How Demoting Christiane Hayashi Backfired

To briefly summarize:

San Francisco voters approved Proposition K in 1978 which put an end of the sale of taxi medallions.

San Francisco voters passed Proposition A in November 2007 giving the Board of Supervisors the option of transferring the powers of the Taxi Commission to the SFMTA. The Supervisors did so and the SFMTA took over the regulation of the taxi industry on March 1, 2009.

In January of 2009, Mayor Gavin Newsom, who had promised not to put medallions up for sale if Proposition A passed, came out with a plan to take all the taxis medallions away from the current medallion holders and sell them in order to cover San Francisco's $500 million dollar debt.

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.

A Short History of San Francisco's Taxi Crisis: Bigoty & Cabbies, Part 1

An African American customer of mine was waxing sympathetic.

"I don't know how you do this job," he said, "I mean they're rude, they abuse you, they demean you ... it's almost like being black."

"Except," I said, "I don't have to drive the cab home."

But he had a point. The stereotype is almost exactly the same. Cab drivers supposedly are dumb, dishonest, lazy, dirty and smell bad. Although they're stupid, you have to watch them because they're clever and they'll cheat you if they can.

The cliché is also fed by the fact that many cab drivers are immigrants and minorities of various kind. Snobs who are way too PC to utter a racial or ethnic slur can still get their jollies by slandering "cabbies."

Of course labeling a class of people as inferior leads to more than mere insults. Inferior people are treated differently. If you want to complain about a bus driver, you call your local MTA. If you want to complain about about a cab driver, in most cities you call the police.

Far too many people would probably agree with the former Director of the San Francisco Taxi Commission, Heidi Machen, who wrote, "All of the ex-cons and alternative types who can't make it in another profession ... eventually wind up driving ... taxis."

At best, we're seen as a collection of foreigners and lowlifes.

Certainly San Francisco's "liberal" mayor, Gavin Newsom, was not thinking of cab drivers in February 2009 when he wrote, "Our job (during the recession) is ... to save San Franciscan's from losing their homes, losing their jobs and losing their small businesses."

On the contrary, Mayor Newsom intended to help fight San Francisco's budget deficit by taking the taxis away from San Francisco's cab drivers, selling them at auctions and keeping "most of the money..."

Newsom never mentioned the fact that his plan would cause most of San Francisco's 1,200 taxicab owners to lose their small businesses, their jobs and no doubt their homes.

"This city asset (taxis) has been underutilized and the (taxi) industry has underperformed," said the mayor who ran for election on a platform of balancing the budget. The city was $600 million in debt at the time he spoke.

And he talks about us underperforming?

That's the nice thing about spouting stereotypes. You don't have to worry about facts. If by "underutilized" the mayor means the taxi industry isn't paying its fair share, this is nonsense. The cab business actually pays millions of dollars per year in fees and taxes. Medallion holders alone pay $1.5 million per year in licensing fees.

If the mayor means (as he seems to imply) that he can solve San Francisco's deficit problems by selling cabs, he's dreaming. If he auctioned off all of the fleet's 1,500 taxis for $400,000 a piece, it would indeed cover his deficit. But (legal issues aside) who would buy the taxis in such a scenario?

Can you imagine the outcry that would take place if Newsom tried to pull a stunt like this in another industry? What if he decided to take over the city's trucking businesses? Or beauty salons? Or even massage parlors?

He would be condemned by the unions on one hand and civil libertarians on the other.

But cab drivers? Who cares? They're "underperfoming".

Mayor Newsom fought against a 1.395% business tax that could have raised millions of dollars for the people but would have hit his friends and himself.

Gavin Newsom apparently thinks that somebody has to sacrifice themselves for the good of the city but it's not going to be him or his cronies.

Let it be the cabbies.

The Independent Contract - In Sum

Over the last 30 years, the law has pretty much caught up with the Independent Contract. A series of court cases have given drivers Workers Compensation and, maybe, Unemployment. It's no longer legal for companies to demand insurance deposits from their drivers.

