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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.
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>
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.
The medallion owners, and they show their appreciation to the city government in an appropriate fashion.
Same reason they don't allow some stores (in the US, typically liquor stores or car dealers) to open on Sundays. It's all about protecting the incumbents from a new entrant who wants to increase their market share and doesn't mind that the existing businesses would have to start caring about their customers.
Its not a million per year, it's a one off when the medallion changes hands. For older medallions that an owner has had for a while this is like an asset to them (like grandpa that lives in a million dollar home but when he bought it it was just a modest property). For newly traded medallions the taxis are usually kept on the road nearly 24/7 by renting then out to multiple drivers in order to generate enough revenue to cover the medallion loan payments (NYC has a whole specialty finance industry just around financing medallions).
I believe it's not per year, but perpetual, and *maybe* it can be leased to more than one driver (one driver won't work 24x7, and to leave such an investment not making money while the driver sleeps is crazy).
But even then, agreed. It's a lot of money to recover!!
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.
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.
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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?
It's actually taxi union goons who manipulate government to close off the market.
Who said anything about $1m per year. You buy a medallion, you drive the taxi for x years, you sell the medallion (Or you lease / work for someone with a medallion etc).
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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!
I'm not really sure why you think Blue Laws are designed to protect incumbents. Why outlaw sales on certain days when it's much easier to keep existing dealers in power by establishing franchise laws instead?
It's no different than a college education. Yes, $800k is still insane, but if you're told you have to spend $X to enable your career, plenty of people choose to pay it. In that case $100k is pretty reasonable for most people these days. At least with the medallion you don't also have to spend four years; you can start your career right away.
It doesn't hurt to be nice.
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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.
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.
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?
Per year makes no sense. At a million dollars a year, a taxi operating 24/7 (with no breaks for fueling or maintenance) would have to make (above other operating expenses) just over $114.15 per hour just to pay for the medallion.
-- Alastair
Aopparently you failed remedial investing 099:
* Appreciation of the asset;
* Income by leasing the asset out;
* A virtually indestructable asset;
* An asset whose costs are 100% tax deductable;
* Low risk;
The only reason Uber and similar firms are a threat to taxis, is becuase they (Uber) currently offer a very rare quality --- good customer service.
Wind Beneath Thy Wings
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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?
Didn't anyone ever do the simple math to figure how many rides it would require to break even ?
They did. It was based on financing the medallion. I bet very few holders have 100% equity in them. An $800k loan financed at 4% is available for mortgages. If medallions were being regarded as comparable collateral by lenders, the cost of this loan is about $3800/mo.
I figure few holders have 100% equity, but I also figure few holders are close to zero. Thuys, the $3800 figure is an upper limit on the monthly finance cost of a medallion for current holders. Actual cost is most likely quite lower due to them having some equity and having purchased years ago..
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
>No cab company charges $30 for a 1-2 mile trip.
Get Uber at the wrong time, and you can pay far more than that.
In cities with mandatory minimum zone charges, crossing the wrong zones can result in a twenty dollar charge, even though one is only going one mile.
Scratch that. In some places, the effective rate is fifteen dollars per mile, or part thereof.
Wind Beneath Thy Wings
"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
Same reason they don't allow some stores (in the US, typically liquor stores or car dealers) to open on Sundays.
While there are still some "blue laws", for the most part in the US, this isn't so. Certainly not in Washington state, where liquor stores or car dealers are open seven days a week...
If you want news from today, you have to come back tomorrow.
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.
Hyperbolic much? No cab company charges $30 for a 1-2 mile trip. That's less than $10 (including a tip) in every cab in every city I've been in. I suspect you are an Uber driver or astroturfer since your whole post is fucking ridiculously dramatic.
What is the logical fallacy where you claim all disagreeing viewpoints are sponsored called?
Not from US but it is obvious from the summary.
It used to be a subsidy in a form of an insurance to small business owners.
If your taxi job goes bust, you could trade in all your assets including the car and the license and be at "positive zero".
Small business owners love you and vote for you and don't want the rules to change.
BUT... once you can trade/lease something indefinitely and it is kept artificially scarce for the sake of the small businesses - it becomes overpriced AND artificially scarce.
Now it benefits large investors and brokers with a lot of money.
Who now don't want rules to change and they have money to lobby you to keep the things the way they are - so they can keep making money from the artificial scarcity.
Mit der Dummheit kämpfen Götter selbst vergebens
Bull Crap! I don't taxi much, but I have on occassion when on vacation, and I don't think I've ever had a taxi ride under $15.
Let's see, I took a cab from my house to SF once, a total of about 12 miles and the ride cost me about $90 (plus I had to pay for the bridge fare).
I recently took a cab in the LA area from the Airport to a person's house only a couple miles away, and it was about $50 dollars. I was charged about $7 right off the top just for the fact that the ride started at the airport.
I took another cab in Seattle this past year, from our hotel near the airport to the cruise terminal and the fee was about $80 at least.
