Slashdot Mirror
Taxi Medallion Prices Plummet Under Pressure From Uber
HughPickens.com writes Most major American cities have long used a system to limit the number of operating taxicabs, typically a medallion system: Drivers must own or rent a medallion to operate a taxi, and the city issues a fixed number of them. Now Josh Barro reports at the NYT that in major cities throughout the United States, taxi medallion prices are tumbling as taxis face competition from car-service apps like Uber and Lyft. The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. "I'm already at peace with the idea that I'm going to go bankrupt," said Larry Ionescu, who owns 98 Chicago taxi medallions. As recently as April, Boston taxi medallions were selling for $700,000. The last sale, in October, was for $561,000. "Right now Uber has a strong presence here in Boston, and that's having a dramatic impact on the taxi industry and the medallion values," says Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers' Association. "We hear that there's a couple of medallion owners that have offered to sell at 425 and nobody's touched them."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
Don't invest in and artificially scarce commodity.
The taxi's and/or drivers didn't stink like overcooked hard boiled eggs, and spoke some resemblance of English, I would use taxis. I'd rather walk or rent a car.
Why are medallions even sold as an asset, instead of leased from the city government? It just creates a vehicle for private rent-seeking and speculation. Some Slashdot users have tried to answer this in comments to earlier stories about Uber by treating a medallion as a share of the city's curbside "real estate". I can sort of see this, but why isn't it taxed like any other commercial real estate?
It sounds to me that even without Uber, the taxi system was poised on the point of a precipice. The Taxi industry is not a stock market and treating it like one is not sustainable.
Also for a long time this system has be renowned for only attracting the sketchiest drivers, so it obviously was not working at all.
Troll is not a replacement for I disagree.
WTF? Either he doesn't really own 100 medallions (and his bank does), or he considers having "only" 30 M$ the same as being bankrupt.
He reminds of a scene from "The Queen of Versailles" (http://www.imdb.com/title/tt2125666/). Some 50 year old lady was complaining that last year "she owned 10 multi-million-dollar houses", and that now, she hasn't anything left.
800k and up for a taxi medallion ?
Didn't anyone ever do the simple math to figure how many rides it would require to break even ?
Cost must also include fuel, car repairs, car replacement (doubt the same cab would ever breakeven).
A fool and his money are soon parted ?
or.. never give a sucker an even break!
Even 100k for a taxi medallion would be too much.
The average price of an individual New York City taxi medallion fell to $872,000 in October
I had no idea that one single taxi generated so much income, to be able to afford a nearly one-million-dollars-per-year fee.
I'm selling [my taxi medallion] and buying something safe, like diamonds.
Especially because conflict-free cultured diamonds have no chance of threatening the De Beers cartel and the "diamonds and guns" that The Transplants sang about. "It's a wicked world that we live in. It's cruel and unforgiving."
</sarcasm>
Why have various US cities made medallions so scarce? Who benefits?
Seriously, could somebody from the US let me know why cities aren't issuing new medallions so that supply covers demand?
You buy the medallion (for many hundred $k) and that gives you the right, in perpetuity, to have a taxi. You're also subject to all the taxi rules (fares, equipment, etc.)
There's also other quasi closed markets: airport medallions, for instance, that allow you to pick up passengers at the airport.
I'm at a loss to understand why the taxi companies don't come up with their own app. They could legitimately claim that their drivers are not crazy wackos that drive run-down Chevy Vegas or something. I mean, the slogan for Uber and Lyft is "normal people in their crappy cars swinging by if they can", right? I rarely take cabs, and don't think I'd ever call Uber. It seems to me taxi regulation is a good thing. We don't let just any joker with a subway train to ride down the rails picking people up when he feels like it. Don't you want to be sure that the car you get it is maintained, driver vouched for and accountable to someone, the cost calculated and constant? It's all bizarre to me.
Now you kids over there, off my lawn!
Everything you know is wrong, Just forget the words and sing along.