It's also true that I have probably romanced the virtues of being an employee. It's doubtful that, under the political climate of the last three decades, we would have been able to form a union even if we been given employee rights. Unions have hardly proven themselves to be bastions of morality either. A friend of mine, in a Longshoreman's Local, had to tip union agents to get shifts. And, the foundations of building have been poured on many an ex-Teamster.

The level of corruption seems to be about the same. On the other hand, union workers are usually much better paid.

But there are advantages to driving a cab as an Independent Contractor. It's a cash business and nobody tells you what to do. You can take radio calls or not, work the airport or not, use any system you can think of to make money and take breaks (or not) any time or any place you like. Furthermore, an economic recession is unlikely to cost you your job. All that happens is that you make less money. In fact, people laid off from other industries invariably swarm taxi companies looking for work during recessions. Most of them make less money driving cab than they had been making before but at least they make something.

Comparing lease drivers to workers in 19th Century sweat shops is also way off the mark. You can do what you want when you drive a cab and, benefits aside, taxi driving pays better than most clerical or retail jobs. The combination of the freedom and cash is what got me into the business - and what keeps me there.

However, the biggest advantage of the Independent Contract clearly goes to the companies. The ability to fire people (excuse me "cancel their leases") without cause has given cab companies way too much power and led to abuses that I've written about earlier (see Alleged Tipping and the series on the Independent Contract). Beyond that it has saved the companies huge amounts of money that they have not had to pay in the way of taxes and benefits.

The gates and gas system has also made the taxi industry recession proof. Although the taxi business is currently down (by most accounts) 30% to 50%, the companies are flourishing. Former stock brokers, computer geeks, money managers and (god knows) maybe lawyers are lining up to drive cabs. But they can't even get an application. The companies are backlogged with drivers. They aren't hiring.

I guess the question is whether or not this is a good thing. As a medallion holder, I appear to be benefitting from this system. But I wonder? Is is right for companies to be flourishing when the amount of actual business they do is in decline? Is it right for them to be protected from the laws of the marketplace?

Most the plans for "reforming" Proposition K, for instance, call for putting more taxis on the street. The people who drew up these plans act as if the current recession didn't exist. As such, these plans as disconnected from the economic realities of our time. Would this be happening if the companies were actually in the cab business instead of the leasing business?

Is the public truly being served by this system? The major complaint about the taxi service in San Francisco is that it's hard to get a taxi in the outlying neighborhoods. But a company cannot tell an Independent Contractor what to do. That would make the driver an employee. Therefore, the companies cannot assign a driver to a call or tell him or her to work a specific area or neighborhood. Because the drivers themselves are on a gate system, they cannot afford to stay in neighborhoods with little business and naturally head back toward the busy areas as fast as they can.

Because the City has not allowed companies to raise gates thus shrinking their income and to avoid legal problems arising from the current system, taxi companies are more and more going to long term leases. They give up their day to day control but they don't have to sweat the details either.

This is a big problem for dispatchers by the way. The days of FIVE in and FIVE out are becoming a thing of the past. They're lucky if the long term lease drivers toss 'em TWO a couple of times a month ... and that's how it should be.

However, it's difficult to see how the long term leases serve the public. Most of the drivers appear to work the airport and the companies have no control over them whatsoever. It's hard to envision these guys spending a lot of time in the Sunset taking radio calls.

I'm tempted to say that I think the system is broken and needs a drastic reform. In fact, in an earlier version, I did. But that's a drastic exaggeration. I got carried away by my own rhetoric.

On the other hand, the public isn't being served as well as it should be, the drivers are treated unfairly and the companies themselves might do better under a different set up.

The gate and gas system may be outdated. As it is the only way the drivers can make more money is by raising the fares and the only way the companies can make more money is by raising the gates. The fares are already among the highest in the country and it's hard to see how raising them now would do anything other than lose business. The gates are already too high for the amount of business we have.

There has to be a better way. All we need is a Solomon to figure it out.

