Wednesday, October 14, 2009

The Plan That Wouldn't die?

Despite unanimous loathing from cab drivers and company managers, Mayor Gavin Newsom's plan to rip-off San Francisco's taxicab industry remained the centerpiece at the Town Hall Meeting on October 9, 2009. Deputy Director of Taxis Chris Hayashi led the discussion with the aim of "adding to or improving" the scheme.

This gave taxi industry insiders a chance to see how dysfunctional the scam (which was adapted from MTA Director Malcolm Henicke's Charter Amendment plan in 2007) really is.

Unable to "get it," at one point I asked Ms. Hayashi to draw a visual representation. Jane Bolig, the manager of Desoto Cab, quipped that it would "look like Berlin after World War II." Medallion holder Mike Spain thought that the plan was drawn up by a grad student. Certainly it appeared to be dreamed up by somebody who knew little about business and less about taxicabs.

The great physicist Richard Feyman once said that the best solution to a problem is usually the simplest. Instead Newsom/Heinicke take a complicated problem and convolute it.

The taxi system as it is now.

There are three different categories of medallions.
  1. There are about 300 Pre K individual medallions.
  2. There are 96 Pre K corporate medallions.
  3. There are 1,100 Post K medallions
The medallions are not for sale.
  • They are given out to working drivers on a waiting list on a first come first serve basis.
  • The list is currently about 3,000 drivers long.
  • Holders of the medallions are required to work a minimum of 800 hours per year.
The major problem with the system is that there is "no exit strategy." Since they cannot sell the medallions and there is no retirement program in the industry, medallions holders tend keep the medallions until they die. This forces many of them to keep driving long after they want to, or should. Others pretend to drive and don't.

The upshot of this is that it takes a long time for drivers to gain a medallion. I've had mine for four years, for example, and it took me a dozen years to get it. While I personally don't think that this was an unreasonable amount of time to wait to own a piece of a business, there were only 1,000 people on The List when I signed up. The List is much longer now.

Heinicke's solution to this problem is to create yet another class of medallions called M medallions. These would consist of:
  • All newly issued medallions.
  • Pre K medallions that go back to the city as the holders die off.
  • Corporate Pre K and Post K medallions that would return (through a convoluted route) to the city after all their holders passed.
Did I say convoluted?
  • The corporate Pre K medallions would first be transfered to a living person who was a shareholder of said corporation as of July 1, 2009. Only when he or she died off would the medallion become an M.
  • Post K medallions, on the other hand, who continue to be given out to people on The List but The List would be capped at around 3,000.
  • Current Post K medallion holders would be allowed to retire and their medallions would become M medallions.
  • The 3,000 New Post K medallion holders would not be allowed to retire thus keeping the current system with all its problems alive. As they eventually bit the dust, the New Post K medallions would become M medallions.
  • In short, all the medallions would eventually become M medallions but the process would take 40 or 50 years.
The plan is actually more complicated than that but the less you know the better. Trust me on this.

The M medallions would be leased to taxi companies not to drivers. The companies would bid against each other at periodic auctions. Heinicke expects the companies to bid about $3,000 for each medallion. This would set up an interesting scenario. For 40 or 50 years there would be two types of medallions:
  • M medallions for which the companies would pay $3,000 per month.
  • All other medallions for which companies usually pay about $2,000 per month.
Why would companies that ordinarily pay $2,000 for a medallion suddenly pay $3,000? Good question. I haven't the foggiest.

Numerous taxi company management types were at the Town Hall meeting and they generally agreed on the following:
  • Taxi companies could only afford to pay $3,000 if they cut back on services like the radio and only dealt with long term leases.
  • The larger companies would probably drive the smaller companies out of business by initially overbidding.
  • After they'd wiped out the small fry, they'd bid whatever they liked. Jane Bolig mentioned a dollar as a possible price.
  • Another possibility would be that the companies would collude to keep the bidding down. This seemed like a popular option with most managers.
In other words the Newsom/Heinicke plan doesn't even work on its own terms.

If I'm a little more acerbic than usual its because I've wasted six hours of my time taking apart two pieces of paper that should have been shredded a month ago. Everybody in this business has already told the MTA that the Heinicke plan won't work.

This is a not very ingenious ploy to separate us from our money. Under this con all the profits in the business would eventually go to the MTA. The medallion holders would be wiped out, the companies would be reduced to leasing agencies and the drivers would become a permanent underclass with no hope of ever improving their status.

I wonder when or if Newsom will realize that, in putting his trust in Heinicke, he's riding a dead horse.

Last Friday's Town Hall Meeting was attended by people who were experts on all aspects of the taxicab business. They were and are eager and ready to come up with a plan that would benefit the companies, the drivers and the public.

When is Mayor Gavin Newsom going to start listening to them?

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