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December 19, 2013

Court sides with Kansas City on limiting taxi permits

Critics of the city ordinance argued in a federal lawsuit that the restrictions favored existing cab companies, stifled competition and prevented driver-owned companies.

A Kansas City ordinance regulating the number of taxicab permits is not unconstitutional, as a local cab drivers association had contended, a federal appeals court panel ruled Thursday.

Critics of the ordinance argued in a federal lawsuit filed in February 2012 that the restrictions favored existing cab companies, stifled competition and prevented driver-owned companies that could improve quality and professionalism.

But a three-judge panel of the 8th U.S. Circuit Court of Appeals sided with a Kansas City federal judge who earlier had ruled in the city’s favor, finding that the regulation created an incentive for investment and increasing quality in the taxi industry.

“Existing firms may invest knowing the number of permits they will hold in the future,” the panel ruled. “Low-quality single-cab firms are avoided.”

The ordinance, the appeals court found, “is rationally related to a number of legitimate government purposes.”

The city had 554 taxi permits in 2005, when it enacted its current ordinance, the ruling noted. Under the ordinance, existing permits could be renewed, but additional permits were not issued until the total number of permits dropped below 500.

When the number of permits reaches 499, existing permit holders could apply for an additional permit. But the ordinance required new applicants to apply for a bundle of at least 10 permits, the ruling noted.

As a result, any new cab company could not apply until the total number of permits dropped to 490.

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