Thursday, January 18, 2018

New York Daily News: Restrict Uber, exempt taxis: Any honest attack on congestion will go after its major driver, app-based for-hire car services

Over the past four years, the rise of Uber and other for-hire app-based car services — and the failure of New York City to properly regulate their operations — has decimated the value of taxi medallions. As medallion owners who have played by the city’s myriad rules, we have watched as upstart competitors have been allowed to operate under their own set of rules, creating the most unlevel of playing fields.

The city’s negligence has also had some grave consequences for our common quality of life. Since regulators created very few barriers to entry for these newcomers, they of course stormed, in the tens of thousands, right into the heart of the city’s central business district, helping slow traffic to a crawl.

Don’t take our word for this. Bruce Schaller, one of New York’s most reputable traffic engineers, has singled out Uber and other for-hire vehicles as the major cause of congestion in the central business district — and goes even further to call out the disrupter for undermining mass transit at the same time.

And Schaller makes perfectly clear that taxis — whose numbers, unlike Ubers, are capped by law — have played no role in this burgeoning crisis.

As a result of this Uber-inspired debacle, the city is now facing a congestion crisis so severe that Gov. Cuomo is making solving it a signature 2018 policy initiative of his administration. This week, he’s expected to reveal details of new plans to charge vehicles for traveling into the heart of Midtown.

Our fear, though, is that in looking to solve the growing problem, the state will advance policies that fail to get at the heart of the matter — and that will, in the process, further victimize medallion owners.

Even the policy advice offered by someone as sophisticated as Schaller is concerning.

In the face of his clear-eyed evaluation of how Uber has caused a traffic nightmare, Schaller beats a hasty retreat from the obvious conclusion: that Uber and its imitators need to be reined in through regulations that restrict their boundless proliferation, and that treat all of these e-hails — as the European Union is now moving to treat them — just like any other taxi company.

Instead, he suggests that Uber and Lyft self-regulate by modifying their algorithms to cut down on the cruising times of their cars in the central business district.

Meantime, even after acknowledging that taxis have not contributed to this growing mess, Schaller proposes a mandate on yellow-cab owners — already the most highly regulated group in the transportation industry — “to reduce time spent in the central business district.”

This is consistent with a false evenhandedness we now commonly hear, one that would place the same fees on both taxis and Ubers — as if both segments are now equally regulated and equally responsible for congestion.

That’s just not so.

Back in 2012, Mayor Michael Bloomberg proposed adding 2,000 new medallions for wheelchair-accessible taxis — bringing the overall medallion total to its current level of 13,587. The proposal needed both Albany’s approval and triggered a full environmental review.

Through these sales, the city hoped to generate more than $1 billion. Cuomo gave his approval and the deal went through — even though the environmental review determined that the additional cabs would create a significant negative impact on the environment.

Compare and contrast. There are now some 68,000 Uber cars total, and the city’s regulators tell us that they are licensing an additional 2,000 such cars every month — without a single environmental review.

Taxi medallion owners have paid dearly into the municipal system — and continue to pay every year with a panoply of fees, one example being the 50 cents a ride that goes directly to the MTA; Ubers are exempt from paying that fee.

Yellow cabs do so because the city said this was in exchange for the exclusive right to pick up street hails — a right that was abrogated when the regulators allowed the Ubers in with absolutely no limits.

Now that it is clear where the blame lies for Midtown’s overly clogged streets, the false equivalency between taxis and Uber is not a reasonable path forward. Whatever the city and the state decide to do about congestion must be focused exclusively on the unregulated free riders and not the already fiscally obligated medallion owners, many of them immigrants, who have been paying into the system and following the rules for 80 years.
Hervias and Guerra are taxi medallion owners and members of the Taxi Medallion Owner Driver Association.

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What is the value of a New York City Taxi Medallion?

As our readers know, we’ve been representing many “underwater” taxi medallions (where the value of the medallion is less than the loan securing it).  And unfortunately for medallion owners, based on a recent auction, no relief with respect to taxi medallions increasing in value seems to be in sight.  Crain’s New York Business reports that an auction of seven medallions on January 16th organized by seller Aspire Federal Credit Union and Windels Marx (their law firm) never exceeded $200K per medallion.  A block of five medallions was sold to the stalkinghorse bidder for $875K ($175,000 per medallion) and two additional medallions sold for $189,000 and $199,000.    Three years ago, these medallions sold for over $1,300,000- an approximately 90% drop in value. Jim Shenwick has represented taxi medallion clients with loans from Aspire. For information on how to manage the declining value of your taxi medallion, please contact Jim Shenwick.

