"I'm no pusher. I never have pushed [taxicab medallions]."
October 24, 2011 9:33 PM   Subscribe

Last month, The Atlantic reported that since 1980s, the price of a metallic NYC taxi license has grown four-times faster than the average home or a brick of gold, claiming it to be a wonderful "inflation hedge." This report proved prescient; on Friday two such medallions (which merely represent the taxi's license) just sold for $1 million apiece — a 42% increase just since August. Also on Friday, mere hours after reading the newsstand headlines, Midtown Manhattan resident Tom Poteat looked down to see a medallion, unattached to its taxi, lying on the sidewalk.
posted by obscurator (50 comments total) 5 users marked this as a favorite

 
If Mr Poteat can benefit from possession of the physical plate, then there is something deeply fucked up in NYC's regulatory regime. Thankfully, reading the article, that is not so.

Here are taxi licence prices for around Australia. And monthly licence fees. Not really very different to NYC.
posted by wilful at 9:45 PM on October 24, 2011 [2 favorites]


How can you possibly make a million dollars as a cab driver in NYC?
posted by empath at 9:49 PM on October 24, 2011


I don't really understand what benefit cities derive from creating an artificial scarcity of taxis. The actual auction prices can't represent that significant of a revenue stream to New York that they couldn't replace it by smaller fees on more cabs.
posted by jacquilynne at 9:51 PM on October 24, 2011 [1 favorite]


Licenses are rented to cab drivers; they don't have to have a million dollars.
posted by michaelh at 9:53 PM on October 24, 2011 [3 favorites]


empath: “How can you possibly make a million dollars as a cab driver in NYC?”

You don't – it's an investment that pays itself back over time, and rather handsomely at that, too. From the "just sold" link above:

“We’re basically talking about a real income stream, here, of about $75,000 per year. (Let’s assume, for the sake of argument, that the income from a taxi medallion rises at the same rate as inflation.) That’s a real yield of 7.5% on a $1 million investment — which isn’t half bad at today’s interest rates. Put it this way: how much would a bond paying a real yield of $75,000 a year cost? At the most recent auction, the 29-year TIPS cleared at an interest rate of 0.999%. At a 1% real yield, an income stream of $75,000 a year would cost you $7.5 million. Now you don’t actually get $75,000 a year if you own a medallion. You have to pay for maintenance, insurance, and workers comp; you also have to pay someone to manage your drivers. But even if you bring the income down to $50,000 a year, that’s still a pleasant 5% yield on your money, and what’s more it’s a yield which behaves much more like a real yield than a nominal yield. Paying $1 million for such a thing doesn’t seem silly to me, especially when there’s a lot of room for capital gains as well.”
posted by koeselitz at 9:55 PM on October 24, 2011 [2 favorites]


Similar thing on a much smaller scale happened in Dublin - taxi numbers were capped at a stupidly low rate (I remember queueing in ranks for an hour or so to get a taxi around 2002), drivers were paying £70,000 for second hand plates, the government deregulated the market and abolished the cap, and said drivers were quiet upset.
posted by kersplunk at 9:57 PM on October 24, 2011 [2 favorites]


and said drivers were quiet upset

Until the great silent taxi-driving majority get vocal, there will be no change they can believe in.
posted by IvoShandor at 10:33 PM on October 24, 2011 [1 favorite]


The current medallion system is capped at an absurdly low number but there is no reason for any of the interested parties to raise it.
posted by The Whelk at 10:54 PM on October 24, 2011


No taxiation without representation.
posted by twoleftfeet at 11:07 PM on October 24, 2011 [3 favorites]


How do you make a living in NYC on 50k per year?
posted by Blazecock Pileon at 11:36 PM on October 24, 2011


How can you possibly make a million dollars as a cab driver in NYC?

It's not the drivers, it's the rentiers who buy the plates and then charge the taxi drivers to use them.
posted by rodgerd at 12:11 AM on October 25, 2011 [1 favorite]


How do you make a living in NYC on 50k per year?

