TAXI-MEDALLION SYSTEM

first published in the San Francisco Examiner, June 10, 2009

taxi-san-francisco

STOP ROMANTICIZING BROKEN TAXI-MEDALLION SYSTEM

by Matt Gonzalez

RECENT SUGGESTIONS BY Mayor Gavin Newsom’s administration that San Francisco should consider selling taxi medallions to raise revenue have been greeted with cynicism from some quarters. Such a plan would replace the current system of giving away medallions to the next driver on a first-come, first-served basis. Some have called Newsom’s idea outright theft; others proclaim he wants to institute a sweatshop system undermining a venerable entitlement program supporters claim favors working drivers.

While I disagree with Newsom’s motives, other critics ignore what many in the taxi industry now openly acknowledge: The current system is already a sweatshop that serves few at the expense of many hard-working drivers who want to make this their lifelong profession, but stand no chance of receiving a medallion. Moreover, even medallion holders aren’t left with any kind of graceful “exit strategy” at the end of their career.

Our taxi system works like this: The City has a limited number of medallions that sets the amount of taxis that can be in service at any time. Medallions are not issued to cab companies. But when a driver isn’t using a medallion, it’s usually “leased” to a company.

A medallion is valuable because it generates roughly $2,000 a month when someone else is renting it.

The system, implemented in 1978 when Proposition K was passed by voters, intended to keep medallions out of the hands of taxi companies and ensure that working drivers received the greatest benefit. Initially successful, the wait-list for a medallion is nearly 20 years now, pitting drivers with a medallion against those waiting for one.

Many medallion holders are now in their 80s.

Because of the driving requirement, an older or disabled driver who can’t drive can be stripped of their medallion with no compensation for not working an average of three shifts a week. In one instance, a driver who reported advancing blindness was told by the Taxi Commission to keep driving or surrender his medallion.

Presently, the working driver builds no equity with their medallion — therefore receiving nothing when it’s taken. This incentivizes hanging on regardless of safety concerns and encourages fraud.

Prop K supporters say the “fix” is not enforcing the driving requirement against old or disabled drivers, which is more in keeping with the Americans with Disabilities Act (an issue pending in court). In doing that, however, the wait-list will certainly grow and the purpose of Prop. K would be undermined — “working drivers” wouldn’t have medallions.

Others urge creating a transferability system that allows a driver at the end of their career to sell the medallion to another working driver through a city-operated public auction. Cities, including the nation’s largest, New York, run such a program, with auction proceeds from new medallions going to the city. Proceeds from driver-owned medallions benefit the retiring driver, less any added city fees, thus creating a constant revenue stream.

There are some concerns, but the primary argument raised, that drivers can’t afford to purchase medallions, overlooks the obvious: monies earned “leasing” a medallion to a cab company generates income that can assist in its purchase and banks risk little making a loan secured by medallions that can be transferred to others upon default.

Just as home buyers rarely own their homes outright, the equity drivers would earn paying off “mortgages” is valuable and may even serve as a surrogate for savings.

Not surprisingly, in New York City hundreds of drivers lineup for the opportunity to purchase a medallion at auction.

Certain issues need addressing before a new system is adopted. What if banks won’t finance medallions without hefty down payments? Can The City develop a down-payment-assistance program? What about drivers at the top of the wait-list who are close to receiving a medallion?

Newsom’s administration unfortunately emphasizes selling medallions to balance The City’s budget rather than because it’s good policy. But money raised through any new system should be committed to health care and retirement, the absence of which has been a chronic industry concern for all drivers, including those who don’t purchase medallions.

Providing benefits in this manner would retain the independence of drivers who aren’t interested in obtaining benefits through any system that categorizes them as city employees, yet keeps the system’s unique San Francisco feature: medallions only to working drivers.

While attempts to raid taxi coffers by Newsom should be opposed unless driver health care and retirement issues are addressed, we shouldn’t cement Prop. K into stone, as Supervisor Chris Daly has proposed. It doesn’t address the chronic deficiencies in how The City manages taxi affairs, and romanticizing Prop. K only perpetuates a broken system.

The Municipal Transportation Agency has recently assumed responsibility for taxi regulations. Let’s not squander this opportunity to fix Prop. K.

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5 comments

  1. mike

    Matt-

    I was enthused to learn of your skepticism for the taxi medallion system. It is designed to benefit the few medallion holders at the expense of taxi patrons, working taxi drivers, and motivated citizens who would like to be taxi drivers.
    I’m developing on an iphone application which would allow anyone to become a part-time cab-driver.
    The biggest challenge to my citizen taxi service is that such an activity is currently illegal. I’d love to discuss the project with you further if you can help me legalize it.

    thanks
    -mike

  2. mpithy

    The Mayor’s idea to sell or auction medallions is unfair to those who’ve waited patiently for years with the understanding that their medallion would be free. If the medallions are auctioned to the highest bidder, including those who haven’t been on the list, those who have should be compensated for the amount of time they’ve waited for their medallions since they may never get one.
    They may not qualify for a loan if they’re already struggling financially.

    Using some of the auction proceeds for health care and retirement is a must, but medical insurance costs and coverage have got to be addressed nationally. This nation is in a stranglehold by the medical insurance and pharmaceutical industries.

    • mattgonzalez

      I absolutely agree that those who are on the list should be given some kind of consideration. If the city were to adopt an auction or transferability system, a credit could be given to those who have waited on the list. I haven’t done the math, but you could probably award a $10,000 credit to be used when bidding on a medallion for each year someone has been waiting on the list.
      That would be a way of recognizing those poised to receive a medallion under the current system.
      Another possibility would be to offer new medallions to those on the list at a fixed price, foregoing an auction system altogether. Again, it would be a way to acknowledge those on the waiting list.

  3. lambjams

    The whole system is bizarrely corrupt. Operating a taxi should be a short-term revocable privilege based on capability and driving record.

    This means a permit system good for 2-3 years, entrance exam on safety and courtesy, and revocation for traffic violations. If you want to drive a taxi, you need to be a BETTER driver than average, not the road hazards we currently have. Minimal permit fees should be appropriate to manage the program.

    It is truly corrupt to allow “leasing” the privilege to someone else. What if doctors were allowed to lease their medical licenses? Driving a car puts the public in danger in a more obvious way.

  4. batyr tachmuradov

    I am on list from 2000
    Now I dont know what to expect what to do I feel like robbed !

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