Wednesday, August 15, 2018

Business Insider: Uber is going on the offensive and plotting clever ways to grow despite NYC's cap on ride-hailing cars

Brian Pascus

Uber plans to use creative measures to remain competitive in New York City following the passage of bills that put a cap on and freeze the number of vehicles that may operate within the city for the next year.

On Wednesday, in a 39-6 vote, the New York City Council passed multiple bills that will pause the granting of new licenses for Uber, Lyft, and other ride-share companies for one year while a study is conducted by the Taxi and Limousine Commission (TLC) to determine the effects these companies are having on the city's transportation industry. The legislation passed by the city also grants a new minimum pay-rate for drivers.

Prior to the vote, City Council Speaker Corey Johnsons said, "We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation," before adding that he does not expect the existing service for ride-sharing customers to diminish.

Mayor Bill de Blasio is expected to sign the legislation on Tuesday, which will take effect immediately.

With new regulations in place, ride-sharing companies like Uber will now need to work within the limits of the law to continue to remain competitive.

In a statement to Business Insider, Uber spokesperson Danielle Filson said, "We take the Speaker at his word that the pause is not intended to reduce service for New Yorkers and we trust that he will hold the TLC accountable, ensuring that no New Yorker is left stranded. In the meantime, Uber will do whatever it takes to keep up with growing demand and we will not stop working with city and state leaders, including Speaker Johnson, to pass real solutions like comprehensive congestion pricing."

But Uber's options under the license freeze are limited in part because of the company will now be restricted to an existing pool of vehicles.

A company spokesperson told Business Insider that Uber is ready to use creative measures to get around the language of the bills. First, the spokesperson notes that this cap is not a limit on the number of drivers, but rather a pause on the number of new vehicles. This distinction is important, as the company is thinking of reaching out to Uber vehicle owners who may be off the app for two or three days a week and see if they will allow new Uber drivers to use their vehicle when it is idle. This way, the company can ensure it keeps a high number of cars on the road despite a limit on new licenses.

Another way Uber plans to work-around the new measures will be to recruit from within the existing field of livery drivers, which includes yellow taxis and black-cars.

While voicing his support for the legislation, Mayor Bill de Blasio told the New York Times, "More than 100,000 workers and their families will see an immediate benefit from this legislation."

Uber estimates the number of industry drivers in the area to be closer to 120,000, and an Uber spokesperson told Business Insider that the company believes there are at least 35,000 existing licensed vehicles not being utilized by their app system. In short, Uber plans to recruit black-car drivers into their network.

And while the newly passed bills plan on creating a new minimum pay-rate for drivers, Uber does not plan to oppose those changes to their business model.

An Uber spokesperson told Business Insider the company is "supportive" of a minimum wage or wage floor for their drivers.

The mayor's office told Business Insider that he plans to sign the legislation on Tuesday, August 14, 2018.

Copyright © 2018 Insider Inc. All rights reserved.

Tuesday, August 14, 2018

The Uber ridesharing cap

The New York Times reported that on August 8th, the New York City Council voted to issue a cap on licenses available for for–hire vehicles for one year, which went into effect on August 14th.  The City Council vote was 39 to 6 in favor of the cap. According to the article, New York City became the first major American city on Wednesday to halt new vehicle licenses for ride-hail services, dealing a significant setback to Uber in its largest market in the United States.

However, according to the article, the law allows the Taxi & Limousine Commission to add more licenses if there is a clear need for more vehicles in some neighborhoods.

The City Council also passed a separate law setting a minimum payments for for–hire vehicle drivers.

The article states that “the City continued to support its decision, saying it will not only help the dwindling taxicab industry, it will also aid in reducing traffic congestion and could potentially hike driver paychecks on both sides from a possible hike in fees for riders.”

Reuters reports that the number of for–hire vehicle drivers skyrocketed from 12,600 in 2015 to about 80,000 this year.

Mayor Bill de Blasio and City Council Speaker Corey Johnson said the laws will curtail the worsening traffic on the streets and improve low driver wages.  Speaker Johnson added that the rules would not diminish existing service for New Yorkers who rely on ride-hail apps.

Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers. A yellow taxi driver was quoted as saying that she supports the cap and hopes it will improve business for taxis.

CNN Tech reported that Uber is already planning moves to sidestep New York’s cap, which applies to vehicle licenses, not drivers. With that in mind, Uber said it will ask current drivers to share their vehicles with new drivers. And it hopes to poach drivers from competing services, expanding its presence in the city.