Players & Plans: Carl Macmurdo & the Matt Gonzales Committee

When I saw MHA President Carl Macmurdo at the Board of Supervisor's meeting last week he said that he and his group hadn't come up with a plan yet. For a moment I thought that he might want to pick the brains of the members but it turned out that he won't meet with the general membership until October.

Carl appears to be a true believer in experts and their expertise (forgetting that it was just such people that sank the economy) so he and few board members intend to work up a plan with Matt Gonzales and Hansu Kim. I can't see how this could be too much different than the plan Macmurdo worked out with the same Gonzales Committee four years ago. Therefore I'm going to morph Carl's March 2008 proposal with that of the Gonzales Committe and take peek at some highlights. What the MHA would like to see would be:

• An end to Proposition K
• Transferability of medallions though a sealed bit auction system.
• A "grandfathering" of medallions to the top 150 to 300 people on the list.
• The auctions would only be open to working drivers but there would be no preference given to years of service and the list would be abolished. There would be only one owner per medallion.
• A driving requirement would be kept in force for the new owners subject to allowances for short term disability and other emergency needs
• A fee of around 20% would be changed to transfer the Proposition K medallions. A fee of 5% to 10% would be changed to re-sell them.
• Convenience and necessity hearing would be required before the City could issue new medallions but, if the need arose for new permits, the City would keep 100% of the money.
• 50% of the money earned by the City from auctions would toward promoting the health and welfare of all drivers

Since I belong to the MHA, I would like to like this plan but there are several things that I disagree with:

• Solving the problem of fairness to List drivers by "grandfathering" medallions. Taxis should not be put on the street unless they are needed.
• Convenience and necessity hearing aside, the plan seems to encourage the City to sell medallions as a source of revenue. Such hearing would have to have much stricter standards than they do now.
• I don't see why a driving requirement should continue once the medallions are sold. The cost of such mickey-mouse record keeping is considerable not to mention annoying and pointless.
• Any auction system will necessarily favor drivers able to raise money over drivers with skill and will easily open itself up to corruption - as it does in other cities like New York.
• "Grandfathered" or not, many drivers who had committed themselves to driving because of Proposition K would be screwed.

On the other hand, transferability fees may be only realistic way to raise enough money to pay for driver's medical and retirement benefits.

I think what I dislike the most is the logic behind this plan as well as the behavior that has resulted from this logic: like the MHA's protesting of neither the $15 million MTA fee nor the plan for the City to arbitrarily put 100 cabs on the street.

Actually I don't like the logic and reasoning behind most of the plans submitted to Ms Hayashi. Many of the justifications are exaggerated, distorted or false. I'll be dealing with them in a future post.

Players & Plans: Luxor

While we're waiting to find out when (or if) the Town Hall Meetings will resume, I thought that it'd a good time to glance at the players and their plans.

Reading through them, I've come to realize that I've arrived late at a party that's been going on for years. Many of the proposals are far too detailed to have been worked up in response to Newsom's bomb. While I was whiling away my summers riding camels on the Silk Road or trading vodka shots in Mongolia, cab drivers were feverishly mapping out strategies and engaging in back-door negotiations - all with the dream of being ready for the death of K.

In short, the allegations that I am "uninformed" are true. However, I'm less "uninformed" than any official journalist is likely to be. Reviewing these plans will hopefully lead toward enlightenment. I only have space to look at a few main points. For a full summary check with sftaxi@sfmta.com .

Let's start with Luxor because it has a plan that is both unique and, up to this point, has had the most effect. Drawn up by President and General Manager John Lazar together with Charles Rathbone, the proposal features:

• A $50,000 up front fee to be paid by a K medallion holder for the right to transfer the permit via an auction. It's a striking idea that the MTA liked so much that thy stole it.
  
• A two tiered system that would consist of two classes of medallions and medallion holders.
  

1. Transferred medallions, called "M", could in turn be auctioned off like medallions elsewhere. The transfer fee for these would be 5% - 20%. And, once an M always an M.
2. K medallions would also be maintained as would the List. K cabs would be given out as they are now. Where would they come from? From drivers who died or retired without transferring their medallions and from the City which would issue 10 to 20 new cab permits each year. K drivers from the list would always have the option converting to an M.

