TAC Interm Medallion Sales Pilot Program Report

This report was put together by Taxi Advisory Council Chair Chris Sweis (Photo between councilors Richard Hybels and John Han). It summarizes and points out problems arising from the Medallion Sales Pilot Program as well as listing TAC's recommendations to the SFMTA Board.

The report focuses on the effects that Pilot Program has had on various groups in the Taxi industry. I'd like to highlight  (with of course my own views) a few things.

The Effect on Cab Companies.

• A movement away from Gate and Gas to Affiliate operations.
• A concern because Affiliates are less profitable for the cab companies.
• A tendency of Affiliates to hire new and inexperienced drivers.
• A concern about inexperienced drivers "negatively impacting" service - i.e. drivers deadheading downtown and to the airport instead of taking dispatched calls.

The Effect on Drivers.

• A loss of shifts for Gate and Gas drivers.
• Slower movement of the Medallion Waiting List.

The main, negative effect of the list slowing down has been felt on drivers closer to the top of the List. This is because medallions formerly became available to the List as older medallion holders died off. As many of the older medallion holders sell their medallions, the pool of medallions going to the list naturally becomes smaller.

The main, positive effect is that drivers on the list can now buy a medallion at a controlled price that allows the medallion to pay for itself.

The Effect on Medallion Holders.

Aging medallion holders are clearly the biggest winners of the Pilot Program. Medallions, that were worth nothing excect in terms of the monthly rental that they brought in, are now worth $250,000.

This has been a special boon to Post-K drivers who are either disabled or over the age of 70. Prior to the program, they either had to work 800 hours per year or face losing their medallions. Instead, these drivers now have a chance, as the phrase goes, "to retire with dignity."

The program has also reduced the stress level for younger Post-K drivers like myself (a kid of 66) because we now know that we won't be forced to drive (or pretend to drive) for the rest of our lives.

Perhaps the biggest winners, though are the Pre-K medallion holders. Having already made from between $800,000 to $1,000,000 from leasing their cabs over the last 33 years, they can now collect an additional $250,000 for exiting the taxi business.

The Driver's Fund.

The drivers fund was originally intended for non-medallion holders. It was to be a Quid Pro Quo (i.e. something that is given or taken in return for something else.)

The medallion holders were to get $250,000 and the non-medallion holders would get the Driver's Fund - now totaling over $1,000,000 with great potential depending upon how it may be fed in the future.

This intent, however, was wiped out by one of the first TAC votes.

Barry Korengold had called for a motion that would insure that the fund's money would go to non-medallion holders.

President and General Manager of Luxor Cab John Lazar, on the other hand, argued that "medallion holders are drivers too" and that the fund should therefore go to all drivers. This carried the day by an 11 to 4 margin despite the fact that some medallion holders are actually not drivers and a few, like John Lazar, have never driven a cab for a living.

What's going to happen to the Driver's Fund, as well as who will benefit from it, will be decided at future TAC meetings.

One possible use of the Driver's Fund that has been discussed would be using the money as an investment fund for drivers.

Recommendations.

The TAC has made several recommendations that it will urge the SFMTA Board to adopt. 

1. To merge the taxi wrap fund and any new income into the Driver's Fund.
2. To move the Driver's Fund into a managed account that allows the money to grow.
3. To have the Key Personnel Exemption apply to people on the Waiting List. (See Below.)
4. To have the down payment assistance program be made available only to buyers who operate their permits as Gates and Gas cabs.
5. To monitor Affiliate run medallions more closely and to have all medallions issued to the Waiting List be run as Gates and Gas taxis for the first 3 years.
6. Preliminary recommendation that the sales program continue after the Medallion Sales Program is complete. (See below.)

Not Recommended.

There were also several motions that the TAC either failed to pass or refused to even discuss in addition to the vote not to give the Driver's Fund to non-medallion holding drivers.

