On one side is The Greater New York Taxi Association<\/a> (GYNTA), which represents the taxi industry.\u00a0 One the other side is the New York City Taxi and Limousine Commission<\/a> (TLC) representing the city government.\u00a0 At the center of the dispute is a report that TLC published on the average price for taxi medallions.\u00a0 A taxi medallion is a license that allows its owner to legally operate a yellow taxi within the city limits (from TLC website)<\/p>\n A taxicab medallion is not only a valuable asset, it is also a license from the Taxi and Limousine Commission to operate a New York City taxicab.<\/p><\/blockquote>\n<\/div>\n TLC regulates the number of medallions that are active in the market, and sets the initial purchase price when new ones become available.\u00a0 All other transactions occur between businesses, who either buy or sell \u2013 much like the exchange of securities on the stock market \u2013 based on need.\u00a0 As the TLC states clearly on the their website<\/p>\n Any change in the ownership of a taxicab medallion must be approved by the TLC, and any new owner must apply and be approved for licensure before assuming an ownership interest in a medallion.<\/p><\/blockquote>\n<\/div>\n In addition, they track them and record the price<\/a> as part of their regulatory function, and make the statistics associated with these transactions a matter of public record.<\/p>\n According to Mr. Barro\u2019s article, TLC\u2019s report has listed the price for medallions as holding steady at or near the peak they reached in the spring of 2013 when, during that same period, \u2018they were actually falling\u2019.\u00a0 Depending on the type of medallion being purchased, the price drops range from 17 to 25 percent.\u00a0\u00a0 As further evidence that something is not quite correct, Barro states:<\/p>\n However, in eight months in 2013 and 2014, the commission [TLC] reported averages that exceeded all actual prices for individual medallions. For example, the commission\u2019s report for February 2014 reflected 14 transfers of individual medallions for an average of $1.05 million. In fact, there were 15 transfers, none at a price higher than $1 million.<\/p><\/blockquote>\n<\/div>\n The original report has since been pulled from the TLC website, so an independent scrub of the data and the conclusions is not possible. But in an earlier article, Barro attributes the competition from Uber and Lyft as the source for the downward pressure on the medallion prices, which had peaked at over $1,000,000 per medallion, and are now slightly above $870,000.\u00a0 In addition, he provides this additional nugget on how the TLC generates its statistics:<\/p>\n In fact, individual medallions have traded below $1 million for most of the last year. But the commission excludes from its statistics any transaction at a price more than $10,000 below the previous month\u2019s reported average.<\/p><\/blockquote>\n<\/div>\n The rule just listed should disturb anyone with even a rudimentary exposure to statistics.\u00a0 With a peak asking price at a million dollars, a $10K fluctuation in price is approximately one percent.\u00a0 To put their statistical approach in more familiar terms, consider what would happen if they were charged with tracking the price of a gallon of gasoline.\u00a0 The TLC would say that any price drops that were greater than 3 cents ($0.03) would be ignored.<\/p>\n Is there a way to try to understand why the commission does its statistics in this fashion?\u00a0 To answer this, I started by making a simple survey of the data available on medallion transfers for the calendar year 2014 (Jan-Nov).<\/p>\n During that time span, the TLC lists 69 transfers of individual medallions along with a brief explanatory note on some of them, ostensibly to explain \u2018out of family\u2019 prices.\u00a0 It is accepted practice when statistically analyzing a population to exclude outliers, and in certain months this seems to be needed.<\/p>\n For example, the May 2014 record lists 10 transactions, with 7 of them at approximately $1000K, 1 at $880K and 2 others well below those values.\u00a0 One of these two was a medallion sale for $525K with an explanatory note of \u201cPartnership Split\u201d and the other, which sold for just under $81K, bore the note \u201cSelling 10%\u201d.<\/p>\n It is reasonable, when trying to appraise the fair market value of the asset, to exclude such outliers where the transaction may have been associated with a desperate situation which may have skewed the asking price from fair market (e.g., an asset had to be liquidated quickly in a \u201cPartnership Split\u201d).