On Thursday, a sea of yellow cabs overtook the Brooklyn Bridge as taxi medallion owners demanded action on a plea they’ve been making for months, if not years: “Debt forgiveness now.”
Roughly 6,000 of New York City’s yellow taxi medallions – the metal plates that license someone to drive a cab – are owned independently by so-called owner-drivers. And while taxi medallions used to be considered a good long-term investment for these drivers – many of whom are immigrants – they’ve become a crushing liability as their value has plummeted. The value of a medallion went from $200,000 in 2002 to over $1 million in 2014, then crashed to less than $200,000 soon after. At the time, much of the blame was placed on the rise of largely unregulated ride-hailing apps, such as Uber and Lyft. But ride-hailing alone was not to blame.
For years, taxi industry leaders and lending institutions engaged in deceptive or risky lending practices, artificially driving up the value of the medallions and pushing independent owner-drivers into bad loans. A Pulitzer Prize-winning investigation by The New York Times in 2019 revealed the details of some of these practices – and the extent to which industry leaders and government agencies participated in, encouraged or turned a blind eye to those risky lending practices. That investigation prompted calls from state and local lawmakers to help vulnerable medallion owners out of underwater loans and prevent similar actions in the future.
Some steps have been taken since, including a complaint filed by state Attorney General Letitia James against the New York City government for contributing to the artificial inflation of medallion values and the defrauding of medallion owners. But for the most part, plans for a bailout for medallion owners or long-term industry reforms have been placed on the back burner as the city faces the coronavirus pandemic. Efforts to provide debt relief to New York City taxi drivers may have fallen by the wayside in the past six months, but taxi drivers are now pleading for help again, reminding lawmakers that their pre-coronavirus debt crisis has only been exacerbated by the pandemic. Yellow cab rides were down 92% in June compared to this previous year, according to data from the Taxi and Limousine Commission. As of January, the average debt medallion owners faced was roughly $700,000.
Thursday’s caravan of yellow cab drivers demanding debt relief was just the latest – and most attention-grabbing – in a series of similar protests that they have been waging over the past few months in a bid to call attention to how the pandemic turned their crisis from bad to worse. “This is a serious humanitarian crisis in the making,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, a group that represents taxi and for-hire vehicle drivers in the city. “Debt forgiveness alone is not the solution for how much repair the industry needs and how much the drivers need to come out of poverty. But without debt forgiveness, this industry collapses – period.”
In addition to the fact that the city’s taxi drivers are largely made up of low-income, immigrant New Yorkers, Desai said that many are also at higher risk for COVID-19, with many owner-drivers being over the age of 62. “Forty percent of owner-drivers that we surveyed said that they had (COVID-19) or that they were quarantined because someone they lived with had (COVID-19),” she said.
Desai and the Taxi Workers Alliance have been advocating for a plan that she said would incentivize banks to refinance drivers’ medallion loans to an amount that is manageable for drivers by having the city step in as a kind of loan guarantor. Under the proposal, if a medallion owner were to default on their loan and the medallion was foreclosed on and put up for auction at a public sale, New York City would agree to place a minimum bid equal to the balance of the loan multiplied by 105%.
But that offer of having the city serve as a backstop would only extend to loans that had been restructured to $125,000 and refinanced at no more than $750 per month over 20 years. This proposal, Desai said, would incentivize lenders to restructure on those terms – knowing that the city would be on the hook if the medallion owner defaulted, the medallion was foreclosed on and no other bidders stepped up.
This week, The Wall Street Journal reported that Marblegate Asset Management, an investment firm that is currently the largest holder of New York City taxi medallion loans, has been giving medallion owners a “loan holiday” every month since mid-March and has in some cases been writing down loans to $300,000, subtracting hundreds of thousands of dollars in debts. But Desai said loans even this big are unrealistic and unmanageable for drivers.
New York City Council Member Mark Levine has been pushing for the city to step in to help buy and refinance loans since last year, and said he was on board with a proposal like Desai’s. “The city, by providing a floor to the market with a loan guarantee, could incentivize lenders to refinance down to the true value,” Levine said, estimating that some sort of loan guarantee program could be put in place for roughly tens of millions of dollars. (A “worst-case scenario” estimate by Desai that includes assumptions that 6,000 loans are underwater and the value of a medallion doesn’t rise above $75,000, puts the cost of their proposal at $75 million over 20 years.)
Levine said establishing this kind of program probably wouldn’t require legislation in the City Council, but that there’s some debate on that. “It’s unclear whether we need to establish a new entity like a nonprofit or whether we could do this through existing entities like (the New York City Economic Development Corp.),” he said.
But with New York City facing its own budget crisis, Mayor Bill de Blasio’s administration has yet to bite at that proposal. In response to a question about whether the city would support such a plan, de Blasio spokesman Mitch Schwartz pointed to comments the mayor made in early August about the need for federal stimulus to support any kind of bailout relief. “In terms of some kind of bigger effort, that really needs to come with federal dollars, especially in light of our fiscal crisis,” de Blasio said at the time.
Earlier this year, just before the pandemic hit New York, a Taxi Medallion Task Force that was convened to propose solutions to the debt crisis released a report with recommendations for immediate solutions to medallion owners’ debts and long-term reforms to help keep the taxi industry afloat. Included in that report was a proposal for a public-private partnership to purchase and restructure debt – possibly to the tune of as much as $600 million.
City Council Member Ydanis Rodriguez, who co-chaired the task force, said that the proposals in the task force’s report remain as important as ever – including the bailout – but said that some of that support should come from the federal government. Another step Rodriguez said the city could take would be funding “driver resource centers” that provide legal and financial counseling for drivers. One such center opened in May, and as of the end of July, had served 500 TLC licensees, according to Schwartz.
In the meantime, medallion owner-drivers are keeping up their advocacy and organizing for debt relief – in part through a weekly three-hour Zoom call and a WhatsApp group that keeps them connected. “We just don’t want people to give up and be demoralized,” Desai said, mentioning the taxi drivers who have died by suicide in recent years. “We never want to see that nightmare again.”
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