A taxi medallion just sold for the lowest price in more than a decade. But new rules could help owners avoid huge losses
One of the 13,587 pieces of tin that give yellow cabs the right to pick up street hails sold in March for $241,000, a low not seen since the early 2000s and a far cry from the $1.05 million that a similar taxi medallion fetched in 2014.
For some quarters of the taxi industry, the sale is one more sign of how far the yellow cab business has deteriorated since Uber gained traction in New York starting in mid-2014. The previous low for a medallion sale during the past year was $325,000, last April, though there also have been sales, sometimes in foreclosure, for as much as $600,000.
But the low sales could be unreliable indicators, given the rule changes implemented by the Taxi and Limousine Commission to help stabilize the market for medallions.
The most recent change took effect March 21, shortly after the $241,000 sale. It allows owners of a single medallion to sell it to a fleet owner or to another so-called independent owner. Previously, those independent owners could sell only to a buyer who did not already own a medallion.
With few investors wanting to get into the taxi business, independent owners have struggled to find buyers. That has depressed prices further.
The March rule change followed the repeal last year of a regulation requiring independent owners to regularly drive the cab they own.
The new rules “are not panaceas, but they reduce the pressures in the market, and a seller may have an option other than going for the lowest price,” said Arthur Goldstein, attorney for the Taxicab Service Association, a group of credit unions.
The new rules also allow credit unions to work out arrangements with lease managers to take over foreclosed medallions and have them continue to earn money, rather than put them up for sale at distressed prices.
Goldstein added that the small number of sales taking place showed that owners were betting that the industry could turn itself around. “There aren’t five of these [low-priced] sales, or 10 of them,” he said. “There’s just this one.”
Nonetheless, credit unions have been hammered by the decline in medallion prices and the inability of drivers to pay off their loans, which sometimes include mortgages taken out against the higher, earlier valuation of their medallion. State regulators in February took control of troubled Melrose Credit Union, which managed thousands of taxi loans, after delinquencies surged. Montauk Credit Union was seized for the same reason in 2015.
Slump or catastrophe?
Still, the small number of sales and their differing circumstances have made it hard to gauge the market. Matthew Daus, a former head of the TLC, recently had a CPA do an appraisal, using a discounted cash flow analysis, for an independent medallion, as part of a bankruptcy case. His finding was that, as of the end of last year, it had a value of around $575,000.
Daus maintains that the industry’s performance has not been as bad as the decline in medallion prices would suggest.
He noted that the total number of taxi trips fell 11% last year, to about 123.7 million, according to TLC data. The total dollar figure for yellow taxi fares fell by 9% last year, to $1.8 billion. “They’re not great numbers,” he said, “but they’re not catastrophic.”
There is no question, however, that the business is in decline, which the industry blames partly on regulations—including wheelchair-accessibility mandates—that have been applied to cabs but not to e-hail vehicles. “What this sale demonstrates is what we, as independent medallion owners, have been saying for the past three years,” said Nino Hervias, a member of the Taxi Medallion Owner Driver Association. “The TLC’s failure to regulate this industry fairly has destroyed our investments and advanced the interests of a $60 billion corporate predator.”
Uber, meanwhile, maintains that it is looking after the interests of riders and of drivers who don’t own medallions.
“The price of a medallion is not an effective measure of how well our transportation system is serving riders,” a company spokeswoman said.
“Instead of serving banks and medallion owners, we should focus on the ability to finally get an affordable, reliable ride in communities outside of Manhattan, and offering drivers more choice.”
Even with the rule changes, there might be more trouble ahead for medallion owners.
“Allowing corporate fleets to bid for independent medallions is a positive development and could help stabilize the market,” said Keith Leggett, an analyst who follows credit unions. “However, the viewpoint of people who deal with distressed assets and who track the taxi market is that lenders are going to end up repossessing a large number of medallions. They will be coming onto the market in the second half of this year, and that will further depress the price.”
A version of this article appears in the April 10, 2017, print issue of Crain’s New York Business.