
Taxi Medallion Prices Are Plummeting, Endangering Loans - JumpCrisscross
https://www.bloomberg.com/news/articles/2017-01-30/taxi-medallion-prices-are-plummeting-endangering-loans
======
JorgeGT
Before feeling bad for the man you see behind the wheel, take into account
that in many cases it is not the individual taxi driver who took the loan;
some companies and individuals used medallions as a mere financial product,
buying them in bulk and renting them to drivers.

For actual numbers and graphs see this NYT article:
[https://www.washingtonpost.com/news/wonk/wp/2014/06/20/taxi-...](https://www.washingtonpost.com/news/wonk/wp/2014/06/20/taxi-
medallions-have-been-the-best-investment-in-america-for-years-now-uber-may-be-
changing-that/)

If you don't have time to read it, two important points:

\- "In New York today, there are four drivers for every medallion, all but
ensuring that an investor who owns one can find drivers to lease it 100
percent of the time."

\- "The threat to medallion owners isn’t that they’ll lose passengers to these
services. It’s that they’ll lose drivers — who have been aggressively courted
by Uber. A taxi driver who doesn’t own a cab and medallion can earn comparable
fares driving UberX passengers in his private car, without paying a lease
fee."

~~~
Gustomaximus
What amazes me from this Washington Post article is prices were still rising
in a steep incline many years past Ubers launch in 2009. You would think 4
years later it was clear for enough people where the market was going, yet
medallions doubled in price during this period (almost tripled by 2015).

~~~
drpgq
Maybe that effect was more due to really low interest rates?

~~~
Gustomaximus
I was thinking the same thing but just because people get cheap money doesn't
mean you throw it at anything. It still becomes an exercise of analysis and
looking to maximise returns. In which case I'm still at 'WTF'

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pfarnsworth
I wonder where all of a sudden all this mass sympathy for taxi drivers come
from. I guess no one remembers how shitty and expensive trying to get a cab
was in SF not even 10 years ago. I for one will be celebrating when the entire
medallion system is completely dismantled and all the monopolists who
exploited that system are bankrupt.

~~~
benjaminjt
Wasn't the system that you seem to be condemning at least in part exploiting
taxi drivers? Why wouldn't that earn them your sympathy?

~~~
pfarnsworth
You mean the taxi drivers that would pass me by on 3rd and Howard for 2 hrs
because there was a conference and they could make more money servicing
conference people? Or the taxi drivers that said they would be at my house at
a certain time and then never show up, forcing me to wait another 45-60 mins
for the next promised car, and then give up and drive myself and pay for
parking? No, I don't have any sympathy.

Plus, they can always become Uber drivers, and have better earnings and make
their own hours. 90% of all drivers I've had are happy to be driving for Uber.

~~~
Eric_WVGG
Same. I once got thrown out of a taxi in the middle of a busy street, halfway
to my destination because I accidentally admitted that I didn't have any cash
and he would have to run my credit card. (This was just a year before all the
drivers spontaneously realized that card users tip better and the practice
changed overnight. But it would still be years later before rides could be
reliably found in the outer boroughs…)

The taxi system is — or was — indicative of all these weird east coast
attitudes that I, as a westerner, find completely insane. All these awful
inefficiencies and shitty attitudes baked that everyone accepts as normal
because that's just how things are done. (Basic traffic enforcement is another
biggie… the "Masshole maneuver," and New Yorkers blocking intersections or
parking on sidewalks, landlords who would rather risk lawsuits than do
inexpensive repairs…)

Although I have moved on from Uber for various reasons, I will be forever
grateful to them for tearing down this horrible system. It sucks that some
independent medallion owners are going to take a bath on their loans, but it
was a terrible investment in the first place.

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scandox
We had this in Dublin in the late nineties. People had been trading licences
for 30 years in a grey market. Licences could change hands for up to 90,000
Irish pounds. That would easily have bought a house in say 1997/1998.

The government then deregulates licensing and issued lots of licences and that
grey market collapsed.

Of course some saw it coming and lumped some other less clear sighted chap
with the problem.

More here:
[https://www.google.ie/url?sa=t&source=web&rct=j&url=https://...](https://www.google.ie/url?sa=t&source=web&rct=j&url=https://www.tcd.ie/Economics/assets/pdf/SER/2001/The%2520Deregulation%2520and%2520the%2520Dublin%2520Taxi%2520Industry%2520By%2520Mark%2520Murnane%2520%26%2520Wendy%2520Pender.pdf&ved=0ahUKEwiz99SPmuvRAhVhJcAKHUFMAYEQFggxMAY&usg=AFQjCNFKz_FviDM1BSlzhvhABvTKHTth0A&sig2=WJKNhtWuWbUMWOmzTmUdkw)

~~~
throwaw181ay
A license shouldn't be sold. I cannot sell my driving license. A license
should be acquired through a standardized test and a reasonable amount of
people should be able to pass the test each year. The current medallion system
which works in a majority of western countries is just corruption.

People would take the taxi way more if it was cheaper, thus buying less cars
and polluting less. This is especially true in Paris where a ride to the
airport is 70€ ! unbelievable (Uber is 50€).

