Tuesday, June 04, 2019

Crain's New York Business: The real killers of taxi medallions

By Sergio Cabrera and Carolyn Protz

A new narrative about the decline of the iconic taxi has emerged. In this new perspective, the entry of Uber and Lyft into the New York City taxi market was not the catalyst for the decline of taxi medallion values. Rather, the medallion lending industry ruined the value of this unique investment.

The real scandal, however, is not just that regulators turned a blind eye to predatory lending, but how the Taxi and Limousine Commission, as well as elected officials, played a pivotal role in taxis’
demise. And it was no accident.

In 2010, the TLC had in hand an internal report predicting the collapse of the lending market because loans were unsustainable. But the agency—even though it knew how fragile the situation was—ignored its own rules, flooded the streets with additional vehicles and streamlined the processing of new drivers, cars and bases competing with taxis.

In essence, the city lit a match to a combustible situation. It was regulators’ malfeasance that allowed the Ubers to come in with little or no financial barrier to entry—exacerbating the danger created by lending now being excoriated.

The TLC was created in 1971 with a mandate to ensure the well-being of the iconic yellow taxi. TLC rule 52-04(a)(4) states: “Establish and enforce standards to ensure all Licensees are and remain financially stable.” This mandate was consciously ignored.

Meera Joshi, who chaired the TLC throughout Uber’s flooding of city streets with vehicles, now says she was worried about medallion costs and lending but was pushed to prioritize other matters. Like what? Adding 85,000 vehicles? Joshi ignored, bent and changed many of her own rules that, if respected, would have prevented this destructive onslaught.

Lest we forget, the TLC—according to former Chairman Chris Lynn—has the final say over all medallion transactions, and Joshi was its general counsel when the 2014 minimum auction bid of 
$850,000 for a medallion was established.

Some examples stand out. In April, 2017, the TLC held a hearing on industry economics that went on for six hours with medallion owners telling TLC commissioners how horrific their lives had become.

Yet all that came out of it was an option for tipping of app drivers.

The following year, amid owner and driver suicides, the willfully blind TLC commissioned a study of driver income. Yet the academics tasked with the study were explicitly told to exclude the yellow-cab industry and to not consider a cap on for-hire vehicles. The study led the city to establish a minimum wage for drivers of for-hire vehicles.

Perhaps the most egregious display of favoritism was how the mayor and the City Council mishandled Uber and Lyft’s resistance to meeting the wheelchair-accessibility requirements mandated for taxis. When push came to shove, the city caved and allowed a company-sponsored plan with no accessible-vehicle mandate.

The tragic bankruptcies and foreclosures being highlighted today were unknown prior to the influx of Ubers. The Ubers’ catalytic role, and the subsequent shameful enabling of the city, is unmistakable.

In 1971 taxis were making 500,000 daily trips. Today they are doing 250,000 while the invaders are doing 769,000. Uber itself has lost billions of dollars undercutting competitors through predatory pricing to capture market share. This cannot be airbrushed out of the picture.

The public sector needs to be held to account for its part in the threatened demise of taxis and the wanton harm done to thousands of defrauded immigrants who came to this country in search of a better life.

Sergio Cabrera and Carolyn Protz are medallion owners and members of Taxi Medallion Owner Driver Association.

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