WATERTOWN, S.D.—After weeks of having her business shuttered and losing out on income, Debra Gagne can finally reopen her ride-for-hire company. This morning, the Watertown City Council held a special session to grant Debra a license to reopen Need-A-Ride, just in time for the busy holiday season. City officials also said they plan to reform the “certificate of necessity” ordinance that shut Debra’s business down in the first place. The changes come just two days after the Institute for Justice (IJ) sent a letter to city officials calling on them to allow Debra to reopen and to change the ordinance.
“I’m ecstatic that I can reopen Need-A-Ride,” Debra said. “This business provides a reliable form of transportation for people all over Watertown. This is fantastic news for my customers.”
The ordinance currently prevents taxi companies from operating in the city, unless the City Council determines there is a “necessity” for that business. It strictly applies to businesses like Debra’s that accept cash payment, but not to app-based ride-sharing companies like Uber and Lyft. A representative from Lyft testified against Debra when she was recently making her case to the City Council that there was a need for her business.
“Certificate of necessity laws drive up costs for consumers, keep potential entrepreneurs like Debra out of the market, and should be repealed,” said IJ Senior Attorney Erica Smith Ewing, who wrote the letter challenging the city’s ordinance. “We’re very happy that the city has agreed to let Debra reopen her business, and we hope this change sets an example for other municipalities to end their certificate of necessity laws.”
Debra has a South Dakota state license that allows her to transport passengers. She had been doing so in several towns without a problem and when she started doing business in Watertown, residents welcomed her with open arms. There was only one taxi company in Watertown and it only operated from 6am to 10pm—which was a problem for people with early flights at the airport or who needed a ride home after drinking on the town. In the meantime, there were few Lyft and Uber drivers, and they often charged up to $75 just to go a few miles. Debra’s new business provided a much needed and more affordable service.
But then things went wrong. The Watertown Police Department conducted a sting operation on her business. An officer hailed a ride from one of Debra’s drivers, and when the officer gave the driver a cash payment at the end of the ride, Need-A-Ride was fined $100 for violating the ordinance. Following the sting, Debra attended a City Council meeting to make her case for getting a license, but city officials denied her request.
Debra was stuck in limbo. She either had to stop accepting payment or stop providing rides altogether. Because many of her customers rely on her to get to and from work, and others use her as a sober ride home from the bar, she decided to continue operating Need-A-Ride without charging. But during this time, she was losing out on important income.
IJ has challenged certificate of necessity laws (also known as certificate of need laws) throughout the country, including a Kentucky law that prevents a home health care provider from offering services to Nepali refugees in a language they understand and a North Carolina law that makes it illegal for health care providers to safely provide care unless the government determines there is a need for the service. IJ has also challenged certificate of need of laws for transportation companies in multiple cities across the nation. These laws stop potential entrepreneurs from succeeding and drive up costs for customers.