On Wednesday it was reported that San Francisco’s largest taxi company, SF Yellow Cab, would file for bankruptcy. While some of the initial reports speculated on competition from Uber and Lyft as the main causes, there are deeper issues here related to the medallion system. Guest contributor , Driver8, who’s driven for the cab companies and the rideshare companies in San Francisco, shared his perspective on the news.
What are the initial reports on the bankruptcy filing saying?
Driver8: I’ve found the article by Carolyn Said (SF Chronicle) to be the best so far. It focuses more on the facts (the $8 million lawsuit that Yellow Cab lost, for example), rather than conjecture about Uber and Lyft killing their business.
That article also describes the way Yellow tried to distance themselves from the driver in that particularly bad accident, much as Uber did in the Sophia Liu case. It’s the “Uber defense!”
Some of the earlier reporting, including from the SF Examiner, did try to shift blame to Uber and Lyft, however this connection was a bit tenous. In that SF Examiner article, the top of the column puts the blame pretty squarely on Uber and Lyft killing their business. But, then go on to state, “The company told the San Francisco Examiner its ridership numbers are healthy.” So, which is it?
What’s the real problem with Yellow Cab?
Driver8: It all boils down to renting cabs to drivers (which is getting tougher by the day), and retaining medallions, which determines the size of your fleet.
As Carolyn Said reported:
“Normally the company pays about $1,000 a month to rent a medallion — the city-issued right to drive a cab — during times when a medallion owner is not driving. One driver said he and other medallion holders haven’t received payments for a couple of months because the co-op is cash-strapped. That payment used to be about $2,000 a month a few years ago, before the advent of Uber and Lyft, he said.” (Emphasis mine).”
This is the real story. If a cab doesn’t get leased (i.e., no gate fee paid), Yellow still owes the cost of the medallion lease for that cab (be it to the city, or to an individual driver). With Yellow being the largest company, it’s more difficult for them to get all (or at least a high enough percentage) of their cabs rented each shift, and also have the greatest medallion liabilities to cover. When Medallion holders aren’t getting paid, or are getting paid less, they take their medallions to another taxi company – or at least attempt to do so – and the cabs go with them.
Tell us more about the Medallion system issues you’ve noticed?
Driver8: If you think about the guys who took out loans in the amount of $250k to buy a medallion, they did so under the expectation of receiving $1,500 to $2,000 per month from their taxi company, and to use those funds to cover their loan payments.
Now, they’re only getting $1,000, or (in some months) nothing at all. Of course, many want to sell (600 of them as of last September, as reported by KQED), but the MTA won’t allow them to sell their medallions.
Instead, the MTA says they need to place their name on a list to be matched with a buyer, and that this process will take up to four years? What happens when these drivers decide that they’re upside down on their loans, and they simply begin to default on them? This is already happening in New York and New Jersey.
What does this mean for the future of SF Yellow Cab?
Driver8: Here in San Francisco, the MTA has an exclusive arrangement with the SF Credit Union for financing these loans. My assumption (conjecture) is that the MTA is guaranteeing those loans. Does that mean the MTA absorbs the cost if those loans are defaulted on, and/or if their artificial price support (i.e., the matching list for buyers and sellers) fails to prevent a crash in the market value of an SF taxi medallion? Or, does the SF Credit Union take the hit? If it is the MTA, then that means we, the taxpayers, are on the hook, and that dollars intended for MUNI, and for city street projects, will be diverted to cover those losses. Even if we’re only talking about 600 medallions (which I’m sure is or will become seriously underestimated), then that equates to $150,000,000 in debt liabilities.
Regardless of all of that, the bankruptcy filing merely gives yellow protection from it’s creditors, for now, and doesn’t mean they will cease operations.
Thanks for Driver8, a long-time taxi driver and rideshare driver in San Francisco for sharing his perspective on yesterday’s news – SF Yellow Cab’s bankruptcy filing.