NEW YORK, N.Y.—City Comptroller Scott Stringer has endorsed the New York Taxi Workers’ Alliance’s plan to relieve up to 6,000 yellow-cab owner-drivers of massive debt.
The comptroller announced his support for the plan at a rally on Broadway outside City Hall Nov. 12, saying his office has vetted the proposal and “found it fiscally sound.” “Predatory lenders took drivers for a ride and left families in a wreckage of financial distress and despair,” he said in a statement. “We have a fiscal and moral obligation to make this right—and embracing this plan is a start.”
The plan is intended to relieve the burden on owner-drivers who took out loans to buy medallions—which are required by city law to pick up street hails, and limited to 13,587—in the early 2000s, when their price rapidly inflated to more than $1 million. The bubble burst when the arrival of app-based ride services in 2014 more than doubled the number of cabs, leaving many owner-drivers “underwater,” paying off mortgages on medallions now worth a fraction of their original cost. Three of the nine drivers who committed suicide in an 18-month period from 2017-2019 were owner-drivers in that situation: Nicanor Ochisor, Yu Mein Kenny Chow, and Roy Kim.
NYTWA’s plan would restructure those debts to no more than $125,000. Drivers would pay them off over 20 years at 4% interest, with payments of $757 a month. If the driver fails to make payments for three consecutive months, the medallion would be repossessed and sold at auction. The city would work as a “backstop,” placing a bid of the loan balance plus 5%, and if it wasn’t outbid, would then resell the medallion at market rate.
In what the union calls its “highest risk/highest cost scenario,” it estimates that there are about 6,000 owner-drivers whose loans are underwater; that the foreclosure rate on the refinanced loans would stay at the current rate of 5% a year for the first five years and drop after that; and that the resale value of medallions would stay at $75,000.
That, NYTWA projects, would mean a net cost to the city of $60 million over the first five years, and a total of $75 million over 20 years. It estimates that gross costs to the city would be $212 million, with almost two-thirds of that offset by the sale of 1,910 medallions. In contrast, it says, the city had a $40 million surplus in its Taxicab Improvement Fund as of last summer, and a lawsuit against the city for defrauding medallion owners during auctions between 2002 and 2014 might seek damages of as much as $850 million.
The plan, Stringer told the rally, would allow owner-drivers “to repay loans on terms they can afford with their current earnings.” Its $75 million projected cost, he said, “could end up being a lot less.”
Owners of medallion debt have already devalued it as non-performing loans, the NYTWA proposal says. Marblegate, which bought some 3,000 loans from the National Credit Union Administration, paid an average of $115,000 each, it estimates. Medallion Financial Corporation told investors in August that it had reduced the carrying value of loans it owned to $119,500.
The loan refinancing, NYTWA executive director Bhairavi Desai told the rally, “is the only way that drivers are going to survive. It is the only way that the yellow-cab industry is going to survive.”
The COVID-19 epidemic, meanwhile, has battered the industry even further. According to a report the city Taxi and Limousine Commission released in July, the average daily number of yellow-cab trips taken dropped by 92% between February and June, and less than 3,000 of the city’s yellow taxis were on the road in June. Drivers’ average weekly income before expenses such as gas, maintenance, and leasing fees, it said, fell from just under $1,200 in January to a low of $314 in late March, and as of late June had only returned to just under $900.
“The truth is, the cost of what we need is low,” Desai said in a statement. “To have the backing of the chief financial officer of the city say the proposal has been vetted and found sound gives us tremendous hope after months of a deafening silence. City Hall can’t keep up the charade that ‘it’s the budget, stupid.’ It’s time for the Mayor to follow the Comptroller’s lead and move forward with debt restructuring that will save our city’s iconic taxi industry and lift thousands of struggling families out of crisis.”
The mayor’s office did not respond to a request for comment from LaborPress.