Comments on: Why taxi medallions cost $1 million

By: Anjilyn

Anjilyn — Sat, 27 Apr 2013 08:15:18 +0000

Really I have to explain this to you? *sigh* this is so sad. yet another example of why a revolution needs to take place. Ok, listen up, this is not complicated. As the economy tanks, what has happened? More and more unemployed people, trying to find a way to make some kind of green, for food, houseing, clothes, you know, those pesky things all you idiot ass-hats with money think just grows on trees. The more unemployed desperate people there are out there, the more people are going to start looking at alternative ways to ear, like, “Hey, maybe I could drive a taxi?” Now you got all these hungry desperate people all trying to get a taxi medallion. It is supply and demand, the demand for employment vs. the supply which is non existent. Hence, $$$$ medallions that will only rise in price as this depression continues. You got this taxi driver who couldn’t possibly be bought off, nothing you could say or do would make him give up his medallion, it’s the only thing feeding him and his family. so hence, this item is an item beyond measure.

By: fade54

fade54 — Fri, 02 Mar 2012 00:10:35 +0000

Interesting stuff, however one part that is not clear to me are the charts showing returns in comparison to the S&P500.

The chart on the right showing the percent change is, I believe, adjusted for inflation in the case of the S&P but the medallion returns do not seem to match the visual for the inflation adjusted price of the medallion.

This (from a rough glance) has risen from an inflation adjusted $70-80k to $1000k a rise of 1200-1500%, not the near 7000% shown.

Am I reading this incorrectly?

By: manhattandave

manhattandave — Thu, 10 Nov 2011 06:02:54 +0000

I think that paying $1 million is a bad investment. There will soon be other alternatives including bike sharing, pedicabs, car sharing, limos and someday, robotic cars. Cars have already been tested which can drive city streets without human drivers.

It is really a scam that this artificial price level has been created with the colusion of the government soley for the benefit of taxi medallion owners. Increase the number of medallions, earn some money for the city, make more cabs available for consumers.

By: g8r82ny

g8r82ny — Wed, 09 Nov 2011 17:32:33 +0000

you economists are so quick to attach all kinds of economic theories and formulas you miss the obvious reasons. The reasons NYC taxi medallions appreciate at such a rapid pace are as follows: One, yes supply and demand most definitely is a major component and has two parts. One part is as the number of potential passengers and fares increases and the medallion suppyly remains constant, their value will appreciate. The second part is the fixed amount of medallions NYC has on the streets.
Factor two is the regulatory environment created by NYC and the contractual promise given to a medallion owner to operate on the streets of NYC. This permanent license to generate revenue enhances medallion value.
Factor three are the stringent lending parameters put in place by medallion lenders, which include public and private institutions. There is no predatory lending in the medallion industry and there is no such thing as a subpar loan. All loans are grade A paper.
And the fourth factor is fear. Medallion buyers drive the price up because it’s a buy now mentality. They’re afraid if they wait, they’ll pay more. End of story.

By: bklawyer

bklawyer — Tue, 25 Oct 2011 13:32:43 +0000

FRWIP – While driving a cab is a cash-based business with potential for money laundering, I don’t think that owning a cab medallion and leasing it out to a driver is likely to be nearly so-cash based nor present the same money laundering opportunities. The lease payments made by the driver to the medallion owner are probably not in cash, but even if they are, they would be limited to $82k (unless there is a whole black market in leasing cab medallions).

By: Geezerman

Geezerman — Sun, 23 Oct 2011 05:01:00 +0000

“No! if the number of taxis were allowed to increase, then the number of taxis would increase. Of course. That’s just a tautology. But the price of a cab ride would not fall, because that’s a separate piece of legislation”

Then you say the medallion owners are wasting their considerable political clout every time they go on the warpath against proposals to let non-yellow cabs pick up street fares? As they recently just did again?

If so, they are stupid for not realizing that the law of supply-and-demand has been repealed for the taxi industry.

OTOH, if a sufficient increase in the number of cabs picking up fares reduces the fares per medallion, how is legislation going to keep the revenue per medallion from falling? When it does fall, what will the medallion owners do to the price of a cab ride to keep their cabs from driving around empty? Even if they must use their considerable political clout to do it?

BYW, there is no reason whatsoever to think “utter chaos” would result if the city govt didn’t fix the price of a ride. Markets self-organize all the time, countless examples, including all the non-yellow taxis in NYC.

By: Frwip

Frwip — Sun, 23 Oct 2011 02:32:28 +0000

I would venture another line of explanation for those sky-high medallions costs. Taxis are largely a cash-based business and operating them is of prime interest to money launderers.

I seriously question the potential income estimates. $82,524 a year? It doesn’t tell the whole story, particularly if laundering is involved.

