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Charter Reform Working Group
July 15, 2008 at 10:30 a.m.
City Hall,1 Dr. Carlton B. Goodlett Place
Room 305
Present: Director Thigpen, Laurie Graham, Bruce Oka, Rich Hybels, Rich Schlackman, Tone Lee, Charles Rathbone, Paul Gillespie, Malcolm Heinicke, John Lazar, Tom Owen, Adam Millard-Ball, Hansu Kim, Thomas G. Williams
Absent: Michelle Allersma, Rick Wilson, Autumn O’ Keefe
1. Call to Order/Roll Call
2. Adoption of Minutes from the June 6, 2008 Meeting: Adopted without objection.
3. Potential Reforms to Current Process for Issuance of Medallion Permits [DISCUSSION AND POSSIBLE ACTION ITEM, EXPLANATORY DOCUMENTS]
- Malcolm Heinicke: Let’s go over proposals and have them presented briefly. I’ll have questions from the committee and then public comment. Start with proposal B; Charles Rathbone.
- Charles Rathbone: The current value of San Francisco taxi medallions is at least 375 million dollars. What I would ask is that the people of the City of San Francisco have an asset like this that is worth 375 million dollars and we are in charge of planning the future of it and preserving the value of it. Our proposal which is laid out is interested in maintaining value and for the city to monetize a valuable asset. In a medallion transfer system the participants have the opportunity to build equity. And I don’t see this in any other proposals. That is the single most distinguishing character.
- Adam Millard-Ball: Can you clarify how this would actually get the city revenue?
- Charles Rathbone: I would argue that I have paid for a floor of this building with 10’s of thousands of hours through dangerous work. First the easy part is regarding new medallions, there is tremendous potential growth. Those new medallions go on the auction block and the city gets 100%. I believe that most current Medallion Holders would be open to a substantial transfer tax.
- Malcolm Heinicke: This proposal is like an exit strategy and would give some percentage to the Medallion Holder.
- Charles Rathbone: I would say starting at 25%. The first time it changes hands is where the city will get revenue from a transfer tax.
- Hansu Kim: The Gonzales group met and we had a similar plan. How do we transition from one system to another to benefit the city? We have to look at what models are working. New York has a tax every time a Medallion is transferred. It would be a political nightmare for the city to take the medallions back.
- John Lazar: It’s an interesting proposal; one, this revenue would fund the taxi industry and give health insurance to drivers and also the regulating body. How does a person get 250K to purchase a medallion? They would have to pay a loan like a house and after 10-15 years they pay off the Medallion. Once its time for the sale what are the guidelines going to be? This proposal is giving an exit plan for drivers.
- Charles Rathbone: It should be people who intend to drive cabs. In fairness to the people who have bought into the system we should go through the first 1000 names on the waiting list and everyone who qualifies under Daly Ma, give them the permit under the current law. After that go to the new system of auctioning the permit.
- Malcolm Heinicke: The system would have to create the Medallion as collateral.
- Hansu Kim: This is not a new model; this is what was done in New York. In New York it’s a very successful system. We forget that the leasing income of a Medallion Holder is substantial. It’s like buying a home with renters paying your mortgage.
- Tone Lee: Transferability is healthier. All medallions should go back to the open market, not like a trust. All drivers should have an equal opportunity. Everything must go to the central government system.
- Charles Rathbone: I would prefer to put it in the hands of a broker. I know that in New York the brokerages are titled regulated. You cannot just go out and sell your medallion you have to go through a broker.
- Hansu Kim: In the Gonzales group we didn’t want private brokers to be involved. We wanted it to be auctioned to drivers only. It’s a private sell that would be divided between the city and the Medallion Holder.
- Thomas G. Williams: I don’t see the whole aspect of service improvements to the city who wants a taxicab. Peak times and neighborhoods are not addressed.
- Charles Rathbone: We have one meeting where we talk about service and one meeting where we talk about permits.
- Laurie Graham: You guys are just saying that it’s for the drivers in the city.
- Malcolm Henicke: If what you have is a permit to operate that you can then sell, why would a Medallion Holder have an interest in providing good service, what would the relationship be?
- Charles Rathbone: The value of the house is worth more. The real value is that there is a limited amount of space in San Francisco and this gives much greater value.
- Malcolm Heinicke: I just don’t see the economic incentive in that.
- Charles Rathbone: It’s an economic asset that the city owns and protecting that asset and getting the value from it.
