SAN FRANCISCO (KPIX 5) — While taxi medallions in San Francisco were once seen as a good investment — literally a license to make money for cab drivers — the popularity of ride-sharing apps has led to a looming financial meltdown for the city’s struggling taxi industry.

The rise of Uber and Lyft as the more common way for people to catch rides around San Francisco has left local cab drivers deep in debt.

And San Francisco could be on the hook for the money owed as the taxi medallion market descends into a financial disaster.

“25 years I’ve done this job. I’ve complied with all the rules and regulations,” said SF taxi cab driver Chris French. “I’m just trying to make an honest living.”

Take a ride with French and you’ll hear an increasingly familiar story.

“I went ahead and I bought a medallion, and like I said, it just keeps getting worse,” explained French.

Taxi medallions are something cab drivers and the city have wrestled over since the 1970s.

That’s because those medallions were the only way to drive a cab in the city. Their restricted number literally drove demand for taxis and the medallions themselves.

Some drivers spent 10, 15 or even 20 years on a waiting list, just for a chance to buy one for upwards of $20,000 to $25,000.

Flash forward to the late 2000s when San Francisco faced two problems: a shortage of cabs on the street and a $50 million budget shortfall at the SFMTA.

“Really the only directions I received from the powers that be at the time were to sell medallions,” said Christiane Hayashi, former Director of the SFMTA Taxi Program

Hayashi, who is now retired, was asked to restructure the medallion system in 2008.

“I think SF was looking at the New York medallion system and seeing that there was a tremendous amount of revenue they were not taking advantage of at the time,” said Hayashi.

So the plan was to turn demand for medallions into a money maker for the city. But the high cost of a taxi medallion at $250,000 — the price of a house in a normal real estate market – meant the city needed a lending partner that could issue medallion loans.

Officials found one just two blocks away from City Hall.

“So I looked at it. I looked at the financing. SF Federal Credit Union was doing the financing,” remembered French. “$1,000 a month. I made the payment, I have $1,500 left over for myself. That seemed like a good deal so I went for it.”

Initially, drivers bought medallions, the city made millions of dollars in transfer fees and the credit union was collecting interest on those loans.

Only something else was happening at the very same moment.

Just as the city finalized the taxi medallion program, ridesharing provided by drivers working for Uber and Lyft started disrupting the taxi industry.

Years later, with those two apps serving as one of the main ways residents and visitors get around the city, the taxi industry is more than disrupted; its crippled.

In cabs across San Francisco, taxi medallions have turned into something like a troubled mortgage.

“So, that’s still not enough to make my rent and the loan payment,” said French. “So I’m giving up. Maybe I can keep up with my loan payments and hold on to the medallion until they can sell it.”

The last time SFMTA sold a taxi medallion?

“They haven’t sold a medallion in a year,” guessed French.

Actually, the last sale dates back to April of 2016.

“What its worth?” asked French. “It’s really questionable.”

If there isn’t a line of people waiting to pay $250,000 for a taxi medallion, it begs the questions: Does the system work?

“Clearly not,” said Hayashi.

But now there is an even larger problem brewing: the San Francisco Federal Credit Union’s taxi medallion portfolio.

“I’ve heard, anecdotally, that some people who have bought medallions are walking away from their loans,” said Hayashi.

KPIX 5 has learned that the San Francisco Federal Credit Union has now foreclosed on 70 medallion loans – and it considers the remaining loans — approximately 480 of them — as “impaired.”

The Credit Union has also filed a legal claim against San Francisco as stakeholders increasingly blame the SFMTA for a medallion market that fell apart when tens of thousands of drivers without taxi medallion were allowed to hit city streets.

“The city should give us our money back,” said French.

“The taxi drivers told us at the time, ‘Why aren’t you enforcing the laws against these illegal market participants?'” admitted Hayashi.

When asked if he felt like the city undercut him, French replied, “Yeah, I feel like they stabbed me in the back.”