For medallion owners, the interesting question is what impact will the for–hire vehicle license cap have on the value of taxi medallions.

  1. The cap is only for one year, so the impact on taxi medallion values will probably not be significant.

  2. The cap maintains and does not reduce the number of for–hire vehicles, which is another reason why the value of taxi medallions will not increase significantly. However, if the number of for–hire vehicles decreased significantly, then we could expect to see an increase in the value of taxi medallion licenses.

  3. As noted in the CNN Tech article, the cap applies to vehicle licenses not to drivers, so Uber and the other ridesharing services, being the aggressive entities that they are, will likely create strategies to maximize the use of their existing vehicle licenses.

  4. The riding public has voted with their dollars and apps, and they prefer the Uber, Via and Lyft model for transportation over that of yellow taxis; notwithstanding the new locals laws, those companies and their markets will continue to prosper.

  5. Three years ago, the value of a taxi medallion was $715,000, and based on last month's Taxi Limousine Commission data, the value of a medallion is approximately $165,000.

In Jim Shenwick’s opinion, the for–hire vehicle cap will have little to no impact on the value of taxi medallions. It is possible that the new laws may slow the decline in taxi medallion values, but its ability to increase values significantly seems to be unlikely.  It would be foolish for any medallion owner to believe that taxi medallions will return to the stratospheric valuations of 2015. The opinions expressed herein are solely the opinion of Jim Shenwick.

New York Times: Uber and Lyft Drivers Rush to Register Cars Ahead of City’s New Cap

By Mariana Alfaro

 In the pouring rain, hundreds of people lined up outside a building in Queens on Monday, clutching umbrellas and paperwork. The frenzy was not driven by a buzzy new restaurant or a new Apple store. Instead the line led to an Uber office and was prompted by the City Council’s recent decision to limit ride-hail apps by imposing a cap on new vehicle licenses.

For hours, drivers waited outside the building in Long Island City for Uber workers to let them in and to register their cars as for-hire vehicles before the legislation goes into effect. Mayor Bill de Blasio has said he is planning to sign the bill into law on Tuesday.

Mohammed Kabir, 47, a driver from Queens, said he spent four hours before emerging from Uber’s office with his paperwork in order. He said he had arrived at 7 a.m., hoping to beat the crowd, and despite the long wait he said he was content that he now had what he needed to beat the deadline.

Since the Council’s vote on the new regulations, which includes establishing a minimum pay rate, Uber had been encouraging existing drivers and others who wanted to become drivers for the tech giant to make sure they applied for the special license plates needed to register private cars as ride-hail vehicles. Once the legislation becomes law, no new licenses, with the exception of wheelchair accessible vehicles, will be granted for a year while the city studies the impact of the ride-hail industry.

Some drivers waited for almost two hours before being shepherded inside. Red Ferhani, 32, said he had been driving for Uber for almost three years by renting cars from other Uber drivers. Tired of losing part of his profit to rental fees, Mr. Ferhani said he wanted to register his own vehicle while he still could.

“I guess everybody’s doing this last minute,” said Mr. Ferhani as he approached the front of the line. Despite the hassle, Mr. Ferhani said he supported the cap.

“I think there’s enough Uber cars out there, it’s already enough,” he said.

Some drivers at Uber’s offices said they had not had enough time to get their documents and licensing fees in order. To register a car as a for-hire vehicle, owners must complete an online application with the city’s Taxi and Limousine Commission, have commercial insurance for their car and pay a $550 to $625 fee, depending on their car’s mileage.

Deniz Osor, 37, was in line only because his friend had warned him days before that the window to apply was closing. Mr. Osor scrambled to get his paperwork in order.

“They should’ve actually extended the time for at least another two weeks,” Mr. Osor said.

Alix Anfang, a spokeswoman for Uber, said the City Council and Mr. de Blasio had rushed the cap through “without stopping to think about the consequences for hard-working drivers who have been saving up to get out of a rental and into a car they own.”

Jose Reyes, an Uber driver from Brooklyn, said he knew people who bought cars in order to register them before the cap was passed.

Uber had prepared for the surge of drivers to its New York offices by shifting employees from New Jersey and Connecticut and opening their doors an hour early. Despite the extra hands, applicants said they were expecting the process to take two to three hours. The usual wait time in the Queens office, according to an Uber worker, is usually 20 minutes.

Frustrated with how slow the line was on Sunday, Syed Hassan, an Uber driver, left after an hour.