The median household income in Manhattan is $47,030, $32,135 in Brooklyn.
posted by delmoi at 12:19 AM on October 25, 2011 [13 favorites]


We’re basically talking about a real income stream, here, of about $75,000 per year. (Let’s assume, for the sake of argument, that the income from a taxi medallion rises at the same rate as inflation.) That’s a real yield of 7.5% on a $1 million investment — which isn’t half bad at today’s interest rates.
And, I would imagine you can swell the medallion at market rates when you want to cash out. So it's more like a stock then a bond. It's also more risky then a bond, since NYC could increase the number of cabs on the street at any time.
posted by delmoi at 12:22 AM on October 25, 2011


What's most striking to me about this "yellow" rush is the nexus of risky investment and war torn Crown Victorias, unless this actually happens.
posted by obscurator at 12:45 AM on October 25, 2011


How do you make a living in NYC on 50k per year?

Get a crappy apartment and don't go out very much. Also, save next-to nothing so when you've finally had enough and decide to leave you've got nothing to show for it.

That's the part of the New York Dream they don't like to talk too much about.
posted by Civil_Disobedient at 1:06 AM on October 25, 2011 [14 favorites]


It's not the drivers, it's the rentiers who buy the plates and then charge the taxi drivers to use them.

Every once in awhile here in San Francisco there are rumblings about requiring license holders to drive rather than rent their medallions out. It's a sick, mobbed up system that should remind everybody of its corruption every time they have been waiting a year for a cab.
posted by rhizome at 1:44 AM on October 25, 2011 [4 favorites]


unless this actually happens.

Dear god that's ugly.
posted by delmoi at 1:55 AM on October 25, 2011


The problem with requiring owners to drive is that owners already have to get people to drive the other shifts - medallions are too valuable to leave the car in a garage most of the day. And if you can hire people to drive other shifts it's not hard to arrange for them to drive "your" shifts. Also, many (most?) medallion owners have some-to-many medallions and they would scream blue murder if they were forced to dispose of them in a fire sale. They probably acquired them as a sort of pension plan, and (although I despise rentiers) I have a certain amount of sympathy for them.
posted by Joe in Australia at 2:04 AM on October 25, 2011


medallions are too valuable to leave the car in a garage most of the day

If they were licenses that were sold at a reasonable rate rather than auctioned, this would not be a problem. License the drivers, not the cars. The current system, I expect, mostly exists to keep independent operators out of the business.
posted by GenjiandProust at 2:51 AM on October 25, 2011 [4 favorites]


As Joe in Australia points out, a big obstacle to opening up the system is that it would be equivalent to an expropriation of those who have already paid big money to get their licences. A relative of mine was, for a short period, mayor of a small city in Spain with a similar artificial taxi scarcity. She was nearly lynched when she attempted to issue new taxi licences.

This said, there are good reasons for restricting access to the taxi market. When the Dutch government opened it up to competition, the result were the Dutch Taxi Wars, which were a good case study of the unintended consequences of liberalisation (there was even a movie).

In an ideal world, acess to the taxi market should not be a matter of deep pockets, I believe. Perhaps the best solution is an examination, like the "Knowledge" of London Black Cab drivers.
posted by Skeptic at 2:55 AM on October 25, 2011 [3 favorites]


Another option is a buyback, however to work properly that has to happen very suddenly, ie allowing minimal time between the decision to do it (and the assessment of the current market rate), and the implementation.
posted by aeschenkarnos at 4:01 AM on October 25, 2011


Another option is a buyback

Would be perhaps, if local governments weren't almost universally skint. At one million dollars each, buying back 13,000 NYC taxi licences would cost $13bn. I can't imagine that Mayor Bloomberg could justify such an expenditure for the benefit of taxi users at the expense of things like schools and public transportation.

You may argue that the city could recoup the cost by selling many more licences at a more reasonable price. This overlooks the fact that what makes the value of the licences is just their scarcity. If they were available in larger amounts, the price that the city could extract for them would crash. Let's suppose that the city, after the buyback, would issue an unlimited supply of licences at a fixed price of $1000 each. To recover its investment, it would need to sell 13 million licences. Somehow I don't believe there are 13 million people interested in running a NYC taxi, even at "just" $1000 per licence.
posted by Skeptic at 4:24 AM on October 25, 2011


There's a court case in Toronto about the whole two-tier taxi licensing thing. Standard plate owners can rent the plate out, have multiple drivers, or sell the plate. Ambassador drivers must be owner-operators: the can't rent the plate out, must be the sole operator (and thus limited to a few hours a day), and cannot sell the plate to anyone. According to the plaintiff, Standard/Ambassador plate ownership is split along racial lines, so it's discriminatory.
posted by scruss at 4:38 AM on October 25, 2011


Or they could just refund the most recent purchase price and tell anybody who complains that taxi licenses weren't designed as a vehicle for speculators.

