"Sandy Spanos is only 58, but now she could lose her house and be unable to pay for treatment for her cancer, which she was diagnosed with two years ago because the reform will leave her and her husband in hundreds of thousands of dollars of debt.
Mrs. Spanos invested in three taxi licenses so she could enter retirement comfortably with a good superannuation, but she said it has all been ripped from her.
“What did I do wrong?” She asked news.com.au.
The Victorian government wants to deregulate the taxi industry by abolishing taxi licenses and introducing a single registration for taxis, hire cars and ride-share services like Uber.
Taxi licenses cost cabbies $500,000 and it’s seen as an investment that will later help fund retirement.
The government now wants to buy back these licenses and has proposed to compensate taxi license holders by paying $100,000 for their first license and $50,000 for up to three others. Mrs. Spanos has three licenses, meaning she would receive $200,000, but she still has a loan of $300,000 she needs to pay back to the bank.
Her husband drives taxis but she said he was losing income.
“I can’t pay the bank back. I’ve still got bank loans and my husband’s income has almost decimated and my assets are being seized and I’m going to lose my house,” she said.
The Victorian government has previously said introducing new licensing requirements would put passengers first and create a level playing field for all industry participants.
“This will drive greater consumer choice, better service, and will place downward pressure on fares,” the government said.
The government claims it will be cheaper to now operate a taxi or hire car as the annual licence fee of $23,000 will be axed."
“What did I do wrong?”
- You paid $500,000 for each of three licenses
- You put all of your money in one basket
- You failed to assess Uber and other possibilities
- You borrowed money for a business that one should have seen issues with a long time ago.
Investing in taxis now is like investing in the film printing business 15 years ago, just as digital was about to replace film.
Chicago Taxi Medallions
The above link is from October of 2015. Twelve licenses sold then for an average of $240,000. 74 owners are in bankruptcy.
"Mayor Rahm Emanuel said the emergence of the ride-share industry has been a net benefit for the city.
“They provide jobs to people that didn’t have a chance to have jobs before, and they provide service to neighborhoods that never had service before,” Emanuel said. “We all know that the taxi industry never serviced the South and West Sides before. Not only does rideshare serve the South and West Sides, they’re opening offices there.”
But he says he will support efforts to level the playing field between the older taxi companies and newer ride-share operators."
The value of a medallion is now $40,000 if you can find a buyer. There will likely be a buyback proposal. Perhaps it will be very similar to the one in Australia.
Medallion Bubble Bursts
"The medallion crash is providing an abject lesson in the folly of central planning. Thanks to this artificial scarcity created by the government, in 2013 all taxi medallions and related assets were worth $2.5 billion in Chicago and $16.6 billion in New York City, according to Medallion Financial, a publicly traded company that specializes in financing taxi medallions. (Tellingly, its CEO, Andrew Murstein, once called taxis “little cash cows.”)
Now those cash cows are getting gored by Uber and Lyft. Uber estimates it now has nearly 35,000 monthly drivers in Chicago, almost triple the number of active taxi chauffeur licenses in the city. In Manhattan’s core, Uber gained 3.82 million pickups, while yellow taxis lost 3.83 million rides. Uber also expanded its pickups in the outer boroughs, leading to dramatic service increases in Brooklyn and Queens.
Increased competition is even benefiting those who continue to hail cabs. Research presented at the American Economic Association found that ride-hailing has “encouraged taxis to improve their own service in response to the new competition.”
Amid this freer marketplace, the taxi industry is facing serious disruptions. Last year, the average price for a medallion in Chicago was less than $230,000, a drop of 30 percent from the previous year. Several medallions went for as low as $150,000. Boston saw the average price for its medallions fall by 40 percent last year. In New York City, an individual taxi medallion once surpassed $1 million in 2014. But by March, medallion value had plunged 45 percent, as Medallion Financial revealed in SEC filings.
But many in the taxi industry refuse to adapt and instead have filed lawsuit to defend what remains of their cartel. After losing in New York state court, two associations that say they represent roughly 4,000 medallion owners sued New York City and its Taxi and Limousine Commission in federal court. The taxi lobby in Miami-Dade County, Fla. even filed a class-action lawsuit seeking $1 billion in damages for “significantly devalued” medallions in May.
In Chicago, the Illinois Transportation Trade Association, a group composed almost entirely of medallion owners and corporate affiliates, took the city to court, demanding “just compensation” for lost medallion value under the Fifth Amendment — the same constitutional provision intended to recompense property owners affected by eminent domain.
Competition is not theft. On behalf of rideshare drivers, the Institute for Justice, a public interest law firm, intervened in the case. Last September, a federal court dismissed the Association’s taking claim, though that ruling was appealed in May.
It’s hard to fathom a license going for $1 million in 2014. Mercy.
This is only the initial wave of the disruption. The drivers will vanish as well.
Mike “Mish” Shedlock