Way at the end of the Board of Supes meeting Tuesday, in the list of resolutions that are typically adopted without even going to committee, was a discussion of a critical issue that has been largely ignored by the local news media but impacts the lives of hundreds of people.
The topic, technically, was a resolution urging the SFMTA and the San Francisco Federal Credit Union to negotiate a fair deal around the post-litigation question of the price of taxi medallions.
What it’s really about is a terrible failure of policy leadership at City Hall that encourage hundreds of mostly immigrant workers to buy for $250,000 permits to operate a cab—right before that same leadership allowed Uber and Lyft to illegally devastate the taxi industry.
Now these drivers are heavily in debt, or have faced foreclosure, with no way out—and the city refuses to take any responsibility.
In fact, the city fought in court an effort to hold it accountable for the mess, and won.
Here’s the back story.
Since the 1970s, San Francisco regulated the license to drive a cab, also known as a medallion, under a seniority system. Nobody could drive without a medallion, but if you owned one, you could lease it out when you were not on the road.
So when you started driving, you had to lease a cab and a medallion, meaning you had to pay maybe $100 a day to take out the taxi. After paying for your gas, you kept all the fare money that was left.
It was a living, but not a great one.
But as long as you were driving, you could put your name on the waiting list, and after maybe 15 years, you would get the medallion—basically free. After that, you could drive without paying the lease fee, and you could lease out your medallion to others. At that point, you had a good middle-class income.
There were problems, sometimes serious. The rules, for good reason, allowed only active drivers to hold medallions; you couldn’t get one and then go into another line of work and just make money leasing it. Sometimes people would start late, and get to the head of the line when they were 60 or older, and would have to keep driving several shifts a week, even when they had no business behind the wheel, to keep that golden ticket.
When you retired from driving, you had to give the medallion up.
The entire system kept everyone in the cab industry from working as a traditional employee, so drivers often had no stable health insurance or benefits.
On the other hand, the system guaranteed that the drivers, not big corporations, controlled the permits. No corporation could own or operate a medallion.
Then in 2010, the SFMTA came up with the idea of essentially privatizing the medallions. The agency decided that instead of a wait list, the medallions would go on the market, and anyone who could come up with $250,000 could buy one.
That was harsh for the people who were at the top of the waitlist for a free medallion. All those years waiting, and now? If you can’t come up with the money, SOL.
For the SFMTA, it was a huge windfall; the medallion sales brought in more than $68 million.
Some drivers liked the idea, which was similar to the system in places like New York. The San Francisco Federal Credit Union agreed to make loans, essentially mortgages, to pay for the medallion purchases, which let people start their own businesses.
The price tag was set at a level that would allow a driver to make a good income after making the loan payments. And, of course, since the permits were sold on the market, if the value went up, that gold ticket could mean a nice retirement.
The deal the city cut with the credit union: The sale price of a medallion would never fall below $250,000.
Then Mayor Ed Lee allowed Uber and Lyft to start an illegal cab industry.
Gee, they were local tech companies, and Lee was going out of his way to woo the tech industry.
The cab drivers complained. These illegal cabs, flush with venture capital money, could charge far less than the cost of doing business, and undermine the regulated cabs (which had to charge the fares City Hall approved). They lost billions of dollars a year; that was chump change to the investors. It was the difference between surviving and not surviving for the cab drivers.
Some people who had jobs regulating the cab industry complained. Those people told me that this was a disaster in the making. Nobody in the Mayor’s Office cared.
After they got a hold in San Francisco by breaking the law with impunity, Uber and Lyft raised enough VC money to hire lobbyists who convinced the state to take over regulation of the so-called Transportation Network Companies, making it impossible for the city to do anything about them.
The cab industry, which was still regulated, couldn’t compete. Suddenly, those expensive medallions were almost worthless.
But since the deal with SF Federal states that the price would never fall below $250,000, the owners can’t even sell the tin badges at a discount.
That means the people who bought them, in good faith, were still stuck with the vig. And the tech lovers at City Hall really didn’t give a shit about these mostly immigrant workers.
Neither did most of the news media, who were also enthralled with the tech industry. So far, only KQED has done the kind of in-depth reporting that that story needs.
When the cab industry cratered, drivers couldn’t pay back the loans. San Francisco Federal sued the city, arguing that city officials knew they had created an impossible situation.
But in SF, the battle stayed in the courts, and the city won. Missing from all the negotiations and litigation: the medallion holders.
Mark Gruberg, a founder and board member of the San Francisco Taxi Alliance, told me that the big problem is that the city refuses to take any responsibility for creating this situation.
But because of the way the SFMTA was created (by voters, through a Charter Amendment), the Board of Supes has no direct authority over the agency.
Sup. Aaron Peskin told me that “all we can do is urge them to take action.” He introduced the resolution, and during public comment, a number of drivers and medallion holders weighed in.
The medallion fail program is a human tragedy that can only be blamed on the City of San Francisco,” one driver said. “It’s up to you to make it right.”
I waited on the taxi medallion list for over 15 years, and that tied me into the cab industry, my prime earning years, waiting to get this medallion,” another driver noted. “When I finally got near the top of the list … you ended the program and the city told me I had the option to either go away or buy a medallion.
“At that point, I bought a medallion … Now I’m living under tremendous debt under the bullying of the SFMTA. Now they’re trying to find a half-baked way out without really giving us relief out for our economic disaster. It’s like passing on debt to your children after you die. So in a city like san Francisco, the city should help its citizens and not prey on them.”
The resolution passed. The SFMTA will very likely ignore it. And the victims of this bait-and-switch scam caused entirely by the city’s failure to crack down on Uber and Lyft when they first started to operate illegally, will continue to suffer.