 180 160 140 120 100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Iso Charts show usage of taxis during the day in number oftrips, distances, duration and total fare. The horizontal axisshows the 24 hours of the day. The vertical axis is in . It alsoshows the Average of all taxis for the day (a), Average for thehour (b), one standard deviation (c and d) and two standarddeviations (e and f). The data is taken from trip logs of taxiscurrently on the road. It is very revealing if done right. 23

18. Current PracticePlease use additional or modified sheets as appropriate to thelocal conditions Name of the locale/city Twin-cities/tri-cities or multi-cities: Operating areas in sq km Population: Resident, floating, seasonal Top five draws of the city: Example: shopping, cultural, tourism Terrain-flat land, mountainous, etc Kinds and number of FHV in operationTaxi 3 Wheel Motor cycle Rickshaw Minibus Limo Other Point-to-point, shared services vehicles Other transit, their passenger trips and inter- stop distancesBus Tram MRT rail BRT Minibus Integration between modes and extentAirport Train Bus Sea The Taxi Toolkit 24

19. Current Traffic The Taxi ToolkitPlease print additional or modified sheets for iterations,multiple tariffs and variations Traffic and Demand Minimum service requirement for FHV Do taxis maintain trip sheets or log of c trips Average number of trips per day of FHV Average distance per trip Average duration per trip Average revenue of FHV per trip Average revenue of FHV per business day Average revenue km run a day How many taxis ply at day, night 25

20. Current FarePlease print additional or modified sheets for iterations,multiple tariffs and variationsPresent fare structure and mechanismPer km Per Unit Min fare Surcharges min dropFares as per meter drop unitsMeters Minutes Minimum fare Changeover speedNight FaresMeters Minutes Minimum fare Changeover speedNumber of tariffs in useLast fare revision date The Taxi Toolkit 26

Tariff21. Fare Iteration ChartsIncome per day UtilizationPlease print additional or modified sheets for iterations,multiple tariffs and variationsContribution per day Now A B C Per km Per min The Taxi Toolkit Per trip Live km Live min Trip Per km Per min Per trip 27

22. Consultation Document The Taxi Toolkit A consultation document lays the issues for consideration. It shows stakeholders the data on the issues. It also lists the concerns that can be raised/ addressed by the process. Here are examples. Fixed Costs of a taxi: The first factor is the cost of the taxi. Some locales have a cost of the licence which are sometimes much higher than the cost of the taxi. Should this be amortised? Does the license cost go down over time or does it go up? This is an economics issue as much as a political issue. Some have a sunset clause to resolve the issue. Table: 1 Item 1 Cost of Vehicle 2 Cost of Permit 3 Insurance, tax 4 Maintenance 5 Fitness Certification 6 Total for lifetime 7 Amortisation per year Working days a year: The fixed cost of taxi is amortised over the working hours. Hence this has to be worked out. On the other side, the taxi service quality in a city is based on the supply of taxis at a given time. So a taxi has 28

to be on the road for a specified period in a year.Allowing for vehicle breakdown, certification,holidays, festivals, personal requirements, and avacation how many days can taxis work?Table: 2 Days per year No of Days 3651 Weekly off 522 Festival Holidays 133 Service, Breakdowns 54 Fitness Certification 105 Usual Working Days 2956 Inconvenience days 127 Vacation 158 Entwining Sundays -5 229 Total Revenue Days 256Seasonality of the demand: A tourist town works only to the season. Cruise ship towns wake up when a ship is berths. Exhibition cities, convention and events cities start up around the event. Some cities are live round the clock while some are quiet from 6 pm. How many days can taxis work?Table: 3 Event Period Live hours12 The Taxi Toolkit34 29

Total per yearDriver remuneration:What is a fair remuneration for a driver for 8 hoursof driving work? To ensure a commitment theequivalent of benefits like health insurance andsocial security must be added to the base income.Table 4 S No Basis Remuneration 1 Take Home 2 Social security 3 Medical Protection 4 Total per month 5 Total per day 6 Total per hourFuel price in Universal Units The price of fuel includes any increases before the next consultation meeting. If prices go up substantially it can be compensated by a surcharge or an index to the distance or duration fare.Table 5 Fuel Expenses Per KmFuel Expenses Petrol Other1 Cost per unit2 Fuel Consumption3 Oil Price The Taxi Toolkit 30

5 Cost of Fuel Per Day The Taxi Toolkit 6 Cost of Oil per Day Fuel Cost per unit 8 distance(Adjust from above)Fuel Price Adjustment : Fuel prices are volatile insome places and it forms a large part of the fare.Small increases can be compensated by a fixedsurcharge per trip. Significant increases will have tobe done by the usage. At the initial fare setting thefare is linked to an upper end of the projected fuelcost during the period in review. Table 6: Fuel Price Adjustment 1 Fuel Expenses per Day 2 Increase in Fuel Expenses per day for 1% increase in fuel price 3 % increase in fuel expense 4 Fuel Surcharge per Trip 5 Or Increase in per KmChangeover Speed: Older mechanical meters couldcharge only one factor at a time. A cleverchangeover mechanism charged by distance athigher speeds and by duration at slow traffic orwhen stationary as in a signal. Electronic meters cancharge by multiple factors at the same time. Soduration and distance fares can run concurrently.This makes the fare equitable to short distances,long distance, heavy and light traffic. 31

Trip Log: Electronic meters can maintain a log of the The Taxi Toolkittrips with position and time. The log helps fine tunefares to equitable fares in future.Transition period: A transition period must bedefined for any change. To re-program the meters,what is the transition period required? During theperiod how will fare be handled? One way is toannounce the revision a month ahead of theenforcement date.Negotiated trips: Sometimes autos ply for day ratesor negotiated fares. How can the authorities beassured that a particular trip is genuinely negotiatedunder these conditions and not abuse?Lower rates: If a driver or company chooses tocharge less than the regulated fares, should it beallowed?Tampering of meters: Is there a simple method fora passenger to verify if a meter is tampered?Inspection of Papers: It is in the interests of allconcerned that stolen taxis or rogue taxis beweeded out. How should this be done? What arethe documents that should be checked? Whatshould be the action taken? Other than during aninfarction or accident, how often should they bechecked?Responsibility of Representatives of Stakeholders:Representatives (not individuals) must reassurefellow stakeholders that their members will conform 32