A new plan to solve New York City’s taxi crisis is brewing — and it’s coming from a pair of local tech entrepreneurs.
A pair of former Wall Street traders who have created a ride-hailing app for yellow cabs are teaming up with a city councilman with an idea to not only slash the debts that drivers owe for their city-issued medallions, but also reset the value of the medallions themselves.
Slated to be introduced this week by City Councilman Ritchie Torres, the plan calls for the council to enact legislation to force private lenders to revalue every taxi medallion at $250,000. In turn, the city would act as a guarantor on all outstanding loans, absorbing only the costs of drivers that default on their payments.
The wager: that the plan would effectively cut drivers’ monthly payments to an average of $1,100 a month, drastically reducing the risk of defaults for city taxpayers. That’s well below the punishing monthly tabs of $3,000 and $4,000 that are driving thousands of cabbies into financial ruin and even suicide, says Mihir Dange, co-founder of Wapanda, a mobile app designed to help cabbies better compete against Uber and Lyft.
“The debt is crushing these guys,” Dange told The Post. “The average driver pre-COVID was doing about 17 rides a day and barely making ends meet.”
Torres, a longtime advocate of medallion owners, said he will introduce what he is calling the Medallion Asset Rehabilitation Program, or MARP, into the council’s budgeting process later this week.
“The city was complicit in the collapse of the medallion market,” said the Bronx legislator. “That complicity comes with a responsibility to save them.”
By 2014, the city was selling taxi medallions for as much as $1.3 million each, telling buyers that the investment was “ better than the stock market.” But the arrival of Uber and Lyft tanked their value to as low as $130,000. Last year, reports surfaced that industry and city officials had artificially inflated the medallion prices, partly by loosening regulatory restrictions.
The new proposal is coming after local officials in January floated a plan to create a public-private partnership to bail out taxi drivers by buying back the medallions. While the program calls for unspecified discounts on the medallions, officials admitted the plan would cost upwards of $500 million.
Proponents of the new plan, meanwhile, argue that it would sidestep the need for a costly bailout. A $250,000 valuation for every medallion, Dange argues, could make for an attractive return for most lenders, who are now staring at the prospect of a slew of defaults, as well as a demand from the New York Taxi Workers Alliance to cap all medallion debt at $150,000.
The plan is in its early stages, and it’s not yet clear how lenders will react. Marblegate Asset Management, a hedge fund that recently scooped up 3,000 medallions, didn’t comment. But the fund is believed to have bought its medallions in deals that valued them well below $150,000, according to people briefed on the deals. A source close to Marblegate called such figures “wildly misleading and completely inaccurate,” but declined to elaborate.
Dange and his co-founder Zahid Biviji, whose app helps drivers identify areas where Uber and Lyft are surge pricing so it can rush in at a lower price, say their plan is designed to ensure that medallions hold enough value to allow their owners to build equity over time.
“Instead of paying down what they can never fully repay, we have created a rehab program designed to help drivers gain equity value and reduce their payments,” Biviji said. “When things open up, an $1,100 monthly payment might make it work for drivers.”
Dange and Biviji modeled their plan on the Home Affordable Refinance Program launched in 2009 to help homeowners underwater on their mortgages in the wake of the financial crisis. That plan used the federal government as a backstop on troubled mortgages, lowering both the monthly payments for homeowners and the risk to lenders. In tandem, that raised the asset value of the troubled mortgages and lowered the default rate.
“The default rate on HARP was 0.4 percent,” Dange said. “We see that being even better with medallions, meaning the city would likely absorb less than $20 million in defaults.”
While that forecast my strike some as outlandishly low, it’s the basis for a proposal to allot the medallion-focused MARP plan $25 million over a five-year period. Even so, some fret that funds might not be forthcoming.
“It is an interesting concept to reverse engineer a medallion bailout based on what owner-drivers can afford to pay,” said former TLC commissioner Matthew Daus, now a partner at law firm Windels Marx. “But unfortunately, due to the COVID-19 pandemic, the fiscal crisis now and into the unforeseeable future may have significantly reduced the chances that public money will be available.”
Torres makes the case that the city should move on medallion relief before it is forced to by New York Attorney General Letitia James, who filed a fraud suit against the city in February, alleging that the Taxi and Limousine Commission artificially inflated the value of medallions. Her action seeks $810 million in damages from the city, with plans to distribute those funds to distressed drivers.
“COVID-19 should not be an excuse to delay relief,” Torres said. “Any COVID relief package must include money for taxi drivers. It’s better for us to act than for the courts to decide for us.”
For their part, Dange and Biviji say they like the prospects for taxis that are armed with their new ride-hailing app once citywide lockdowns are lifted. Plexiglass shields and easy-to-clean vinyl upholstery will become a lot more attractive to passengers, they predict.
“Try finding a movie based in New York City that doesn’t have a yellow cab in it,” Dange said. “You can’t. Yellow cabs are in the DNA of this city, and it doesn’t make sense not ensure that they survive in the long-term after this pandemic ends.”
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