The line, he said, went around the building. “There were more than 1,000” drivers waiting, he estimated. Still, he returned on Monday with a friend to keep him company.

The crowd on Monday was smaller, but that did not make it any less hectic. Uber workers admonished drivers to stay in an orderly line. Once inside, drivers were directed to the second floor where they were given instructions, depending on the stage of their applications.

Some drivers, after seeing the long list of requirements, decided to wait until the cap is lifted before registering their car. Diakanke Bah, 28, was on her way out after being told that she would probably not meet the deadline since she still had to get a for-hire driver’s license.

“If I do get my license, I will have to probably rent out someone who has already registered with the T.L.C., but it won’t be with my car,” she said.

Copyright 2018 The New York Times Company.  All rights reserved.

Monday, August 13, 2018

New York Post: More Americans are defaulting on their credit cards: analyst

By Gregory Bresiger
Despite a booming economy, many Americans are having trouble paying credit card bills, industry observers warn.

An increasing number of auto borrowers are also asking for more time to pay.

These trends disturb card industry experts.

“It is a problem we should watch,” says Bill Hardekopf, founder of

“I would say that credit card defaults is definitely a cause for concern,” says Joe Resendiz, an analyst with ValuePenguin, which tracks the credit industry.

Resendiz noted the recent second-quarter net credit card default numbers rose for Bank of America and JPMorgan. In an otherwise rosy report, the amount of in-default charge card bills rose by 10 percent and 9 percent, respectively, compared with the same period in 2017.

But JPMorgan charge-off rates remain “low” on a historical basis, said spokeswoman Betty Riess.

The latest numbers also come at the same time that those with the poorest credit card records — subprime borrowers — saw their credit card debt increase by 26 percent, ValuePenguin said.

Another observer,, noted a $16.25 billion increase in revolving debt in May. “This was the biggest May jump since 1995,” it said. Revolving debt is the card debt that is carried from month to month, usually at high interest rates because a card, unlike a house, is an unsecured debt.

Revolving and non-revolving debt is currently at $3.86 trillion, LendingTree said. It predicts it will pass $4 trillion this year.

Some borrowers, credit industry analysts say, are forgetting the disasters of 2008. That’s when a sudden recession left many Americans without jobs and big banks with huge unpaid debts.

Resendiz said most big banks are seeing default rates rise. The credit card default rate rose in the latest Federal Reserve numbers to 3.65 percent.

This was the seventh straight quarterly increase, yet still far from the 2008 numbers, when default rates were above 10 percent.

© 2018 NYP Holdings, Inc. All Rights Reserved.

New York Times: Riders Wonder: With Uber as New York’s Plan B, Is There a Plan C?

By Winnie Hu and Mariana Alfaro

Jenine James no longer worries about getting stranded when the subways and buses are unreliable — a constant frustration these days — or cannot take her to where she needs to go. Her Plan B: Uber.

So Ms. James, 20, a barista in Brooklyn, sees New York’s move to restrict ride-hail services as not just a threat to her own convenience and comfort but also to the alternative transportation system that has sprung up to fill in the gaps left by the city’s failing subways and buses. She does not even want to think about going back to a time when a train was her only option, as unlikely as that might be.

“It was bad, so imagining going back, it’s terrible,” she said.

The ride-hail cars that critics say are choking New York City’s streets have also brought much-needed relief to far corners of the city where just getting to work is a daily chore requiring long rides and multiple transfers, often squeezed into packed trains and buses. The black cars that crisscross transit deserts in Brooklyn, Queens, the Bronx and Staten Island have become staples in predominantly black and Hispanic neighborhoods where residents complain that yellow taxis often refuse to pick them up. They come to the rescue in the rain, and during taxi shift changes, when rides are notoriously hard to find even in the heart of Manhattan.

New York became the first major American city on Wednesday to put a halt on issuing new vehicle licenses for Uber, Lyft and other ride-hail services amid growing concerns around the world about the impact they are having on cities.

The legislation calls for a one-year moratorium while the city studies the booming industry and also establishes pay rules for drivers. It was passed overwhelmingly by the City Council and is expected to be signed into law by Mayor Bill de Blasio, a Democrat, who attempted to adopt a similar cap in 2015 but abandoned the effort after Uber waged a fierce campaign against him.

The cap was supported by many transportation analysts who say the ride-hail cars have contributed to worsening traffic in Midtown and Lower Manhattan, and by taxi drivers whose financial plight has become precarious in the past year, underscored by a spate of suicides. Mr. de Blasio held a celebratory rally on Thursday with Corey Johnson, the City Council speaker who wrangled widespread support for the cap among his colleagues by focusing on the plight of taxi drivers. 

