On the Back-seat Terminals: Some Facts?

There is a lot to be said about the back-seat terminals (photo) currently being installed by National, Luxor and Yellow Cabs. Some of it might even be true. (See TaxiTownSF.)

But there are some misconceptions.  I don't claim to be an expert but I will try to clarify a few points.

1. It's not a TV, it's a video terminal and a card swipe.  According to Chris Hayashi, it will have no audio. It will, however, carry advertisements and public service messages. I don't know if it can be turned on and off by the customer.

2. The taxi companies WILL NOT pay for the terminals. The vendors will pay for all equipment and pay for their costs out of the fees collected and advertising revenue.

3. The cab companies WILL NOT share any advertising revenue with the drivers. The vendors will get 90% of the profits above the installation costs and 10% will go to the Drivers Fund.

4. The taxi companies ARE NOT currently allowed to be merchants for credit card accounts ( for obvious reasons), although some companies are requesting the SFMTA to be allowed to be merchant account holders themselves.  The actual cost of the merchant account is closer to 3%, so there is potential profit involved.

5. Despite it's prominence in the field, Verifone will probably not be the only vendor. Any company that meets certain standards set by the MTA could qualify. CMT and Wireless Edge are also planning to compete.

6. Although drivers are required by law to take credit cars, I notice that there is no regulation that says that a driver MUST use a specific credit card cashing system, especially since the drivers are not employees. Drivers are free cash them anywhere or any way they like.

• Many drivers - especially those at Desoto Cab already have their own merchant accounts.
• For drivers with smart phones Square - which is a free and charges 2.75% - is a good option.
• There are other companies on the market with similar or possibly lower rates such as Obopay which claims to charge only 1.5% per transaction and doesn't need a swipe.
• I understand that the Russian speaking lady near Checker Cab will still be happy to cash receipts for 10%.

7. Taxi companies have the option of not putting in the terminals in which case they are responsible for paying to cash the credit card receipts.

TAC 3-14-2011 Part 2

The rough draft of the TAC report on the Pilot Program was put together by Council Chair Chris Sweis (photo) after going through more than 12 hours of tapes. For this he deserves an award.

However, as councilor Carl Macmurdo and others pointed out, Sweis forgot to include Medallion Holders as one the four primary participants in the S.F. taxi industry. (A Freudian slip? Sweis wouldn't be the first owner of a taxicab company to wish that medallion holders would disappear. ) The Chair admitted that it was an oversight and promised to include a section on medallion holders in an amended draft at the next session.

As for the rest, I simply want to deal with a few points of the draft. You can read the full text in TaxiTownSf.

The discussions at TAC were mostly about the effects on Taxi Companies and Drivers on the waiting list.

1.The major effect on companies was the change from Gates and Gas to Affiliate Leases.

• In 2003 there were few cabs operated on as Affiliates.
• By 2010 more than half the taxis were affiliates.
• 56% of the medallions purchased during the pilot program have chosen to become affiliates.

Sweis and others see this as a negative.

• G and G operations, according to Sweis, "provide greater control over vehicles and drivers."
• Loss of G and G medallions "will reduce company revenues and quality control."
• Companies are losing taxis to Affiliates.
• Experienced drivers are losing good shifts when Affiliates replace them with less experienced drivers.
• Which "would lead to a decline of taxi service to the public."

Driver Tone Lee (photo) disputed this claiming that Affiliates and LTLs did a better job because the drivers worked harder and took better care of the cars that they, themselves, purchased.

Gratchia Markanian, the head of Checker Cab, made similar points and predicted that all taxis would someday be Affiliates.

Hansu Kim (photo), on the other hand, who has been strongly in favor of Affiliates, reversed his position and said that taxi companies needed gate and gas arrangement to be profitable. Coincidentally, Kim recently purchased Desoto Cab.

Councilor John Lazar of Luxor Cab said that the frozen gate rates had "killed gates and gas" arrangement. He also said, as he's said before, that new buyers couldn't afford to work under gate and gas because their loan payments were too high.

I have a few problems with these arguments - namely that neither one of them appears to be true.

• The payments on a 15 years loan are $1,798 per month. The lowest amount that a GG medallion holder is paid is $1,800 per month and the highest is $2,400 per month. In addition a medallion is worth $5,000 to $10,000 per year in better shifts etc. What can't they afford?
• If the cab companies are so strapped for cash, how come they are engaging in medallion bidding wars?

