What's a medallion?
The photo shows taxicab medallions that were issued by the City and County of San Francisco in various years. Each plate is the physical representation of a numbered business permit, a taxicab T-permit. Each medallion authorizes the operation of one taxicab. The permits expire annually and the medallions are re-issued in new colors each year.
The metal plates are prominently displayed on the dashboard of a taxi and are a key indicator that the cab is properly licensed, insured and inspected.
A "cab" operating in San Francisco without a medallion is illegal, is almost certainly uninsured or under-insured, and is subject to neither mechanical nor meter inspections. Importantly, medallion cabs can only be driven by licensed taxicab drivers who possess a valid A-card permit issued by the City and County of San Francisco following training and a background check.
San Francisco, like most cities, limits the number of taxicab permits. Currently the number is around 1400, which is the same as the number of taxicabs.
The experience of other cities over many years has shown that open-entry "deregulation" of taxis is poor public policy. The documentation is extensive; see the Regulation page at Taxi-Library.org for further reading. Almost every city that has de-regulated had a negative experience and re-regulated within a few years. In a nutshell, the problem is that the capital costs of entering the taxi business are low. In an unregulated market, anyone with the price of a used car can enter the business. While this may sound good to free-market fans, experience with taxis has shown that quality goes down, prices go up, and public safety is compromised.
Given that there is a limit on the number of permits, the medallions acquire an artificial scarcity value just like anything else that has a limit to supply. Similar scarcity values accrue to many other kinds of permits regulating commercial activity, including radio and TV frequency rights, liquor licenses, billboard permits, mineral exploration rights, and fishing rights for salmon and crab. The scarcity value invariably is monetized in some manner, typically through leases or outright sale of permits.
Most industry observers would agree that the scarcity value of a San Francisco taxi medallion in mid-2007 is somewhere around $1800 per month. That is usually expressed as a medallion lease fee, or as a dividend in a shareholder arrangement. The permit lease value tends to be predictable because the taxi industry in San Francisco is relatively mature and stable, but values can vary sharply in response to company profitability. As in any business, poor management and adverse judgments can seriously reduce profits.
A worrisome development for San Francisco taxi operators is the unchecked growth of gypsy cab and illegal towncar operations, which have much lower costs and who compete directly with legal operators. To get a sense of the extent of the problem, look in the Yellow Pages under Taxicabs. Only one of the many "Yellow Cab" listings is legally licensed to operate in San Francisco.
Attempts to determine the "sale price" of a San Francisco medallion are highly speculative because the permits cannot be transferred, and because a myriad of factors determine value. In cities where medallions are traded, prices range from less than $100,000 in Chicago to more than $500,000 in New York City.
A classic path followed by taxi drivers in San Francisco for more than 50 years is to first obtain a taxicab driver permit or A-card, and then work as a driver in someone else's cab, typically as an independent contractor. At some point, the driver applies for his or her own taxicab permit or medallion.
In recent years, the wait between applying and receiving a medallion has been more than ten years. The wait is getting shorter due to rules that now favor drivers who have years of experience. An applicant can trim years off the wait for a medallion by agreeing to operate a ramped taxicab, which is a more expensive vehicle and is thus less popular among applicants.
Upon receiving their own plates, many permit holders elect to operate as "independents." They purchase and outfit a taxicab, obtain the required insurance, and affiliate with a dispatch service. Each cab must also affiliate with a "color scheme" or cab company which acts as the interface between regulators and groups of individual medallion holders.
An independent operator, of which there may be hundreds in San Francisco at any given time, will either single-shift the cab (be the sole driver) or will hire extra-shift drivers for the times when the medallion holder is not driving. Most industry observers agree that independent operation is the most profitable mode of operation, and the most difficult.
Most medallion holders eventually change from independent operation (or bypass that step altogether) and instead affiliate with one of the larger cab companies. The advantages of teaming up with a hundred or more other medallion holders are numerous: economies of scale; reduced exposure to loss; easier access to capital; greater flexibility in scheduling shifts; and the services of a skilled fleet manager. For the medallion holder, operation becomes easier, but the profit has to be split with the cab company and its manager.
See the website of the SF Taxi Commission for information on how to obtain a taxicab driver permit or a taxicab medallion.
For an overview of the industry from the early 1900s to modern times, see the article Taxicabs and San Francisco Labor History.
City policy toward disabled medallion holders
In a City renowned for compassion and for its accommodation of disabled people, one City department is different from all the rest. The Taxi Commission has adopted a policy of punitive sanctions against medallion holders who become disabled, including revocation of their permits. MHA opposes that policy.
Following is a chronology of differing interpretations of the "Prop K driving pledge" and its transformation into a "continuous driving requirement."
