TAC 9-27: Gate and Gas vs Long Term Lease

The main topics of the latest TAC were Gate and Gas (GG) vs Long Term Lease (LTL) and the Driver's Fund. Both subjects were discussed at length and in depth so I'll deal with them in separate posts.

First, I want to apologize in advance for any omissions or errors. I recorded the proceedings and slacked on my note keeping. When I listened to the tape, however, the only people I could understand were myself and Carl Macmurdo, who sat next to me. This article, in other words, will be even more a stream of consciousness than usual.

                                   Random Stuff

San Francisco, the third most expensive city in the country, has the 10th highest taxi fares.

Some Pilot Program Stats:

• 18 medallions are being issued to people on the list.
• 1 SFMTA held medallion has been transferred (i.e. sold) to a buyer.
• 19 medallion holder medallions are in the process of being transferred.
• 9 Pre-K medallion holders have died during that last year.
• 3 Pre-K medallions have been sold.

Quote of the week,

"Cab drivers are all schemers and frauds ... and need to be watched." Bill Mounsey  (photo, above) on the drivers ahead of him on the Waiting List.

Leasing vs Leasing 

The above title is my way of noting that no other system  (like a split of the meter) is in play. 90% of the county may work on some form of employer-employee relationship but we in the cab business prefer to stay in the same league as strippers, office temps and call girls.

The Name Game.

The initial discussion centered around tying to decide what to call the new owners who chose to work their cabs as an LTL. Some people wanted to call the relationship an "affiliate" because the new owners would usually be affiliated with a color scheme but I think Rebecca Lytle of the San Francisco Federal Credit Union carried the day by calling them "Owner Operated" leases (OOLs.)

The Owner Operated Lease.

It's basically the same as an LTL, except the owners don't lease it from a company. They buy their own cars and chose their own drivers. If they associate with a company, they pay for the radio and the color scheme.

There are significant differences in the way the contracts are written because the credit unions demand certain information from the owners (I'll cover this later in an interview with Rebecca Lytle) but the taxis themselves are worked much like an LTL.

The Leasing Debate.

There are strong feelings on both sides of the GG vs LTL issue.

Cons
Green Cab manager and councilor Anthan Rebelos said that he had "about five pages" of things he didn't like about the LTL. Councilor and driver John Han, Mark Gruberg of the UTW and myself also spoke strongly against the practice. Putting our ideas together, you could come up with the following partial list:

• Hundreds of experienced drivers have lost their shifts or their jobs.
• They've been replaced by drivers with less knowledge
• LTL drivers are less likely to take radio calls.
• LTL taxis hurt service in the neighborhoods.
• LTL cabs are frequently subleased to brokers.
• These brokers are charging desperate people illegal amounts of money to drive shifts.
• This brings a criminal element into the industry and, as such, creates situations of potential violence.
• This is almost impossible for the MTA to police.
• The companies themselves often don't know who's driving their cabs.
• This increases the potential for catastrophic insurance losses; and 
• Endangers the public.

Pros

• Jim Gillespie of Yellow Cab says that LTL drivers are as likely to take radio calls as anyone else.
• In the past, he's also claimed that LTL drivers get into fewer accidents.
• A man whose name I didn't get (photo, right) said that he'd been driving for 34 years and had been given junk taxis under the GG system.  He now works under an LTL  and loves it because he's got a brand new cab and makes a lot more money.
• Driver Ton Lee, who represents Asian drivers at the airport, said that LTL drivers work hard just like everybody else and deserve consideration.

The Devil Made Him Do It.

John Lazar of Luxor Cab said that he resisted LTLs until 2004 when he "lost 24 GG medallions."

This echoed Jane Bolig of Desoto Cab who said, "medallion holders are diving the system" by setting up bidding wars between companies (Hmm - guilty). She also said that "insane" liability insurance rates were forcing companies to change the way they do business.

"Force" is a big word with Lazar who claimed that new buyers were "forced" to go OOL because of the high cost of their loans. At an earlier meeting, he had said that a buyer making $2,300 a month couldn't cover $2,700 a month loan. This time he asked Rebecca Lytle to confirm his theory.

Ms Lytle, however, did nothing of the kind, saying that their cheapest monthly rate was $1,446 per month for a 25 year balloon loan. She later told me that the rates for the other loans that she had underwritten were:

• $1,798 for 15 year balloon loan.
• $2,304 for a 12 year fixed rate loan.

Not Forced - Wanted.

Nonetheless, all but a few of the new buyers have chosen to become Owner Operators. This is something that few people at the Town Hall meetings anticipated and it changes the dynamic of the sales. All the calculations that were done to come up with the $250,000 fixed rate were based on a GG system.

Once upon a time, Director Chris Hayashi told me that she wanted to end LTLs. Even if she still wanted to do this, it would take three years to phase them out because of the money the drivers have spent on cars. And, what about the new OOLS?

There could be a lot more said about this subject ... and there will be.

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.

