Yellow Needs More Cabs? For Whom?

There are several questions and interesting aspects about Yellow Cab manager Jim Gillespie's claim to the MTA Board that Yellow needs 139 more taxis in order to service all the radio calls that the company gets.

1. Why 139? Why not 140 or 135? Must be scientific, huh? Let's do the math:

• Gillespie says that Yellow failed to pick up 280,000 or 25% of its radio calls during the last 6 months.
• 280,000 / 139 = 2,014 radio calls that Gillespie expects each new taxi to pick up in 6 months
• 2,014 / 182.5 days = 11 radio calls per cab picked up per day.
• /2 shift a day = 5.5 radio calls per day per driver.

Sounds a bit lame, doesn't it? But, maybe Yellow doesn't expect much from new drivers. Let's look at the veterans for comparison:

• If 280,000 = 25% then 840,000 (280,000*3) calls must have been picked up during the last 6 months by Yellow's 500 cabs.
• 840,000 / 500 = 1,680 radio calls picked up per driver for 6 months.
• 1,680 / 182.5 = 9.2 radio calls taken per cab per day.
• /2 = 4.6 radio calls per driver per day.

Hmmm. Seems like the vets are even lamer. Let's do a little more math. What if each vet picked up 5.5 radio calls per day?

• 5.5*2 = 11*182.5 = 2,007.5 picked up calls per cab for 6 months * 500 = 1,003,770 radio calls picked up.
• If 280,000 = 25% then Yellow handles 1,120,000 (280,000*4) radio calls per 6 months.
• 1,003,770 / 1,120,000 = the percentage of calls that would be picked up by Yellow drivers if the vets were as good as Gillespie expects the rookies to be = 89.6% of the calls picked up.

 What if the vets worked just a little harder and picked up 6 rides per shift per day?

• 6*2 = 12 pickups per cab per day*182.5 days = 2,190 pickups for 6 months*500 taxis = 1,095,000 pickups.
• 1,095,000 / 1,120,000 = 97.8% of the calls picked up.

Well, it looks like we've found a solution to Yellow Cab's problem - train or whip the slackers.

In short, this is the only time that I can recall a company using the incompetence of its personnel as a reason to expand its business.

In short, the only science involved in Gillespie's speech was the science of bs.

2. Yellow Cab will not guarantee that all, or any, of the new drivers will take radio calls.

Perhaps you, gentle and misinformed reader, imagine that Yellow has a dispatching system that will use GPS to automatically assign the closest of those 139 cabs to one of those 280,000 radio calls?

Alas - that's not the case. Yellow's computer will inform their closest empty cab that there is a nearby radio call but whether or not the driver will accept the order is anybody's guess. He or she can take it or leave it. This also assumes that the closest driver actually has his computer on, which is problematical.

What's going on here?

3. Yellow Cab (along with all other San Francisco taxi companies) is in the leasing business, not the taxi business.

• They make their money from leasing taxis to drivers, not from the actual fares.
• The drivers pay the companies first and then make their money from picking people up.
• As long as a cab company can fill it's shifts with lease drivers, it doesn't matter how much actual business the company does.
• Mild recessions (with declining demand for taxis) are usually good for cab companies because desperate, unemployed people will take bad shifts. A little money is better for them than nothing.
• Yellow Cab, for instance, wasn't hiring in 2008 and 2009 because all their shifts were filled. 

4. Yellow Cab (along with all other San Francisco taxi companies) will never tell a driver to take a radio call. Why?

• Cab drivers in San Francisco are Independent Contractors, not employees.
• What these drivers are is independent of are all laws that protect employees.
• Cab companies do not have to pay unemployment taxes, social security taxes or (for Long Term Lease drivers) Worker's Compensation, etc on Independent Contractors.
• Telling a driver to take a radio call would make said driver an employee. 
• Telling a driver to take a radio call would mean that Yellow Cab would have to pay the taxes etc listed above.