So the questions moving forward will be who is responsible for sorting out this mess and who is responsible for that medallion debt?

“Ultimately, the city owns those medallions,” said French.

So what was originally a plan to fill a budget hole at the SFMTA is now at the center of a legal claim against the city, tied to $125 million worth of troubled loans at a local credit union.

There is also a second complaint filed against the city by the Medallion Buyers Alliance complete with six pages full of claimant names.

While the SFMTA has hired a consultant to try to make some sense of this financial fiasco, for the moment, the city does not have any solid answers as to how it will solve the taxi medallion problem.

The mayor’s office declined to comment on the issue Monday, as it is now a legal matter.

But in the complaints, you can already read the arguments in the case against the city.

The SFMTA sold the medallions and were responsible for enforcing the city’s taxi regulations, yet they failed to stop an obvious threat to the medallion economy.

The expensive mess also touches on politics and possibly a legal review of San Francisco’s relationship with ridesharing companies that upended the taxi industry.

Comments (9)
  1. I’m glad to see some reporting on the role the city has played in SF medallion sales and the devaluation of them. Thank you for shedding some light on this issue. However, as an SF taxi driver since 1987, and as former head of the San Francisco Cab Drivers Association and Co-Chair of the SFMTA Taxi Advisory Council from 2010 -2012, I’d like to point out a few errors and omissions in this report.

    To start off, it’s been long established that Uber and Lyft are not “rideshares”, as they’re referred to in this report. That was the original hoax, which gained them their false legitimacy. They chose this misnomer because true “rideshares” are exempt from regulations required of all other commercial passenger carriers, as they are not for profit and help keep cars off the roads. Lyft and Uber do exactly the opposite.

    This report does not mention that medallions were not bought or sold in San Francisco for more than 33 years, until the SFMTA decided to start selling them in 2012. Many of us did NOT think medallions were a good investment, or that they should be sold at all. This idea was pushed by the SFMTA with the support of the mayor, in order to raise around $20 million a year for the city. It is for this reason Mayor Lee did not win a place in the hearts of cabdrivers when he endorsed Uber, Lyft and others who were ignoring the law, as “innovative entrepreneurs”, when they provided the exact same service as SF licensed cabbies (we had apps too…).

    The drivers who put their names on the list knowing they’d have to wait 15 years or so, did not put their names on the list to buy a medallion. They put their names on the list to get a permit issued to them at a nominal processing fee (about $1,800) if they qualified when their name came up. Qualifications included but were not limited to fulling a yearly driving requirement, passing an FBI fingerprint background check, a physical, and being a cabdriver in good standing (not too many complaints or violations), etc.

    Taxicab service (not necessarily painted “taxicabs”) should be regulated by cities and counties, as specified in California Code 53075. Since the city is not regulating the vast majority of taxi service providers, making it impossible for regulated taxis to compete on a level playing field, they should definitely reimburse the banks and drivers for what was their idea in the first place (selling medallions for a profit to the city).

  2. This is a good news article, the most important in a while, that gives a reasonable if partial first approximation of the situation and it rightly suggests, through its very important presentation of the Credit Union’s “complaints,” that the SFMTA is culpable of serious wrongdoing. The news that the Credit Union has now stepped up to the plate is the best news this horrific situation has gotten in a long time. In fact, the entire international situation could change if the Credit Union persists in its very reasonable process, since an improvement in the understanding of how the SFMTA acted to encourage the TNCs could have important effects on the TNCs everywhere.

    Directing attention to the SFMTA’s criminal, and I mean criminal activity involved with medallion sales is very much the task of the day.

    Not only is the SFMTA to blame, its wrongful action is much easier to decipher than this news article allows.

