New York City has set aside $65 million of federal stimulus money that is meant to fix the debt crisis among taxi drivers after months of yellow cab protests shutting down bridges and highways. But, instead of giving money to the drivers in need, it’s seemingly bailing out lenders, including a big Connecticut hedge fund.
According to an article that ran in Jalopnik, “Over the past two decades, the city not only watched as [medallion] prices skyrocketed, but encouraged it. To put some figures on that, medallion prices shot up 455% from 2001 to 2014… only to quickly drop again. That meant medallions went from $200,000 in 2002 to over $1 million in 2014, then crashed to less than $200,000 soon after.”
Under both the Bloomberg and De Blasio administrations, the city made $855 million off of those values, as the NY Times reported in 2019. During the bubble, government officials worsened the problems by exempting the industry from regulations. The city also chose to fill budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.”
The city sold those medallions, profited off of them. Now it’s the drivers who are suffering. As NPR put it in 2018, “cities made millions selling taxi medallions, now drivers are paying the price.”
Instead of helping drivers by forgiving their debt, they are instead choosing to bail out the lenders. The plan: To lend drivers $20,000 to pay their medallion debt, and they can borrow another $9,000 for other monthly payments. With some drivers hundreds of thousands of dollars in debt, this won’t accomplish much. All it does, basically, is funnel a bunch of money to big lenders without helping drivers, Bhairavi Desai, leader of the profit union New York Taxi Workers Alliance, told news outlet Business of Business.
Here’s how the city bails out lenders not drivers by funneling its relief money right back to them, as Desai explains: “In 2018 [Marblegate] bought about 300 taxi medallions, hedging their bets on the struggling industry; Uber and Lyft (which don’t require medallions) were just flourishing. Since February 2020, Marblegate started to purchase the medallion loans from lenders. In the proposal that the city just announced, medallion owners can borrow $20,000 from the city at zero interest, but it must be used as leverage to negotiate debt restructuring. So, the city’s plan is to essentially loan owner/drivers $20,000 that they can then turn around and offer to the lender, Marblegate, or banks, or credit unions, with no concessions from the lenders as to what the new balance would be on these loans. Not only is the city directing its stimulus through the drivers to the lenders, it is doing it with no guarantee that the loans will be meaningfully paid down. “The city’s plan is not nearly enough to bail out the drivers, who each owe about $500,000 in loans on average.”
A Taxi Workers Alliance plan asks the city to write down the loans to $125,000 and bail out the drivers it helped send spiraling into debt. The lenders would still get paid, but the drivers would be in the clear, according to Desai.
“Our proposal has been that the city set up a backstop – if the hedge fund or bank reduced the debt to $125,000, the City of New York would guarantee it, 100% of delinquency. The medallion owners are protected and the banks and hedge fund would be guaranteed $125,000, even if the debt is $300,000 for example. Even in the [worst] case scenario, our plan would end up costing the city $75 million over 20 years. Our plan is more fiscally sound and would be life-saving. Their plan costs more and does absolutely nothing, offers no relief.”