NYC Yellow Cab Industry at Crossroads: From Hunger Strike to Celebrity Endorsements
With an ongoing driver hunger strike, local politicians being arrested, celebrity endorsements, the issue being discussed at the NYC Mayoral debate and more, the medallion crisis is at a crossroads
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We’ve written several pieces on the current yellow cab medallion crisis and even volunteered some ideas. This article though isn’t going to re-hash all the details of the current $65 million medallion relief program or the NYTWA proposal, which at its core is calling for the City to guarantee medallion debt (i.e., NYC government backstop, up to $145k), to help facilitate debt restructuring negotiations.
With an ongoing driver hunger strike in front of City Hall, local politicians being arrested, celebrity endorsements , the issue being discussed at the NYC Mayoral debate and more, the medallion crisis is in the spotlight and at a crossroads. There are multiple sides of the arguments for and against the City guarantee. Was it the City’s fault? Was it financial engineering gone bad? Was it Uber & Lyft? Is it just a case of an old industry being disrupted by new technology? The answer honestly depends on which seat your sitting in (or have sat in).
Finally, this is a fundamentally a crisis involving human beings, many with children and families to look after. Whether I agree or disagree with the drivers who owe hundreds of thousands of taxi medallion-related debt, I can certainly understand that they are stressed. Many probably view this as the last chance at major debt relief so want to maximize whatever they can negotiate.
Who’s Responsible?
This article isn’t really going to be about my opinion, but rather SIMPLY (i.e., a book could be written about this topic) frames the different major viewpoints. I think broadly speaking there are three main “camps” of opinions.
⛺ CAMP #1: Medallion driver-owners deserve a City guarantee & additional debt relief. The City is to blame for the medallion crisis.
NYC’s government was responsible for protecting the scarcity value of the yellow cab medallion and failed. The City allowed tens of thousands of Uber & Lyft vehicles to enter the NYC for-hire fleet, destroying the scarcity value of the medallion. The City raised hundreds of millions from medallion auctions, as recently as 2014, and promoted the medallion as a foolproof investment. NYC also allowed aggressive lending to take place in the medallion industry without any regulatory oversight. Many drivers, now hundreds of thousands in debt from past medallion purchases at much higher valuations, find themselves in an impossible situation and need aggressive debt relief urgently, which should include a City guarantee. The current medallion relief plan is more a bail out of banks and hedge funds owning medallion debt than it is about helping drivers.
⛺ CAMP #2: Medallion driver-owners shouldn’t be given any debt relief, especially not funded by taxpayer money.
NYC yellow taxi medallion owners were simply disrupted by e-hailing technology. Medallion prices were clearly inflated and any investor or driver should have known all investments carry risk. In fact, the potential for such disruption was even predicted as early as the late 1990s. Uber, Lyft and others operated within the existing regulatory framework that did not cap non-medallion/non-street hail for-hire vehicles in NYC. In addition, the City attempted, in good faith, to block the number of vehicles for-hire services like Uber and Lyft could add in 2015, but failed. Eventually, the City did manage to cap the number of Uber and Lyft vehicles on the road in 2018. “Bailing out” medallion owners sets a dangerous precedent and is a questionable use of tax payer money. Should more regulation have come earlier? Perhaps, but that is inherently a risk of investing in anything.
⛺ CAMP #3: Medallion owners should accept the current relief plan
The NYC government and Taxi & Limousine Commission (TLC) have already secured funding and implemented a medallion relief program. To ask for relief beyond this is not only unreasonable, but politically / financially impractical. A City guarantee would put the City on the hook for hundreds of millions of dollars and is not a fair or good use of taxpayer funds.
What’s Next?
There are multiple viewpoints to take on this subject and the above simply frames what I believe are the three main “camps” currently. As I’ve previously written, I believe that medallion prices have bottomed and values should begin to recover, as long as existing TLC rules remain in place. Unfortunately for many medallion owner-drivers, even if medallion prices doubled or tripled from current valuations of near $100,000, they would still be underwater on their debt. That being said, you have to remember paying off medallion debt will ultimately result in an asset for the drivers who can make it through (i.e., after you pay medallion debt, you own a medallion outright). For example, let’s say three years from now a taxi medallion is worth $300,000 and the debt was written off to $140,000 (today), that would be an extremely controversial outcome that could have legal ramifications.
I also recently spoke to a few NYC yellow cab drivers (again this isn’t scientific) who rent their medallions and got a sense of the current market. The drivers are paying between $700 to $800 per week to keep 24/7 access to their taxi and earnings were anywhere from $200 to $250 per day on average. My point here is that if a driver owns a medallion they are also on average saving a few thousand in leasing costs per month (which are also at historically low levels), so that has to be factored into contextualizing all the numbers being thrown around.
The recent passing of former “Taxi King” Gene Friedman is a bitter reminder of how much wealth (Friedman was reported to be worth over $500 million at one point) was made and lost in the NYC taxi medallion industry in recent years. Behind medallions, especially driver-owned medallions, there are human beings, people with stories, families, kids and aspirations. All investments carry risk, but there was undoubtedly a unique regulatory backdrop and expectation when many drivers invested in a NYC taxi medallion that should be factored into framing the current crisis and its proposed solutions.
AutoMarketplace.com NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace.com on YouTube ▶️
Mr Mian thank you for your article. You were missing some very important information. In the TLC rules they must maintain medallion values and drivers wage. Which they have not. Also the medallion had exclusive right is a hail and an ehail. Uber/Lyft work on pre arrangement, that is a lie. They work by ehails. Besides all the illegal hacking that goes on. Also no one is talking about the medallion owners who worked there whole life for a medallion and have no income from the asset. Lastly you mentioned how some are renting car for 700-800 a week 24/7. That might seem like good money for a medallion owner. That doesn’t cover the bills. Ins/wc/car pymt/repairs/tax stamp/ned renewal/credit card fees/ and so on. The solution is simple it has been going on for 100 years you need a medallion to operate with a capped amount. or the city should buy them back at the last auction price. Lump sum or payout.