The closest I've come to getting charged what you said was in Las Vegas that was only a mile or two and it was $15. After finding out how short of drive it was, my wife and I walked back instead of catching the cab.
Don't know where the heck your riding cabs for $10 (with the tip included), but in my little cab'ing experience, I've never found one. I think they'd charge you that much for driving to the end of the block. Most cabs I've seen charge you a couple bucks before leaving the curb and to start the meter.
The Sunday sales thing is a religious law.
Was, not is. Jesus got the law on the books, but business owners took charge of it long ago. Most of them paid their legislators to overthrow it -- but there's a special class of retailers whose demand is inelastic enough that they don't need 7-day availability.
We rarely buy a bottle of liquor on impulse. It's an anticipated purchase, and we plan ahead; once in a while, if we're in a 6-day jurisdiction, we get caught without booze and we remember it next time. Sunday closing may reduce sales a little, but it reduces overhead much more, especially for a small merchant. So, at least here in Colorado, you could drink in a bar on Sunday but not buy package liquor, until we forced a change a few years back.
The same effect is even stronger with cars: we never forgo a car purchase because we can't buy it on Sunday, and Colorado still doesn't have Sunday car sales.
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I live in a state with something like quadruple the population of WA, and liquor stores have mandated hours: They have to close by 9 PM, be closed all day Sunday, not open before some time in the morning. I'm just glad that I can still buy normal beer or wine at the grocery stores until midnight. Some states will only allow half-strength beer in grocery stores. They have enough of a market where the national breweries make special watered down versions of their products specially for them.
I'm not sure what the OP was on about "incumbents" though, these regulations affect all the liquor stores - old, new, big, small. Some countries like Finland have government-run liquor stores that hold a legal monopoly, that seems more about protecting the incumbents. The US laws are in contrast misguided attempts at legislating morality, and completely ineffective to boot. Any serious drinker here knows the store hours and they just stock up earlier in the day or earlier in the week.
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.
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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 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.
This business of charging by distance AND time that taxis use is awful and has got to go.
As much as I dislike taxis, I can't really blame them for this. If your destination has them stuck in traffic, that prevents them from otherwise making money.
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.
If the taxi driver shouldn't have to pay for something outside of his control, why should the passenger have to pay for something that's outside of her control?
Distance-based fees already give taxi drivers an incentive to take the longest route possible. Time-based fees just add to the incentive they have to take the longest, busiest route.
Taxi licensing schemes only serve to ensure that the customer doesn't have any other option, because all taxi drivers and companies in such an area will end up engaging in the same behavior due to the artificial monopoly they've been granted.
The passenger shouldn't be charged any time-based fees, and instead the taxi driver or company could buy insurance to cover the risk of loss due to traffic congestion.
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Actually, given that you did indeed level an accusation of bias on the basis of being employed by Uber, whether to drive(employee loyalty) or paid to make the comments(astroturf), you're changing the subject here more than he is.
As for the $30 trip, going by memory that would be doing a zone change in London* or maybe a 'short' trip to the airport(extra toll charge for that).
*Taxi rules can be weird.
I don't read AC A human right
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
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.
That's not including the double dip you take for time as well. It might be 2.25 per mile, but also (at the same time) a certain amount per minute as well, which end the end, means that going a mile (no matter how fast or slow) does not equal 2.25 as you seemed to imply.
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.
What is the thinking error where you ignore the message of the post and focus on semantics to change the subject?
My post pointed out an actual logical fallacy in your argument, without insulting you in any way. You reply with, "thinking error", which implies some actual defect in my thinking process instead of argument. While it was a strong suspicion before, at this point the evidence is great that you are an asshole.
Well, that wouldn't apply, because it wasn't a "disagreeing viewpoint" it was racist FUD.
Yeah, I agree with you. The point is much better served by saying that, instead of making the almost certainly untrue claim that the first poster was paid by someone to argue with idiots on Slashdot.... Furthermore, instead of mentioning the racist FUD, he mostly was just griping about the cited cost of cab fare.
Some people wouldn't use anecdotes or memes to judge an entire profession. It's not being a "social justice warrior", just a rational human being. Yes, it takes more work, and simply sticking to oft-told stories is far easier on the brain, but you can't be sure that what you're saying is true, unless you have some valid, rigorous studies to back it up.
It has nothing to do with offence (even if your heavy-handed judgements are likely to cause it), but to do with accurate data. Get some, then you can make your point without fear of being called a knee-jerk racist xenophobe. You can't get angry with other people for calling your out for being one when your position is absolutely identical to one.
The problem is when they are stacked. Drive 10 miles at 50 mph, and you get charged for 10 miles, and 12 minutes. It's not like it was a slow trip, but you get double-charged. At least calculate the bill from the worse of the time or miles, not the sum of both.
Singapore addresses this by charging 20% more at busy times to make up for the slower traffic, but avoids the time-based fees (I think).
Learn to love Alaska
In America, "free market" is just short-hand for "the market is free to do my bidding".