~~~
paulddraper
> A license shouldn't be sold.

Many proponents of cap-and-trade schemes disagree.

~~~
adevine
I think throwaw181ay is making a different argument, which is essentially that
you should license the _people_ (e.g. like a driver's license, which indicates
proficiency) and not the _thing_ , which is (basically) the car.

~~~
SilasX
And they do -- you acquire the taxi driver certification ("this guy has good
eyesight, isn't a criminal, knows the taxi rules") independently of the
medallion ("no more than N cabs may be operating at any given time"). The two
regs accomplish different purposes.

As the parent notes, in certain setups (like cap and trade) the tradeability
of the license is important for ensuring that the restricted resource is used
efficiently: the most economical emitters of carbon get the rights, and the
most economical drivers get the medallions.

~~~
cabalamat
> the medallion ("no more than N cabs may be operating at any given time")

The whole point of this is to ensure that the price for taxi rides is higher
than what the market-clearing price would be. In other words, it's a scam to
rip off gthe consumer.

(Similar arguments apply to zoning regulations and house prices, of course)

~~~
SilasX
There are good motives and bad motives behind every law. I don't find it
productive to assert, as fact, that the malicious stuff is only kind, without
addressing the good that they're ostensibly accomplishing.

You might as well dismiss all cap-and-trade proposals as being "just another
scheme to raise energy prices".

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tptacek
Let's all remember that prices are plummeting in the face of rides that are
heavily subsidized by venture capital firms, by one account to the tune of 60%
of the cost of the ride.

~~~
djsumdog
I'd also like to know what drivers make in NYC cabs (individual and vis a
company) vs Uber vs Lyft, both gross and adjusted for car/fuel costs.

I've lived in some cities where Uber drivers were mostly former taxi drivers
who made more with Uber, but I've also lived in places where Uber cut driver
income over several years and none of the people I rode with started out as
Taxi drivers (and therefore couldn't tell me if the income was comparable).

I agree, Uber doesn't have a great track record of playing fair.

~~~
epc
From an opinion piece in 2012 —
[http://www.nytimes.com/2012/05/26/opinion/they-are-taxis-
not...](http://www.nytimes.com/2012/05/26/opinion/they-are-taxis-not-
limos.html) — drivers made around $113/12 hour shift after paying the rental
fee (also $113). There was a related news article around the same time (this
was in discussion of a fare hike) but I can't find it.

Typically drivers who rent a taxi rent by the shift and must pay their rental
fee upfront. There are ghost fleets of taxis queued up at garages in Brooklyn
and Queens since so many drivers have dumped medallion cabs for driving for
Uber/Lyft/etc.

~~~
epc
Not the article I was looking for but from the Atlantic in 2012:
[http://www.theatlantic.com/national/archive/2012/05/hidden-c...](http://www.theatlantic.com/national/archive/2012/05/hidden-
costs-being-new-york-city-cabbie/327747/)

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brotherjerky
Of course, it's unfortunate that a person can end up losing a financial bet --
it can definitely ruin lives.

... but in this case, these things were so valuable because they were severely
constricted. Competition was restricted which means consumer prices are
higher. Sure, perhaps that's measured in cents per ride, but it was still a
tax levied on all drivers going to a small, lucky few.

~~~
zeroer
My guess is that it's more like dollars per ride, on the order of 20-35%
cheaper.

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kqr2
There is a good Planet Money podcast on this topic:

[http://www.npr.org/sections/money/2015/07/31/428157211/episo...](http://www.npr.org/sections/money/2015/07/31/428157211/episode-643-the-
taxi-king)

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bmh_ca
The best write up I have seen on taxi medallions (and in general one of the
best bits of journaliam) is this Globe and Mail article:

[https://www.google.ca/amp/s/sec.theglobeandmail.com/globe-
dr...](https://www.google.ca/amp/s/sec.theglobeandmail.com/globe-
drive/adventure/red-line/how-uber-is-ending-the-dirty-dealings-behind-
torontos-cab-business/article25515301/%3Fservice%3Damp?client=safari)

~~~
valuearb
Great article.

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chrisbennet
Even if the licenses were restricted, if they issued (leased?) by the city
instead of sold, the cost wouldn't have been able rise.

