This week I would like to touch upon the New York City taxi medallion industry and its current state; or should I say current crisis?
The NYC taxi medallion industry was the deal of a lifetime for maybe 40 years or more. A taxi medallion is an intangible asset; the right to paint a car a particular yellow with lettering etc., install a certified meter, and pick up random people for fees and tips.
Until 2006 there was poor oversight on driver’s income. So not only did you own an appreciating asset the size of a home, but your work effort to support it went mostly unnoticed by the IRS.
When I entered the industry in 2003 medallions were selling for $400,000 and rental income was 18,000 yearly. You could own two medallions in a corporation, never drive, and rent your rights to a taxi garage for $36,000 a year [$1,500 per month per medallion]. Not only was this a great passive income, but the medallion appreciated at a nearly exponential rate.
Five years later, in 2008, buyers paid $1,225,000 per medallion and monthly rental incomes moved over $3,000. Medallion income continued to climb up over $3,000 and the highest I heard was $3,600 per month per medallion for rental in 2010 and 2011.
And then came the big crash [and burn] which started in May 2011. The decline in taxi medallion value and revenue really took a foot hold with UBER. NYC Mayor Bloomberg never liked the taxi and limousine commission and looked to put them out of business. Uber was not defeated on entry to the NYC market, as they were defeated in other places like Puerto Rico and Israel for example. When Uber spread to those places (and others) government required all Uber drivers to have a hack license, inspect the vehicle yearly, and require extensive insurance.
Not the case in NYC [yet] or any of the places Uber is competing [to my knowledge].
To date there are about 13,000 medallions in NYC issued by the TLC [taxi and limousine commission]. There are about 14,000 Uber drivers. Uber can be tracked on your iPhone through the app that summons the car. Your ride destination was pre-determined and pre-paid.
You are able to choose a driver in your proximity, after reading their ratings from the latest passengers, if you like. If you are sending an elderly parent or child in the Uber car, you track its entire ride, ensuring your passenger arrives safely without diversions from the route.
The Taxi & Limousine drivers are having a lot of trouble competing with that.
If you are in this industry, I would appreciate your perspective – comment below.
Harlan S. Kahn CPA
Paris Accounting Corp