    It was the SFMTA who themselves completely undercut their own “sold medallions” by creating the 8000-series “Corporate Medallions.” Putting the blame on the TNCs is a sham and a handy excuse. The Corporate Medallions were issued directly to the companies, and were created largely at the urging of Han Su Kim, the President of DeSoto/Flywheel. There were no driver/medallion holders in that situation. Some of the companies were also completely left out of that deal, so any outside observer can see that there is also favoritism for DeSoto/Flywheel going on, favoritism that was already evident by Mr. Kim’s success in getting the City to require TWO credit card machines in every cab… while he just so happened to be the local rep for the credit card device’s manufacturer. On the question of the credit card machines, the SFMTA seems to be taking orders from Mr. Kim. At an SFMTA Board meeting, I myself submitted a petition with 495 signatures of members of the public who objected to the back-seat devices. My petition was ignored.

    The 8000 Series medallions were a deal that left the drivers out entirely. The medallion holders simply showed up to work and learned that the Corporate Medallions were costing the companies literally three-tenths the cost of their own medallions. The SFMTA itself caused the crash. The SFMTA undercut the $2500 per month that the medallion holders were getting from the companies by creating Corporate Medallions for which the companies only had to pay $750 per month, AND THE SFMTA KEPT ALL THAT MONEY. So the SFMTA left the driver-owners it had created very much behind, while actually doing some “profit taking.” And since the SFMTA was administrator, it could declare what the public need for medallions was, sell more, undercut them too.

    The SFMTA has been in strident, dramatic conflict of interest in all its doings with the San Francisco Taxi Industry. VERY MANY members of the public are aware of this fact.

    I have driven a cab in San Francisco for 27 years and have been a consistent participant in the taxi community since the creation of the Taxi Commission. I attended very many of the Town Hall meetings and Taxi Advisory Counsel meetings at which these matters were discussed and I am willing to testify in court my observation of the matter that should be of utmost importance to the Credit Union: that the deciding factor for all pro-medallion sales parties was the repeatedly offered claim that the money with which to make the monthly bank payment would come from the medallion holder’s monthly royalty. Explained this way, the banks thought the deal was a no-brainer. By undercutting that royalty the SFMTA utterly betrayed the drivers to whom it had sold medallions. Charged with a regulatory function, the SFMTA used its power to make money off of the drivers, and wrongfully blames the market at large for the problems it has created.

    Chris French’s expression that he feels he has been stabbed in the back is therefore wholly appropriate.

    If there are still 7000 cab drivers in San Francisco, the 70 failures caused by the SFMTA’s operation represent a whopping one percent of the work force. Talk about giving the concept of the One Per Cent a different spin! If there are fewer drivers now, that percentage is only higher.

    We are not talking about one per cent who merely lost their jobs. We are talking about one per cent who defaulted on loans the size, as one commentator correctly observed, of home loans, as a result of government incompetence and corruption, and lenience with corruption.


    The banks were promised a situation in which the City made no mention of creating a product that would undercut its own first product.

    The S series medallions also did not do any good for the situation. There were a number of things bad about them, but the worst of these is that the SFMTA Board instructed Miss Hayashi to present an hourly schedule for their weekly use that nearly approached that of a regular full-time medallion (basically creating a full-time meadllion’s 14-shift week without two shifts), which was never discussed at Taxi Advisory Meetings and which meant that all the SFMTA’s negotiations at the Taxi Advisory Counsel were in bad faith, since never was such a schedule discussed until it was presented and immediately passed.

    So the City created not one, but two forms of medallions that competed with their own sold medallions by savagely undercutting their price.

    This sort of “business operation” is very, very clearly racketeering. The Credit Union’s “complaint” is one which the lady reporter was very correct to suggest could work ill for the SFMTA and the City. The persons who ordered the Medallion Sales Program were over-reaching their mandate to begin with, since the mere three lines of directive in the Proposition A that gave authority of the taxi industry to the SFMTA stipulated that the SFMTA was to continue, not redesign, industry oversight.

