SF paid taxi medallion program ruined lives, purchasers say

For Dave Smith, owning a San Francisco taxi medallion is like having an albatross around his neck.

Ten years after buying his permit from The City for $250,000, he still owes the credit union more than $100,000, he said. Between his loan payment, the money he pays his cab company to drive under its color scheme — essentially the cab’s brand and colors — gas and maintenance costs, his expenses run around $4,000 a month.

Even though he drives 60 to 70 hours a week, he said, he doesn’t make enough to make ends meet, so he delays paying bills, staying just ahead of his creditors.

“I rob Peter to pay Paul,” he said. “It’s high stress. You’re on the edge all the time to come up with money.”

When Smith bought his taxi medallion in 2014, he said, he didn’t think his life would turn out this way. At the time, a San Francisco medallion was still seen as a license to make money, even with Uber and Lyft already on the scene.

Now, though, after those companies decimated the industry, he said he views that purchase — and the loan he took out for it, which still hangs over his head — as a huge mistake.

“It’s a life-destroying situation, to be honest with you,” he said.

Smith’s misery has plenty of company in the taxi community. Fourteen years after the San Francisco Municipal Transportation Agency launched its paid-medallion program, the industry is a shell of what it was then. Cab companies have gone bankrupt. Thousands of drivers have left the business. Hundreds have either surrendered their medallions voluntarily or had them foreclosed on.

The drivers that remain in the business said their earnings have been cut by as much as 50% — even as many, like Smith, are still trying to pay off the loans they took out when the industry was thriving.

Amid the industry’s collapse, the paid-medallion program — launched with much fanfare by SFMTA in 2010 — has become a failure in all but name.

The San Francisco Federal Credit Union, which provided most of the loans for the medallions, has lost millions of dollars on them from defaults. Holders such as Smith, who haven’t defaulted and still have medallions, can’t get out of their situations by selling them, despite having his name on an SFMTA list of available medallions for years. Indeed, no medallions have been sold at all since 2016.

Because each cab on the road has to have a medallion, and the price for each medallion remains fixed at $250,000 — even if it’s previously been surrendered or foreclosed on — it’s practically impossible to add new cabs to the market, even if demand should warrant it. And no one wants to spend that much for a medallion these days.

“We wish the SFMTA would address this medallion crisis,” said Evelyn Engel, an executive board member of the San Francisco Taxi Workers Alliance.

“We believe that The City betrayed the taxi drivers that bought medallions, and The City needs to make amends to them in some manner,” she said.

Legal fights against SFMTA

One effort to force the SFMTA — which earned $63 million from the medallion sales program — to address the situation ended in defeat Thursday.

When the agency created the paid-medallion program, it i ncluded a line in the authorizing legislation that compelled SFMTA , if it ever ended the program, to buy back the permits — if holders wanted to sell them — at the price at which they were sold.

In 2018, the credit union sued the agency, alleging SFMTA breached its contract for that loan program in part by never declaring a formal end to it and buying back medallions — including those the organization was starting to foreclose on. At the time, the financial institution claimed that write-offs of defaulted medallion loans and increased reserves to cover expected future foreclosures had cost it more than $10 million.

Even so, in October 2021, a jury ruled against the credit union . In February, a state Court of Appeal upheld that ruling. And on Thursday, the California Supreme Court formally denied the credit union’s appeal of the appellate decision, effectively closing the case.

That leaves the credit union stuck with the losses on defaulted loans — and drivers such as Smith saddled with medallions they can’t sell and loans they can’t afford.

Credit-union representatives did not respond to repeated requests for comment about the medallion-loan program.

After the 2021 trial-court decision, MTA representatives said they hoped to work with the credit union to revitalize the paid-medallion program and create a loan-forgiveness program — neither of which has happened to date. Agency representatives did not immediately respond to a request for comment about whether the end of the case would revive efforts for loan forgiveness.

The City’s old regulation regime

The local cab industry wasn’t always like this. From 1978, when voters passed Proposition K, until SFMTA launched the paid-medallion program, the permits were free — but severely limited in number and transferability. Cabbies could only get one when another taxi driver died or surrendered a medallion — and only after their name slowly made it to the top of a city-maintained waiting list, a process that could take 15 or more years.

The restrictions on medallions were meant to promote safety, limit traffic and ensure drivers made a decent living. They were also designed to make sure that medallions were held by working cabbies rather than cab companies or investors.

In part because of such limitations, medallions were highly valued. With no Uber or Lyft — at least until the end of the free-medallion program — there was plenty of demand for cabs.

It wasn’t unusual for cabbies to make $250 or $300 in cash, after expenses, for a 10-hour shift, or to make as much as $100,000 a year or more, according to other cabbies who drove during that period.

Medallion holders also had an opportunity to supplement their driving incomes without working: Cab companies would pay holders a monthly fee — which around 2014 was as much as $2,500 a month — to lease their medallions so other cabbies could drive under them.

How the industry has changed

That system started to change in 2010 when the SFMTA — which had taken over the regulation of taxis from the Taxi Commission the prior year and was facing a budget deficit — realized it too could make money off the medallions and potentially loosen up the yearlong wait list for them.