Companies are currently offering bonuses as high as $5,000 and medallion payments as high as $2,400 a month to wrest medallion away from each other. If they're so broke, where are they getting the money for their campaigns?

In the end, they passed a motion by 10 to 4 to have all cabs that are awarded to drivers on the list to be worked as Gates and Gas for the first three years.

Next: The effect on Drivers.

TAC 3-14-2011

The  above photo contains all the Taxi Advisory Council members except Jane Bolig and Bill Minikel's head. (Sorry Bill.) The seating arrangement is ad hoc because someone else was using the room. From the audience/public aspect it's infinitely superior to sitting at the end of a table where you can't see faces or hear anybody talk. It would be nice if they kept a similar arrangement in the future. But that's an opinion.

Most of the meeting was taken up with the TAC report to the MTA on the Pilot Program.  But first some numbers.

SF Credit Union as of 2-28-11

• 65 Loan applications approved.
• 0 Declined.
• 45 Sales finalized that required financing.
• 30 Borrowers had the 20% down payment.
• 15 needed Down Payment Assistance.
• $35,000 = Average Down Payment Assistance amount.

Taxi Services as of 3-14-11

• 56 Medallions transferred.
• 37 Transferred from a Medallion Holder to a New Buyer.
• 19 Transferred directly from SFMTA to a New buyer.

Monetary Distribution as of 3-14-11

• $4,496,077 ($250,000 -5% = $237,500 x19) to SFMTA from direct sales to New Buyers.
• $1,387,500 (15% of %250,000 = $37,500 x37) to SFMTA from Seller to Buyer transferres.
• $700,000 (5% of $250,000 = $12,500 X56) to Drivers Fund.
• $100,820 in Taxi Wrap Fund which will eventually go to the Drivers Fund.

Random Facts

• 7 Sales transactions closed since last report. 
• 11 Approved
• 235 Number of Medallion Holders age 60 to 64.
• 174 Number of Medallion Holders age 65 to 69.
• 409 Total of Medallion Holder age 60 to 69.

One interesting point is the fact no applicant has been turned down for  a loan. This is amazing in itself. But it is also a rebuttal to the those last year who argued against selling medallion because nobody but loan sharks would give cab drivers money.

These two sheets don't quite match up but the most significant number for many at the meeting was left out.
      20 Medallions have been given out to working Drivers who have earned them by being on the list.

Leaving this out made it look as if the SFMTA wasn't keeping it's word on giving one medallion to the MTA and one to the list until they both equal 60. But the actual count is:

• 20 to the List.
• 19 to the SFMTA.

Nonetheless the List is moving very slowly - a matter of great concern to Councilor Bill Mownsey and many others on the List who have been waiting for a decade and a half.

More on that later when we get into the actual report.

Wesley Hollis Justifies Credit Card Charges.

Wesley Hollis of Executive Cab answer me back in John Han's blog.

http://www.taxitownsf.com/2011/03/credit-card-charges-other-color-scheme.html

You will note that Hollis the sets the record straight by writing, "...Town Taxi has always charged a flat 5% on their credit card sales.  I have to turn in my MDT credit card sales to Town Taxi."


Of course this is currently illegal but that appears to be a minor point (sort of like being left-handed) in the taxicab business.

Backseat Swipes and Legal Charges

Beginning now with National Cab and soon with Luxor, the San Francisco taxicab fleet is converting to rear-seat, credit card/information terminals.

Among other things the new technology will have the ability to:

• Decline or authorize credit cards or Paratransit Debit Cards.
• Break down charges (meter fare, bridge tolls, airport fees, tips, etc)
• Keep electronic waybill data.
• Touch screen.
• Keep numerous statistics.

These terminals will allow advertising under certain conditions:

• There will be NO AUDIO.
• Installation costs will be paid for from revenue and not charged to color schemes.
• Ten percent of the advertising revenue is to be paid into the Driver Fund.
• The content of the terminals will include a percentage of public service announcements. 

Drivers can be charged up to 5% of the credit card receipts:

• There will be merchant accounts set up at a bank for each driver and the fares must be transferred to that account within two business days of payment.
• These accounts must be allow the driver to withdraw funds at ATM machines.
• The terminals must have the ability to display buttons that suggest tips based on the fare at the end of the trip.

There is lot more involved of course but, for me, these are the highlights.

