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Limousine Lumps

by Steven Miller

t was cynical enough to make even hardened observers of the Nevada Legislature stop and gape. Assembly Bill 366 had been sold to the public in 1997 as a way to start moving Nevada into a new era of competitive, deregulated marketplaces. Yet when the Senate Commerce and Labor Committee added some 500 pages of amendments to the 14-page assembly bill, hidden within those amendments were some of the most savage new regulations the Silver State has ever seen.

While most of AB 366 was written to move Nevada toward the deregulation of electric power, the regulations that were so fierce were designed to protect large state-certified taxicab and limousine companies from the competition of small entrepreneurs.

"That’s the real irony here," Institute for Justice attorney Deborah Simpson told Nevada Journal. "In the same bill that they wanted to deregulate a true utility, they put in harsher limitations and regulations against something—transportation—that’s clearly not a utility."

The Institute for Justice is a public interest law firm that champions individual liberty, free market solutions and limited government. Based in the nation’s capital, it currently has three cases in Clark County District Court challenging Nevada’s taxi and limousine regulations on constitutional and other grounds.

The cases have brought national attention to the hardball tactics of Nevada regulators and the back-room dealing that pervades Nevada’s legislative and regulatory systems. It’s exactly the last kind of publicity any state intent on attracting new industry should be generating.

In a publication it sends its supporters, the Institute for Justice wrote:

Because he dared to challenge the state-imposed limousine monopoly that blocks out all newcomers, John West had in the span of two days lost any chance of a state license and watched as the government towed away his only means of providing for his wife and his two young children.

In two calculated moves, Nevada’s [Transportation Services Authority] had achieved its aim of preventing West from competing with existing companies. Without his car, West couldn’t carry the passengers he had booked for interstate trips—trips for which he is federally licensed. Canceling those fares would mean he couldn’t meet his steep vehicle payments. In short order, his limousine would be repossessed. West’s situation was dire.

The publication then recounts how the Institute and its supporters put together a "multifront counterattack."

But small non-profit magazines aren’t the only national publications telling the world about Nevada’s hostility to small-business entrepreneurs. The state’s self-inflicted black eye has been the subject of comment within the editorial pages of Investor’s Business Daily and in Reader’s Digest magazine.

"A Free-Enterprise Flat Tire In Vegas" is the title of the Investor’s Business Daily commentary by Michael W. Lynch, Washington editor of Reason magazine.

"When John West applied for a certificate," wrote Lynch in December, "regulators wanted to know who he planned to use as a mechanic, how many miles he planned to drive and how much gas he planned to purchase at what price." Not only that, Nevada law requires that new transportation entrepreneurs not "adversely affect" already-established competitors and allows those competitors a right under the law to challenge each applicant and force them to expend time and money defending their applications.

"Such financial questions may be absurd," points out Lynch, "but letting other companies meddle in the application process is obscene."

"Mugged by the Law," is the title of the January, 1999 article in Reader’s Digest. It begins:

William Clutter, 38, thought his ticket to financial self-sufficiency was the limousine he used to provide transportation for Las Vegas tourists, weddings, parties and proms. But to the state of Nevada, he was a criminal.

How Did Nevada Get Into This Fix?

hat ambitious small businessmen in the Silver State get treated like criminals is not exactly the public relations message most likely to help Nevada diversify its economy.

So how did the state end up taking all these lumps? The short answer is that in 1997 state lawmakers—trustingly or for other reasons—signed onto the skewed agenda of super-lobbyist Harvey Whittemore.

Whittemore was on the payroll of Nevada’s wealthy Bell family, which under the names of Bell Limo, Bell Trans and Presidential Limousine owns and operates the great majority of limousines in the state. The family also operates several major taxicab companies—Henderson Taxi, Whittlesea Blue Cab in Las Vegas and Whittlesea Checker Taxi in Reno.

For years the Bells have aggressively used the state regulatory apparatus for efforts to keep competitors from growing. In September, 1996, for example, Bell Trans protested an application by On Demand Sedan Services, Inc., a Vegas taxicab firm, to expand into limousine services and to also drop its rates to customers. And when John West, mentioned above, applied in September, 1997 for a permit for up to 10 limousines, Bell Trans challenged his application, claiming approval would "adversely affect" competition. This even though West’s operation would have been a flyspeck beside the mammoth Bell fleets, and even though the Bells are certified to put unlimited numbers of new limousines on the street, should they choose. Last May it was Las Vegas Limousine that drew Bell Transportation’s ire. Bell’s general manager submitted an affidavit charging that Las Vegas Limousine was "vastly exceeding its authority and … illegally operating limousines in excess of the number authorized by its Certificate of Public Convenience and Necessity." Bell Trans hired Corporate Intelligence International, a Las Vegas private investigations firm, which stationed its agents at McCarran International Airport, the Luxor hotel and Circus Circus hotel to count "unauthorized" LVL limos in operation. Last September the Las Vegas Sun reported that Bell Trans was objecting to an application by a quadriplegic who sought a license for a limousine that would transport other wheelchair-bound people. Bell contended that it already provides similar services—until forced to concede that in fact none of its limousines accommodated wheelchairs.