- Hansu Kim: One of our biggest problems with this system is that it promotes absentee ownership and fraud. You have to look at other markets, which purchase medallions. They are looked at as valuable assets; the more they work the more money they can make. They take better care of their cars and provide better service.
- Rich Schlackman: Is selling it for 250K a way for us to get out of the business?
- Charles Rathbone: If they are going to go for this at all is going to be determined by ones pocket book.
- Malcolm Heinicke: The Goldman report did not recommend that the current Medallion Holders get revenue; the Goldman School Students recommended that the permit goes back to the city but would not get money from the auction.
- John Lazar: Is there going to be a requirement to be able to do that sale of existing permits?
- Tone Lee: Before Prop K people never drove the cabs they just bought them. Any Medallion should be equally allowed to be sold. Each family could own one Medallion only.
- Hansu Kim: I’m not sure that this is the best system.
- Malcolm Heinicke: Thomas G. Williams, present proposal.
- Thomas G. Williams: We worked on this proposal with UTW. We are not trying to fix this issue but we are trying to fix service problems. During peak time there is not enough cabs and we under serve the neighborhoods are the two problems. The medallions get out for free to qualified drivers. New medallion holders are forbidden to lease Medallions to other drivers. They are allowed to serve the public. Medallion holders can buy their own car or come together with another medallion holder and buy a car together. You can go to a company and rent a car from them. There are neighborhood and disabled community issues. The city would give medallions or permits to companies who promise to employ their drivers with benefits.
- Malcolm Heinicke: When I read through this the first time you keep using the name medallion.
- Thomas G. Williams: One part of the money goes to the Medallion Holder.
- Malcolm Heinicke: This driver, he/she is only able to drive if they have a certain amount of experience.
- Tone Lee: Do you get this medallion free or is there a payment?
- Thomas G. Williams: Yes.
- Tone Lee: Nothing should be free.
- Tom Owen: Is this going to create another form of PC&N system?
- Malcolm Heinicke: You’re sort of saying every eligible driver can drive.
- Thomas G. Williams: Yes.
- Malcolm Heinicke: There is no revenue for this city through this proposal
- Adam Millard-Ball: How do you propose dealing with transition issues? Service taxi plan, I don’t see anything specifically that would promote service, can you explain that.
- Thomas G. Williams: Phasing out is easily done by letting the medallion holders die off, take away leasing abilities.
- Malcolm Heinicke: Isn’t the service mechanism; rather than having a limit so that you have the same number of cabs on Friday night and Monday morning.
- Laurie Graham: How would you employ sedans? We have 6000 licensed drivers in the city. How can a company employ a sedan driver?
- Thomas G. Williams: Cost would go the company.
- Laurie Graham: How much do you think it cost to operate a ramp taxi?
- Thomas G. Williams: Depends if you employ the driver or not?
- Laurie Graham: Not employ, its $4500 per month. Two people are sharing a car but can’t take time off because they are stuck with a cab that has to operate 24 hours a day.
- Hansu Kim: My concern is that I see this as a deregulated system. You’re allowing the market to determine this. Don’t you think we would flood the system? How do you transition away from this system that has such value?
- Thomas G. Williams: Its not really deregulation of the industry.
- Tone Lee: Lifetime medallion, the service it not good to keep.
- Rich Schlackman: What system has been tried in 18 cities that hasn’t worked, deregulation.
- Dir Thigpen: Under your system that you proposed what would be the recourse against these drivers?
- Thomas G. Williams: Affiliated with the Color Scheme. You have to set your fines for misbehavior.
- Dir Thigpen: If the city is not getting revenue out of this proposal, how does the city have the resources to regulate this?
- Thomas G. Williams: A-card fees that you set and Color Scheme fees.
- John Lazar: I see what you’re saying but it’s essentially happening. San Francisco is rated as a top city and we have a 98% compliance with paratransit. Enforcement is important but I don’t think we have that bad of a problem. We don’t have enough cabs, do you agree on that?
- Thomas G. Williams: we add more cabs to the proposal. People keep their medallion and serve the public.
- Adam Millard-Ball: I don’t think it’s fair to tie this with deregulation in other cities. You’re not advocating an unrestrictive proposal?
- Thomas G. Williams: If they choose to purchase their own cabs it doesn’t make a difference.
- Charles Rathbone: Under the medallion transfer problem, it’s possible for a driver to build equity. Under your proposal is their any way for drivers to make money?
- Thomas G. Williams: Yes, a savings account.
- Malcolm Heinicke: John and Bruce are next.