The current base rates for NY are :
- $2.50 per load-in
- $0.40 per unit

One unit is charged :
- Every 1/5 mile, when the taxicab is traveling at 6 miles an hour or more; or
- Every 60 seconds when not in motion or traveling at less than 12 miles per hour.

Source: http://www.nyc.gov/html/tlc/html/passeng er/taxicab_rate.shtml

Essentially, it means that at least 60 units are charged every hour while a passenger is loaded, regardless of the distance.

So, the absurd case of a cab running 20 hours a day at 80% and loading 2 rides per hour (a very ‘well run’ cab) will take in an absolute minimum of $484, running at less than 12 mph, not taking into account surcharges, peak hours, etc. $170,000 a year.

Factoring everything else, I’d say you can easily launder $400,000 a year in cash with a ‘well-run’ cab.

That’s a lot of money and that’s worth a lot of money.

My $0.02…

By: BradH

BradH — Sat, 22 Oct 2011 19:12:48 +0000

As smartphones become ubiquitous, it could allow this sort of change in the market. You start the app to flag a cab, are provided with fare bids and an estimated time until you are picked up, (and user feedback on the accuracy of these time estimates!) and choose the one you want. An app like Taxi Magic is halfway there already.

By: AndrewNYC

AndrewNYC — Sat, 22 Oct 2011 14:42:11 +0000

I’ll buy the argument that the price makes sense based on cash flow, but what explains the trend? That graph doesn’t match interest rates.

Maybe investors just discovered medallions as an asset class?

By: Finster

Finster — Sat, 22 Oct 2011 14:36:54 +0000

So, how many potential jobs are being regulated away at the behest of this cartel? It feels very Greek to me.

People want to make a living, jobs are scarce. Taking people from point A to point B is a relatively simple task, running a cab company by radio and dispatch is a little more challenging, but it’s a very projectable business.

On each monopoly I encounter, I tend to ask: Is it a natural monopoly and thus tolerable and in need of regulation to prevent excess. Or is it an artificial monopoly, which is created to serve the interests of a certain group. The intersts of New York City here should be naturally to prevent over congestion of the city through an excess of cabs. The question needs to be: Is there more usable road space and would there be more cabs viable to serve the demand for tansportation. Would this additional supply lower fares for customers and thus serve a more efficient market.
If the answer is yes to both questions, then not expanding the number of cabs is a decision that consciously enriches the license holders and impoverishes everybody else.

Restating the obvious sometimes helps.

By: Kaleberg

Kaleberg — Sat, 22 Oct 2011 04:22:39 +0000

Seattle has a deregulated cab system, but it is controlled by a number of large corporations that set the prices and handle dispatch. They have to post fixed rates, including the price for getting downtown to and from the airport. In most of the city, it is impossible to hail a cab. The density just isn’t high enough, so most cabs are on radio call like New York City black cars and gypsy services. It isn’t chaos, but I’ve never had a ride with some Joe Blow who just set himself up as a one man cab company.

By: qrt145

qrt145 — Sat, 22 Oct 2011 03:29:18 +0000

You must live in a bubble if you think that “utter chaos” would result if the taxi fares were not standardized, because that’s the way it works already for most of New York City. Most of the city is not served by yellow cabs, which tend to stick to midtown and downtown Manhattan and the airports. Uptown and most of the other boroughs are served only by livery cabs which are not legally allowed to pick up passengers who hail them from the street, but do it anyway. And while there is an official minimum fare, after that there’s no meter and it’s resolved by haggling or by popular knowledge about what the “right fare” is.

That’s the way it works in many cities. Sure, it may seem a chaotic to outsiders, but it works pretty well and I wouldn’t call it “utter chaos”. Yes, the tourists usually are overcharged.

By: q_is_too_short

q_is_too_short — Sat, 22 Oct 2011 02:10:25 +0000

would be nice for city to sell 1000 licenses for $1B, no? beats issuing bonds at whatever percent

By: bxg6

bxg6 — Sat, 22 Oct 2011 01:26:05 +0000

> No! if the number of taxis were allowed to increase, then the number of taxis would increase. Of course. That’s just a tautology.

Nitpick: this is not tautology. Perhaps it’s not very insightful, but still this is an unfairly dismissive word to use. There can be and are things (though not taxis) for which this statement would be wrong: i.e. they have reached an equilibrium in their number, while remaining fewer than, or the same as, a government imposed limit.

By: Stevensaysyes

Stevensaysyes — Sat, 22 Oct 2011 00:32:11 +0000

Does anyone how the city justifies limiting the number of medallions? Wouldn’t New Yorkers want as many taxis as possible cruising the streets?