1. Failed to pass a motion by Councilor Barry Korengold to limit the number of medallions that the MTA could sell outright to the sixty agreed upon in Pilot Plan.
2. Failed to pass a motion by Councilor William Mounsey that would have changed the ratio of medallions sold outright by the MTA to medallion give to the Waiting List from 1:1 to 1:2. In other words, 2 medallions would given to the Waiting List for every medallion sold by the MTA. 
3. Failed to discuss a plan by Councilor Barry Korengold that would preserve the Waiting List by allowing medallion holders to retire and give the medallions back to the City when they died.
4. Refused to even discuss discussing replacing the current leasing system with a split meter (along with employee rights) despite the high probability that such a change would drastically improve service to the neighborhoods.

A closer look at two recommendations.

6. The explanation written in the report says that "many members of the council are pleased with ... Sales Pilot Program and would like to see it continue ... "

Possibly but, if this is true why did it take the better part of three TAC meetings to pass the recommendation? The truth is that Dan Hinds kept on bringing the motion up over and over again until he bludgeoned it though. He basically paralyzed the proceedings by constantly calling for a vote about medallion sales no matter what other subject was being discussed. In effect, Hinds filibustered the TAC making it impossible for the council to do any other business until the voted on his measure.

In my opinion, the vote was taken more to shut Hinds up than for any other reason.

3. I'm amazed that TAC Chair Chris Sweis had the temerity to include extending the Key Personnel Exemption to people on the Waiting List in his report after being told that such a vote was inappropriate and would probably have been illegal if TAC actually had the power to put the recommendation into effect.

To put it simply - Chair Chris Sweis, Councilor Athan Rebelos and Councilor John Lazar are all on the Waiting List and thus voted to make it easier on themselves to get medallions worth $250,000 than it would be for other people on the list. In addition, Councilor John Lazar has two sons working for him who are on the Waiting List and would thus qualify for the Key Personnel Exemption.

Let me expand on this last point. Lazar's sons have never driven a taxicab. Lazar is thus trying to use a public office to try to give his children medallions worth $250,000 without the two of them ever having to drive a cab for a living.

Back Seat Terminals: Demonstrated

Athan Rebelos (photo, person) and Hansu Kim (photo, hands) were kind enough to show me the VeriFone PIMs at Desoto Cab Thursday.

I now understand that I made some mistakes in my previous post on the subject. For one thing, the terminals will broadcast ABC news feeds so, indeed, they can be described as TVs. (I'll mention another misconception later in the post.)

I came as a skeptic. I wasn't convinced that customers would tip more and I was very concerned about drivers not being able to control the sound.

In fact, I felt that, if I couldn't turn off the sound, I didn't want the damn thing in my cab.

The truth, as it turns out, isn't quite so simple.

• There are sound control arrows on the front seat terminal that Athan is pointing at in the picture and the driver can turn the sound all the way off.
• The ads and the public service announcements will NOT have sound.
• However - the caveat - the customer can turn on the sound for the news if he or she wants to and it overrides the driver's control.

But, the speakers are on the back of the suicide seat so they point away from the driver, meaning that the sound is fairly low when it is on. Furthermore:

• The system resets with each new fare so the sound should not remain on after a customer leaves.
• From talking to customers who have used the terminals in NYC, the first thing most of them do is turn off the sound if it is on anyway.
• So very few customers are likely to turn the sound on at all.

Conclusion: the sound at worst should be a minor annoyance.

What about the 5%? Will the tipping prompts really give the drivers more money?


The terminals have prompts that encourage the customers to tip well. If the fare is low (under $10?), they are prompted to tip $2, $3 or Other (photo).

On longer rides, the customers are prompted to hit 20% or Other. In addition, the 20% is calculated to include any extras such as airport or bridge tolls.

Hansu Kim says that studies have shown that customers tip up to 30% higher than they would without the prompts.

I don't know if I quite buy this. After all they are studying a novelty. Once the newness wears off, the tipping will probably level off as well.