So when Bell lobbyist Whittemore offered a couple of suggestions for Senator Randolph Townsend’s Senate Commerce and Labor Committee, it was not surprising that the Whittemore proposals were as bellicose as all the other efforts by Bell company to deploy the state regulatory apparatus against potential competitors.

The existing state Public Service Commission, said Whittemore, should be split into two new bodies—a new Public Utilities Commission, to deal with electric utilities, and a new Transportation Services Authority (TSA), dedicated entirely to limousine and taxicab regulation. The transportation agency also, he argued, should be given much bigger regulatory teeth—the power to impound any limousines found operating without one of the state’s hoary certificates "of public convenience and necessity."

Whittemore had his way with the willing Senate Commerce and Labor Committee, and then with both houses of the legislature. In the hectic final days of the session when rules were suspended, many members, pressed for time, depended on their leaders and did not read the huge landmark bill they were voting into law. But it’s doubtful that even more time—absent a major public outcry—would have made much difference: campaign contribution reports to the Secretary of State’s office reveal the heavy involvement of Whittemore in candidate campaign fundraising. Further, Whittemore is deemed by many observers the current master, among lobbyists, of legislative process.

The final legislation signed by Governor Bob Miller on July 16, 1997 was as oppressive as Whittemore and the Bells could have hoped. The bill not only created the new Transportation Services Authority but also specified that any "vehicle used as a taxicab, limousine or other passenger vehicle in passenger service must be impounded by the authority if a certificate of public convenience and necessity has not been issued authorizing its operation." [Emphasis added.] In addition, the law gave the agency power to levy penalties up to $10,000 in impoundment fees, $10,000 in civil fines and $2,000 in criminal fines. And just to make sure that the TSA always remained committed to its search-and-destroy missions, the agency received no other funding; it was made entirely dependent on the fines it could levy.

This is the quick explanation how the state of Nevada came to shoot itself in its public-relations feet. But it doesn’t really illuminate the heart of the problem—that Nevada’s whole "public convenience and necessity" approach to regulating ground transportation is essentially bogus to begin with. That the state still continues to use that particular standard—given modern understanding of how essential regulatory reform is for business innovation and growth—is solid evidence of a decades-long failure in state leadership.

The "public convenience and necessity" rule itself, says the Institute for Justice’s Simpson, appears to be a vestige of the 19th Century, when state and federal governments were underwriting railroads. If so, that suggests two reasons why it’s not appropriate as a certifying standard for Nevada limousines and taxicabs: First, publicly subsidized cross-country railroads are not at all comparable to local Nevada taxicab or limo start-ups. Second, the era of railroad formation was notorious for the bribery of city, state and national officials (Jay Gould and Jim Fisk are two names that come to mind).

While federal airline and trucking regulators for decades still used the standard of "public convenience and necessity," national regulatory reform during the Jimmy Carter and Ronald Reagan administrations largely put it out of its misery. Today all over the country, wherever the public convenience standard has lingered, it’s turned into a front for a rancid kind of crony capitalism. In Nevada two years ago a Las Vegas Sun reporter asked Taxicab Authority Administrator Bob Anselmo whether the Las Vegas taxicab industry—operating under that same state standard—was a restricted club that allows no new members to join.

"It’s not a restricted club, but there has not been a new company in 25 years," Anselmo replied. "It’s a restricted oligopoly. It’s not owned by one owner per se, but no new companies have been approved [because] the existing companies are meeting the needs of the traveling public."

Over on the limousine side, only three new applications have been granted in the last 20 years—a major reason no doubt why over 60 Nevada drivers signed onto an Institute for Justice suit in behalf of William Clutter.

A Las Vegas Review-Journal editorial analyzed the state of Nevada’s cobwebbed rationale succinctly:

In reality, the current regulatory system amounts to nothing more than a protectionist racket designed to coddle existing limousine companies by limiting competition …. The concept of a government certificate of "public convenience and necessity" is utter nonsense. Consumers decide every day which businesses are convenient and necessary by making purchasing choices that reflect their preferences. In a free economy, companies flourish or fail based on their ability to meet those preferences. It’s called the marketplace, and it’s a far better arbiter of what’s convenient and necessary than any government functionary.

In Indianapolis—a city slightly larger than Las Vegas—Mayor Steven Goldsmith took office confronted with a situation similar to the one Nevada faces today. Declaring his "most important job as mayor of Indianapolis is to ensure the continued economic success of America’s twelfth largest city," Goldsmith established a Regulatory Study Commission and took on the task of restoring regulatory sanity to his municipality. How he accomplished it in the local transportation marketplace is detailed in the article below.

If Nevada wants to broaden its economy beyond gaming, it will have to face up to reforming the state’s regulatory apparatus. As did Indianapolis, Nevada needs to begin with the premise that regulatory restrictions must be justified, not simply assumed. And for that purpose, a Nevada Regulatory Study Commission would make immense sense. NJ

Steven Miller is amanaging editor of Nevada Journal.

News to Use
1997 Legislature's Assembly Bill AB366
http://www.leg.state.nv.us/69th/97bills/AB/AB366.HTM
Indianapolis Regulatory Study Commission
http://www.IndyGov.org/mayor/comp/pt1/chp3/index.html
Institute for Justice
http://www.ij.org
Steven Miller
sm@npri.org

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