- John Lazar: Full service cab companies will solve our problem. ( reads proposal)
- Malcolm Heinicke: How do we reform the regulatory system?
- John Lazar: If we had the cabs utilized correctly we wouldn’t have this problem, I don’t have a problem in my company, and it’s a problem of supplying my demand.
- Malcolm Heinicke: How would we do this through charter reform? Not changing the medallion system we have now, just what the Medallion Holder can do with their medallions.
- John Lazar: You look at the industry and its flag down. We have residential companies. I’m a flag down, neighborhood and paratransit.
- Malcolm Heinicke: How do we reform San Francisco ’s current legal structure?
- Dir Thigpen: It would be the MPC.
- Malcolm Heinicke: How would we do it from a policy standpoint?
- John Lazar: If we had more cabs at companies that provided service we would not have that problem.
- Paul Gillespie: There are technological improvements going on right now. Technology is going into the vehicles and some of these things will be addressed. Are you going to restrict medallion holders to only go to companies who have wheelchairs?
- John Lazar: Better utilization in fleets to the demographics of San Francisco you can fix the problem. I am focused on customer service. We show 1000 calls dropped everyday. If people are calling for service and you can’t provide service then you have a problem.
- Tone Lee: Small cab companies have to survive. Small companies provide service.
- Hansu Kim: I’ve seen a deterioration of service because Medallion Holders have left companies who are full service to companies that do not provide service.
- John Lazar: Only 5 companies out of 34 turned in financial statements.
- Hansu Kim: These standards that are outlined here shouldn’t be in business?
- John Lazar: That’s up to the city.
- Hansu Kim: You can’t serve all calls.
- John Lazar: You get a report of calls received and calls dispatched. Who’s the regulator that determines supply and demand of medallions to service the public?
- Thomas G. Williams: I agree that we need companies that serve the public. A company who trains the drivers, isn’t that a city job?
- John Lazar: Train the driver how to work a computer and work a credit card machine.
- Thomas G. Williams: How do we test well trained managers? Isn’t voice faster than GPS?
- John Lazar: The computer offers it to the closest cab.
- Bruce Oka: Last time I counted there were 34 cab companies in the city, keeping in mind what Hansu said there are certainly small companies that are doing good job. How many companies are doing a good job and how many companies should leave the city?
- John Lazar: The only company that talks to me is Yellow cab. My reinvestment in my company has 37 ramp vans, 5 cab companies can do the job for the whole city.
- Bruce Oka: If there were 200 more cabs at Yellow and 200 more cabs at Luxor does that solve the problem?
- John Lazar: I would take that challenge.
- Paul Gillespie: I think that what Rich offered was great.
- Hansu Kim: Yes or no, do you think your essential problem is rewarding.
- John Lazar: Yes.
- Malcolm Heinicke: (presents proposal 4) Service, long lines at hotels and residences cannot get cabs when they need them, especially in neighborhoods. From the publics point of view that’s a problem. We are putting out these medallions and reaping no benefit for the city. From the drivers standpoint since I was first introduced to this method there is a large cost built into this process. This is passed on to the companies and the drivers and arguably to the consumer. With respect to the companies they can’t service their needs and with regards to the medallion holders who exist now and have not exit strategy. My proposal; go to a medallion bidding system, phased in similar to transferability. Permits to be the medallion holders for a set period of time. (presents proposal) Daly Ma eligible drivers only and give opportunity to experienced drivers. The majority of the medallions would be left to Daly Ma and will be a term of 5-8 years to see a significant benefit. The money will be paid to Muni on a pay as you go basis. If one cannot pay they would back out and Muni would re-bid the permit.
- Tom Owen: Would there be a limit on the number of leases? I wonder who would take the partial pay; 8 year lease.
- Charles Rathbone: What I like in this plan is the monetize the scarcity and get some revenue to the city. The two plans have some common ground. Since no one is able to get equity I think that the medallions would take lower value.
- Malcolm Heinicke: Equity building leads to higher payments up front. The reason for this is because in large part I want to avoid the notion of a big up front lump sum of money. You’re looking to secure and I’m looking to rent them out over time. There are more benefits than just the regulation of the monetary stream. A real interest to me is this gives her a much stronger regulatory mechanism.
- Charles Rathbone: I see a model in which the government is attempting to run a market, are you sure that MTA is going to do a better job than the auction would?
- Malcolm Heinicke: Why is this more government run than your proposal. It will be an auction and they can determine how much profit it will bring them and the value of this asset. By not having an ownership model right off the bat, you leave regulators room to change the system. I’m not getting rid of the medallion holders under my proposal.