5.  Yellow Cab (along with most other San Francisco taxi companies) is more and more operating its medallions under long term lease arrangements.

• The medallions are leased by the month and the taxi companies have no control over who drives the cab.
• Hundreds of experienced drivers have lost their shifts due to this trend.
• They have been replaced by new drivers who aren't trained (for Yellow to train them would make these drivers employees).
• Most of these Long Term Lease drivers hang out at the airport or head downtown.
• These new drivers are much less likely to take radio calls than the people they replace.

And, those are the real reasons why people in the Bayview, the Sunset, the Richmond and Noe Valley, not to mention the attractive blond at Greenwich and Scott, aren't getting taxis as quickly or as often as they should.

As long as the current taxi system remains in effect, 139 more Yellow Cabs will do little or nothing to improve San Francisco's radio business. 

Gillespie was quoted in the Examiner as saying, "If we had more taxis and they were more spread out, people could get their cabs quicker and more people would call ..."

If the cabs were "more spread out" ... but they won't be any more spread out than the current cabs are. Under the current system there is no leadership or direction, there is no one to tell the taxi drivers where to spread. The new taxis, like the currents ones, will gravitate to areas where the service is already good like SFO and Union Square but service to the outlying areas would not be improved one whit.

If Yellow Cab (along with the other companies) ran their businesses in a more rational manner, if the companies were more interested in serving the public than in avoiding various forms of taxation, the taxicabs we already have on the street would more than adequately handle the radio calls.


The only people who would really benefit from those 139 more medallions would be the owners of Yellow Cab along with the new medallion holders.

TAC III Part 2

The Taxi Advisory Council spend much of their time last Monday articulating their goals and structuring their future meetings with the aim of having a report on the Pilot Plan ready by the end of the year. (If you click on the photo you can blow up a good summary etched by Chris Hayashi.)

 The subject of electronic waybills was also discussed. Director Hayashi pushed for them because they would end the possibility of anyone handing in fraudulent waybills and allow her to gather accurate information on taxicabs for the 1st time ever. Many drivers, on the other hand, were less enthusiastic about the idea. Council member Bill Mounsey especially disliked them because he felt that an electronic watchdog would restrict his freedom.

During public comment, Driver Eric Hattan brought up UberCab - an illegal, high-tech taxi service that is using San Francisco as a beta test before going into other markets.

But for me, the most interesting facet of the afternoon was a brief preview of the "Gates and Gas" (GG) vs Long Term Lease (LTL) debate.

Counciler John Lazar of Luxor cab showed concern over the fact that most of the buyers were opting for the LTL. He said that:

• Because the payments for the loans were more for the buyers than they could earn from a GG arrangement, they were "forced" to go to LTL.
• This was causing numerous experienced drivers to lose their shifts.
• The California EDD was going after Luxor as a test case and would later go after every other company.
• The EDD considered GG drivers employees and LTL drivers Independent Contractors.
• This seemed to imply that it would be less expensive and more profitable for cab companies to go to LTL.

During public comment, Hansu Kim expressed the fear that the industry would go totally LTL and that the cab companies would become little more than radio services in the future. Other speakers, including myself, thought that LTL drivers didn't take radio calls and hung out either at the airport or downtown - thus reducing the level of service to the neighborhoods.

TAC decided that they needed to know:

• How many cabs were on LTL?
• How many were GG/
• What percentage of buyers were going LTL?
• The effect on public service.

People also wanted to know how many drivers had lost their jobs and what had happened to them but one of the company managers didn't think that there was any way to find out this information. Meaning they don't keep records of who works for them? Or, perhaps he meant that he didn't know what happened to the drivers after they lost their shifts.

Council member Timothy Ajaegbu (right) said that he was very concerned about this trend because he is a gates and gas driver.

A further and deeper discussion of GG vs LTL is on the agenda for next week.

