Livelihoods versus technology: the future of Quebec’s control over taxi industry

FILE: The price of a permit has decreased almost 40 per cent since Uber began operating in Quebec about four years ago, according to the province’s Transport Department. (Photo: Jaakko Hakulinen/Flickr)

MONTREAL — The head of one of the companies offering financing for taxi permits in Montreal insists there is still a market for the much-devalued commodity.

The price of a permit has decreased almost 40 per cent since Uber began operating in Quebec about four years ago, according to the province’s Transport Department.

Michel Hebert’s company, FinTaxi, is doing what it can to prop up the market by refusing to finance permits at a value below $110,000 — regardless of how much a seller is willing to offer.

“We think the value of the taxi permit is higher than $110,000,” Hebert said in an interview. “And we are keeping that base.”

FinTaxi is wholly owned by the Fonds de solidarite FTQ, a massive investment fund with ties to the province’s largest labour federation, which counts the taxi drivers’ union among its members.

Organized labour in Quebec doesn’t only have a vested interest in the future of the government-controlled taxi system to save jobs — there are tens of millions of dollars on the line for the Fonds FTQ if the permit market goes bust.

FinTaxi and two branches of the Desjardins credit union finance the vast majority of taxi permits in Montreal and the city’s market is valued at hundreds of millions of dollars.

It’s this web of thousands of livelihoods and millions of dollars that makes the crisis facing the province’s taxi industry so complicated.

And Quebec has given itself six months to try and solve it and to chart a path for the future.

Over the next half-year, taxi industry stakeholders and the Transport Department will try to come up with a formula to compensate taxi drivers and permit holders who have been hit hard financially since Uber’s arrival.

It’s unlikely, however, that the Quebec government will relinquish its control over the taxi industry and dissolve the permit system, said Vincent Geloso of the right-leaning Montreal Economic Institute.

“This is an issue where the government is crudely counting votes,” he said. “There are few votes to gain from allowing competition.”

Quebec’s Transport Department limits the number of taxi permits in each city across the province, thereby ensuring a stable market for the taxi industry.

The value of a permit in Montreal reached roughly $200,000 in 2014.

Hundreds of taxi drivers have borrowed up to 75 per cent of the permit value from FinTaxi in order to buy the right to drive a taxi in the province.

When Uber entered the market, it operated illegally outside the government-controlled permit system, thereby increasing the offer and diluting the value of the permits.

Dominic Lemieux, whose union represents taxi drivers, said during the upcoming negotiations his side will push for an “equitable system.”

“We all want to play on the same field,” he said. “But we also don’t want to have a system where it’s a race to the bottom.”

Uber’s platform allows people with a car to spend a few hours a week making extra cash driving people around.

That economic model has called into question whether driving a taxi can realistically continue to be a full-time job with a market protected by government regulation.

“Why impoverish thousands of taxi workers to give a side income to people who already have a livelihood?” Lemieux asked.

Uber has been operating legally in Quebec under a pilot project since last October.

The Transport Department said it would renew Uber’s pilot project for one year — but included more regulation that Uber has rejected.

Uber has threatened to leave Quebec by this Saturday if it can’t reach a new deal with the provincial government.

Whether Uber stays or goes is irrelevant to the precedent Quebec has set regarding who has the right to innovate in the province, Geloso said.

“Quebec is saying, to innovate in this province, you have to seek permission from the government,” he said.

One of the innovators to receive such permission is Teo Taxi, a company with a fleet of 120 electric vehicles but not a single taxi permit.

Instead, Teo has a “special regulation” with the Quebec government allowing it to bypass the law that limits one company or person from leasing more than 20 permits, said Jean Vachon, a company spokesman.

Teo operates within the government-controlled system and leases 100 permits — but has plans to grow significantly.

When Teo began in 2015, it guaranteed a permit holder a seven per cent return a year on a value of $180,000.

“The value of the permit has decreased since then,” Vachon said.

Teo is at the government negotiation table and would like to see a “circulation of permits that maintain their value,” within the government-controlled system.

“It’s relatively easy to become a taxi driver,” Vachon said. “If we don’t limit the offer, there will be too many who will make a small revenue.

“Technology should be at the service of society, not society at the service of technology. Modernization that starves people is not modernization.”