Bruce Schaller, a transportation consultant who has studied the ride-hail services, said that it was only a matter of time before city officials took action. Since Uber successfully fended off a proposed limit three years ago, the number of for-hire vehicles in the city has soared from about 63,000 to more than 100,000.

“You can’t have Uber and Lyft growing forever in Manhattan without having total gridlock,” Mr. Schaller said. “At some point, the city was going to have to say enough — and they have now said enough.”

But Alix Anfang, a spokeswoman for Uber, said the city’s “12-month pause” on issuing new vehicle licenses will threaten a reliable transportation option for New Yorkers without improving the reliability of the subways outside Manhattan. “As Uber continues to grow in communities outside of Manhattan, we will do whatever it takes to ensure that no New Yorker who needs a ride is left stranded,” she said.

Nisha James, 34, a nanny from Brooklyn, said she felt the cap on the ride-hail services had been a Manhattan-centric decision without regard for what it will mean for riders in the other boroughs. “I don’t think they were thinking about anywhere else,” she said, adding that the cap will likely send her and other Uber riders back to public transit when they cannot get a car.

In the Bronx, Jeff Gutierrez, 26, said that he only takes Uber now to commute to his job in media sales for a cable news station across the borough. Uber takes 15 minutes. The bus takes 1 hour and 30 minutes and is so crowded he cannot always get a seat. There is no contest. “We should not be stuffed like sardines in a bus,” he said. “Uber is so affordable and convenient. I will never ride the bus or train again as long I work in the city.”

Uber officials said that they planned to recruit drivers who already hold for-hire vehicle licenses in the city to work for Uber, a group that represents as many as 35,000 potential new drivers. Moreover, since the moratorium is on new vehicles — not new drivers — they also hoped to maximize the use of existing vehicles by encouraging their owners to allow other drivers to use them when they are sitting idle.

Though the cap would apply citywide, the ride-hail companies have warned that it could lead to fewer cars and worse service with longer wait times and higher prices, particularly in the boroughs outside Manhattan. With a limited supply of vehicles, too many drivers could opt to remain in Manhattan picking up well-heeled tourists and business workers, leaving too few drivers in the other boroughs where ridership has been growing the fastest. Yellow taxis, which are similarly limited in number, have traditionally been concentrated in Manhattan’s business districts, though they can legally operate anywhere in the city.

Mr. Schaller acknowledged such concerns, but added that unlike taxis, the ride-hail cars are dispatched with technology that allows the drivers to see exactly where the calls are coming in. He said that if they see more calls coming from, say, Queens, they will go there. “Water doesn’t bunch up at one end of the lake, it levels off across the whole lake,” he said. “The drivers chase the money — and if the money is all over the city — they go all over the city.”

Not all fans of the ride-hail services were disappointed by the regulations. Shiri Wolf, 38, a lawyer who recently moved back to the Upper West Side, said that even though she has come to rely on the ride-hail services, something needed to be done about the “horrendous” traffic on city streets.

“In the five years I’ve been gone, I think traffic must have doubled,” she said. “It’s fair to have cabbies earn a decent living, and they may have some efficiencies to gain, to learn from Lyft and Uber, but on the whole they’re more expensive because they’re regulated and I think regulation is a way to keep things fair for everybody.”

Still, some riders are bracing for the worst. Carmel Maurice, a client coordinator from Brooklyn, was seething as she waited for an Uber outside the Atlantic Terminal, a major transit hub in Brooklyn, on Thursday morning, less than 24 hours after the legislation passed. “I feel like it’s unfair,” she said, adding that she had opted out of public transit in Brooklyn because “it’s never reliable, it’s never on time.”

Darella Jasper, a Brooklyn security worker, said that if the rides become more expensive, she might have to cut back on her use of Uber and Lyft, even though they are the easiest way for her to get around Brooklyn and Queens. “To get from point A to point B,” she said. “We’re just going to have to find other alternatives.”

Copyright 2018 The New York Times Company.  All rights reserved.

Thursday, August 09, 2018

New York Times: New York City Caps Uber and Lyft Vehicles in a Crackdown

New York became the first major American city on Wednesday to halt new vehicle licenses for ride-hail services, dealing a significant setback to Uber in its largest market in the United States.

The legislation passed overwhelmingly by the City Council will cap the number of for-hire vehicles for a year while the city studies the booming industry. The bills also allow New York to set a minimum pay rate for drivers.