If you are concerned about your shift or the future of the taxi business, you should try to be there. The turnout so far has been amazingly small. You don't know what you've been missing. This is better than Reality TV. For one thing, it's really REAL.

TAC III Part 1

The Taxi Advisory Council met for the third time under the assured and cheerful chairpersonship of Chris Sweis.

The main topics considered were a new credit card system and how to structure the long term agenda for future meetings, with the goal of making a report to the MTA Board by 12/31/2010. There was also a brief foray into the "Gate and Gas" vs "Long Term Lease" (with no other possibility considered) debate.

Credit Card Charges

Most of the discussion on credit cards revolved around a plan to put in a backseat terminal that could be operated solely by the customers. A  5% or 6% charge would be passed on to the drivers. The terminal would also include advertising with the revenues being split between the taxi companies and the drivers.

 Barry Korengold, among others, didn't like the idea of charging the drivers and suggested the costs be passed on to the customers. Jane Bolig wondered what happened to the 75 cent surcharge for the use of a credit card which was supposed to have been passed by the MTA. Barry Toranto, during public comments, pointed out that filling stations charged two sets of prices - one for credit card use and one for cash - and thought that it would be legal for cabs to do the same as long as it was posted.

 Chris Hayashi said that Visa would not okay passing on the charges to the customer due to contractual obligations that no one but she understood and that the MTA could not regulate a private contract. She added that the taxi industry could try a "kick the door down approach to Visa" (by say, refusing to accept Visa) but there's no guarantee that it would be successful.

A few people brought up the illegal fees (reputed to be as high as 10%) that some companies are allegedly charging their drivers for the use of credit cards but, for some reason, Chris Sweis didn't think further discussion of the subject would be productive. Jim Gillespie said that Yellow Cab only wanted to pass on their actual charges which amounted to about $80,000 per month. He also claimed that San Francisco was the only city he knew of that did not pass credit card charges on to the drivers.

Hansu Kim said that the Veripone system that he represents had done studies showing that customers tipped much more than normal using Veriphone, meaning that the drivers would actually get more than the 5% charge back in tips.

John Lazar gave a breakdown of the credit card charges that Luxor deals with.

• Visa and most other cards charge 3.8%
• American Express charges 5.0%
• There are also potential fraud and other problems that required staff time. 

Lazar's solution would be to raise the meter which would allow drivers to recoup the  5% and more. Athan Rebelos thought the drivers should get a 50 cent peak time surcharge along with a 50 cent surcharge for radio calls and rides with multiple stops. David Kahn pointed out that taxis in other countries charged more for picking up radio calls than for flags and suggested that we do the same here.

In short, there were many ideas but no clear agreement about what should be done.

Advertising Revenue

This was also true of the idea of splitting the advertising revenue. None of the owners liked the idea because it would be too complicated for them to figure out for each driver. No one liked the idea of audio being allowed for the advertising in the cab because, according to John Han, it would "drive me batty."

Me, too.

I don't think anyone suggested these possibilities: (1) if the revenue was large enough - to let the owners keep it and pay the 5% credit card charge themselves; or (2) To average out the amount of the advertising revenue per month and pass the driver's share back in reduced gates. But who am I to have the last word?

Part 2 tomorrow and tomorrow and tomorrow.

Leasing: An Idea Whose Time has Come ... and Gone? II

"The Lease" is a Reagan era relic that has been used primarily to bust unions and take away worker's rights. Leasing of course has existed in various forms for hundreds (thousands?) of years but the practice wasn't used in employer/employee situations until the late 1970's. The change was brought about after a Federal court judge (supposedly Supreme Court reject Robert Bork - although I've been unable to track this down) ruled that independent contractors could not legally unionize.

The ruling turned the "Independent Contract" into one of the most effective (and under-reported) political documents in American history. As one of the instruments of Vodoo Economics (The theory that giving tax breaks to the rich improves everyone's lives.), it helped transfer massive amounts of money from the middle and working classes to the rich during the Reagan era - a trend that continues today.