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1978 - Proposition K was passed by the voters. Its intent was to prohibit the buying and selling of taxicab permits, and to gradually phase out corporate ownership of taxicab permits.
Click this link for the text of Proposition K.
Proposition K includes a full-time driving pledge for permit applicants in section 2b. An applicant must "declare under penalty of perjury his or her intention" to be a permittee-driver. The overwhelming majority of post-K medallion holders have fulfilled that pledge by years of actual driving. About 600 pre-K medallion holders were exempted from the driving pledge and the later driving requirement.
Another part of Proposition K, section 4, relates to "continuous operation" of a business. That language, which existed in the regulations prior to Prop K, is intended to prevent warehousing of taxi permits. It is a "use-it-or-lose-it" provision requiring that taxi permits must be used, and can't be retained if they are not used. The context of elevating that language to the City Charter is that the City had just gone through almost a year (1976 and 1977) during which hundreds of medallions sat unused while legal wrangling took place over the old Yellow Cab bankruptcy. In Prop K, the City sought to ensure that such a huge service interruption could never happen again.
Unfortunately for disabled medallion holders, the continuous operation provision of Prop K was later interpreted as a driving requirement, even though the section makes no reference to driving. That interpretation was made by the Taxi Commission and the City Attorney, and by the judge in the 2002 PDA lawsuit.
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1988 - Police Code Article 16 was amended to include new language (not in Prop K) transforming the pledge to a requirement. See Section 1081(f) and the related Section 1090(e) requiring revocation for not meeting the driving requirement.
This link is to the text of Article 16 in the Police Code.
Medallion holders argue that, even if it was OK for the City to impose a driving requirement without consent from the voters, it is not OK to have a driving requirement that discriminates against the disabled.
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1990 - Americans with Disabilities Act becomes law
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2002 - On July 11, the Appellate Court ruled on the PDA lawsuit. The unpublished decision found that Prop K's Section 2 can be interpreted more broadly than the City had claimed. A key determination is that the City can make limited allowances (modifications to the driving requirement) for medallion holders who become managers or who become disabled.
Click this link for the text of the decision in the PDA suit.
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2002 - On October 8 in response to the Appellate Court ruling, the Taxi Commission enacted Resolution 2002-93 making "continuous driving" an Essential Eligibility Requirement for post-K medallion holders. The EER is intended by the Taxi Commission to exclude disabled medallion holders from the ADA.
Medallion holders argue that the EER is discriminatory because a disabled person can still meet Prop K's continuous operation requirement, even without driving.
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2003 - The Taxi Commission revoked the medallion of disabled driver Mia Rivera. This was the first revocation of a disabled medallion holder. The revocation was overturned by the Board of Appeals on the grounds that it violated Ms. Rivera's rights under the ADA.
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2003 - Following the reversal of the Mia Rivera revocation, Taxi Commission director Naomi Little developed a policy that accommodated disabled medallion holders. That policy is stated in a memo from Ms. Little to Supervisor Jake McGoldrick dated July 30, 2003.
This is the policy that we want the Taxi Commission to return to. That policy allowed disabled medallion holders to retain their medallions.
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2005 - Under the direction of executive director Heidi Machen, the Taxi Commission abandoned its 2003 ADA policy. Instead of referring ADA cases to Dr. Katz of the Department of Public Health, the cases were referred to Taxi Commission staff. The new procedure is illustrated by this letter from a doctor on behalf of an 83-year old medallion holder, and the Taxi Commission's response to the request for waiver of the driving requirement. Despite failing health and failing vision, and against the doctor's advice, the Taxi Commission staff set a driving requirement of 78 4-hour shifts.
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2006 - The Taxi Commission, at the urging of Director Heidi Machen, approved resolution 2006-28 and began offering accommodation only to medallion holders who are temporarily disabled. A medallion holder with a permanent disability would not be accommodated.
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2007 - Attorneys representing two permanently disabled medallion holders filed suit in US District Court seeking ADA protections for their clients and all others in the class of similarly situated medallion holders. Click here for the text of the complaint, or read an article about the class action suit.
Goldman Report on transferability
The San Francisco Taxicab Industry: An Equity Analysis is a June 2006 report from the Goldman School of Public Policy, University of California at Berkeley, recommending the sale of taxi medallions in San Francisco. Action is unlikely anytime soon because medallion holders are on Mayor Gavin Newsom's do-not-call list following our highly public fight with Taxi Commission director Heidi Machen in 2006. Nonetheless, the transferability issue is bound to resurface because the potential gain to taxpayers and to the City Treasury is at least tens of millions of dollars. MHA looks forward to discussing the options, hopefully before we are all dead from old age. The key recommendation of the Goldman group, auction of taxi medallions, would require a vote of the people to enact.
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