Uber has become one of Silicon Valley’s biggest success stories and changed the way people across the globe get around. But it has faced increased scrutiny from government regulators and struggled to overcome its image as a company determined to grow at all costs with little regard for its impact on cities.

New York’s move to restrict the number of ride-hail vehicles and to establish pay rules for drivers — another step no other major city has taken — could provide a model for other governments that want to rein in the industry. New York’s aggressive stance also raises questions over how fast Uber can continue to grow as the company, which has been valued at $62 billion, plans to move toward an initial public offering next year.

The proposal to cap ride-hail companies led to a clash among interest groups with taxi industry officials saying the companies were dooming their business and Uber mounting a major advertising campaign to make the case that yellow cabs have a history of discriminating against people of color.

Mayor Bill de Blasio and Corey Johnson, the City Council speaker, said the bills will curtail the worsening traffic on the streets and improve low driver wages.

“We are pausing the issuance of new licenses in an industry that has been allowed to proliferate without any appropriate check or regulation,” Mr. Johnson said before the vote, adding that the rules would not diminish existing service for New Yorkers who rely on ride-hail apps.

Mr. de Blasio praised the bills and said he planned to sign them into law. The cap on new for-hire vehicles would take effect immediately.

“More than 100,000 workers and their families will see an immediate benefit from this legislation,” Mr. de Blasio said, referring to the city’s army of for-hire drivers. “And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt.”

But Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand. Ride-hail apps have become a crucial backup option for New Yorkers swept up in the constant delays on the city’s sputtering subway, as happened on Wednesday when signal problems again snarled train lines across a large swath of the city. Ride-hail services have also grown in neighborhoods outside Manhattan where the subway does not reach.

The battle over Uber’s future in New York has been prompted in part by growing concerns over financial turmoil among drivers — a problem underscored by six driver suicides in recent months. On Wednesday, a large group of drivers rallied outside City Hall before the vote and held signs displaying the names of the drivers who took their lives.

New York is the latest city to grapple with questions over how to regulate the company. In London, Uber’s most lucrative European market, Uber recently regained its taxi license after the company agreed to stricter regulations, including providing the city with the trove of traffic data that the firm collects and has often been reluctant to share. Uber has also faced regulatory battles in American cities, like Austin, Tex., and in countries like Canada, Brazil and Italy.

In Seattle, the City Council approved a bill allowing Uber drivers to form unions, but the measure has faced a legal challenge. Uber left Austin in 2016 after the City Council passed a measure requiring the company to perform fingerprint background checks, though Uber later returned to the city. The mayor of Honolulu recently vetoed a bill to cap price increases by Uber during busy periods.

The company’s new chief executive, Dara Khosrowshahi, has embarked on a global charm offensive to repair the company’s image after a series of controversies, including complaints among workers over gender discrimination and harassment.

Uber criticized the Council’s decision to approve the cap, but said the company would work to keep up with the increasing appeal of its service despite the limit on new vehicles. 

“The City’s 12-month pause on new vehicle licenses will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion,” Josh Gold, a spokesman for Uber, said in a statement.

Anand Sanwal, chief executive of CB Insights, a software company that examines technology trends, said the cap could impact Uber’s public offering if it reduces revenues and emboldens other cities to take similar action.

“If it changes their growth trajectory, that could have an impact on their valuation and the narrative around the company,” Mr. Sanwal said.

Uber said the company would immediately reach out to tens of thousands of for-hire vehicle owners who are already licensed but work for other local car services and try to recruit them to work for Uber. The company said it would also continue to press for another solution, known as congestion pricing — a proposal to toll drivers entering Manhattan’s busiest neighborhoods and that would require approval from state lawmakers.

Many experts believe congestion pricing is the best way for New York City to fix congestion and secure the funds needed to fix the subway. Mr. Johnson supports the idea, but Mr. de Blasio has opposed it. Gov. Andrew M. Cuomo, who controls the subway, has said he will push for congestion pricing during the next state legislative session to help pay for an ambitious, multibillion dollar overhaul plan for the subway.

The City Council approved the cap in a 39-to-6 vote. Councilman Eric Ulrich, a Republican from Queens, said he opposed the cap, arguing that limiting Uber to help yellow taxis was similar to regulating Netflix, the streaming service, to help Blockbuster, the video rental chain.

The legislation allows for the city’s taxi commission to add more licenses if there is a clear need for more vehicles in some neighborhoods. In New York, many Uber drivers work full time and the city regulates Uber vehicles as part of the for-hire vehicle industry, which is different than other cities.