On the other hand, the natural thing to do with these screens is to hit the $2 or the 20% buttons.

There is also the fact that (at VeriFone anyway) the customers do not have to sign the receipt for under $25. In fact, according to Mr. Kim the minimum for a signature is now going up to $50. This makes taking a credit card almost as fast as cash. The customers like this and, if the customers are happy, they tend to tip more.

In short, tt's hard for me to see how the tipping on these terminal would not more than the cover 5% drivers are to be charged for cashing the receipts - even in a worst case scenario.

For drivers at Town Taxi and Checker, even covering the 5% would be a huge improvement by itself. And, who knows? The drivers (other than Green's) at Citywide Dispatch might even start accepting credit card calls.

Why should the drivers be charged at all?

1. As I've mentioned, many of them are already being overcharged now.
2. The use of credit cards is expanding rapidly with huge costs to the companies. These PIMS will allow them to recover their costs.
3. The drivers should make more money.
4. The public should be better served.

The Merchant Accounts


There have been some complaints from drivers about these accounts - mostly due to the delay in being able to use the funds.

The normal hold on the money is 24 hours to 48 hours. On three day weekends, this can mean up to 4 days without the drivers being able to touch their money.

However, Hansu Kim says, that with a month or two, VeriFone will start "instantaneously crediting the driver's accounts," meaning that there will no longer be any hold on the funds..

It should also be kept in mind that these accounts have been set up so that the taxi companies can't touch the money and thus the unscrupulous companies amongst them will be unable to misappropriate the funds.

Advertising Revenue

As previously reported, 90% of the revenue will go the vendors and 10% will go to the drivers. The companies will NOT get a share.

On top of this, it will probably take three years before anybody makes a profit off the revenue. VeriFone estimates that it will take that long for the advertising money to cover the installation costs.

One More Thing


Contrary to rumor (spread partially by me) Hansu Kim says that he does not own shares in VeriFone. He says he is a paid consultant for the company and will neither receive a commission nor in any way make a personal profit from the sale of the units.

Kim also says that VeriFone will not hold a monopoly on the systems. CMT (being used by Luxor) and Wireless Edge will also be involved.

TAC 10-12: This and That

Most of the TAC meeting was concerned with leasing but a few other subjects came up.

1. Chris Hayashi, wearing her flashiest dress ever, mentioned that she was re-staffing in order to end various backlogs.

She also said that an owner/driver has been putting stickers on cabs calling for an end to Paratransit. The man apparently has a website advocating violence against handicapped people. Chris said that she has started revocation action against the owner and added that any other drivers who knowingly placed anti-Paratransit stickers on their cabs would face disciplinary action.

"This goes way beyond the rights of free speech," she said.

2. Hayashi has revised and re-written Article 7 of Division 1 of the Transportation code to add several new misdemeanors. I intend to write a post on the subject later but the ordinance would:

• Allow MTA investigators to fine illegal limos and taxis $5,000 for violations.
• Make enforced tipping illegal.
• Make it a misdemeanor for a customer to refuse to pay the fare.

The ordinance will go before the MTA Board on Tuesday 10-19-2010. Public comment will be allowed and is usually listened to by the Board.

3. Speaking of public comment, I quietly suggested that TAC's policy of requiring public comment to come before the council discussed a subject instead of after was, "unheard of, ridiculous and outrageous" adding that TAC was the only committee that I knew of that followed such a policy.

Much to my surprise, Council President Chris Sweis discussed the issue with me after the meeting. I told him that the public could make more meaningful contributions if they were allowed to speak after the councilors but before motions and voting. I was backed up in this by Barry Korengold who noted that both the Board of Supervisors and the MTA Board conducted their public meetings in the manner that I was suggesting.

Sweis said that his main concern was that my approach would be less efficient. I told him that I thought that doing it (taxi reform) right was important than doing it quickly.

Swiess said that he'd look further into the matter and presumably make a ruling on it next meeting.