~~~
adevine
The whole medallion scheme just reeked of utter rent seeking. It was just a
transfer of wealth from the poor (drivers) to the rich (medallion owners) for
no reason. As you state, the city could still have restricted the number of
drivers and cars though direct-to-driver licenses without the need for
medallions.

~~~
taneq
I thought the original idea was to regulate the sketchy freelance taxis that
existed beforehand. The current system of "expensive medallions owned by rich
people who then hire poor people to drive the cars for a pittance" is just
what happens once capitalism gets hold of a system with poorly thought-out,
exploitable rules.

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hvidgaard
Medallions as an idea to regulate the market is not bad. But the
impelementation we see today is the result of years of lobbyism, and to some
extend corruption.

If a city needs to regulate the taxi market, and there could be reasonable
arguments for that, for instance, ensure capacity at all hours, or during peak
periods. A medallion systems works fine, because you can sell a medalion with
terms of when to drive. We do it for doctors in Denmark. If you want to
practise medicine, you must do a certain level of on-call duty.

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kosei
A friend of mine's family had 3 of these (father and two brothers) that they'd
bought over the years as the whole family had gotten into the taxi business.
Medallions were supposed to be their nest egg in the same way many people feel
about their house. Sadly, this has taken their whole world for a spin.

~~~
hvidgaard
If they bet their savings on 3 medalions, they did the 1. thing people advise
not to do. Invest everything in one single thing. It's sad, but it's not
unexpected.

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empath75
I think cities should reimburse cabbies if they aren't going to enforce quota
restrictions on Uber, etc.

~~~
jonknee
Well the city wasn't the one that sold them for so much money, it was the
aftermarket that drove them up (because essentially no new ones are being
issued).

A refund wouldn't do much and in general if you buy an asset that decreases in
value you have only yourself to blame. Medallion owners are no more special
than anyone else.

~~~
ams6110
I bet if you followed the money you'd find some very wealthy city councilmen
or bureaucrats who were in charge of determining how many medallions to issue.

~~~
lovehashbrowns
And I bet if a reimbursement program were put into place, most of it would
mysteriously not go to the cabbies themselves.

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cabalamat
Good: every dollar of medallion price is a dollar of anticipated price
gouging, of ripping off the consumer.

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turc1656
The entire taxi medallion nonsense has always pissed me off. I'm glad Uber and
Lyft exist even though they come with their own set of problems. I personally
am delighted to see these medallion prices plummeting. The entire concept of
them was to use government force to say who has the right to work when and
where. It has always been a very draconian thing. Companies that buy these
medallions or individual cabbies that put money down toward a loan have all,
for the longest time, operated under one simple premise - that the city they
live in would protect their investment by strongarming anyone who tried to
shake it up.

Here's a good article: [http://nypost.com/2016/07/05/city-lets-uber-and-lyft-
canniba...](http://nypost.com/2016/07/05/city-lets-uber-and-lyft-cannibalize-
the-american-dream/)

I don't feel bad for anyone mentioned in this article. "It was a good
investment, on a yearly basis, averaging about 10 percent of the value, we
were counting on that,” said the Peru-born Hervias, 57. “I told my kids I
would give them each $200,000 for college." So this guy tried to leverage his
licence to conduct business in NYC into paying for his house as well as not
one but multiple college educations?! You must be joking. And they expect me
to care about this sob story? And how about this woman: "She went to a recent
TLC meeting and demanded that the city buy her medallion back from her at the
price she paid for it plus interest. 'The city has its hand in the revenue
grabbing on the back of medallions owners who were told this was an investment
that they could own and control to be profitable,” said Robinson. 'That’s not
only a lie. It’s corruption.'" I'm sure she would have considered it
corruption and lying if she was able to continue to profit from government
force, right? Uh, huh. She only has a problem because her "investment" turned
sour. She expected the government to guarantee this so-called investment by
the city dropping its iron fist to force people like Uber and Lyft out of the
game.

What ever happened to trying to lower the barriers of entry to support
competition? Anything as simple as a one man operation in a vehicle that has
an up front cost of over $1 million is clearly not competitive and totally
protectionist by design. Plus, the city sets rates so there isn't even
competition in the industry. I know, I know, it's for "consumer protection"
because tourists were getting screwed. Uh huh. Look, I'm sure that's an issue
in every city, but not having competition is a terrible idea. The government
should not be setting prices.

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jgalt212
Whether you wait for the defaults or not, Medallion prices will be a good
investment as Uber et al are eventually forced set prices above costs.

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EGreg
Was there any way to make money on this?

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bbcbasic
Medallion CDS?

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EGreg
Can we still do it? Who would be a counterparty lol

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Proven
Great! Less money to the government, less problems for the people!