The City Council also moved recently to regulate Airbnb, another tech company that has upended the hotel industry. Mr. Johnson, a Democrat who became City Council speaker in January, has quickly taken bold steps to make a name for himself on high-profile issues, including convincing the mayor to pay for half-price MetroCards for poor New Yorkers.

Many taxi and Uber drivers say they support the cap proposal. They hope it will halt the flood of new vehicles clogging city streets and allow them to make more trips and improve their earnings. Uber and other ride-hail services could add new vehicles only if they are wheelchair accessible.

Lyft, the second most popular app in New York, also criticized the vote: “These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of color and in the outer boroughs,” Joseph Okpaku, a vice president at Lyft, said in a statement.

The vote was a moment of vindication for Mr. de Blasio, a Democrat, who lost a bruising battle with Uber over a proposal for a cap in 2015. Since then, the number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 63,000 in 2015, according to the city.

The taxi industry has also been decimated by Uber’s rise. The price of a taxi medallion, which is required to operate a taxi in New York, has plunged from more than $1 million to less than $200,000.

Elizabeth Cassarino, a yellow taxi driver, said she supports the cap and hopes it will improve business for taxis. As she drove a taxi through the clogged streets of Manhattan on Wednesday, she said her credit cards were maxed out and she had trouble making enough money to pay for food.

“Finally,” she said. “We’re starving to death.”

Copyright 2018 The New York Times Company.  All rights reserved.

Wednesday, August 08, 2018

Cramming Down a Taxi Medallion Loan in Chapter 13

Many individuals who owns taxi medallions that are “underwater” (the amount of the bank loan exceeds the value of the medallion) are interested in cramming down the taxi medallion loan so that the secured portion of the taxi medallion loan equals the value of the taxi medallion and the remainder of the taxi medallion loan would be treated as unsecured debt.

As discussed below, the secured portion of the taxi medallion loan would be paid in full and the unsecured portion would be paid pennies on the dollar, allowing the medallion owner to pay the bank less than the full amount of its loan and keep the medallion!

In the way of background, chapter 13 is not available to corporations or limited liability companies; pursuant to § 109(e) of the Bankruptcy Code, only individuals can file for chapter 13 bankruptcy. So, if a mini fleet was owned by a corporation or an LLC, a chapter 13 filing would not be permitted. The corporation or LLC could file for chapter 7 or chapter 11 bankruptcy (see our previous blog post on chapter 11 and cramdown).

In our example, let’s assume that a taxi medallion is worth $175,000 and the individual who owns that medallion owes the bank $500,000 (the collateral for the loan is the taxi medallion). $175,000 of the debt would be deemed secured and the remaining $325,000 would be deemed unsecured.

To file for chapter 13 bankruptcy, there are debt limitations; pursuant to § 109(e) of the Bankruptcy Code, an individual debtor must have unsecured debt of less than $394,725 and secured debt of less than $1,184,200.

Chapter 13 also requires that the debtor (medallion owner) must have a job or regular source of income to fund the chapter 13 plan. The duration of a chapter 13 plan is generally three to five years. A medallion owner filing for chapter 13 must pay the bank and other creditors $1 more than they would get in a chapter 7 bankruptcy (the “best interest of creditors” test) and the bankruptcy judge must determine that the plan is feasible, meaning that the debtor will be able to make the payments under the plan.

If the above requirements are met, and the bank will not agree to have its debt bifurcated into secured and unsecured components, the debtor must move to “cram down” the bank or secured creditor.

Cramming down a secured creditor is detailed in § 1325(a)(5)(B) of the Bankruptcy Code and the relevant provisions are as follows:

  1. The first essential element in chapter 13 cramdown is that the plan provides for the retention of the lien securing the allowed secured claim by the bank.

  2. Chapter 13 cramdown requires that the chapter 13 plan propose to distribute property having a value, as of the effective date of the plan, at least equal to the amount of the allowed secured claim. The effective date of the plan will ordinarily be provided for by the plan and may be the date the order confirming the chapter 13 plan becomes final.

  3. Property can be distributed to the bank over the course of the plan period. The property may be property of the estate in existence at the date of confirmation, or deferred cash payments representing future earnings or income of the chapter 13 debtor, provided that at the time the plan becomes effective, the value of the property to be distributed in the future equals the amount of the allowed secured claim.

