The chequered history of the taxi plate

The history of the taxi plate is much the same Australia wide although the timing of change differs wildly from state to state depending on the whim of the various governments. In 1990 though, having realised that they had created a monster by opening the taxi plate market up to investors and multi-plate owners, thereby pricing professional drivers out of the market, a unanimous decision was made between all state and territory governments and the Federal Government to buy back every taxi plate in Australia by 1995. The then Labor Federal Government (Hawke and Keating) even agreed to foot 50% of the cost. However, the NSW and Queensland governments claimed the 5-year deadline was too tight and demanded it be extended by another 5 years to 2000. Unfortunately Honest John (Howard) was elected in 1996 and the whole idea was buried. And that’s my friends is how we opened the door to UberX and the taxi industry priced itself out of business.

by Peer Lindholdt

The taxi industry has a long history of regulation dating back to the pre-1930s. Up to 1982, local councils were responsible for issuing taxi licences (plates) and regulating fares in NSW. However, that year all responsibilities for industry regulation were taken over by the NSW State Government.

Pre-1982, the good old days, a taxi owner could only own one plate and he had to earn at least 60% of his income from driving his own cab. He could supplement his income by bailing (renting) his cab out to accredited bailee drivers. If he decided to retire from the industry he could sell his plate, but only to a bailee.

New licences were issued for free by ballot exclusively to bailee drivers with 10 or more years’ service who had signed up to the seniority list. However, this system was wound back over the next three years and then discontinued completely as the government opened the industry up to investors and multiple plate ownership. Hundreds of bailees on the list had their dream of one day becoming their own boss and the proud owner of a taxi plate shattered, whilst those who already were owners thought all their Christmases had come at once. And they had. The value of taxi plates exploded.

NSW DoT data shows that between 1982 and 1994 Sydney taxi plates more than doubled in value to $208,000, by 1997 that had risen to $285,000.

Following the liberalisation of ownership in ’82 the government began flogging new perpetual plates by auction in tightly controlled numbers, raking in millions. Money for jam! The market, as always, was fuelled by desperate migrants looking to buy job security, naive investors easily led by mafia controlled radio networks offering ‘free advice’ on how much to bid. They would even fill out the paperwork for the suckers. This ensured the release of new plates would have only minimal short-term impact on existing licences. The NSW taxi mafia, epitomized today by ‘the Board of the NSW Taxi Council’, controlled the market and had captured the regulator (DoT), stocked with a mix of lazy, incompetent and corrupt bureaucrats.

Then came the crash!

Over the next three years the average plate price collapsed to below $200,000. Some plates, it was said at the time, sold for as little as $150,000.

The crash was caused by a string of major, but unrelated events in 1998. First we were hit by the Asian financial crisis, which had a serious economic impact on Australia, especially the tourism industry. When the economy sneezes the taxi industry catches a cold. Then the DoT, ostensibly to stop the plate market from overheating further and to prepare for the Sydney Olympics, introduced open entry to the hire car industry, halved the plate lease fee to $8,000 and released 100 new six-yearly, non-transferable plates for regular taxis at an annual fee of $6,000, a third of the rate charged by owners at the time. That coincided with the announcement by the ATO that taxi operators and drivers would have to register for and pay GST when it was introduced in 2000. Shock horror, the taxman is coming to catch us! Hundreds if not thousands fled the industry for jobs at 7-Eleven.

Also in 1998 we saw the creation of IPART (The Independent Pricing and Regulatory Tribunal), which as part of its function was to advise the Government on taxi regulations, fare rates and the sustainable release of new plates, officially in line with population growth. However, from a report it released in 1999 it became abundantly clear that its ultimate goal was to deregulate the industry, not suddenly, but over time by ‘gently’ flogging new plates in numbers exceeding demand. Economists call this ‘phasing’.

Since its first report on the taxi industry in 1999 and in every report since IPART has stated: “The Tribunal believes that the private interests of existing licence owners should be considered in controlling the rate at which the supply of licences is increased”.

Meaning what? Meaning: We will do them slowly, so slowly they won’t be able to sue for compensation.

Example: Say IPART modelling shows that there is a need to release 100 licences to keep up with population and economic growth; it would instead release 200 licences. The theory was that by growing the taxi fleet faster than demand the income per taxi would drop slightly, which would have a flow-on effect on operators who would then put pressure on owners to drop their lease fees, which in turn would reduce the value of their plates. And pigs can fly!

In 2001, according to a 2003 IPART report, Sydney plates on average sold for $205,000 and lease fees were $17,000 p.a. Ten years later, despite IPARTs annual ‘phasing’ agenda, plates were selling for upwards of $400,000 and lease fees had increased to $30,000+ p.a. The gravy train looked unstoppable.

Then in 2010 IPART had a light bulb moment. Rather that issuing perpetual or long-term leases it would from then on in only issue 1-year leases renewable at their original purchase price for 10 years. Annual tenders were introduced in the hope it would resurrect its ‘phasing’ program, which so far had failed miserably. It was not to be.

The networks, which in Sydney control the buying, selling and leasing of perpetual taxi plates, advised the punters that if they wanted a chance to get a plate in the tenders they better bid higher that the market rate, which at the time was $28,500. Hundreds took their advice. The average winning bid for an unrestricted licence was $31,000 (PALs $20,000).

In the three years to 2013, in seven separate tenders, TfNSW tendered a total of 568 unrestricted annual licences and 464 PALs (Peak Hour) since it started tendering them in 2010. However, the growth in the taxi fleet was only around half of this. Since January 2010, the net growth in licences has been 264 unrestricted licences, 212 PALs, and 101 WATs. (Source: IPART 2014)

Naively IPART believed that saturating the market would reduce the overall lease fees and thereby the value of perpetual licences. It totally underestimated the taxi mafia’s ability and power to manipulate the bidding to ensure that the average lease fee remained at around $28,500. No successful tender was under $28,000 according to the Tribunal.

Even the invasion by Uber in 2012 with its launch of Uber Black (HCs) made any noticeable impact, not even its launch of its ‘ridesharing’ UberX in 2014 caused much more than a ripple. After all UberX was operating illegally and it was therefore only a matter of time before the government would shut it down.

On 18 December we finally learned that ‘pigs can indeed fly’. Ridesharing services were legalized and IPART’s prayers answered – the lease fee for perpetual taxi plates has crashed, and with that the value of the licences. It took Uber anarchism and a morally corrupt government to do in six months what IPART had failed to do in 15 years.

Currently you can lease a Sydney unrestricted taxi licence for as little as $15,000 and buy one outright for around $150,000, and the race to the bottom has only just started. We are already back to 1982.

But fear not if you are a licence owner. The NSW Taxi Council and its cash cow, your NSW Taxi Industry Association, have everything under control. It is, it says, meeting with TfNSW every week lobbying on your behalf. And as we have learned in the last few months – pigs can fly. •

 
 
 
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OZ Cabbie February 2017

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