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Tuesday, April 30, 2013

Judge Strikes a Blow to Sanfelippo Taxi Empire

The city’s permit cap is unconstitutional

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The Sanfelippo family’s control of Milwaukee’s taxicab cartel may be over.

In an oral decision delivered April 16, Milwaukee Circuit Court Judge Jane Carroll found that the city’s strict cap on taxicab permits is unconstitutional.

Days later, a Milwaukee Common Council committee debated lifting the cap incrementally so that another 100 permits would be granted within the next six years.

The proposal’s author, Ald. Robert Bauman, hopes that the more lenient cap will satisfy the judge so that she won’t ultimately strike down any taxicab permit cap as unconstitutional.

“With the court ruling, we’re forced to do something,” Bauman said.

If Judge Carroll doesn’t find that the 321 cap—or any cap—is constitutional, there could be an unlimited number of taxicab permits available to those who want to work for themselves or a new company.

The cab drivers’ newfound freedom could come at a heavy price to the Sanfelippo family-controlled taxicab companies, Joe Sanfelippo Cabs and American United Taxi Company.

Those entities hold about half of the city’s 321 taxicab permits.

The sale price of each permit is about $150,000, meaning that the Sanfelippo companies’ permits are valued at more than $20 million.

But if Judge Carroll ultimately strikes down the cap in her written order, to be delivered later this month, then the Sanfelippos’ empire will be weakened and the city’s drivers will no longer be “urban sharecroppers,” as their attorney, Anthony Sanders of the Institute of Justice, describes them.

 

$150,000 for a Taxicab Permit

Sanders challenged the city’s taxicab permit cap, which the Milwaukee Common Council passed in 1991 so that it wouldn’t have to hold hearings on permits. The cap froze in place the number of permits held and aldermen argued that it would add value to the permits, then $85, and increase professionalism in the industry.

But the free-market law firm Institute of Justice found that the cap has led to an unusually low number of cabs in the city—about 1 for every 1,850 residents—as well as artificially high fares, which are also capped by the city. (Drivers can charge less than the capped fares.)

In addition, Sanders argued, the cap also created a monopoly in which permit owners abuse their employees by charging them unfairly high rents and forcing them to pay for their own gas. And because the cost of a permit is so high—about the price of a home—those who are lucky enough to buy one would have a hard time purchasing additional permits and challenging the Sanfelippos’ control of the city’s taxicab cartel.

That’s why Sanders calls Milwaukee’s cab drivers “urban sharecroppers” who at times have no earnings left after paying their weekly cab rent and gas.

“They do not own their business, theY cannot own their own business, they’re tied to a particular owner basically because they’re lucky enough to be in a cab, and they have to pay above what the market would otherwise bear for the right to drive that cab,” Sanders said.

Sanders argued that competition—not an arbitrary cap and monopoly—would reduce fares, increase professionalism and boost entrepreneurship.

“If you lift the cap [the drivers] will be able to start their own businesses,” Sanders said. “Maybe they’ll succeed and maybe they won’t, but at least they will be free to work for themselves.”

 

Is Raising the Cap Constitutional?

Ald. Bauman also called the city’s cab drivers sharecroppers, but unlike the Institute for Justice lawyers, he believes that a cap is best for the city. Bauman had proposed eliminating the permit cap altogether, but after lengthy hearings he revised his proposal and feels that “the gradual approach is in the public interest.”

His proposed ordinance would offer 50 new permits in the first year, plus ten each year in the following five years. The number of inspections per year would increase as well. And his proposal’s ban on subleasing permits strikes at the heart of the Sanfelippo empire.

“Sanfelippo—that’s what he does,” Baumann said. “That’s how he makes his money. It became clear in these hearings that there was more money to be made leasing cabs and having other people drive them than to actually pick up passengers, which is not a good situation.”

The Public Safety Committee will hold a special meeting on Monday, May 6, to hear testimony on the matter again. Bauman said he wanted to hear from more consumers about the effect of the cap on the availability and affordability of cabs. Ald. Terry Witkowski is also working on a plan to adjust the city’s cap on passenger fares.

Bauman said he was hopeful that the proposed ordinance would satisfy Judge Carroll’s concerns about the current cap when the Institute of Justice and the city attorney discuss a solution with her at the end of the month.

“If there is a new law in place on that date, our people can say, ‘Your Honor, our council has reformed the system with your ruling in mind and this is the new regimen,’” Bauman said.

Assistant City Attorney Adam Stephens said that Judge Carroll ruled only on the city’s 1991 ordinance and not the constitutionality of a cap on permits.

“Theoretically, if the council were to pass a new ordinance before the court made up its mind and issued a final order, that would significantly change things,” Stephens said. “Because her decision is based on the law as it stands now. If it’s not the law anymore then she’s going to have to come up with something new.”

But the Institute of Justice predicted that a more lenient cap as proposed by Bauman wouldn’t satisfy Judge Carroll.

“The city is thinking it’s in control here, thinking that the judge’s ruling doesn’t really make a difference because they changed the law and it’s a whole new ballgame,” attorney Sanders said. “What they don’t realize is that the judge has spoken that the cap is unconstitutional and if they keep trying to protect the same owners they will keep getting rulings that the law is unconstitutional.”

 

The Sanfelippo Empire

So who, exactly, are the taxicab owners that the city is trying to protect?

State Rep. Joe Sanfelippo (R-West Allis) is the registered agent of the largest taxicab companies as well as the registered agent for the taxicab permits with the city.

He has claimed in the past that he does not have a financial stake in the companies, based on South Second Street in Walker’s Point. Instead, his brother, Michael, is the president of the company and runs it.

But Joe Sanfelippo’s statement of economic interests, filed with the state Government Accountability Board in January, shows that in addition to working as a Milwaukee County Board member in 2012 he also derived income from American United Taxi and Joe Sanfelippo Cabs Inc.

A recent review of the taxicab permits on the city’s website shows that those two entities control at least 192 of the city’s 321 permits.

He also testified on behalf of American United Taxi in Madison in the summer of 2012, when the state Assembly debated implementing a taxi medallion system in Milwaukee.

Sanfelippo didn’t testify during the April city hearings, but his former conservative colleague on the county board, Joe Rice, spoke against the item on behalf of the Milwaukee Chapter of the Wisconsin Association of Taxicab Operators on April 18. Former Ald. Mike D’Amato is lobbying against Bauman’s proposal on behalf of that organization.

And taxi drivers have long claimed that Joe Sanfelippo is in the office a few days a week, doing administrative work. “Joe Sanfelippo” is on American United’s voicemail system but an employee wouldn’t confirm if that was for the state representative.

She told the Shepherd on Monday that Joe couldn’t come to the phone because Mondays are their busy days.

Michael Sanfelippo told the Shepherd that he owns and runs the company but lists Joe as the registered agent because he’s often out of the city. He said he favors lifting the cap. He said his company filed an amicus brief in the Institute of Justice case supporting the cap because his attorney, Dean Laing, decided it was best.

That said, he has found a way to use Judge Carroll’s ruling in his company’s favor.

On April 18, just two days after her ruling, Michael Sanfelippo wrote to Barry Bateman, director of General Mitchell International Airport, offering to purchase an additional 142 permits. He had attempted to purchase 20 taxicab permits for $100,000 in 2008, his letter states.

“While I do not personally agree with Judge Carroll’s decision, it is nonetheless the law,” he wrote.

The airport has capped its permits at 56 but Carroll’s ruling was only on the city’s permit cap, not the one implemented at the airport.