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Monday, September 27, 2021

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News + PoliticsOpinionSF has exploited, failed, and bankrupted its taxi drivers

SF has exploited, failed, and bankrupted its taxi drivers

Mayors Lee and Newsom sold pricey medallions to make money -- then let Uber and Lyft make those investments worthless. The drivers deserve help.


In 2019, in a series of Pulitzer Prize-winning investigations, The New York Times exposed how government officials stood by as a generation of cab drivers was exploited, victimized by predatory lending, trapped with unpayable loans, and driven to poverty and despair:

New York City in particular failed the taxi industry. Two former mayors, Rudolph W. Giuliani and Michael R. Bloomberg, placed political allies inside the Taxi and Limousine Commission and directed it to sell medallions to help them balance budgets and fund priorities. Mayor Bill de Blasio continued the policies.

The parallels of this human tragedy are all too familiar to San Francisco cab drivers. Former Mayors Gavin Newsom and Ed Lee sold medallions – the licenses that allow an operator to drive a cab — to balance budget deficits. Under Lee’s administration, tens of thousands of quasi-taxi Uber and Lyft vehicles — without medallions — flooded our streets selling rides below cost, which as a result, trapped cab owners with unpayable loans and drove the entire taxi industry into poverty and despair.

Cab drivers protest outside of Uber HQ in San Francisco.

Government officials of that time and subsequent mayoral administrations just stood idly by. Their actions, or the lack thereof, had a profound impact on the lives and careers of cab drivers who — in good faith — invested a lot of money and many years of their lives in the medallion system they treasured as their unofficial retirement pension.

Unfortunately, few media outlets have done in-depth reporting about what led to this decade old tragedy nor has the plight of medallion buyers gotten the attention it deserves.

Just in case you still don’t know, or perhaps, in case you still don’t care, the medallion sales program masterminded by Newsom and carried out by late Lee had one objective only: Take advantage of a money-making opportunity by transforming the distribution of taxi permits in San Francisco into a system similar to that of New York City.

Under their respective administrations — from early 2010 to the spring of 2016 — the San Francisco Municipal Transportation Agency sold hundreds of medallions for $250,000 each and balanced their budget on the backs of hardworking cab drivers who otherwise would have earned a medallion for almost no cost through the existing waiting-list system.

Lyft had already been using private vehicles as on-demand taxis, providing illegal taxi services in the city since May 2012. Uber would soon add an UberX choice to their App to participate in the same activity which then-Uber CEO Travis Kalanick had referred to as “criminal misdemeanor pickups.”

Instead of cracking down on those yet-to-be-regulated app-summoned taxis, Lee questionably shielded these companies from taxi regulations and gave away jurisdiction of these new entrants to the California Public Utilities Commission, a state regulatory agency.

And, instead of halting the medallion sales program. at an August 2012 meeting, the MTA Board — without hesitation — ignored the warnings and rushed to permanently adopt the program, recklessly pushing for more medallion sales until the market crashed in April 2016, trapping more medallion buyers with loans for which they wouldn’t be able to pay.

Long before the CPUC ruled Uber and Lyft Transportation Network Companies, Lee — in an apparent betrayal of his sworn oath to uphold the law in office — embraced both companies in his State of the City Address in January 2013 and later, to celebrate Lyft’s one-year anniversary, proclaimed July 13, 2013 “Lyft Day” in San Francisco.

This brings to mind that Lyft had been operating illegally for more than one year and still got a trophy from the mayor.

And Newsom, the mastermind of the medallion sales program, as lieutenant governor in 2014 – acting without concern for medallion purchasers already committed to medallion loans — urged the California Legislature not to stifle innovation by heavily regulating TNCs.

Newsom and Lee should have known that Uber and Lyft posed a great risk to the medallion sales program and the taxi industry as a whole, and yet again, instead of making objective legal decisions towards a level playing field in the transportation-for-hire market, they chose to support, promote, and facilitate the unfair competition that would kill the medallion market.

For years, cab drivers were misled into buying taxi medallions at the very same time the city opened the doors for a vast oversupply of Ubers and Lyfts to provide the very same taxi service without having to comply with any taxi regulations and without the very same taxi medallions sold to balance the MTA’s budget at cab drivers’ expense.

If that’s not illegal, it should be.

