Taxi drivers are suffering especially since rideshare companies like Uber and Lyft took a fair share of the transportation market. Additionally, another factor that has played a role in the hardship of taxi drivers in New York City are the medallions. Medallions are city permits required to own and operate a cab, which drivers normally take out a loan to purchase. A lot of taxi drivers have declared bankruptcy, and a few have even committed suicide, as a result of having to pay back the interest on the loans for medallions.
A high-level panel in New York has requested a $500 million bailout for taxi drivers who have high medallion loan interest rates. Even with the worldwide pandemic of COVID-19 going on, taxi drivers are still in need of this bailout.
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The main reason for this proposed bailout is to assist taxi drivers with the loan payments related to medallions. Looking at the demographics of taxi drivers, about 80%-90% are immigrants from other countries. When they come to the United States and start working as a taxi driver, it is required to own a city-permit to be a legal driver. However, drivers are funneled into taking out reckless loans in order to get started, which is leaving them bankrupt and struggling to survive. The loans that these taxi drivers are taking out total almost $1 million dollars, while only having an income of about $22,000 a year.
Similar to what happened in 2008 when the housing market crashed, the medallion loans crashed after they were artificially inflated. Before they were worth about $1 million, now they are worth a fraction of that.
Rideshare Surge Model
Rideshare companies such as Uber and Lyft have taken at least 50% of taxi drivers business over the past 7 years. The way these companies surge prices during a busy event or when demand is generally high could be a new way taxi drivers could make more money during a busier time. The City Council is proposing that to be the new model to help drivers make more money.
As a result of the medallions, bubble burst, and rideshare companies coming in, a panel appointed by the City Council has requested a bailout. The bailout is proposed to be $500 million and be used to pay the interest rates, at discounted prices, on the loans for the medallions. The $500 million would come from mainly private donors, investors, and the City Council.
Request a Demo of Agenda Discovery
As this bailout could be coming to the surface soon, this will heavily affect the transportation industry in New York City. While taxi drivers will have their medallion loan interest rates paid back, what is going to happen to the industry with Uber and Lyft? Will a large percentage of taxis companies go out of business in the next few years? With Agenda Discovery, you can track legislative meetings related to the transportation industry that is happening at the local level. Request a Demo today to stay informed.