4. Mark Gruberg of the UTW, in one of his stranger (considering that he's supposed to be representing lease drivers) speeches, passionately attacked the provision in the MTA ordinance that would make tipping illegal. He said that it would be unenforceable.

Nonetheless it'll be on the books, Mark, making it more enforceable the than nada we have now.

5. As the meeting was winding down, John lazar, out of the blue, said that the taxi industry was being run by an agency that didn't know anything about taxicabs and was doing nothing. He added that the room was full of people who really knew what they were doing, implying (I think) that the cab business would be better off if it wasn't regulated.

Director Hayashi  responded heatedly to Lazar saying, "I take exception to the idea that we've done nothing here." She went on to praise her staff for their hard work and accomplishments under trying circumstances; and pointed out that, among other things, they'd re-written all the rules and regulations concerning cabs and cab driving in San Francisco.

I would add that, while Lazar and his knowledgeable pals spend over 20 years trying to get the right to transfer medallions, Chris Hayashi is the person who made transferability happen. She also:

• Negotiated the Pilot Plan.
• Set up a realistic method to rid the City of illegal limo and cabs.
• Created the Taxi Advisory Council that has empowered Lazar to influence the way the industry is run.
• Etc. Etc. Etc.

Although I no longer think that Chris Hayashi is perfect, she's close enough for the cab business.

Next: More on Leasing.

Taxi Advisory Council - Two

At the Taxi Advisory Council meeting on August 30, 2010 Chris Sweis of Royal Taxi and Big Dog City was elected as the Chair and Barry Korengold of the San Francisco Cab Driver's Association as the Vice Chair.
 
The primary emphasis of the meeting was how to decide what to study as well as how to limit the study so that they could finish a report to the SFMTA by 12-31-2010

Studying the Pilot Plan

John Lazar of Luxor Cab pointed out that the process of selling medallions was already causing problems because the companies were being given no advance warning as to when a new medallion holder might take over a taxicab. He added that many of the buyers were choosing to run their cabs as "long term" leases instead of "gates and gas"  and this was causing regular drivers to lose their shifts.

Another potential problem could be what would happen to someone who had bought a cab under a long term leasing arrangement only to have the medallion sold out from underneath him or her.

It was agreed by the council that they should deal with the above problems in future meetings as well as the more general problems of the "long term" lease vs the "gates and gas" lease.

Athan Rebelos said that they should study what effects the Pilot Plan had on:

1. Buyers
2. Sellers
3. The Riding Public

Dan Hinds thought that they should create "accountability" from future medallion holders by setting high standards for people on the list.

Jane Bolig thought that the the possibility of raising the Fixed Price might have to be explored if potential sellers held on to their medallions because they thought that the price was not high enough.

Director Chris Hayahsi said that the Pilot Plan ends when you "transition through all the buyers and sellers. Watch what happens and make recommendations."

One of Hayashi's famous visual aids (see photo) summarizes some of the things that the council will be studying.

During the public comments Mark Gruberg said that he was worried that the Driver's Fund hadn't been defined. He also said that the was offended by being left off the council. "The UTW is the oldest driver's organization," he said. "The MHA and the SFCDA both have representatives. The UTW should have one too."

MTA Board member Bruce Oka gave a short talk saying, "If the Pilot Plan fails, we're in a lot of trouble. We can't afford for that to happen ... the more input (from the Taxi Advisory Council) the better," he added, "we are listening."

Elections

For me, this was the most interesting aspect of the afternoon. After watching the last meeting, I posited the theory that TAC appeared to be controlled by an "old boys' and girls' network" of owners, stockholders and managers that outnumbered everyone else by an 8 to 7 margin.

This week my idea did not cut the mustard.

The 8 to 7 margin did hold for the election of the Chair but Chris Sweis was elected instead of one of the "old boys" like Jim Gillespie or Dan Hinds.  The real surprise, however, was that Barry Korengold was elected as Vice Chair when Athan Rebelos and Laurie Graham voted for Barry instead of Carl Macmurdo.