Yes, I know, that would require a spine. I can dream.
posted by Holy Zarquon's Singing Fish at 5:02 AM on October 25, 2011 [4 favorites]


That's the part of the New York Dream they don't like to talk too much about

Oh come on guys. There are people born and raised in New York that live on tips from delivering Chinese food paid the table.

I don't go out of my way to badmouth whatever hick towns you guys are from so leave New Yorkers alone.
posted by Ad hominem at 5:24 AM on October 25, 2011 [5 favorites]


How do you make a living in NYC on 50k per year?

That's...actually about what I make. I live in a fairly-comfortable apartment in Brooklyn -- with a roommate -- I don't go out to lots of restaurants, and I avail myself of a lot of the cheap or free events. I also don't have a car, so no parking fees or insurance; I go to a cheap gym; and I do a lot of evenings-in with friends rather than evenings-out.

And that's while trying to pay off some debt, so a big chunk of that goes towards that goal. So I may be able to splurge even more in a couple years.

...But that's actually not why I came in, I came in because of this:

Midtown Manhattan resident Tom Poteat looked down to see a medallion, unattached to its taxi, lying on the sidewalk.

Because Tom was an old neighbor! We both lived in the same building on the Lower East Side in the late 90's; he and his roommate were about two doors down the hall. Nice guy -- we shared quite a few cabs to work, in fact. He was working in Midtown (I assume he still is), so good to know that he now lives within walking distance of his job and his only taxi association is recreational and idiosyncratic.
posted by EmpressCallipygos at 5:36 AM on October 25, 2011 [5 favorites]


The idea of selling permanent medallions was foolish to begin with. If they had simply charged an annual fee, they could change it year to year to adjust the number of taxis to meet demand and space on the road. But now that permanent medallions are out there, there's massive lobbying pressure to keep the number limited and taxi prices high.

Last time I was in NYC with my wife, we walked out of JFK and a friendly taxi driver helped us load our luggage into the trunk. Then a cop car pulled up. Two cops jumped out and wrestled him to the ground, handcuffing him with his face pressed into the asphalt. They dragged him off into their cruiser and pulled away. The taxi was still running with the doors open and our luggage in the trunk. Apparently that's what happens if you try to drive a taxi without the medallion.
posted by miyabo at 6:05 AM on October 25, 2011


Last time I was in NYC with my wife, we walked out of JFK and a friendly taxi driver helped us load our luggage into the trunk. Then a cop car pulled up. Two cops jumped out and wrestled him to the ground, handcuffing him with his face pressed into the asphalt. They dragged him off into their cruiser and pulled away. The taxi was still running with the doors open and our luggage in the trunk. Apparently that's what happens if you try to drive a taxi without the medallion.

Did the cops or the taxi driver tell you that was why he was being arrested?
posted by headnsouth at 6:25 AM on October 25, 2011 [1 favorite]


They said something like "Roger, this is what happens when we see you driving an unlicensed cab." (They definitely recognized him and knew his name -- presumably this wasn't a first offense.)
posted by miyabo at 6:51 AM on October 25, 2011


(The cops didn't acknowledge our presence at all.)
posted by miyabo at 6:51 AM on October 25, 2011


Yeah I don't get what happened in that story. Was it a yellow cab? There are hack lines at the terminals so he should have been waiting in that, don't known if skipping the hack line is punishable with arrest though.

If it was a car service guy, they are not supposed to pick up random passengers who didn't call. Don't know if they would handcuff the guy and haul him off, maybe there was a sting on gypsy cabs going on?
posted by Ad hominem at 6:52 AM on October 25, 2011 [1 favorite]


"Roger, this is what happens when we see you driving an unlicensed cab."