The agency instituted a pilot program through which older or disabled holders could essentially sell their medallions to people on the waiting list. SFMTA set a $250,000 price for the medallions and stipulated it would get a $50,000 cut, with the rest going to the former holders. To help taxi drivers afford the steep price, the agency set up a financing program for them with the San Francisco Federal Credit Union.

Two years later, SFMTA made the program permanent and expanded it by selling brand-new medallions. Some of those it sold for half price to cabbies at the top of its waiting list, the rest for the full $250,000 price. In both cases, the agency raked in the full amount.

Yoseph Awoke was among the early purchasers. An Ethiopian immigrant who came to the U.S. in 1989, Awoke said he began driving cabs in The City a decade later after some friends who were cabbies encouraged him to join them.

After waiting more than 10 years for a free medallion, Awoke jumped at the chance to buy one in 2011, putting down $50,000 he had saved up as a down payment and taking out a $200,000 loan from the credit union for the rest, he said.

At the time, it seemed like a good decision, he said — he was making good money driving taxis, and loved the job. With a medallion, he could continue to drive and would also be able to rent it out for $2,000 or more a month.

“I bought a medallion hoping that I have my Social Security,” he said.

Mike Murphy had similar motivations. He loved to drive; he’d been doing it since he was a kid, even before he had a driver’s license. To this day, he said, it’s his best skill.

He started driving a cab around 1995 and put his name on the waiting list for a medallion not long after. By the time MTA made the paid program permanent, he was nearing the top of the list. Because of that, the agency allowed him to buy one for $125,000 in early 2014.

“I believed that this was my Willy Wonka golden ticket,” Murphy said.

But things quickly went sour for Murphy, Awoke, Smith and others. In 2012, Uber, Lyft and early competitor Sidecar launched taxi-like services in San Francisco without any kind of regulatory approval. Although the California Public Utilities Commission initially barred the services from operating without a license, it quickly lifted that ban and, in 2013 gave them its stamp of approval.

The CPUC placed no limits on the number of cars or drivers the app-based ride-hailing companies could put on the road, and it allowed them to set their own prices. With plenty of venture-capital money behind them, the companies flooded the streets with drivers and undercut the cab companies’ fares.

Within a few years, Awoke said, he was down to making around $10 an hour, or around $120 to $140 for a 10- to 12-hour shift — less than half of what he was making before.

And with drivers making less money and able to spend less to rent cabs from taxi companies, those companies began cutting the amount they’d pay to lease medallions. Within two years of his medallion purchase, the amount Murphy says the cab company paid to lease it from him fell from $2,500 to less than $1,600.

It would only go down from there.

cabbies’ financial woes

Awoke said he refinanced his loan. After his cab company cut the rate it was paying to lease his medallion, he tried to better his position by buying and driving his own cab rather than leasing one from the cab company, which cut into his driving earnings. But that meant that instead of getting paid by the cab company for the use of his medallion, he had to pay the company a monthly fee of $1,150 to use its color scheme and radio-dispatch service.

In an emailed statement, SFMTA representatives said the agency has taken numerous steps to support the taxi industry and particularly paid-medallion holders. Among other things, the agency suspended taxi-related fees in the 2022-23 and 2023-24 fiscal years, it and increased fares in 2022. In 2020, barred taxi drivers other than those with paid medallions from picking up passengers at San Francisco International Airport, a move that many cabbies oppose.

But many taxi drivers say those moves haven’t been nearly enough to buoy the industry or the paid-medallion program.

Murphy said things came to a head around 2017. The amount his cab company was paying to lease his medallion was no longer covering his monthly loan payment.

After marrying a woman with children from a previous marriage, he said, he had eight kids to support, along with a mortgage, a car payment and credit card bills. But when he drove, he would come home with $50 in his pocket at the end of a 12-hour shift after paying the cab company and buying gas.

He tried to get the credit union to help him work out his loan, to no avail, he says. To save cash, he stopped paying his credit cards. He tried driving for Uber and Lyft but didn’t make enough to cover his medallion loan. Then, he found work as a stagehand and started picking up more and more shifts. Even though he was driving a cab less and less, he still had a $900 monthly medallion loan payment hanging over his head.

By early 2018, he had walked away from driving a cab, his medallion and his loan. At that point, he still owed more than $100,000.

“I was throwing up the white flag and surrendering,” he says. “I had no choice.”

Though something of a relief, the decision undermined his financial credit. The defaulted loan still sits on his credit report and weighs down his credit score, he says.

“It still hangs over my head,” Murphy says.

Awoke said his breaking point came with the COVID-19 pandemic. The lockdowns city officials put in place at the start of the outbreak to try to avert the spread of the coronavirus halted nearly all demand for taxi services. Although the credit union allowed drivers to pause payments on their loans near the start of the pandemic, that lasted for only two months, even though the industry’s operations were still essentially on hold at that point and most drivers couldn’t work.

Awoke kept his medallion for another eight months or so, he said, but the credit union eventually foreclosed on him. By that point, he’d paid $100,000 on his loan. He now works as a security guard and parking attendant.

“There was no longer work,” he said. “You can’t work under COVID. I don’t understand why the bank foreclosed the loan during that time.”

Smith is still driving, but he said he too has thought about walking away. If things get worse, he likely will. But he still holds out hope that something will be done to better his lot and that of other paid medallion holders.

“I have I guess you’d call it foolish optimism that something was going to happen here,” he said. So I’ve been hanging on.”