Mayor’s taxi industry proposal won’t level the playing field with Uber, Lyft

File photo by Emily Jan

As ride-hailing services like Uber and Lyft expand, hundreds of taxi owner-operators face medallion foreclosure.

The advent of ride-hailing companies, mainly Uber and Lyft, has dramatically expanded the number of for-hire vehicles in the city and improved service in traditionally under-served communities of color.

At the same time, it has precipitated a collapse in the taxi industry and a new foreclosure crisis involving loans used to finance the once-valuable medallions required for taxis.  Hundreds of small owner-operators who account for 40 percent of the city’s medallions face economic devastation. Most of them are immigrants and people of color.

The taxi industry did a poor job serving black communities in particular. But I’d argue that even the most discriminatory driver didn’t create the extreme racial segregation in which we Chicagoans live, where fear is one of the main factors keeping people divided.

And it does no one any good to drive people who’ve worked hard all their lives, and are often people of color themselves, into economic penury. That’s what’s happening, and it’s a direct result of the city changing the rules of the game.

Just four years ago, when there was a strict limit on the number of taxis in the city, medallions were selling for $350,000.  It was a good investment, and drivers took out mortgages to buy medallions from the city.  They would work off the loan and have an asset with which to finance their retirement.

But in 2014, the city allowed ride-hailing companies to operate unlimited numbers of vehicles. Since then, the taxi industry has been slowly collapsing. Monthly revenues are down 40 percent over the past three years, and no longer cover average operating expenses, according to Cab Drivers United (American Federation of State, County and Municipal Employees Local 2500). The union estimates that 40 percent of the city’s cabs are inactive, and their medallions headed for foreclosure.

Foreclosures were unheard of a few years ago, but are ramping up. But some 900 medallions had received foreclosure notices by March of this year, according to a union report, and 147 foreclosure lawsuits had been filed.  Expect those numbers to increase steadily.

Drivers who financed a few medallions, thinking they had a secure investment – and then paid for it with thousands of hours of hard work – stand to lose the wealth they thought they’d built up and find themselves saddled with crippling debt.

Last week, Mayor Rahm Emanuel (whose brother Ari is a major investor in Uber) proposed a few changes he claimed would “create a level playing field.”  They didn’t go very far in that direction.

One proposal would extend the maximum allowed age of taxis from seven to 10 years, or 11 for fuel-efficient cabs. Yet ride-hail vehicles can be any age as long as they pass inspection. Emanuel also proposed removing fingerprinting requirements for cab drivers, a requirement that Uber and Lyft drivers don’t face.

He proposed letting cab drivers accept pre-arranged fees through phone apps.  But the city would still require cab apps to be linked to in-vehicle credit card processors, limiting drivers’ access to apps, said Meg Lewis of Cab Drivers United.  Instead of being paid directly through an app-based account, as in the case of ride-hail drivers, cab drivers would still have to go to their companies to get their payments processed.  With Yellow Cab now filing for bankruptcy and other cab companies in trouble, that requirement could create problems for drivers getting paid.

One of the biggest inequities between taxis and ride-hails is in the amount of fees and taxes paid to the city.  Every medallion owner has to pay a $1,000 annual licensing fee.  Ride-hailing companies pay only $10,000 to license their entire fleet.  So Uber, a $60 billion corporation, currently pays about 52 cents per vehicle in licensing fees, Lewis said.

Taxis also pay about $1,000 in additional fees that ride-hail companies don’t pay.

Asked about relief on city fees, a city spokesperson told the Chicago Tribune they are “part of the city’s operating budget.”  So the city will continue to extract about $14 million a year from the industry, even as it drives it into the ground.

Maybe we don’t need a taxi industry – although unlike ride-hail companies, taxis serve people with disabilities and people without credit cards.  Maybe we don’t need small businesses, and everything will be run better by a few huge corporations. Maybe we don’t need full-time jobs, and we can all subsist on the $10,000 or so a year earned by the average Uber driver.

And, certainly, all cab drivers aren’t angels.  They’re an extremely independent breed, and some of them are headstrong.  They have all the vices the rest of us have. But that doesn’t justify the way they’re being screwed by the city.

  • Just Axin

    Sometimes people make bad financial decisions. How about the money the taxi industry raked in for decades as they kept their monopoly intact?