  4. Section 1325(a)(5)(B)(iii)(I) provides that if property to be distributed to the holder of an allowed secured claim is via periodic payments, such payments shall be in equal monthly amounts.

  5. The valuation conducted by the court under § 1325(a)(5)(B)(ii) is meant to determine whether the property to be distributed under the plan is at least equal in value to the amount of the allowed secured claim. In most chapter 13 cases, the property to be distributed under the plan will consist of deferred cash payments derived from the earnings or other future income of the chapter 13 debtor during the plan period.

  6. Section 1325(a)(5)(B)(ii) requires the court to determine the value of property to be distributed under the plan, as of the effective date of the plan. In other words, the court must ascertain the present value of the property to be distributed. Accordingly, in addition to deferred principal payments aggregating the face amount of the allowed secured claim, a chapter 13 plan need only propose to pay interest on the amount of the allowed secured claim at the appropriate rate (many courts have endorsed using the prime rate plus a risk premium of 1 to 3 percent) over the duration of the plan.

  7. Section 1325(a)(5)(B)(ii) requires that the present value of property to be distributed under the plan be not less than the amount of the allowed secured claim. The amount of the allowed secured claim is determined in accordance with the provisions of §§ 506(a) and (b) of the Bankruptcy Code. Section 506(a) provides that an allowed claim is either undersecured or oversecured, based on a determination by the court as to whether the property secured by the creditor’s lien has a value that is greater or smaller than the amount of the allowed claim.

Therefore in our example, let’s assume that the interest rate on the $500,000 loan was 5% (the current prime rate) and the Debtor proposed a chapter 13 plan, to cramdown the bank, by allowing the bank to retain its lien during the term of the loan and repaying the bank $175,000 over 5 years at 6% (prime rate plus a risk premium of 1%), or monthly payments of $3,383.00, month, plus chapter 13 Bankruptcy Trustee payments of a maximum of 10% per plan payment, then the Debtor could confirm a chapter 13 plan and keep the medallion, if it made 5 years (60 months of payments) at $3,383 per month or $3,721.30 per month with the 10% Bankruptcy Trustee fee included.

Besides a chapter 13 cramdown, a medallion owner may also want to consider a workout with the bank, a chapter 7 bankruptcy or surrendering the medallion to the bank. Individuals with underwater medallions should talk to an experienced bankruptcy attorney before deciding on what strategy to pursue. Jim

July 2018 TLC medallion sales

The July 2018 New York City Taxi & Limousine Commission (TLC) sales results have been released to the public. And as is our practice, provided below are James Shenwick’s comments about those sales results.

1. The volume of transfers fell from June. In July, there were 36 taxi medallion sales.

2. 22 of the 36 sales were foreclosure sales, which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).  Three transfers were estate sales for no consideration and two transfers were also for no consideration, which also do not reflect fair market value and which we have also excluded from our analysis.

3. However the large volume of foreclosure sales (approximately 61%) is in our opinion evidence of the continued weakness in the taxi medallion market.

4. The nine regular sales for consideration ranged from a low of $160,000 (two medallions), $170,000 (two medallions), $175,000 (two medallions), $200,000 (one medallion) and an unusual high of $500,000 (two medallions).

5.  Accordingly, the median value of a medallion in July was $175,000.

Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at

Monday, August 06, 2018

New York Times: Taxi and Uber Drivers Are United in Backing a Cap on Ride-Hail Vehicles

By Emma G. Fitzsimmons and Aaron Robertson

As New York City weighs new regulations for Uber and other ride-hail companies, a group that is often overlooked has entered the spotlight: the thousands of drivers who ferry New Yorkers across the city every day.

It is their economic despair — underscored by six driver suicides in recent months — that has prompted the City Council to consider legislation this week to cap ride-hailing vehicles in the city and set a minimum pay rate for drivers.

Both taxi and Uber drivers are optimistic that the city’s proposals would halt the flood of vehicles clogging city streets and start making it easier for drivers to earn a decent living.

“There will be more wages for the drivers and things will get better,” S.N. Singh, a taxi driver for more than 40 years, said on a recent morning as he waited at the taxi parking lot near Kennedy International Airport.

Drivers sometimes have to wait at the lot for two or three hours until they are dispatched to a terminal to pick up a passenger. They can often be found playing backgammon on trash bins, chatting in small groups or, on hotter days, napping in their cabs with the windows rolled down.

With an influx of vehicles from Uber and other ride-hail apps, drivers are having a difficult time finding passengers and traffic is slower than ever, Mr. Singh said.

