Will the taxi task force’s report do anything to help medallion owners?

NYC taxi drivers are facing a taxi medallion loan crisis.
NYC taxi drivers are facing a taxi medallion loan crisis.
Curioso/Shutterstock
NYC taxi drivers are facing a taxi medallion loan crisis.

Will the taxi task force’s report do anything to help medallion owners?

Experts weigh in on whether an app, surge pricing or a bailout can stop the industry’s implosion.
February 6, 2020

How do you solve a problem like the taxi medallion loan crisis? Many taxicab owner-operators – those who both own a medallion and drive their own cab – have been struggling over the past few years, as medallion values plummeted alongside the ascent of ride-hail services like Uber and Lyft in New York. But last year, an investigation by The New York Times revealed the depths of that crisis, highlighting the predatory lending practices that contributed to the rise and precipitous fall of medallion values. In the immediate aftermath of that reporting last May, city and state lawmakers called for reforms to help medallion owners out of debt and prevent something similar from happening in the future.

Now, a Taxi Medallion Task Force led by City Council members Ydanis Rodríguez and Steven Levin has a slate of recommendations that aims to achieve just that. The group – which also consists of academics, taxi medallion owners and driver advocates – issued a report last week with proposals including a loan buyback and partial forgiveness program funded by “mission-driven” investors, a universal smartphone app to help taxis compete with Ubers and Lyfts, and an evaluation of fares, with the possibility of adopting surge pricing. 

But with thousands of medallion owners in debt – the average debt being around $700,000, Levin said – the task force’s recommendations are just a starting point. For insight on the merits and flaws of the task force’s report, and where the city should go from here, City & State turned to three experts on the matter: Eric Goldwyn, a research scholar at New York University’s Marron Institute; Nicole Gelinas, a senior fellow at the Manhattan Institute; and Emil Skandul, founder of Capitol Foundry, a digital innovation firm.

What’s your response to the recommendations made in the task force’s report?

Nicole Gelinas: The report notes that the taxi industry is “in a state of crisis,” yet the City Council has now had more than half a decade to act decisively either for or against yellow-medallion owners, and has only come up with a report that punts on the key issues. In its recommendations, the task force offers no guidance on whether the city should provide taxpayers’ money to purchase either medallion-backed debt or the medallions themselves, which is a critical question. Instead, it offers such bland advice as the Taxi and Limousine Commission should “study the current industry economics” on issues such as surge pricing, and recommends that the Port Authority and TLC “work closely together to help curb illegal street hail activity at the local airports.” In sum, the report shows that the City Council is not interested in making the tough decisions, either for or against taxi-medallion owners.

Eric Goldwyn: Many of the recommendations are thoughtful, humane and smart, but the first question to answer is, how do we unwind the medallion system as quickly as possible, eliminating the laws that artificially distinguish between types of services that are no longer appropriate in 2020? These include: the yellow and green taxis’ monopoly over street hails, the 90% non-cash payment requirement for for-hire vehicles, etc. Changes to these laws, which would equalize the different services, would also have a significant impact on future bankruptcy proceedings.

While there are many factors that led to the implosion of the yellow taxi market, the blurred lines between street hail (yellow/green taxis) and pre-arrangement (for-hire vehicles) have definitely contributed to the confusion that created an opening for Uber, Lyft and others to exploit. As long as that confusion persists, it is counterproductive to continue separating these vehicle types when they serve similar functions, and the cost of entry was hundreds of thousands of dollars cheaper to go the for-hire vehicle route. 

Thus, what do we do with people who have medallions now? Focusing on those who purchased city-auctioned medallions post-2004 seems like the right place to start. A buyback seems like the cleanest solution, though obviously costly. It doesn't make sense to double down on more rules and enforcement – this has never worked for the Taxi & Limousine Commission, just ask the commuter van crowd. "Illegal" street hailing predates this crisis by at least four or five decades and is a reflection of a broken transportation system that doesn't work in all five boroughs. Furthermore, it's highly doubtful that even with 1,000 enforcement agents (a fivefold increase over the current 240) the TLC could curb illegal street hails. In many ways, it would be better if no more medallions were traded and medallion brokers and credit unions moved on to other products.

