Wednesday, January 11, 2012

Summary of Proposals For The Permanent Medallion Sales Program. By John Han.

Photo by John Han.
(Part 1 of 2)


On January 30, 2012, the Taxi Advisory Council (TAC) is expected to approve final recommendations for a more permanent method of taxi medallion sales in San Francisco.

In light of the test program known as the “Medallion Sales Pilot Program” being at an end, the San Francisco Municipal Transportation Agency (SFMTA), in October of 2011, issued a public notice inviting members of the public to submit recommendations to the TAC, regarding a future, more permanent approach towards medallion sales.

Recommendations were submitted by:

The San Francisco Cab Drivers' Association (SFCDA), Luxor Cab, Richard Moles, Mark Gruberg, Ruach Graffis, Carl Macmurdo, and Ed Healy.

In anticipation of the daunting task of having to compare key recommendations in the proposals, there needs to be an attempt to highlight the key recommendations, note the common recommendations, and make an attempt to resolve whatever differences, if possible.

This blog post is an attempt at doing these three things. And it is written with the goal to represent the diverse views with accuracy and fairness. However, I reserve the right to insert my own views on the recommendations as well... views that any reader can agree with, disagree with, or ignore, as the main goal is to summarize the recommendations.

The proposals are chronologically listed here in no particular order of preference.

Proposals that were able to be obtained in electronic format at the time of this writing are published online and are linked to in this summary.


Richard Moles has two proposals, the gist of the first being - “I propose that drivers who purchase a medallion should also be allowed to keep their place on the medallion list.”

  • With this proposal, a driver can purchase a medallion and then when that driver's name comes up on the earned medallion list, the driver could then sell the medallion that they purchased.”

To finish Moles' statement, it means that after the purchased medallion were resold, the driver could then receive an earned medallion.

Although opinions can change, at the time of writing this, I can't think of a good reason to not support this recommendation.

Richard Moles says he has driven cab for 27 years and has been on the waiting list for 14 years.

Moles' second proposal is a version of the “Scaled Pricing Method”, which is intended to assist drivers at the top of the waiting list in purchasing medallions. Drivers at the top of the list have been there the longest, and having to purchase a medallion now for $250,000 after all these years may not be realistic.

Moles says,

The way it is now, the last person to receive a medallion paid $0. The next person will have to pay $250,000. So I propose that there should be a variable pricing for the purchase of a medallion according to the number of years a driver has been on the medallion list.”

Scaled pricing is a general concept common to Carl Macmurdo's proposal, though with varying details, and as a general concept, has been publicly supported in the past by De Soto Cab's president Hansu Kim.

Here is Moles' version...

Take the number of years that the first driver on the list has waited to get an earned medallion as of the date the list was closed. Divide $250,000 by that number. Reduce the price of the medallion by that amount for each year a driver was on the list. If the first driver on the list had been waiting 15 years, that would be $250,000 divided by 15 which would be $16,667 per year. For example, if you had been waiting on the list one year when the list was closed, the price for a medallion would be $233,000 for that person when their name comes up ($250,000 minus $16,667 = $233,000). (If a driver had been waiting on the list 12 years, the price would be reduced by 12 x $16,667 = $200,000, so the price would be $50,000.) Transfer fees could also be prorated according to the number of years on the list.”

Note that Moles' recommendation also includes lowering MTA transfer fees.

(Moles' proposal was available at a TAC meeting in hard copy. It was not available to this website in electronic format at the time of publishing. However, the text is fairly brief and I hope to have highlighted the key points.)


Macmurdo's proposal covers several aspects of medallion sales. With respects to the scaled pricing method, his proposal reads as follows,

Hold a Public Convenience and Necessity type of hearing to ascertain whether it is appropriate to add 200 new full-time medallions during the next two years. If so, issue 200 new taxi medallions during the next two years, the first 100 (technically Prop. K medallions) to be issued without purchase to waiting list applicants.

The 101st medallion (technically a Prop. A medallion) is discounted, so that only $50,000 is collected from the purchaser, the 102nd permit selling for $52,000 , and so on with the 200th medallion selling for $248,000. All subsequent medallions will sell for $250,000 , or whatever full, set price is in effect. At this point the waiting list for non-purchased medallions will have morphed via a graduated discount feature into a preference list for purchasing a medallion for the full, set price in effect.

Logically, medallions which are returned to SFMTA for reasons such as permittee death can be utilized as part of the 100 total medallions needed to effectuate the transition to a sales model at the full, set price. Once the transition is complete, SFMTA might afford the option to all remaining listers either to stay on the purchase preference list, or instead receive a refund of their list application fee, with interest.”

One should note the obvious, as Macmurdo does in his proposal, that implementing the 'scaled pricing method' to the top of the waiting list requires the issuing of new medallions. Macmurdo suggests 200 over two years, by issuing 100 per year, if a PCN type hearing would ascertain it.

But moving onto a new issue in the proposal...

Macmurdo begins his proposal by saying, (bold emphasis is mine),

San Francisco taxi service is lacking at times, and fleet increases are inevitable. In terms of defining a permitting mechanism for issuing future medallions, a major conflict exists between the following possibilities:

(1) perpetuating the legacy system created under Proposition K of 1978, wherein over 3,000 persons have entered their names onto an expectation list hoping to obtain a non-purchased taxi medallion, or
(2) effectuating the concept that future medallion issues might rightfully be sold by SFMTA as a valuable city asset, and that failure to do so actually is irresponsible public policy.