Uber/Lyft are described as "disrupting" the traditional taxi business model. In 5-10 years when all cabs are driverless, Uber/Lyft will be a footnote.
that a fundamentally corrupt system is taking a little pain? They aren't even close to the woodshed yet.
There is no reason for medallions to exist any longer. The very easy solution to this is a) require a different class license for hired (hailed or called) car drivers and b) require the use of special plates (many already require a TX- type plate). I'm not even sure a uniform color is really "required" given the presense of the "taxi (un)occupied" roof top display though at this point I think yellow (at least in NYC) is so ingrained it may be a disadvantage to differentiate a hailed car.
Shockingly, the first two of my requirements already exist in most places. So again, why are we still dealing in the corrupt medallion business?
Maybe the deep pockets get out of taxi medallions and start investing in tulips.
Demand for rides is highly variable depending on tourist season, holidays, weather and sports. Medallions can not scale to maximum demand while also allowing for affordable prices throughout the year. Everyone knows that trying to catch a taxi in NY is an unreliable nightmare and one should always have a backup transportation plan.
It's too bad really, as regulation is badly needed for companies like Lyft and Uber. Ideally, DMV would require a second, stricter written and road tests for people who are going to drive for money. Then points would be subtracted from driving record for both traffic violations and run ins with the law, including cheating on the fare. We need to try to prevent psycopaths from picking up passengers, but not with an an onerous system based on scarcity.
Try comparing with the Better-off & Rich index maybe?
how can they really be worth that? Isn't each medallion worth 1 taxi cab? I'm having a hard time trying to figure out how 1 taxi cab can bring in enough money to justify that kind of value.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Is it really a government-granted monopoly if anyone with a chauffeur's license and proof of appropriate insurance can lease a medallion from the city government? It'd be like buying license plates: something everyone does every 4 years. There would need to be some way to distinguish part-time drivers using services such as Uber from full-timers in traditional taxis because a traditional taxi occupies curbside real estate for a longer part of each day. Any ideas for how to do that?
The parent comment shouldn't be modded down. It's 100% correct, even if some of the 'social justice warrior' types here don't like the truths it exposes.
In most cities, taking a taxi is an absolutely awful experience. And it's not just the occasional bad experience. Every single experience is fucking awful!
The drivers are one of the worst parts of these bad experience. The parent is right, they usually are third-world foreigners who often don't speak the native language well at all, and often don't even know the city they're driving in well!
It's bad enough when locals have to deal with this, when they know where they want to go and how to get there. But it gets even worse when it's a traveler who may not know the city well, trying to communicate their destination to a recently-arrived third-worlder who also doesn't know the city well.
And taxis usually are dirty and grimy. I think this has to do with the drivers in many cases, too. These third-worlders bring their native land's lack of cleanliness with them to the first-world. The insides of their taxis do look and smell like the slums of Mumbai, the shit-ridden streets of Lagos, or the rotting corpses of Baghdad.
If all that weren't bad enough, the price is astronomical for what you get, assuming the taxi driver isn't screwing you over in some way. Why the hell would anyone want to pay $30 to travel a mile or two in third-world conditions? The parent is right, you're better off saving your money and walking. If you're taking more than two taxi trips in a given day, you really are better off renting a car. It's idiotic that it costs $30 for five minutes of their time, and a couple of miles of distance.
The situation will never improve as long as the facts are suppressed because some people are worried that they might "offend" these third-world taxi drivers who provide shitty service.
It's actually taxi union goons who manipulate government to close off the market.
So basicly $2.4 billion dollars in "worth" not zero intrinsic worth(or close to that). Value was artifically created and does not represent goods or services than can be consumed. So thats essentially $2.4 billion dollars worth of theft from people who own, make, or otherwise consume tangible goods and services.
It seems the summary is a lost art here. At near 450 words, this is no longer a summary. Please /. if you cannot summarize the subject within a single paragraph with a few links forget it. There is no need to make the summary a thesis.