The avoidable clash of the now-defunct medallion sales program with the unregulated rise of Uber and Lyft brought great financial hardship to all medallion purchasers and all medallion holders who acquired their permits before 2010. It has had an adverse effect on the entire taxi industry and it left the MTA’s lending partner holding a bag full of unpayable loans.

In March 2018, the San Francisco Federal Credit Union filed a lawsuit against the MTA over its actions related to the “Program.” The remaining causes of action are: 1) Breach of contract, 2) Breach of Implied Covenant of Good Faith and Fair Dealing. It states:

“The SFMTA repeatedly failed to inform the Credit Union that the City refused to bring TNCs under the SFMTA’s jurisdiction.”

It defies explanation and common sense that the MTA — fully aware of Lee’s position on TNCs — ignored the risks these companies posed to the taxi industry and carried out as many medallion sales for as long as they could in a medallion market bound to fail.

The reality is, the medallion sales program has failed and even though the MTA denies it, most of their policies to reinvigorate the program have failed as well. Not a single medallion has been sold since April 2016. What once was an asset, is now a liability.

Purchased medallions foreclosed upon are more than 270 … and counting. Medallion buyers still trapped with these loans, still trying to make their monthly payments on those devalued, currently worthless medallions, are driving themselves to their graves with no future prospects.

In a futile effort to materially increase income for medallion purchasers, the MTA has implemented several ill-advised policies detrimental to various other industry stakeholders, thereby also reducing public taxi availability.

The “Lyft Day” episode alone shows that the San Francisco is culpable for having had a significant role in the demise of the medallion value, clearly making all medallion holders and the taxi industry the real victims in this multi-million-dollar debacle.

The city’s responsibility is not only to the credit union but all medallion purchasers and all medallion holders who invested decades of their lives in the previous medallion systems. Nevertheless, the credit union is the only plaintiff in the claim; all medallion holders can do is wait and wonder what the outcome of this lawsuit will bring.

And as we wait for a possible trial — already postponed four times — the thought of a jury quashing this litigation, rewarding the city for acting in bad faith and stabbing the taxi industry in the back after using it as a cash cow, brings more fear and anxiety to a long struggling industry.

The situation in which the taxi industry finds itself today does not place it well enough to emerge from this toll-taking COVID pandemic, nor the financial damages caused by the positions taken by Newsom and Lee, nor the complacency of our representatives in the California Legislature who failed to properly regulate TNCs when they should have.

Although the taxi industry is not exempt from AB5, the state law represented a possibility to achieve a level playing field in the market. Now, with the passage of Prop 22, Uber and Lyft are even more emboldened to make a mockery of transportation and labor laws, dump more vehicles on our streets, exploit more drivers, and once again thumb their noses at lawmakers.

To its credit, the City Attorney’s Office is one of the plaintiffs in a lawsuit filed by the state attorney general against Uber and Lyft, enforcing AB5 retroactively. However, the office is also defending the MTA’s actions related to the medallion sales program in the credit union lawsuit.

Ironically, Uber and Lyft still deny being taxi services because they don’t have the rights to street hails. Even more ironic, Lyft rides in some Florida cities — targeting seniors who do not rely on apps — can now be ordered over the phone through an agent, just like a taxi dispatcher. Very possibly, Uber and Lyft will do the same in San Francisco.

If the city wants to only have Uber and Lyft on our streets, handing over 100 percent of taxi services to poorly regulated mega corporations with bad records, perhaps the city should sell them the rights to street hails and phone dispatching to bail out the entire taxi industry and make the credit union whole. Why not make Uber and Lyft pay for this?

And how about autonomous vehicle companies such as Cruise and Waymo testing their “robot-taxis” in San Francisco? Will the city have any jurisdiction over them? If so, will the city require them to buy medallions? If they provide taxi services in the city, why not require them to have taxi medallions as well?

In the wake of The New York Times’ investigations, the City and State of New York took actions to address their medallion crisis. The Attorney General’s Office and the Mayor’s Office opened an inquiry into the medallion loans cab drivers obtained. Recently, Senate Majority Leader Chuck Schumer pledged his support for debt relief for NYC’s struggling cab drivers.

Although it’s not nearly enough and even though New York City could still face an $800-million lawsuit from State Attorney General Letitia James over medallion loans, Mayor Bill de Blasio plans to spend $65 million from the federal stimulus package to restructure loans cab drivers acquired.