• Drivers high up on the list would be able sell or auction off their positions to drivers lower on the list.
• The City would give a few corporate medallions every year to dispatch companies like Luxor as a reward for top performance.

While it's authors see lots of winners (money for the City, protection for both medallion holders and drivers on the List as well an exit strategy), the proposal also has difficulties.

• $50,000 is a chunk of money. It = two and a half years of my life. And up front?
  
• The figure is so high that it doubtless has already destroyed any chance of negotiating a reasonable compromise with the City. Then again, at this point that might not be possible anyway. Threatening to steal all the medallions probably was Newsom's idea of negotiating.
  
• The amount may be so high that only desperate drivers would pay it. Once the old and infirm had cashed out, the medallions would probably move very slowly. Many medallion holders wouldn't be able to raise the money or wouldn't have enough left to retire on after they did sell their medallion.

As for Luxor's plan for a dual system ...

• It appears very complicated and the best ideas are usually simple. On the other hand, San Francisco's taxi industry is very complex. Maybe there are no simple solutions.
• It also seems to me that the supply of K medallions would dwindle fairly quickly as most holders converted to the M permits. Charles Rathbone thinks that 30% of K drivers would chose not convert but even so the number of K medallions would eventually run low.
• For me, that is the major flaw of the dual system. It can't be maintained without constantly putting new taxis on the street.
• And, the cabs would be added solely to make the system work - not because of any real business demand or necessity.

The more I think about this proposal, however, the more I like it. It needs to be tweaked of course but it's bold and creative. It shows a willingness to look at the situation with fresh eyes instead of being mired in the usual us vs them narrative. Now if only Mr. Lazor could put that $50,000 back in his paper bag.

Chris Hayashi on Illegal Taxi's Etc

I called Director Chris Hayashi of  the MTA'S Taxis and Available Services to find out when her Town Hall Meetings would resume but she couldn't give me an answer. Her office is swamped with numerous problems such as moving personal from the Taxi Commission and re-checking the qualifications of almost every driver who ever had dealings with Officer Makaveckas. It'll be at least a few weeks before she'll be able to plan the meetings.

She did say that soon after June 19th her office will start issuing the thirty or forty medallions that have been backlogged by the Proposition A changeover to the MTA. Most of the medallions come from either the deceased or revocations and will be handed out to drivers on the list ala Proposition K. 

Hayashi's department is also gearing up for a crackdown on illegal limos and taxis. They'll start by going after the cabs which she says are, "on the front burner right now." "The "initial stages" of the operation are already in planning. This entails a a lot of administrative detail. "The best work requires the best preparation ...  the groundwork is being laid so that we know when we do hit the ground that we are effective. I don't want to just chase them (the illegal taxis) around."

These preparations sound incredibly complex and include:

• Putting the Traffic Division under the control of the MTA which "will get more responsiveness from traffic cops on MTA issues and taxis is now one of those issues."
• Coming up an enforcement plan. "The airport has one," Hayashi said, "so we're going to do our own for downtown ... we want that before we turn the police loose because ... we want to make sure that we have what we need for the district attorney to prosecute."
• "We want to talk to the District Attorney's Office first, give them a heads up that these cases are coming , let his office know how important it is to prosecute these and find out what they need in order to make sure they can prosecute effectively."
• And of course they need to identify and find the addresses of the illegal taxis.

Hayashi's team is compiling a list of illegal cab - including four that I gave her. Drivers can help in this effort by sending their photos of taxicabs that they think are illegal to:  sftaxi@sfmta.com or they can call 415.701.4400 for with other information. 

Some things you might look out for are:

• A fleet of taxis with a 333-3363 phone number pretending to be yellow cabs. If would be helpful if the MTA knew exactly how many bogus taxis are in this fleet. So if you see any of these cabs try to photograph them. 
• Any location where you see illegal taxis parked - especially if it looks like a base address.
• Try to get license numbers, vehicle numbers, color schemes, phone numbers and any thing else that might help to identify the fake cabs. It might also be useful to take down the cross streets where and the time when you saw them.
• For now, focus only on the taxis. The limos are a more complicated issue so the MTA is going after them later.