Achille Talon
Hop!
go rent seek somewhere else
Comment removed based on user account deletion
how can they really be worth that? Isn't each medallion worth 1 taxi cab? I'm having a hard time trying to figure out how 1 taxi cab can bring in enough money to justify that kind of value.
Come to think of it, I'm having trouble with the entire world economy adding up. This fascist groove thing has never added up, and it ain't a free market or level field.
People are unfair, in spite of natures gifts. Welcome to the primitive social human infection of reality - living organic systems led by intangible, experiential , desires.
If only a company with a CEO and other corporate officers that had some integrity would step up. Dirty tactics makes Uber a bad choice. Vote with your wallet and all that stuff...
The total cost of driving, including wear and tear on car, is about 54 cents per mile, or $2.70 for a five mile trip. A taxi charges $15. There's a lot of money to be made with a 555% markup.
They have one. It's called Curb.
Hundred of thousands dollars for mere right to operate a taxi car is nonsense. Anyone who has such money has better things to do, like lending it to others. Such lenders are rentier and don't contribute useful work to society. It DOES make sense to test possible taxi drivers wrt safety concerns but medallion system doesn't achieve this goal. You can lend them to anyone and they can be inherited. Thus absolutely anyone can end up having one.
Genuinely asking: Not having tried either of these services, how did they solve the problem of vetting the drivers so the public is safe?
This is a whole market that is totally created by nothing but regulation. As one should expect it has grown into something else and has become entrenched with powerful forces you benefit from the status quo; which has little to do with the intent of the system's creation in the 1st place.
Carbon Credits might have worked for a while, just like this and would have some of the original intent carried out still like this but in the long term it would be warped just like this has been. Likely more warped given the scope of that market and how much more of it was going to be privatized and out of control --- managed by the same banks who destroyed the economy (and continue to do so.)
Captcha: outrages
Comment removed based on user account deletion
So *before* fuel, maintenance, depreciation, and driver costs, a medallion (before Uber) was worth less than 14% ROI? That sucks.
Is it just my observation, or are there way too many stupid people in the world?
"I'm already at peace with the idea that I'm going to go bankrupt," said Larry Ionescu, who owns 98 Chicago taxi medallions.
Then,
'In Chicago, their value has doubled since 2009.'
1) Does not compute
2) diversification, look it up
It's hilarious that the summary of this story uncritically accepts that the origin of taxi medallions was about "public safety." This is a lie and it's always been a lie. The system was about limiting competition. Pure and simple. The people in the industry want fewer people competing, because there's more profit for them. They made friends with the right politicians, who then introduced the system and controlled how the industry was "regulated." I put that word in quotes because it wasn't regulated in the sense that people believe. It was regulated to avoid competitors hurting incumbents operators. This is the way pretty much all regulation really works. (Look up "regulatory capture" if you're interested in how it works.) There is no legitimate reason to control the number of taxis. Period. I don't even see a valid reason to license them, but if it were about safety, licenses would be available to anyone who could meet certain safety and insurance requirements. I don't have much sympathy for the owners of the current medallions. They've had a government-granted license to print money, which is why these medallions have had value. It's time to let the market take over. The medallion system needs to die.
If we followed such "laws", you'd still have to use pay-phones instead of the cellular one in your pocket. And your car's speed would've remained limited to 4mph and you'd have to pay someone to walk in front of it with a red flag — or keep using a horse-drawn carriage.
But you are even more thoroughly full of it — because, though Uber may have a few billion, it is not Uber but rather the drivers, who sign up with them, that are breaking these local ordinances. None of them are billionaires.
In Soviet Washington the swamp drains you.
Comment removed based on user account deletion
You know, people were panning germany for forbidding uber. But we do not have (as far as I can tell) a "medaillon" limit. All you need to be a legal taxi is :
* make a "taxischein" (driver license allowing you to transport people)
* Have insurance which allow commercial transportation of people
* Have a metered reader which the government checks ("geeicht")
None of which is an artificial scarcity like the medaillon mentionned.