As it will become more evident in other proposals, this is one of the first and most obvious bones of contention amongst persons in the City's taxi industry. And that is – to what degree should the City regard the taxi industry as its “cash cow”, and use taxi revenue to fill budget voids in other agencies, such as MUNI?

And, how much of the taxi revenue should the City re-invest back into the industry itself vs. allocating taxi revenue to other purposes, such as solving non-taxi budget deficits?

This issue will be highlighted again in another area of the summary.

Here are the other subtitles of Macmurdo's proposal,
  • Positive and negative effects of the proposal
  • Menu of additional possible exit strategies
  • Final options for Pre K medallion holders (this would allow Pre K holders to sell)
  • Commentary
  • Options for K medallion holders (this includes alternative for Prop K holders to sell, that would also relieve Prop K holders of the driving requirement)
  • Commentary
  • Increased standards for new medallion holders (This suggests that prospective new medallion holders should be subjected to geographical exams and high driving record standards.)
Carl Macmurdo is president of the Medallion Holders' Association. His proposal may be viewed online.

CLICK HERE to read it in full.


Luxor's proposal is by far the shortest amongst the proposals. It's so short, in fact, that it can be reviewed here on this page line for line. Here it is, with a few comments inserted in italics.

Luxor Cabs, Inc.

The Medallion Sales Pilot Program

'The medallion sales pilot program has been an unqualified success.
  1. There have been no adverse consequences to the public.

  2. It has benefited the MTA, which is a benefit to the people of San Francisco.

  3. There have been no major adverse consequences to color schemes or to dispatch services. (Comment: At Monday's January 9th, 2012 TAC meeting, Athan Rebelos of DeSoto Cab, and Timothy Lapp of Yellow Cab, both questioned whether there have been “no major adverse consequences”. Some companies have expressed concern that the Medallion Sales Pilot Program has resulted in a number of gate and gas medallions switching to Affiliate, possibly threatening the stability of the companies.)

  4. The pilot program has benefited permit sellers and permit purchasers alike.

  5. Drivers on the waiting list have two options instead of one: now there is the option to buy as well as the option to wait. (It may be noted that for drivers at the top of the list, who also tend to be the oldest, the option to wait has been dramatically affected. Medallion sales is moving the list faster for people lower down on the list. But movement for people at the top of the list, who deserve to have their medallions first, has slowed to the point of being near stagnant.)

A Permanent Medallion Sales Program

Proceed with sales by allowing all medallion holders to sell. Continue to offer purchase opportunities to drivers on the waiting list, then open it up to all drivers with a minimum of five years experience.

Protect the interests of drivers on the waiting list by committing to provide a substantial number (hundreds) more medallions to the list over future years. (At last Monday's TAC meeting, Charles Rathbone of Luxor Cab suggested designating a “substantial number”, such as a number in the hundreds, and then issuing, for example, 75 new medallions per year, until the designated number is reached.)

Add a new element to the medallion distribution system by leasing some number of non-medallion permits to full-service color schemes. Those permits would be issued for a specific period of time, such as three years, and could be withdrawn from the market if it is determined that there are too many cabs.” 

(At the TAC meeting, Charles Rathbone, in my opinion, didn't necessarily define what, “non-medallion permits to full service color schemes” means, but kept it as a broad definition. He did however say that the meaning of “full service color schemes” includes companies that accept credit cards, have on-site gas filling pumps, and have on-site maintenance and repair garage, and that companies with these attributes are better than other, smaller companies that don't. 

Rathbone said that Luxor could even entertain the possibility of returning to an employee based model of taxi driver, instead of independent contractors. However, he said that it would be possible only if the City's entire industry were to be made up of employee drivers. He said it would be “impossible” for some companies to dutifully maintain the responsibilities of employee drivers, while other companies that would be competing with them were to stay with “independent contractor” drivers.)

This is the end of the first part of the summary.

Still to come are summaries of proposals by – Ed Healy, Mark Gruberg, SFCDA, and Ruach Graffis.

After that, a comparative approach, with an attempt to identify similarities and differences.  And, reconcile differences if possible.  


  1. Erik,

    These proposals are very interesting. I wonder if any change in the rules would be made retroactive to the 150 people or so who have already bought their medallion at full price. Or will they just be out of luck? That would be a bitter pill to swallow after playing by rules they may have assumed would not change.

    And if a new A-Card seniority system were established once the waiting list is exhausted, could a person sell the medallion they purchased and get an earned medallion without charge once they qualified by years driving?

    Any opinions on this?

  2. Just like any investment if the drivers who already purchased have to take a loss, then so be it. The study that was completed by the SFMTA clearly indicated that the 250,000 for a sale of a medallion is appropriate. I am sure there were variables left out of the equation, however the cab driver who invested in such a ridiculous price to begin with should have done their homework. I do not mean to be cold about the situation, but that is how an investment works, there are risks. Unfortunately the cab industry is not handling the demand of the customers and additional cabs are needed on the streets. Many suggested this being an issue to begin with, but never heard anyone cab driver at the meeting factoring this into the equation on pricing.

  3. Erik,

    Opinions are to be discussed at a rescheduled date of January 30, at 1pm in room 8244. Then a vote for final recommendations is expected, but could possibly be held off for one more meeting.

  4. Thanks John,

    I will be at that meeting.


  5. Its hard to believe that someone is going to fork over so much money for a medallion in a business that is so unstable at the moment, its basically made up as we go along so I would say it would be wise not to purchase a medallion unless you want to put yourself in an early grave.It seems such a commitment to a life of misery to me.


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