    The one glaring error in the article is the claim that there were not enough medallions. On that point, the reporters are operating on catechisms created by the companies. Bad business practices which the City permitted at the companies allowed those companies to make more money only if they had more cabs. It is always a mistake to think of the passengers as the customers who are being served. According to all the banks, the drivers are the end users. The cab companies MADE MORE MONEY by giving BAD DISPATCH to the drivers, thus creating the appearance of a problem solved by having more cabs around. The public, not understanding the situation, thought the same way someone would think if they went to the store and found no bread on the shelf. They would think more bread was needed. But a cab is a product that could be on the other side of the isle and never be found. DISPATCH IS AND ALWAYS for my 27 years in the business BEEN THE REAL ISSUE. With all their horrors, the TNCs proved this. The very fact they try to pass themselves off as not being transit companies is all the indication that is needed to determine what the real solution was.

    Nor is this the whole problem. The companies are now involved in double-tiered leasing of medallions, proving at a glance that the claim the medallions are worth less is completely false.

    That’s right, while the SFMTA is bankrupting drivers and enriching itself, it is allowing the companies to engage in black market leasing of medallions. The existence of the black market proves, all by itself, that the claims of “market forces” are misjudged at best and misrepresented at worst.

    The black market for medallions still very much exists. The companies have reduced the fee they pay their driver-medallion holders, but they have leased those same medallions out to persons whose activities prior to the present SFMTA Taxi Division regime were completely illegal. So the companies are getting at least the high prices it used to get, perhaps more, and keeping some of what used to be the drivers’ money. From one important point of view, that is all that has happened. The bank ought to have a field day over that.

    There is also the fact that the SFMTA’s mismanagement of the industry has been worsened by its altering of the laws to suit its preferred description of the need. As the SFMTA has ruined ALL drivers, medallion holders or not, it has blamed the problems on the TNCs while lowering standards in order to make more medallion sales.

    The reason the SFMTA has sold no medallions in almost two years is that none of this, except perhaps the part about the creation of the black market for medallions, is any secret. (In the case of the double-tiered leasing of medallions, the SFMTA has not changed the law, it simply doesn’t enforce that law.) Everybody knows that buying a medallion is not only a bad deal, the SFMTA has repeatedly proven they will make things worse at any moment. Even some of the most ardent petitioners for medallion sales want to sell their medallions as soon as possible. And one of those is one of the DeSoto architects of the whole scam.

    I serve on the SFMTA Taxi Task Force but have been repeatedly ostracized by not being sent meeting materials. I have written to Miss Kate Toran about this. She is well-known for almost never replying to emails. Her assistant replies to my letters but shows no understanding of the many matters I have brought up. At the Task Force, I represent drivers, and by now it is clear mine is in many respects a hostile presence. As so often, the SFMTA solves its problems through strategic incompetence.

    The companies are barely making it, in important part by requiring the older drivers who want to reduce their driving commitment, to hold to a now much higher personal driving requirement than ever at any time in history. The companies’ driving requirement is much higher than the City’s. The old “drive ’till you drop” career situation, WHICH WAS ONE OF THE MOST IMPORTANT COMPONENTS OF THE MEDALLION SALES PRESENTATION, is now worse than ever. There is no longer any army of enthusiastic young people, this is a war fought by veterans being worked, literally, to death.

    The people at the SFMTA – Board, Executive, and Taxi Division – are the most morally culpable people about whose wrongful activities I personally am competent to comment. They have precipitated an international scandal involving hundreds of thousands of torn lives and an incredible drop in the standard of public service. Some of these people, probably including some people in the industry, should be indicted and thrown in prison, while the City should be held responsible for an astonishing and vast deception and misuse of the public trust. Not just lost investments and incomes should be rectified, there is real cause for damages to be paid.

  3. How do we add ourselves as claimants with the Medallion Buyers Alliance?

  4. How about investigating bribes and corruption between left uber, dead Mr. Lee and others ? My hunch is thst city officials are bribed and paid off to allow these uninsured drivers to function. Mr. Smith

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