The Independent Contract - 5

I think of "tremendous minds" as belonging to people like Verdi or Goethe or Einstein who create beauty or expand our knowledge of life, not to some geek who figured out a new way to shaft people. But there is no denying that Robert Bork's interpretation of the Independent Contract was brilliant. His decision made it possible to wipe out 150 years of labor history merely by calling a thing by a different name.

Desoto Cab still had a few union people driving for them when I worked there so I became very aware of the difference between their status and mine. The union drivers were guaranteed a minimum wage, had paid vacations and sick leave, couldn't be fired without cause and didn't tip. I, on the other hand, could lose money (although I never did.), could be charged for unfilled shifts if I took a vacation or missed a day because of illness (which I also never did. Rather than pay Desoto for nothing, I passed my diseases on to my customers.), and could have "my lease cancelled" for no reason at all.

Little by little, the charming, silver-tongued Marvin had talked most of the union drivers into signing lease agreements. My favorite story was that he told one union man that he could keep his paid vacations and the rest of it even if he became a lease driver. "Why pay money to those damn unions?" Marvin asked him. The driver couldn't think of a reason so he signed the Independent Contract. Shortly after that, he took his yearly vacation. When he returned, the sucker discovered that Marvin had cancelled his lease.

Two of the teamsters still working at Desoto were Bob Franklin and Tom, whose last name I'm ashamed to say that I've forgotten. He suffered from a degenerative disease similar to MS and was a tireless worker despite his affliction. Bob introduced me to some of the top people from both the Teamsters and the AFL-CIO but they were unable or unwilling to help us because they were fighting just keep what they had during the Reagan era and they'd already lost in court over the Independent Contract.

We decided that the only way to attack the contract was to gain "workers rights." In order to do this we drew up a petition to that effect and brought it over to Rua Graffis of a group called the Alliance to polish the final wording. The idea was that the Alliance would help us get signatures. Once we had signed up more than half the drivers, we intended to bring the petition to the Board of Supervisors and, hopefully, get them to put a measure on the ballot stating that cab companies had to give drivers "workers rights." If our plan worked, it would have been possible to organize a union.

I thought that it would be very difficult to get the petition signed. There have always been a lot of drivers, like my good friend Murai, who liked the supposed freedom of the lease and didn't want to become employees. I also thought that many drivers would be afraid to sign and that it would difficult to explain our idea to foreign drivers who didn't understand our laws.

For the safety of the drivers, we decided to try and get the signatures at the airport. The first night we showed up, most of the drivers were Indians, Pakistanis and Sikhs. I didn't know how many of them spoke English or if they'd even talk to us. I would have been happy to get 10 drivers signed up.

I nervously walked up to a Sikh and handed him the petition. He silently looked at me and then slowly read the petition. He asked me for a pen and signed it. He gave it to another Sikh driver, who read it and signed it. The two of them then explained the petition to a couple of other drivers in their own language. Both the other drivers signed it. When we left the airport a couple of hours later, we had signed up most of the people in the lot. Three weeks later, with Bob and Tom doing most of the heavy lifting, we had signed up more than half the working drivers in San Francisco.

I thought that when we added the signatures that the Alliance had no doubt gotten we would have at least 75% of the drivers on the petition. But I couldn't get ahold of Rua. For some reason she wasn't returning my calls.

However, the magic number was 50% so I got together with Cliff O'Neil, who was the first president of the UTW and knew Supervisor Roberta Achtenberg. The year was 1990. We'd hoped that she would sponsor the legislation. In fact, she was very gracious to us and enthusiastic about our idea. "Let's get the ball rolling," she told us when we left. Cliff also lined up Supervisor and future District Attorney Terence Hallinan to write the bill.

In short, it looked a like a done thing. But I was new to insider politics at the time. Weeks went by without any action. I kept calling Cliff who didn't know what was going on either. After a couple of months, I stopped by to visit him and he told me that the legislation was dead. Achtenberg was still interested but no one else was. Terence Hallinan suddenly found the idea, "too complicated." The supervisors had been told that the cab drivers of San Francisco did not want employee rights. They wanted to be independent contractors. The supes did not want to meet with us. They refused to look at our petition.

I had a thought. I called up Rua Graffis and asked her what had happened to her signatures. "We will decide what the cab drivers of San Francisco want," she declared royally and slammed the phone down on me.

I later found out that Rua had helped sabotage "employee rights" on one other occasion. When the Democrats held their convention in San Francisco in 1984, then Mayor Dianne Feinstein had offered to give the cab drivers "employee rights" if the Alliance did not protest at the Moscone Convention Center. However, Feinstein made the mistake of letting an assistant make the call. The Alliance turned Dianne down because she didn't talk to them in person. Instead Rua marched around the convention hall protesting Feinstein with about 10 other people - thus giving a sound bite to the greatest union buster in American history, Ronald Reagan.

Since I didn't want to waste my time on a politics of absurdity and impotence, I decided to follow the old tried and true adage, "if you can't lick 'em join 'em." I went down and put my name on the list to become a medallion holder.

The last few years, I've been thinking of Rua with fondness. If it hadn't been for her, I might still be a lease driver bashing my head against walls.