\u00a0 Based on this philosophy, I removed from the data all cases where the transaction price was well out of family.\u00a0 This left 62 sales distributed unevenly over the 11 months.\u00a0 The monthly average is shown in the figure following, where a definite downward trend can be seen in the last 4 or 5 months reported (it is important to note that September has only one transaction).<\/p>\n I also tried to characterize the fluctuations in these data, and I used the population standard deviation of the 62 cases as a measure, which gave a reasonable estimation of approximately the price fluctuations at $55K.\u00a0 This number is well over 5 times larger than the $10K used by the commission, and so it is easy to see how their rule of excluding from consideration any transaction that was $10K below the previous month\u2019s average basically led to the conclusion that prices were flat.\u00a0 In effect, the commission\u2019s asymmetric approach introduces a bias into their analysis that simply ignores the statistical data from August to November.<\/p>\n Why might the TLC indulge in such statistical black magic?\u00a0 Well, obviously to protect their own interests; but what exactly are these?\u00a0 Let\u2019s explore some of the possibilities.<\/p>\n The commission is seeking to protect the livelihood of the taxi driver.<\/strong>\u00a0 This seems an unlikely explanation, as propping up the price of a medallion clearly helps the owner maintain his investment while only indirectly helping the driver to maintain his job.\u00a0 The median salary for a taxi driver in New York<\/a> is about $38K, which is a far cry from having the capital needed to buy a medallion, so it is unlikely that there is a high percentage of owners\/drivers in the market.<\/p>\n The TLC is trying to maintain the regulated market in the face of the intrusion by Uber and Lyft. <\/strong>\u00a0There is a segment of the population who believe that preventing Uber and Lyft entry to the marker would have two benefits.\u00a0 The first is that it would prevent the kind of fare-wars that erode driver pay<\/a> and would protect their salaries.\u00a0 The second is that Uber and Lyft are not as committed to passenger safety<\/a> as they should be. \u00a0Both of these explanations also seem to be unlikely.\u00a0 Uber and Lyft have made huge inroads into the driver-for-hire markets in many US cities with the tacit or explicit permission of the local governance, and so the TLC would be going rogue.\u00a0 Second, there is no evidence that Uber or Lyft drivers commit felonies at any higher rate than yellow cab drivers.\u00a0 In this hyper-connected world, bristling with social media, it is actually in the best interest of Uber and Lyft to have trustworthy drivers.\u00a0 Also, some conventional taxi drivers must be law breakers. else why have a court ruling<\/a> upholding the commission\u2019s authority to suspend licenses of drivers who break the law.<\/p>\n The TLC is trying to maintain its own influence and position.<\/strong>\u00a0 This is the likeliest explanation.\u00a0 Government bureaucracies trade in their own form of wealth and capital, which is measured by the authority they wield and the favors that they curry from the industries they regulate.\u00a0 GNYTA\u2019s website<\/a> suggests that their relationship with the TLC is a cozy one when they state<\/p>\n GNYTA was formed because its members shared a vision \u2013 a vision of a strong vibrant progressive taxi industry in New York that would partner with government to create the most dynamic, fuel efficient and accessible taxi industry in the world.<\/p><\/blockquote>\n GNYTA\u2019s goal is not to be an obstacle but an actual partner with the legitimate goals of government.<\/p><\/blockquote>\n<\/div>\n Of course it is in GNYTA\u2019s interest to align itself with its regulators as long as the latter controls the number of medallions, thereby maintaining a barrier to entry for competition.\u00a0 It is a classic protectionism arrangement where government and big business are partners for each other\u2019s benefit, and the consumer is of secondary interest.\u00a0 This type of arrangement is sustainable only until an external force upsets the status quo.\u00a0 This is what seems to be happening with the rapid rise of Uber and Lyft, and the cracks in the relationship between the TLC and GNYTA are starting to appear.<\/p>\n","protected":false},"excerpt":{"rendered":"![\"NYC_Ave_Individual_Medallion_Sales_2004\"](\"https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2014\/12\/NYC_Ave_Individual_Medallion_Sales_2004.jpg\")
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