It sounds like his previous offenses may have involved more than just driving an unlicensed cab. You probably narrowly escaped being overcharged, or even robbed (or worse).
posted by Skeptic at 7:00 AM on October 25, 2011


Are we sure they weren't other taxi drivers masquerading as cops? And since when are cops okay with unattended vehicles at the airport?
posted by postel's law at 7:03 AM on October 25, 2011


At any rate you too can buy in. Medallion financial Corp invests in medallions and trades under the ticker TAXI.
posted by Ad hominem at 7:06 AM on October 25, 2011 [1 favorite]


It makes me sick that while medallions trade at over $1 million, TLC and the cab drivers are constantly whining about the need to raise fares. We've created a system that allows private parties to buy in at whatever price they want (privatizing all benefits of the system) and then lean on a public entity to set fares high enough to recoup their obscene investments (publicly dispersing all downsides of the system).

If you insist on privatizing public transit, then put your money where your mouth is and do it for real: make licenses free to all drivers who are qualified and interested, and let the "free market" dictate the optimal number of cab drivers and prices to riders.

Otherwise it's just the public subsidizing a few guys with garages in Queens.
posted by dixiecupdrinking at 7:13 AM on October 25, 2011


Yeah, honestly the strangest thing was that they just left the vehicle sitting there in a loading zone. Presumably they called it in to a tow truck, but we didn't stick around long enough to watch. I'm sure they were cops, but they may have been airport cops and not NYPD.
posted by miyabo at 7:15 AM on October 25, 2011


That's the part of the New York American Dream they don't like to talk too much about.

Let's not limit our scope here, this is the modus operendi for tens of millions of people across every state in our great nation.
posted by FatherDagon at 7:38 AM on October 25, 2011


The Taxi and Limousine Commission (TLC) should follow the model of the New York Stock Exchange (NYSE) and go public.

The TLC and pre-IPO NYSE appear to have very similar characteristics. Like the TLC, the NYSE had a limited number of seats (medallions), little incentive to increase the number of seats, since the seat owners did not want to lose their investment, and their own rule making structure. The NYSE, which was losing market share to the other exchanges (NASDAQ), the upstairs market, and program trading, etc. recognized that the old system of selling seats was a hindrance to competing with the other stock trading systems and would eventually lead to its demise.

Instead of circling the wagons to protect their franchise, the NYSE incorporated as a for-profit and sold shares. The proceeds of the offering were used to pay back all of the seat holders at the market price for seats at the time, in NYSE shares. The old seat holders (now share-holders) now don’t mind having extra entrants, since each new NYSE dealer contributes incrementally to the NYSE, and ultimately, their own profits.

The TLC’s revenue will consist of fees for using the NY TLC logo and Yellow Cars. They will issue more logo and Yellow licenses and collect more than they ever thought they could from the occasional auction.

Of course, to keep it fair, other independent cab companies will have to be allowed to pick up passengers. A Nasdaq version of the taxi cab business, maybe with distinctive green colored cars, may even give Yellow cabs a run for their money. Maybe they could charge less, and use less expensive cars; or charge more and guarantee every driver is licensed or patrol the outer borough places Yellow cabs won’t go. In short, there is a model for ensuring existing medallion owners don’t lose their investment, and increasing the number of cabs on the streets. If the NYSE seat owners could be persuaded to give up their seats, so can the medallion owners.
posted by otto42 at 7:51 AM on October 25, 2011 [4 favorites]


How do you make a living in NYC on 50k per year?

People always say this and it boggles my mind. Right now I make about 30,000 before taxes. I have $500 a month in student loans. I live in Queens with roommates, paying only slightly more in rent than I did in my NC college town. While I'm not exactly "comfortable," I wouldn't consider myself to be poor at all. I can go out for beers, buy shoes occasionally, fly home for Christmas. Why do people think all of NYC = lower Manhattan?
posted by showbiz_liz at 7:58 AM on October 25, 2011 [1 favorite]


I don't understand why license holders should be required to drive. We don't require liquor license holders to work behind the bar.
posted by desjardins at 8:16 AM on October 25, 2011


I don't really understand what benefit cities derive from creating an artificial scarcity of taxis. The actual auction prices can't represent that significant of a revenue stream to New York that they couldn't replace it by smaller fees on more cabs.