These people think for themselves. In fact, during the various ballots, at least five or six council members cast votes contrary to what my theory predicted. Well ... that's what trash cans are for.

Bill Mounsey said that there were a lot of talented, intelligent people on the council with contrary opinions and that, instead of belonging to one group or another, they needed to work together to evaluate the Pilot Plan and improve the industry.

Indeed, Chris Hayashi has put together a dynamic, talented and knowledgeable group of people. If they do end up working to improve the business instead of just serving themselves, no one would be happier than I.

On the Agenda

In his first real test as Chair, Chris Swies showed a little uncertainty as to how to proceed.

Athan Rebelos wanted to add the Driver's Fund to the agenda for the next meeting. Swies clearly did not want to do so. Under the rules that the council had established the week before, the TAC sets the agenda, not the Chair.  I think that Swies should have either asked Rebelos for a motion or opened the subject up for discussion. Instead he said that the Driver's Fund was something to be studied later and acted as if the matter was tabled.

However, Swies did acknowledge Barry Korengold, who also wanted to discuss the Driver's Fund, and said that they needed to determine on whom the monies in the fund were supposed to be spent. Korengold made a motion to add the matter to the agenda, it was seconded by Rebelos and the motion was overwhelming passed by the council.

TAC will also look at the new credit card plan and take on the question of whether or not a 5% charge should be passed on the drivers.

  

Town Hall Meetings: Final Speeches

With Matt Gonzales (standing in front of Mike Spain) making a surprise Monday appearance as a sub for Hansu Kim, the presentation of reform plans came to a close on Wednesday December 9, 2009.

Gonzales, Spain and Giuseppe Carvelli all spoke in favor of auctioning off taxicabs - though Gonzales said that he could accept fixed price sales. Their ideas are basically similar so I'll just mention a few points. Arguments in favor of auctioning cabs claim that auctions will:

• Allow older drivers to exit the business.
• Move the List or allow for a faster turnover of medallions.
• Allow drivers to build up equity.
• Allow for the possibility of making a profit off their investment.
• Give medallion holders the freedom to sell at any time.
• Raise revenue for the city.

In Spain's version, revenue would also be raised for a drivers fund.

There were two other ideas in their presentations that I found new and interesting.

Gonzales said there was no real reason why a loan for buying a medallion had to be for 15 years. It could just as easily be for 30 years like the mortgage on a home. In that way, the new medallion holders would have more money to spend on themselves than show up in some other projections. In other words if a loan only cost them $1,000 a month, they could live much better than they could if loan costed $1,800.

Spain, saying that he'd borrowed the idea from Hansu Kim, proposed a voucher system for drivers that could be used toward the purchase of a medallion at an auction. For instance if someone had been a working driver for 20 years he or she would get a voucher for $250,000. If a medallion sold for $400,000, the person would only have to come up $150,000 of his or her own money to compete.

Driver Peter Kirby, who is on the list, had a similar idea saying that drivers should be given credit or money for the time that they had spent on the list in event of an auction.

Driver Athan Rebelos introduced a plan that would create two classes of medallions: fleet medallions that would be prohibited from picking up at SFO and would be used primary for answering radio calls; and individual medallions that would operate much like medallions do now. Both classes could or would be auctioned off under various restricted conditions. The money raised from the auctions would go for taxicab regulation and enforcement, a general city fund and a medical and disability fund for cab drivers.

A great deal of thought and work went into preparation and presentation of all the various plans. I haven't had the space or time to do them justice here. You should be able to find copies of them from the Town Hall meetings archive at:

http://www.sfmta.com/cms/ctaxitownhall/ArchiveofMarchandApril2009TaxiTownHallmeetings.htm

or by contacting:

• Director of Taxis & Accessible Services
  One South Van Ness Avenue, Seventh Floor
  San Francisco, CA, 94103.
• Phone: 415.701.4400.