“You can’t move in the city,” Mr. Singh said. “You can’t move anywhere.”

The City Council is expected to vote on the proposals on Wednesday. Uber has mounted an aggressive and highly visible campaign against the cap, but Corey Johnson, the Council speaker, believes it has enough support to pass — a stark difference from three years ago when Uber defeated an earlier cap proposed by Mayor Bill de Blasio.

The legislation would limit the number of vehicles at the current level by stopping the issuance of new for-hire vehicle licenses while the city studies the rapidly changing industry, which has been transformed by Uber’s remarkable rise. Ride-hail companies would be able to add new vehicles only if they are wheelchair-accessible. The legislative package, which Mr. de Blasio supports, would make New York the first major American city to impose a limit on ride-hail vehicles. The regulations could set a precedent for other cities seeking to rein in Uber.

There is “resounding support” for the cap among drivers, said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, a group that represents many taxi and Uber drivers. At a recent driver meeting after the Council revived the idea, Ms. Desai said: “It was the first real moment of hope that I’ve seen at any of our meetings in the last three years.”

Her group has raised concerns about the recent driver suicides, which included three taxi drivers and were attributed in part to financial stress. Taxi medallions — the aluminum plates required for the roughly 13,500 yellow taxis in New York — once sold for more than $1 million but are now worth less than $200,000. The number of for-hire vehicles, which was 63,000 when the cap was proposed in 2015, has surged to more than 100,000 vehicles.

Mr. de Blasio defended the cap on Friday and argued that it was part of his broader efforts on income inequality.

“What’s happening across the board because of these huge corporations is they are driving down the wages of hard-working people who work in this field,” Mr. de Blasio said in a radio interview. “That alone is a reason to call a time out and assess what’s going on here.”

Taxi and Uber drivers compete on the streets for passengers, but they find common ground on the cap. Uber drivers say they also struggle to make a good living after Uber takes its commission — sometimes more than 20 percent — and after paying for high vehicle costs. With no new vehicles joining the app, Uber drivers say they will have less competition and could spend more of their day carrying passengers, instead of driving around in an empty car.

“There’s a better chance of drivers getting better trips,” said Jacky Lin, who has driven for Uber for more than a year and is part of another driver group called the Independent Drivers Guild.

Lyft, the second most popular app, has joined Uber in opposing the cap and says that nearly a quarter of its drivers could leave because of routine turnover, leading to a shortage of drivers over the next year if a cap is adopted. Lyft’s leaders say the city declined an offer from the ride-hail companies to establish a $100 million fund to help taxi drivers in exchange for dropping the cap.

“The bills as drafted didn’t really do anything to address the people who are in the most trouble right now, which are the taxi drivers with the underwater medallions,” Joseph Okpaku, a Lyft vice president, said in an interview.

Uber has sent emails to its riders urging them to oppose the cap, arguing that it would raise prices and lengthen wait times for passengers. The cap would raise rental costs for Uber drivers who lease their vehicles and create a more restrictive leasing arrangement for drivers, said Josh Gold, a spokesman for Uber. Uber supports a separate bill before the Council to set minimum driver wages.

“It boggles the mind that the Council would take action to help drivers with an earnings bill while at the same time hurt drivers who can least afford to pay higher rental costs through a cap bill,” Mr. Gold said in a statement. Uber also claims that it provides transportation alternatives to riders outside Manhattan who are ill-served by public transit or have grown tired of the constant subway meltdowns.

But Carl Dauphin, a taxi driver since 1986, said it was time for the city to finally curb Uber’s growth.

“They got to do it — they have no other choice,” Mr. Dauphin said as he waited at the Kennedy parking lot before picking up a passenger. “Their back is against the wall right now.”

The problems in the industry have reached a breaking point because many New Yorkers have become fed up with constantly congested streets, he said.

“It’s not about us no more; it’s about the people in the city,” Mr. Dauphin said. “Because when you have the city crawling with traffic, everybody’s losing.”

Yousaf Latif, another longtime taxi driver, said he has started coming to the airport lot in search of a fare because Uber had taken over Manhattan.

“We don’t have enough passengers for the yellow where we can survive and stay in the city,” Mr. Latif said.

Some drivers hope the legislation will mean a return to the better wages that they earned in the past. Anila Nargis, an Uber driver, said she earned more money last year when Uber offered better driver incentives.

“It was easier for my family,” she said, “because I don’t have to run that much and then I can spend a little more time with my kids.”

Copyright 2018 The New York Times Company.  All rights reserved.