The Lease was introduced into the San Francisco taxicab industry by Jim Steele, the manager of Yellow Cab, in the late 1970's and was soon taken up by every other cab company in the city. When Luxor and Desoto switched to The Lease, they allowed the drivers who already belonged to the union to continue doing so until they either retired or died off, but no new drivers were permitted to join.

The Advantages of Leasing

There are two major advantages to leasing for an employer.

     1. The first is economic.

•  Without a union to deal with companies no longer have to provide: medical benefits, sick leave, maternity leave, paid vacations, retirement benefits.
• The saving go far beyond that, however, because workers are not only forbidden to unionize but are no longer employees; and thus lose the protections and benefits that 150 years of labor history and law have won for employees. There obviously is no minimum wage and the company no longer has to pay half of the driver's Social Security tax or unemployment taxes etc. When The Lease was originally morphed into an anti-labor document, companies did not have to pay for Workers Compensation either. The government forced them to start paying for this ten or fifteen years ago.
• In addition, the companies no longer need as many bookkeepers, accountants, payroll clerks, supervisors and other staff as they would if they were dealing with salaried employees.

      2. The second is power.

• I'm not going to give you a long list on this one. The simple fact that a cab company can cancel the lease with the driver at any time for any reason what-so-ever or no reason at all, the fact that there is no such thing as an unjust firing, gives the companies almost absolute power over their drivers.
• And you know the old saying, "Power corrupts and absolute power corrupts absolutely." Never truer than in the taxi business.

Taxi Company Scams

In over 25 years of attending meeting about cabs, I've never heard the hidden realities of the taxicab business seriously discussed and hardly ever even mentioned. I think it's time. We're trying to set up the business on a new footing. It's time to talk about our dirty little secrets.

I've thought of naming names but I'm already looking for motorcycle cops in my side and rearview mirrors, I don't particularly want to see a fleet of hybrids behind me. Besides, certain corrupt practices are so widespread in this industry, it would be almost rude to point out one person instead of another. Instead, I'll just take a tactic from Hansu Kim and say, "everybody knows" that what I'm saying is true.

The major corrupt practice in this business of course is enforced tipping. As far as I know the only taxi companies that don't force their lease drivers to tip are Metro and Green Cabs.

I'm not talking about the scenario where a driver slips a dispatcher a ten or twenty for a long ride but the fact that a driver has to tip five dollars in and five dollars out plus two dollars for the gas man just to be given a car to drive. In other words, if the official gate at a company is $100 per shift, the actual gate is $112 per shift.

This is the way that it has worked at every company I've worked for; and any driver who refuses to tip as required will be given bad, often dangerous, cabs to drive or won't be able get out when he or she is scheduled.

With good reason. Dispatchers, people answering the phones and other office personnel are paid minimum wage by the companies with the expectation that the rest of their pay will consist of tips from drivers. If they let one driver go without paying the whole system would eventually collapse. Drivers who persists in not tipping will often find that their leases will be cancelled for some apparently unrelated reason.

I expected to catch flak for writing this piece but I'm already getting criticism before publishing the post.  My proofreader asks, "How do cab companies force drivers to tip in and tip out? I have only known three drivers who refused to give anyone a tip ... and they got shit cabs and shifts but ... their leases were never cancelled.

How can I respond? How about with two blasts from the past? (I should point that these stories are from 15 or 20 years ago and Desoto is now under different management).  Alleged Tipping and More Alleged Tipping. If being giving bad shifts and dangerous cars to drive doesn't fit your definition of "forced", would "extorted" be more precise? In any case, two managers at two different companies told me, not only that I should tip, but how much. Their point was clear enough to me.

We're not talking chump change here. I know one dispatcher who used to clear $400 a shift. Industry wide, the lowest figure I can come up is the ridiculously, absurdly low number of $10,000,000 a year in revenue from "forced" tipping.

Over the years various other scams have been forced upon the drivers by one company or another.

