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City plan to help struggling taxi industry panned

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The SFMTA is set to vote on a plan next week in an attempt to revitalize The City’s taxi industry. (Kevin N. Hume/S.F. Examiner)

Just days before The City’s transit agency is poised to approve controversial new rules to save the ailing local taxi industry, the San Francisco Credit Union is blasting the effort as “disingenuous.”

That’s not just idle talk: The credit union is already suing the San Francisco Municipal Transportation Agency to the tune of $28 million for allegedly allowing taxis to fail against ride hail competitors Uber and Lyft, prompting the credit union to foreclose on 158 taxi medallions.

Medallions are a permit from The City to drive a taxi. For many years, they were awarded to investors and drivers in various forms without a requirement that holders must be drivers. In 1978, when a new taxi regulation scheme was introduced, they were awarded for free, but a driving requirement was added. And in 2012, the SFMTA began selling medallions for $250,000 in partnership with the credit union, which offered reduced-cost loans to drivers.

2012 was the same year that UberX, Lyft and Sidecar launched.

Flash forward to today, and it’s no secret the taxi industry nationally, and locally, is facing stiff competition from ride hails. That’s prompted the SFMTA Taxi Services division to offer a road ahead to the SFMTA Board of Directors for approval on Oct. 16.
Among the proposed changes, the SFMTA wants to boost financial aid to wheelchair-serving taxis, drop restrictions on who can buy medallions to allow companies to buy them in bulk, restrict which cabs can seek fares at the lucrative San Francisco International Airport, and phase out about 260 taxi medallions owned by non-driving medallion holders. There are about 1,450 medallions in service today, according to the SFMTA, used across 4,800 active taxi drivers.

It’s the changes to the medallion program and the airport restrictions that are drawing the most heat. The credit union’s CEO, Jonathan Oliver, told the San Francisco Examiner in a statement that the newest effort to save the taxi industry is too little, too late.
“After two and a half years without a single medallion sale, the SFMTA has proposed ‘reforms’ which will not solve the underlying problems of the industry or the medallion transfer market,” Oliver said. “Instead of taking a global approach, which is what we have recommended, the proposals end up pitting one segment of the taxi industry against others.”

SFMTA told the Examiner that phasing out the pre-1978 medallions would encourage investors to purchase other types of medallions. SFMTA argues those pre-1978 medallion holders no longer drive, and often work other jobs. Eliminating those older medallions may benefit active taxi drivers who paid $250,000 for medallions in 2012, but it also sets the two groups of medallion holders in opposition, Oliver said.

The SFMTA has asked the credit union to lower medallion prices, but Oliver said the credit union was only willing to do so if the SFMTA sat down at the table with them and taxi industry stakeholders to find a consensus solution to “figure out” how the taxi industry “can co-exist with the incredible growth” of ride hails.

“The City needs to find the political courage to concede that the existing [taxi] program has failed,” Oliver said.

He’s not alone. Taxi professionals from nearly every key group have told the Examiner they’ve got gripes with the new plan. Mark Gruberg, founder of Green Cab Company, loathes the SFMTA’s proposal to only allow some taxi drivers to perch at SFO.

“Facing the competition of hundreds of more cabs in The City will be murder,” Gruberg said. He drives The City himself, and stays away from the airport, but he said many drivers lack the experience to make driving across The City lucrative in the face of steep competition.

“Those drivers will drift off. They’ll say, ‘if I can’t do it in a taxi i’ll do it in an Uber or a Lyft,’” he said. “We’ll be losing drivers and that again will hurt the public.”

Gruberg acknowledged that phasing out some non-driving taxi medallions will give help to people who paid premiums for medallions that is “desperately needed,” he said.

But reducing the number of available medallions may also have unintended consequences, he said. “I can foresee many of the old ills we had in the taxi industry, corruption, where people pay money under the table to drive a certain cab, will crop up again,” Gruberg said.

Kate Toran, head of taxi services at the SFMTA, defended these changes as needed for taxi drivers to survive a changing industry.

“This is about dignity, their life and livelihood,” she said.

Toran told reporters in a briefing Thursday that too many drivers park at SFO in what is often called “the pit,” and could make more money if they roamed The City and picked up fares in the outer neighborhoods. Restricting airport access to certain medallion holders could garner everyone added revenue, she said.

Toran also said the non-driving medallion holders in question largely obtained those medallions years ago and have since made nearly $1.6 million apiece, she said, before SFMTA started leasing medallions for $250,000 in 2012. Allowing the medallion market to shrink, then, would help drive business to taxi-driving medallion holders who still owe thousands of dollars in loans, she argued.

“We really want to put the purchased medallion holders in the center,” Toran said. “They’ve invested the most in the industry and yet they make the least.”

It’s those very loans the credit union offered at low cost to taxi drivers, at the prompting of SFMTA, that gives the bankers a vested interested in seeing the taxi industry truly revitalized. Gruberg in particular felt SFMTA had much to gain with shrinking the pool of taxi medallions, and access to SFO, while the industry has much to lose.

“In the end the biggest winner is them, because they may be able to get the credit union off of their backs, the lawsuit off of their backs,” he said.

But to do so, he said, “They’re picking winners and losers.”

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