There is a public interest in regulating safe taxis, both mechanically and operationally. Not only for residents but for business and tourist travellers. A deregulated system encourages a cut throat race to the bottom that rewards defered mainitaince and poor labour practices because you have too many cabs chasing the available business. That's not to say the current medallion system is optimal just that some kind of volume regulation of taxi systems is generally in place in most cities as a way of ensuring a minimum revenue stream.
posted by Mitheral at 8:53 AM on October 25, 2011


I don't go out of my way to badmouth whatever hick towns you guys are from so leave New Yorkers alone.

The hick town I came from is called Brooklyn. BROOK-LIN. Though I wouldn't really call it a hick town—I mean, I guess you could if you're from Singapore or Neo Tokyo or something. A lot of New Yorkers haven't heard of it, since it might involve crossing a bridge to get there.
posted by Civil_Disobedient at 8:58 AM on October 25, 2011 [3 favorites]


I don't go out of my way to badmouth whatever hick towns you guys are from so leave New Yorkers alone.

I wasn't trying or intending to badmouth New York, just ask a straightforward question, which I now regret doing. Sorry, carry on.
posted by Blazecock Pileon at 9:11 AM on October 25, 2011


"I don't really understand what benefit cities derive from creating an artificial scarcity of taxis. The actual auction prices can't represent that significant of a revenue stream to New York that they couldn't replace it by smaller fees on more cabs."

The regulations that have resulted in an artificial scarcity has made NYC's taxi fleet less safe. The fares are also regulated so covering the cost of the medallion can only be achieved through lowering maintenance and labor expenses. Deferring maintenance results in unsafe cabs and lower labor costs ensures those with inadequate driving skills or violations remain as possible, or are, employees. Additionally, the remaining drivers that may not be bad drivers still have to drive at hours when they probably should be resting.
posted by otto42 at 9:16 AM on October 25, 2011


There is no reason an investment market in government-issued licenses should be allowed to exist, full stop. There is no reason a secondary market should exist, either. These can and should be treated like any other form of business license, and regulated accordingly. France has a vaguely similar system for regulating notaries and the result is artificial scarcity, massively jacked-up fees, and corruption. A million dollars for a license to do something that keeps the actual worker in poverty is insane.
posted by 1adam12 at 9:16 AM on October 25, 2011


They said something like "Roger, this is what happens when we see you driving an unlicensed cab."

Do you see what happens, Larry? Do you see what happens when you drive a TAXI in the ALPS?!?
posted by chimaera at 9:22 AM on October 25, 2011 [3 favorites]


A deregulated system encourages a cut throat race to the bottom...

Deregulation? No, expansion.

a big obstacle to opening up the system is that it would be equivalent to an expropriation of those who have already paid big money to get their licences.

The medallions were sold between private parties, there's no expropriation going on. The medallions just lose that value, the same as any collectible when the market shifts. If the people who spent big money on medallions have a problem with it, maybe they should have worked to expand the system rather than buying into it.
posted by rhizome at 10:44 AM on October 25, 2011


How do you make a living in NYC on 50k per year?

Can't answer that, but I do know that there's a NYC cab driver who lives down the street from me, way up in the far reaches of northern Westchester County. So perhaps, like much of the NYPD, lots of cab drivers don't actually live in the city they serve?
posted by badgermushroomSNAKE at 11:39 AM on October 25, 2011


The medallions were sold between private parties, there's no expropriation going on.

Houses are also sold and bought between private parties. That does not mean that if the government comes in and takes yours, it isn't an expropriation. Of course, in this particular case, the medallions wouldn't actually be taken away, but that would change little for the guy who has taken a $1 million debt for an asset suddenly made worthless by an act of government (and not by "a market shift"). Zarquon's proposal of a buyback at the most price of the most recent sale of each medallion comes closest to fairness, except that it would favor the most recent buyers (that is, mostly speculators) compared to those who bought their medallion 30 years ago, have actually been working it for a modest living, and expected it to at least provide for their retirement.

So, what should have been done would have been to gradually expand supply a long time ago to prevent such a speculative market bubble. At this stage, a slow expansion to gradually reduce the price seems the only option, but this should be done very, very carefully, since such "soft landings" are notoriously difficult to control in any market.
posted by Skeptic at 12:59 PM on October 25, 2011


We had the same problem in Dublin. Deregulate, deregulate! The only people who get hurt are the speculating medallion-holders.
posted by ironjelly at 1:59 PM on October 25, 2011


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