And yet what do we see in the article here ? Artificial limitation in the country of the "free market" which are even worst than in Germany.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
Bullshit. In my city the rates are $2.25 a mile.
And there is no minimum fee? And there is no fee that is time based rather than distance based (because after all going a mile in Vegas in dense traffic is going to take a while).
Sounds like you just don't know taxis well at all, not to mention with your ACness you may even be a taxi driver yourself trying to con the next mark...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I see what you did there...
I have used only two Slashdot accounts: this and one that I had used in college. I'm not one of Twitter's accounts; I didn't even have a Twitter account until very recently.
sex offences [...] would disqualify one as a cab driver
Technically, if you peed behind a bush ten years ago, you're a "sex offender". States have cheapened this phrase so far that the registry becomes less of a tool for finding who's likely to assault someone in the future.
Control of resource seized, creating artificial (but very real) scarcity and concomitant high prices; the rich benefit; no one else can play.
So what else is new? Precisely the same strategy used with broadcast station allocation, for one extremely parallel example.
I've fallen off your lawn, and I can't get up.
Comment removed based on user account deletion
so...competition drives down prices.... who'd a thunk it? (this USED to be a basic common sense well-known principle)
The real news here is NOT that competition by some new upstarts bringing innovation to an industry makes things better for everybody except the bloated unresponsive established businesses and their crony political buddies... the real news is that (sadly) the American education system (also run by corrupt bloated established cronies) is so bad that this story ends up being news at all; it SHOULD be the case that everybody expected this and that everybody would therefore have been fighint the medallion system all along. The ONLY people who should support medallions should be evil crony capitalists (who HATE the free market) and the evil corrupt politicians they buy who are thier partners in this offense against the public and the free markets.
If the best "sympathy quote" you can dig up is from a guy who's going bankrupt but currently has A HUNDRED FUCKING MILLION DOLLARS tied up in medallions (98 medallions at nearly 1M each), then your site doesn't really need any sympathy.
Comment removed based on user account deletion
What was left out for simplication is the $24 / hour the customer is charged when at a light, in traffic, or otherwise not going very fast on top of the mileage charge and the "getting in" charge. In New York city, that $24 is a pretty significant part of the total. Other places, not so much.
We have a similar 'fixed' taxi system which creates the artificially high value of taxi plates.
But it also includes expensive taxi insurance for high mileage, high risk which Uber drivers don't have to pay.
So use at your own risk, you may not be covered by their comprehensive insurance in case of accident.
Go well
So all this shit about security and safety of uber to get it banned is about protecting a cash cow for some rich bastards investing in taxi services? Kill the taxi fuckers!
Clearly this is a system where a few people get to dictate scarcity and inflate prices to keep competition out of the market. I'm glad it's being turned on its head.
Yes Francis, the world has gone crazy.
Larry believes he will go bankrupt, Larry who owns assets which he could liquidate for around $55 million - so unless he has debts of over $55 million or one CRAZY hectic lifestyle, he cannot bankrupt unless he's 2 marbles short of a jar and chooses not to liquidate now. If this is the case, then he's an idiot and I have no sympathy. And if either of the former are true, I still have no sympathy.
Uber is gut, them investors be mad. Read on for Benett's (a frequent contributor) opinion on that.
Taxicabs are heavily taxed and regulated which benefits local municipalities and generates additional municipal revenue.
40 BILLION dollars worth uber refuses to pay even a penny. How is this so called "competition" fair ?
Uber has funds - let it pay same what our small local transportation businesses are paying.
I realize that Uber has an app - but an app should not be used as an excuse to break laws and evade taxes !
You want to compete then compete fairly - be you a 2 man small businesses corp or a multi-billion dollars offshore mega-corrporation.
The lesson is that multi-billion dollar oligarchy such as Uber can trump laws and regulations. Laws are for small businesses in US.
In America, "free market" is just short-hand for "the market is free to do my bidding".