- Hansu Kim: I find this so offensive it’s not even funny. You’re trying to take the money from the medallion holders and give it to the city. This is a mechanism you’re using to make medallion holders renters for the rest of their lives. You want to take their income and use it as you see fit. I can see where you’re coming from but you are absolutely not taking the medallion holder in consideration. If this goes forward, I will fight it. Why do you want to make drivers rent the rest of their life when they can be owners?
- Malcolm Heinicke: What’s the difference between this and that?
- Hansu Kim: We have this valuable asset and all the income derived is coming to us.
- Malcolm Heinicke: It is a concession lease but they are making money too.
- Hansu Kim: Under your mechanism you are basically saying the city is going to take the money and get the vast majority of income instead of taxi drivers. Under a current scheme you want to keep the value and monetize it. It’s tremendously disrespectful. Do you think medallion holders are going to agree?
- Malcolm Heinicke: The idea is to take artificial cost that is built in and give current medallion holders an exit strategy.
- Hansu Kim: I see this as a way for you to get more money for the city. I don’t like the city.
- Adam Millard-Ball: I think this is a really great proposal.
- Hansu Kim: The three of you public members are not familiar with the taxi industry.
- Adam Millard-Ball: I think this is a great proposal. It has a very equitable distribution. I think there is principal here.
- Malcolm Heinicke: I would as a conceptual basis would want to keep the color scheme control at a basic level. With regards to Thomas proposal, it’s inconsistent.
- Thomas G. Williams: As a gate and gas driver I support it.
4. Public Comment (Please limit public comment to items NOT on the agenda)
- Peter Witt: Charles proposals of 350, I think drivers would be driving fast. Luxor’s ramps, I thought we have problems with ramps and trouble covering demand. Dispatch service, it will be addressed I wonder what will be addressed. We have a report that states exact figures. (reads).
- Barry Toranto: I drew up this idea of why I’m against auctioning. I get offended when people say these medallions are given away. All these people that tell us what to do have not even driven a cab. You’re saying the city deserves to make money.
- Mark Gruberg: Of these four proposals the one that UTW proposed is the only one that points out service. Charles stated that service can be dealt with on different provisions. If we don’t address that we won’t get to the root of the question, neither does Commissioner Heinicke. I agree with what was said about the intent and purpose of Prop K and not going into transferability. I don’t think that revenues should in any way be collected for no other purposes.
- Jane Bolig: The first proposal is semi libertarian, some of your other arguments you don’t think out in terms of cost. Proposal b, if I’m going to sell my permit for 250 the city is going to take a percentage of that. Proposal c, John, Luxor cab has a lot of voice and you only use it to promote your own concern. Malcolm, I agree with Mark the primary flaw is that the city is capturing this revenue but what does the city do with it. What are we going to do to make it a productive asset? I hope that whatever you propose to put in a charter amendment. (provided handouts)
- Dan Hinds: The medallion applicant waiting list is not working. We have Medallion Holders who should not be driving now. We have to address this. Transferability can resolve this problem. In terms of service and the idea of transferability you create a core group of drivers who are committed, vested and taking a risk and a lifetime commitment.
- Jim Gillespie: I want to comment on Charles proposal, I’ve always supported it. I have watched from 69 to now that prides go away. I’d like to see transferability bring the pride back into people doing their jobs.
- Tariq Mehmoud: Not giving us a chance to represent the drivers, we have the maximum signature in this industry. In your proposal pretty much messed up the whole story. We have to find an exit strategy for transferability. Coming to this service first plan, I don’t see it anywhere. I want to see MTA and medallion holders getting money.
- Carl Macmurdo: I found your proposal very offensive saying that we have no vested right or interest. Luxor’s proposal I like. UTW proposal, deregulation has failed everywhere. We need some respect for people high up on the list and current medallion holders.
- Mary McGuire: John’s proposal, his concerns are real and deep, they can compete. Maybe we need to reward drivers to pick up calls. Essentially what’s going to happen to me? Are you saying I have to pay rent to Muni? I’m very concerned about this. Is the system that bad that you have to make drastic changes?
- Michael Spain: A lot of people have thought of this. You go to any major city around the world and the most efficient one is the one we have here.
- Nick Sweis: Most of the problems are that owners don’t want to get their permits. Once they reach 65 years old they don’t want to drive anymore. Once you reach 65 medallion holders should get a percentage. I would still benefit some of my medallion fees.
- Adjournment, 12:50pm.
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