• Some companies have forced their drivers to buy overpriced gas at company pumps.
• Back in the days when it was legal for cab companies to ask for insurance deposits, at least one company used to take the deposit if there was an accident regardless of whether or not their driver was at fault. If the driver complained, his or her lease would be cancelled.
• The latest scam is for companies to illegally pass credit card charges on to their drivers. At least one company is making the drivers pay 10% of the charge when it only costs the company less than 5% to process the cards. I guess you could call that a value added tax.

"We all know" that there are more scams of various kinds but I feel no need to list them all here. Corruption is part of the culture of taxi drivers under the lease and it will remain so unless, or until, drivers are given back their legal rights.

Next: Why the lease is dysfunctional.

Leasing: An Idea Whose Time has Come ... and Gone?

Whether or not you can solve a problem often depends upon what questions you ask ... or fail to ask. The questions define, and limit, the possible answers.

I was thinking of this during the last TAC meeting when Chris Hayashi said that the council would be debating the question of "gates and gas vs long term leasing." The way she phrased it didn't allow for any other possible industry model. No one in the room, except me, appeared to think that there might be another way to put the question.

Leasing, in one form or another, is like a given in this business. Everyone accepts it. Even those opposed to the powers-that-be form their alternative ideas in terms of leasing.

Yet, leasing has only been used in the taxi industry for about 30 years. Furthermore, the lease was never intended to be used in a business like this one and, in my opinion, is a very bad fit.

Before rambling on, I think it's fair to tell you where I'm coming from.

Most of my large, extended American-Irish family were (and still are) in the plumbing and heating contracting business in St. Paul, Minnesota. Some of them owned companies. Most worked out of the unions. Those who owned the shops had all been trained by the unions. My father was on both sides of the equation at one time or another and I worked as a pipe-fitter apprentice for my uncle, who was the most successful contractor in town.

It wasn't an idyllic world. The guys in the unions were always complaining about those "greedy SOBs" who wouldn't pay them enough; and the owners bitched that they couldn't make any money because of those "damn unions." But, they did make money and the workers were very well paid. Just about everybody owned a boat or a cabin on a lake, sent their kids to college and retired at 62.

My upbringing has given me an insiders view of both management and labor.  Unlike Mike Spain, I don't think that running a successful business makes one morally superior; and, unlike Mark Gruberg, I don't think that owning a company makes one evil. Nor do I think that a person necessarily achieves nobility by being a worker.

With that in mind, let's glance at the current state of the taxi business under the lease.

Nobody makes much money.

• The profit margins for the companies are extremely small. At least one company is on the brink of bankruptcy and at least one other needs enforced tipping to end up in the black each month.
• Non-medallion drivers, who already are among the lowest paid workers in any profession, have been losing their shifts en-masse as long term leasing has been taking over.
• Even the apparent winners of the system - medallion holders like myself - make comparatively little. If you tried to pay union plumbers or bus drivers the money I make, they'd strike.

Furthermore the public service that everyone gives lip service to is spotty. 

• If you could create a system more inefficient then that of sending 1,398 cabs out every shift with 1,398 different ideas as to how to work and where to go, I don't know what it would be.
• Of course the drivers don't really act independently but instead tend to swarm to areas of high taxi demand like downtown, SFO, North Beach, Moscone, the Mission, Union Street and the Castro.
• This leaves the outer neighborhoods of the city under-serviced.
• In over 30 years of leasing, no one has yet to figure out how to pick up either a radio call in the Sunset on a busy night or a person in wheelchair at any time anywhere in San Francisco.

And we act as if "The Lease" was the Eucharist placed inside the Koran laying on the Holy Grail wrapped by the Torah.

I think it's time to step outside the "gates and gas vs long term lease" box and look at the business with fresh eyes. With that in mind I'll be devoting several posts over the next month or so to examining leasing, its various effects and its consequences.

Next: A micro-history of "The Lease" and the "Independent Contract."