Friday, April 2, 2010

The Pilot Plan: Heinicke and 60/40 - Not!

Director Malcom Heinicke

started a flood of panicked rumors at the March 30th MTA Board meeting by implying that the final percentages of the Fixed Price sale were yet to be determined. Coupled with earlier statements by Heinicke, this had led to the wide-spread fear that the final draft would contain a provision taking 40% away from the sellers instead of the 20% that everyone had agreed on.

As it turns out this was wishful thinking on the part of Marvelous Malcom.

The 20% figure has already been passed by the SFMTA Board on February 26th when they passed the Pilot program. Changing this percentage would require either an amendment to the Pilot program or a new plan of Heinicke's. In either case, the board would have to pass the new provisions instead of the ones they've already voted yes on.

Neither of these scenarios are likely to happen. The Force does not appear to be with Director Heinicke these days.

Sneak Preview

The financing on the Fixed Price sale is just about finalized. A group of six or seven credit unions and banks will be involved in order to spread the risk.

It appears that the magic number will be $250,000, the loan rate will be around 7% and the monthly payments will probably go from $1,800 to $2,100 depending upon how much money the buyer puts as a down payment.

The final figures and provisions of the plan should be available next week; and of course public hearing have to be held before the SFMTA Board can vote on the measure.


  1. Ed,

    thanks for your post; it seems likely to play out in the manner you envision (80/20). April 20th meeting should give us a clearer picture. We will see. paul harting

  2. You are right. It's good not to count the chickens before they hatch.

  3. If they sell more than 10 under this plan I will be flabbergasted.

    What fool would commit themselves to 250K of debt or fork over cash to purchase an asset that cannot be resold until one is over 70, has a 20% commission if resold, is revocable for a myriad of reasons, such as leaving town for a year to take care of a sick relative, is subject to depreciation by the issuance of an unlimited number of other medallions etc.

    If anyone has 250K to buy something, a liquor store, a laundromat, or a parking lot make infinitely more sense.

  4. Very well put. It's a pipe dream of those who have a medallion already and want to feel like they are 1/4 millionaires now. It does not make any sense. What a bag of worms these greedy people have opened up. And what happens to the medallion when a holder goes bankrupt, has a nasty divorce, gets sued for something outside the industry and they go after the medallion, uses his medallion a collateral for a bad loan and on and on and on?????
    The Medallion gets tied up in court proceedings and another cab is taken off the street. Just a small version of what happened when Yellow went belly up in 1977. Multiply that by all the things that will go wrong with these new owners and we are right back to the mess that lead to Prop K in the first place. Those that do no remember history are doomed to repeat it.

  5. I wish you people would sign your names so I know who is talking at me. I tend not to respect people who say things without taking credit for them. The last two comments sound like they come from UTW types - judging by the unlikely scenarios it sounds like Mirabile could be one of them.

    Whoever -

    1. The 70 years age limit is simply for the pilot program. Once the older people are out of the business, I think the medallion can be re-sold at any time.
    2. Nobody is going to have their medallion taken away for leaving town to take care of a sick relative. You people come up with the most ridiculous crap I've ever heard in my life.
    3. Deregulating the cab industry in this town is highly unlikely and a fixed price won't depreciate.
    4. The Fixed Price was designed for drivers who don't have $250,000. The monthly fees a driver gets for leasing out the cab will cover the price of the loan. After paying off the loan, he or she would have a couple hundred thousand dollars which is a couple hundred thousand more than he or she would have if he or she waited 15 years to get a medallion for "free."
    5. What happens to a dude who goes bankrupt etc etc and doesn't own a medallion?
    6. Yellow cab owned almost all the medallions in the city when it went belly up. It's (to say the least) improbable that, say, a thousand individual medallion holders would make the same bad investments and go bankrupt at the same time.

    Try reading a little history - it might keep you from drawing these absurd analogies.

  6. Dear Crocker,

    No, I have no affiliation with the UTW. I don't give my name anymore because I found out in the past what happens when one speaks publicly in this profession. I was burned so badly by Heidi and the chemically imbalanced Jordana the scars have not healed. We'll see if things change, but I have my doubts. My points are valid. This new system sounds great if you want to feel like a 1/4 millionaire. But what will be the price for that? The new system will create more problems than the previous one. It is a set up for overwhelming greed and corruption to enter the system.

  7. This is anonymous Number 1 who also wishes to remain anonymous.

    If the driving requirement stands, and prosecutions for violations continue, why is the sick relative case ridiculous? Someone may have to leave town for five years, who knows? The point of the example to identify the perishable nature of the supposed asset. Other assets of similar capital worth are not subject to the same risks. It is insane from a real world business perspective to tie up assets that way. This is a businessman talking, also with no affiliation with the UTW.

    I understand the price point of the fixed price, but I don't think it will work unless the city itself guarantees loans for 15 years and that is unlikely to happen. At least if the city did guarantee the loans it would provide an incentive to not revoke a medallion from a holder who was making payments.

    If a private lender provides the loan and the holder has the medallion revoked, there is no mechanism for the lender to be made whole if the ex holder stops making payments. This is huge risk factor. The medallion is not a normally securable asset as long as driving requirements remain in place.

    I'm simply pointing out the economic flaws in the plan. I'm not discussing the ethics, politics, history, or the merits/or lack of merit, of Prop K.

    I know lots of people had lots of meetings and tried to address lots of issues.

    Imagine you have 250K because that is the real measure of this, whether or not is it a loan. Would you invest it in a medallion or buy a tangible asset that is safe and transferable? Business is the management of risk as well as making your customers happy. The risks here just do not add up.

  8. Buying a below minimum wage job for a quater of a million dollars is obsurd.

  9. This is anonymous number 1.

    IF I am correct and the sales of medallions are far below expectations, who will be held responsible at SFMTA for the budget shortfall of 10 million or so?

    Or will it be a "whoops, sorry about that" with no consequences except MUNI cuts or raised fees?

  10. I'm going to finish this thread for my benefit Because I think you people are a waste of my time.

    1. You example is preposterous not ridiculous.What if any businessman had to leave his business for 5 years? The odds are that anybody he left to take care of it would rip him or her off and his business would go down the tubes.

    I doubt that anybody could live for 5 years and be so sick that a driver couldn't find a way to drive 800 or, if he or she couldn't, that Taxi Division wouldn't work with them. At any rate they could sell the medallion if they couldn't drive, making them much better off than they would be if they were simply regular drivers who couldn't work.

    2. The failure rates on loans in NYC where the cabs sell for over $500,000 is 0.5%.

    3. The medallion will sell like hotcakes.

    4. If they don't get their 10 million they will of course blame Chris Hayashi. In they may be setting her up to fail because they aren't giving her enough staff to process the medallions.

    5. If they succeed in blaming her, what they will do at the end of the year is allow the cabs to be sold at open auctions. That is to say: no more list, no more "free cabs," no more drivers fund, no more driver input, Heinicke will rule the day.

    This will actually be much better for "greedy" medallion holders like myself than the fixed rate.

  11. No, actually what they will do is take your medallion back, then sell it along with all the others. You will get zero. It is city property after all. Why should you get anything for it? That is their attitude. If Director Hayashi was truly on the side of drivers, she would release the Medallions she has sitting in her office and let the counting of the waybills happen in the future, whenever that may be. At least those who have been waiting 15 years now would have some claim to them when Heineke sends a torpedo into the whole plan. If she did that, the money to hire staff would appear very quickly as the MTA would see that they better get on board if they want to sell the new Medallions coming into their possession.