One thing drivers should avoid, however, is any kind confrontation, vigilante action or citizens arrest. I can attest to the wisdom of this.  One limo driver I photographed last year threw a punch at me and another one tried to run me off the road with his limo. While I personally found these events entertaining, I sensed that my customers didn't. As Hayahsi puts it, "avoiding fist-fights is a good thing."

She would also like all drivers to check their brakes before starting a shift. San Francisco's cable car fleet is small.

Hayashi thinks that she can get $5,000 for every illegal cab she catches. She's looking forward to this "because the city needs the money." 

Once director Hayashi has "all my stuff in order ... it'll just be a matter of going out and mopping up the floor. We'll swoop down and pick 'em off one by one."

A Micro History of S.F. Taxicabs with Definitions

In order to understand the issues involving the Mayor and San Francisco cab drivers, a few definitions and a little background are necessary. For starters, it's impossible to understand anything unless you know what a medallion is.

• Medallion = a license to own and operate a taxicab. I believe (correct me if I'm wrong) that all U.S. cities have some form of medallion system. In all cities, except San Francisco (once again, correct me if you can) these medallions are for sale, usually at auctions. In New York City they cost upwards of $500,000. They are currently not for sale in San Francisco because of:
• Proposition K = which was passed by San Francisco voters in 1978 and gave the city a unique system. The medallions are not for individual sale but are owned by the city and the rights to use them are sold to working drivers for a fee. There is a limit of one medallion holder (often called an owner) per taxi. He or she can use the medallion as long as he or she follows certain rules. When the holder retires or dies, the medallion reverts to the city and the rights to use it is sold to the the first driver on a waiting list. Over the years, the rules covering the holding of medallion have evolved. Currently: 

1. It takes an average of fifteens years to get to the top of The List.
   
2. A driver has to have worked a minimum of 800 hours per year for five of the last six years to qualify for a medallion.
3. Medallion holders have to work a minimum of 800 hours per year to keep their medallions.
4. If the holders cannot work because of disability or illness, the medallions are be taken away and given back to the city.
5. The San Francisco Medallion Holders Association has filed a lawsuit against the above rule on the basis that it violates the American Disabilities Act. A verdict is pending in the Ninth Circuit Court of Appeals.
6. Proposition K could not be changed except by San Francisco voters. Numerous attempts to eliminate Prop K were all overwhelmingly voted down. 
7. Then along came:

• Proposition A = which was passed by the voters in 2007 as a way to raise money for the reform of the Municipal Transportation Agency (MTA). The money was primarily to be used for the repair, rebuilding and improvement of the bus and rail system. The measure contained a one sentence rider that put taxicabs under the control of the MTA. The Mayor took this to mean that the voters had overturned Prop K.

Definitions 

• Independent Contractor = those who have signed an independent contract with companies rather than work for a salary. All the cab drivers in San Francisco are Independent Contractors. It is an accurate description of the condition of Medallion Holders. For ordinary drivers, however, the contract is pure fiction. About the only thing they are really independent of is the protection of most labor laws. Thanks to a Supreme Court reject named Robert Bork, independent contractors can't legally form a union.
• The List = the waiting list that cab drivers sign up for the right to own a medallion. The medallions are awarded on a first come first serve basis.
• Medallion Holders = guys who have bought the right to own and operate taxicabs. Often incorrectly called "owners."
• Medallion Holders Association (MHA) = what it sounds like. An organization devoted to the interests of the medallion holders.
• Metropolitan Transportation Agency (MTA, SFMTA) = The agency that controls San Francisco's buses, light rail, taxis and other vehicular sevices.
• Transferability = The right to transfer or sell a cab medallion to someone else.
• United Taxicab Workers (UTW) = what is sounds like. An organization devoted to the interests of non-owner cab drivers. It's an association, not a union.