Emil Skandul: I was happy to see that many of the recommendations I put forth in a City & State op-ed were included in that report. In October, I had argued that the only way for the taxi industry to be saved, and not go the way of the horse-driven carriage, was to reinvent itself, starting with its digital approach and app experience. The committee recommended many of those ideas, including building a unified taxi app, ride-sharing, rewards and loyalties, and better data and app integrations. What's missing in this report is the execution strategy and a vision beyond just building an app. It requires understanding how the industry is changing, and restructuring the TLC to be more responsive, innovative and agile. 

Is a “universal taxi app” the right way to help taxis compete with ride-hail services like Uber and Lyft?

Eric Goldwyn: I support the idea of a truly universal taxi app that allows a passenger to choose whichever option suits him or her best. I mean, all taxis and for-hire vehicles should be hailed through one app. No more separate apps. The city could collect a fee from registrations, inspections or a commission to cover the costs of development, customer service, etc.
This app would also allow the city to have complete access to data on origins, destinations, route choices, fares, driver and passenger identification, etc. It also allows for the potential to integrate with other transport services, such as ferries and ideally OMNY, the MTA’s new fare payment system – not to mention potential integration with Citibike and other services that emerge in the future. This app wouldn't have to preclude cash payments.

Nicole Gelinas: The organized medallion industry has experimented with yellow cab apps for half a decade, with little success. One of the problems is that out-of-towners accustomed to using Uber and Lyft to get around are unlikely to download a New York City-specific app just for one or two local trips.

Emil Skandul: A TLC-backed app should have been launched during the Bloomberg administration, not a decade later. But now it's not just about creating a consistent digital experience – this is about improving the overall customer experience when so many riders prefer Uber and Lyft. It will require improving the condition of vehicles and even retraining drivers. Disruptive changes are needed at the TLC to implement the type of product and business model innovations that will improve the digital and customer experience to get people riding in cabs and make the yellow cab business model more sustainable.


 

What, if anything, should the city do to deal with the taxi medallion crisis that isn’t addressed in the report?

Emil Skandul: What the TLC needs to do is to act like a startup itself. Creating an app to compete isn't a one-and-done initiative – it will require a team of entrepreneurs that continue to act like startups do, and test, iterate and improve the taxi experience. The real, long-term solution is to hire and build a team of talented entrepreneurs, designers and developers who have experience working at these startups and who can continue to deliver improvements to the business model for years to come. The taxi industry's business innovation may not even be surge pricing that it is now looking at, but perhaps an app like Kayak for comparing Uber, Lyft or yellow cab prices, or even allowing cab drivers to set their own fares. 

Eric Goldwyn: Ultimately, and the report certainly hints at this, we need to rethink the point of taxi regulations. If it's about preserving and increasing the value of medallions, we should keep the yellow's monopoly on the street hail, ramp up enforcement against illegal street hailing and reduce the number of licensed for-hire vehicles. If safety is our primary concern, we should have policies that focus on insurance, vehicle inspections, driver fitness, crash rates, etc. If environmental concerns are guiding us, we should impose limits on cruising for passengers, examine the impact of each additional yellow, green and for-hire vehicle on air quality and congestion. Obviously, some of these goals can be combined.
Finally, much of the data is aggregate data divided by the number of medallions. This is a bit misleading, since not every cab is on the road, as noted in the report. It would be interesting to know if as many people are driving yellows today as they did 2014. If fewer people are driving and there are fewer yellows on the road, the decline in ridership and revenues may not be as dramatic as reported on an individual active-driver basis. (Obviously for medallion owners it’s still dramatic.) How have leases changed over time? These fees seem to be pretty similar to what they were five years ago, which is surprising, since the intervening period has been so tumultuous.

Nicole Gelinas: The real work comes not in making yellow cabs more like Uber and Lyft via a new app, but from the opposite direction: updating how New York regulates its streets to give value back to the street hail. Street hailing makes sense where it always made sense: in the city’s densest environments, where Uber and Lyft cars driving slowly or idling to wait for e-hails add to traffic congestion. Now that the state is moving to charge vehicles for the congestion they create, the city should recommend to Albany that it exempt yellow cab owners from the first five years’ worth of congestion charges, in consideration of the fact that yellow cab owners already paid a crude version of the fee in purchasing the medallion. As the city itself moves to make more corridors of core Manhattan off-limits to private cars in favor of buses, bikes and pedestrians, it should offer yellow cab owners offering shared rides free access to some such streets for the first few years.

Annie McDonough
Annie McDonough
is a tech and policy reporter at City & State.
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