Legal fees

Charging the fees to drivers will be a sticking point for some but a relief for others. Those paying 10% to 12% should like the new arrangement. Those, like myself, who currently pay no fees will bitch.

Actually some of us have already bitched long and loud to Director of Taxi Services Christiane Hayashi. Many at the TAC meetings - especially Barry Korengold - were strongly against passing the fee onto drivers. But, to no avail.

The merchant account agreements with credit card companies do no allow the charges to be passed on to the customer. However, there are aspect of this that might either be not so bad or maybe even good.

Not So Bad

• According to (soon to be/current) Desoto owner Hansu Kim studies have shown that the prompts on these terminals encourage customers to tip larger than before - much more than enough to cover the 5% charge.
• Of course Kim has some connection with Veriphone - one of the companies that owns the terminals. I've done my own research both by talking to customers who have used the system in New York and my own experience of using a front seat terminal (see photo) at Green Cab.
• The people from New York agree that they tend to tip more and my customers at Green are also tipping higher with the new terminal. They can see all the data and, if they sit in the front seat, they like playing with the gadget and this stimulates them to tip more generously.
• The new arrangement will allow the above-board taxicab companies to profit by not having to pay the fees that they have been paying for the last several years.
• Last but not lease - taxicab companies aren't allowed to be merchants so they won't be tempted to misuse driver's money.

Maybe Even Good

• If they had passed on credit card charges to the public, the MTA would probably be less likely to:
• Agree to a meter increase.
• Agree to an added fee for taking radio calls.

One  negative aspect that is the fate of that poor, Russian-speaking lady at the shed near Checker Cab. She'll be out of a job and probably doesn't qualify for Unemployment Insurance.

Credit Card Charges: Illegal

It is currently illegal for taxi companies to charge drivers for cashing credit card slips. Period. 

Illegal? So what?

The illegality of credit card charges means little to the hundreds of cab drivers who are forced to pay fees as high as 10% or 12% to get cash back for their receipts.

Taxi Services Enforcement and Legal Affairs Manager Jarvis Murray, in fact, is looking into complaints against various taxicab companies for charging their drivers fees to cash their receipts.

Jarvis said that it is an ongoing investigation so he couldn't give me the names. But he did say that Luxor Cab, Yellow Cab and Green Cab do not charge for cashing the slips.

In any case, the anonymity of the offending companies will end soon.

At the last TAC meeting Councilor John Lazar of Luxor Cab insisted that Director Christiane Hayashi provide the names of these companies to the council and she agreed to do so at the Monday 3-14-11 meeting.

As a preview, I've been told by drivers that Royal, Town Taxi and Checker have all been charging 10% for the service.

At Checker, drivers go to a shed on the property where a Russian speaking woman cashes the receipts. Royal drivers were being sent to the same shed but rumor has it that Royal isn't using her services anymore. Town Taxi has recently reduced it's charge from 10% to 5%. Regent Cab, the other hand, discourages it's drivers from taking credit cards - also a violation of the rules.

Since the fees from the credit card companies are usually 3% or less, the Taxi companies are making themselves a hefty profit from these exchanges - with the money, of course, being taken from working drivers.

Many drivers simply don't take credit cards for this reason, putting themselves at risk for citations and and annoying the public.
  
Tmw - The new backseat terminals and legal charges.

Supes Pass Watered Down Enforcement Against Illegal Cabs et al

At yesterday's Board of Supervisors meeting, the board unanimously voted to pass their watered down version of legislation making it a misdemeanor to operate illegal taxis or limos, or to solicit or accept payment for referral of passengers, or assignment of shifts or dispatched calls, or other illegal activities that suck money off of legitimate cab drivers and both cheat and endanger the general public.

The Supes voted to okay their own amended version of the ordinance that lessened the penalties that the police can give from $2,500 and $5,000 to $1,000.

A confused message: crime doesn't pay ... too much.

Whatever - as my mother used to say, "it's better than a poke in the eye with a sharp stick."

The legislation will allow MTA investigators to issue tickets to illegal vehicles et al. Taxi Services Director Christiane Hayashi hopes to hire two full time investigators who can devote all their energy to enforcing the laws against illegal cabs, sticky palmed doormen and the like. This will mark the first time that anyone has seriously and systematically gone after these felons.

The Board of Supervisors also passed a resolution supporting Peak-Hour Taxi Permits.