Thursday, January 11, 2018

NYC Airports and Taxi Medallions

As we’ve been writing about and problem solving in our practice, ridehailing apps like Uber and Lyft are continuing to negatively impact taxi trips, revenue and “underwater” medallion owners.  And now these apps are leading to declines at one of taxis’ last strongholds-New York City airports.  The Wall Street Journal reports on a new analysis of Taxi and Limousine Commission data by Bruce Schaller, which found that “taxis’ share of pickups compared with app-based services at the airports has fallen from almost 100% in [June 2013] to 58% at LaGuardia and 53% at JFK [in June 2018],” even as demand for airport transportation grew. 

Unfortunately, this is further unwelcome news for taxi medallion owners and will continue to suppress or reduce the value of NYC taxi medallions and compound the problem for owners of “underwater taxi medallions” (medallions whose value is less than the bank debt secured by those medallions). Owners of underwater taxi medallions are encouraged to speak with and meet Jim Shenwick.

Monday, January 08, 2018

Taxi Medallions, Trusts and Workouts

Our law firm specializes in representing taxi medallion owners whose medallions are “underwater” (meaning that the loan secured and collateralized by the medallion is greater than the value of the medallion) in workouts with banks and creditors and in bankruptcy filings.  We have noticed a trend recently where many medallion owners who own underwater taxi medallions have transferred their house or primary residence to a trust for no money or other consideration for the transfer.  There appear to be two reasons for these transfers or conveyances: (1) estate planning (where the owner of the house wants future appreciation of the property to benefit a family member or third party); or (2) the property owner (who also owns the underwater medallion) believes that by conveying the house to a trust, he or she is putting the house outside of the reach of the bank or creditor, who will not be able to foreclose on the house if there is a default on the medallion loan and litigation.

In our experience, after meeting with and speaking to many medallion owner clients, we have determined that most of these transfers are not done for estate planning purposes, but to put the family house outside of the reach of the bank or other creditors (the second reason). 

A couple of observations need to be made with respect to the transfer of a house to a trust from a debtor/creditor and/or bankruptcy perspective.  If an individual borrows money from a bank, and their liabilities (monies owed to third parties) exceed their assets (property which they own), which is generally the fact pattern for an individual who wants an underwater taxi medallion, the transfer of the family house to a trust for no consideration (money or property) is a fraudulent conveyance. The statute of limitations (or look back period) is six years under the New York State Civil Practice Law and Rules and two years under the Bankruptcy Code.  In a fraudulent conveyance action, the bank or other creditor can commence an action in New York State courts to reverse the conveyance of the family house from the trust back to the individual, and there are many reported cases where creditors have commenced these actions and prevailed (see United States v. Evseroff). Accordingly, a homeowner who makes this type of the transfer may have incurred legal fees and paid real estate transfer taxes and fees to accomplish nothing from a workout or bankruptcy perspective!

In fact, besides accomplishing nothing and incurring legal fees and real estate transfer taxes and fees, the medallion owner/homeowner may actually end up in a worse position than the medallion owner that did not make the transfer, for two reasons: (1) if the trust owns a house and not an individual (who owns the underwater medallion), then the individual cannot claim the New York State homestead exemption which is currently $165,550 per spouse ($331,100 for a married couple) in the New York metropolitan area; and (2) a creditor may object to the discharge of their debt because of the fraudulent conveyance of the house to the trust (see Husky Int’l Elecs., Inc. v. Ritz).

The New York State homestead exemption provides protection to New York State residents, to wit the first $165,550 in equity in a primary residence, after the payment or satisfaction of a consensual mortgage, is property of or belongs to the homeowner and is not subject to the reach of a creditor or a bank.  Additionally, the Bankruptcy Code provides that if a debtor made a fraudulent conveyance transfer prior to the date of the bankruptcy filing, this may be grounds to dismiss their bankruptcy case or deny them a discharge of certain debts.

While there are techniques and approaches to undo or mitigate the damage done by these transfers or conveyances, it is better to not do them in the first place. We have however represented many individuals in mitigating the effects of these types of transfers.
Prior to engaging in a workout with a bank or creditor, an individual or a debtor should and can engage in “asset protection planning” under New York State and federal bankruptcy law, but fraudulently conveying the family house to a trust to put the house outside of the reach of a creditor or a bank, does not work and is not valid asset protection planning.

Our experience has shown that nervous or stressed out homeowners who own underwater taxi medallions may be doing themselves more harm than good by hastily conveying their house or other valuable assets to trusts or third parties for no consideration.  We would advise medallion owners to consult with competent, experienced attorneys or lawyers before engaging in such actions.  In fact, engaging in correct and meaningful asset protection planning can often times result in a successful workout with a bank or a successful discharge of debt in a bankruptcy filing.