There is no relief for medallion buyers in San Francisco. Nonetheless, the MTA is the biggest recipient of a second windfall of $297 million from federal stimulus packages. As yet, there is no money from those stimulus packages allotted to the taxi industry. Medallion holders’ misery, pain and anxiety just linger on.

The truth of the matter still remains: The city didn’t care to protect nor act in good faith with the cab drivers nor the industry they were selling to and profiting from; they took the position to embrace TNCs even before they were given any legitimacy by the CPUC.

Our former mayors allowed Uber and Lyft to go from rogue to mainstream without having to comply with any taxi regulations and without the very same medallions cab drivers were misled into buying. The policies of Newsom and Lee doomed the medallion sales program and crushed the taxi industry as a whole.

The failure of the current medallion system is not to be blamed on the taxi industry. Its failure is a human tragedy that can only be blamed on the City of San Francisco. Therefore, the City of San Francisco must either take responsibility for its actions or be held accountable.

This is an injustice of epic proportions; it must end. Justice for the taxi industry is well deserved and it is long overdue.

Marcelo Fonseca has been a taxi driver for more than 30 years.

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  1. “The SFMTA repeatedly failed to inform the Credit Union that the City refused to bring TNCs under the SFMTA’s jurisdiction.”

    Isn’t this prevented by state law? The state was heavily-lobbied by the TNCs to tie the hands of local jurisdictions.

  2. I’m with pollyb on this one. Pay attention if you spend time driving in the city. Lyft and Uber drivers are LOST.

  3. Uber is worth $70 billion? Time to short in my opinion. The company’s whole business model is based on profitability to be obtained when self driving cars are used, which may be never. The company is despised by almost every government in the world. And they are a public menace, increasing traffic and decreasing efficiency. The only reason they should have any value at all is the possibility that someone like Amazon might take them over for a delivery business.

  4. Polly,

    A useful rule of thumb, whether entering a yellow cab or Uber/Lyft, is to always know your route beforehand.

    But perhaps more so with yellow cabs who have been known to take a long route to boost the fare, something not possible with Uber/Lyft since you know the fare before you get in.

    And by the way, plenty of yellow cab drivers do not know their way around the city. It’s not like London cabbies who have to do “The Knowledge”.

  5. I make it a point of using Flywheel. I support the taxi trade of professional drivers who know the city. When I’ve used Lyft (never Uber), I’ve had drivers who were utterly dependent on faulty or failing GPS devices.

  6. I disagree that it was wrong for the city to make money on taxi medallions—medallions are city property, after all! And the choice to open the floodgates to ride hailing services was a popular policy decision that the city/state should have the right to make, although I do question the wisdom of that decision. I think the city’s biggest sin was in vesting the “unofficial retirement pension” for retiring medallion holders. Rather making medallion purchasers pay $250k to retirees with a 20% transfer tax + 9.25% interest, the city should have instituted a tax on all medallion holders to raise the equivalent revenue. That way, the City would have borne the risk of medallions dropping in value rather than medallion purchasers bearing that risk. They constructed this fragile system to sell medallions for $250,000 and get loans from the credit union for the purpose of giving the previous owner a heavily taxed windfall.

  7. For the same reason you’d shop at the corner store instead of Amazon. You do shop at the corner store, don’t you?

  8. At least in NYC you can hail a yellow cab on the street. Try doing that in SF in the rain or outside of a few popular corridors.

    Uber and Lyft do well in SF because we are a high tech area, But also because yellow cabs do not work well in most areas of the city. The business was a monopoly with all that that implies, and so was wide open to disruptors.

    Uber is now worth $70 billion. What would anyone pay for the city’s yellow cab business and all its vested interests and monopoly aspirations? And why can I get downtown on an Uber for less than what Muni charges?

  9. Follow the money. Who in city government may have been profitted from supporting the Uber Lyfts? Who among the board and staff? Who profits from the demise of the taxi business?

  10. FINALLY, The truth, the whole truth and nothing but the truth about the scam perpetrated by the city upon its cab drivers and cab companies by politicians who never took cabs and whose only interest was feathering their beds and stuffing their pockets. Maybe the recall of Newsom is the right thing to do.

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SF has exploited, failed, and bankrupted its taxi drivers

Mayors Lee and Newsom sold pricey medallions to make money -- then let Uber and Lyft make those investments worthless. The drivers deserve help.
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