In the days of Uber, Lyft, some still buy S.F. taxi medallions

Cabdriver Gerard Rowland places his temporary medallion on the dashboard. He purchased the medallion in S.F. last year. Cabdriver Gerard Rowland places his temporary medallion on the dashboard. He purchased the medallion in S.F. last year. Photo: Paul Chinn / The Chronicle Photo: Paul Chinn / The Chronicle Image 1 of / 10 Caption Close In the days of Uber, Lyft, some still buy S.F. taxi medallions 1 / 10 Back to Gallery

Driving a cab isn’t a road to riches — especially now that the streets are flooded with drivers for new on-demand services UberX and Lyft. But after 20 years as a San Francisco cabbie, when Gerard Rowland got the chance to buy a taxi medallion last year, he didn’t hesitate.

“It’s a gamble, but it’s always a gamble with the taxi business,” he said. “There are bad years and good; we’ve always had threats against our existence, from BART, Super Shuttle and other things. Competition like this Uber stuff would have happened anyway.”

Now Rowland, 53, is an owner-operator, driving about six 10-hour shifts a week and leasing his new $30,000 Toyota Prius to other drivers the rest of the time.

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Taxi medallions — the government-issued right to operate a single cab — have fallen in value in many cities, a clear indicator of the ride services’ impact. New York, Chicago and Boston all saw medallion prices tumble by about 20 percent in the past year.

But in San Francisco, medallion prices are set at $250,000 by the Municipal Transportation Agency, which says there are still plenty of buyers, with 681 sold since 2010. (Of those, 200 went for $125,000 to drivers who had spent the longest waiting their turn under the previous system, in which medallions were almost free but required years-long waits.)

The city now has about 1,900 medallions — up from 1,500 a few years ago — and is gradually raising the number to 2,100.

“It’s still a good investment,” said MTA enforcement and legal affairs manager Jarvis Murray. “We don’t believe the taxi business is going to go away anytime soon. Demand for medallions hasn’t abated.”

By capping the sale price of medallions, the MTA insulates medallion holders from market fluctuations, either up or down. When drivers want to resell, the price is what they paid, minus a 5 percent transfer fee. The agency said it is unlikely to cut the price. For those cabbies who paid nearly nothing for their medallions, the new sales system is an even better deal; they receive $200,000 when they surrender it for resale.

Buying a medallion essentially transforms a cabbie into an entrepreneur.

“Drivers say, 'When we buy a medallion, we buy a career,’” said MTA director of taxis and accessibility services Kate Toran.

Medallions confer the right to operate a cab around the clock, so owners can generate income by renting their medallions to other drivers or cab companies whenever they’re not using them themselves.

But that’s where the Uber effect shows up. Due to the new competition, cab companies have slashed what they pay to rent a medallion. And medallion holders who run their cabs themselves said they must scramble to find other drivers, many of whom have flocked to app-based ride companies.

Such changes “tell a story that Uber and Lyft have siphoned significant demand from cabs,” said John Morgan, an economics professor at UC Berkeley’s Haas School of Business. In the long run, “it will be harder and harder to maintain the revenue flow from medallions,” especially because Uber and Lyft are more loosely regulated than cabs.

He thinks taxis will maintain a place in the market, “but it may be as a niche product.”

Medallion buyers must drive at least 800 hours a year. They don’t have to pony up the full quarter of a million. They can put down as little as $12,500 and finance the rest through a loan of up to 30 years (not one has defaulted, the MTA says).

“It was a deliberate public-policy decision to make it affordable to blue-collar workers,” said Charles Rathbone, assistant manager of Luxor Cabs. “The down payment is the price of a used car and is within reach for almost all taxi drivers.”

But an increasing number of cabbies have switched to driving for UberX and Lyft, where there’s no need for a medallion and no “gate” — a fee of about $100 a day paid to taxi companies or medallion owners. Last week, Uber said it has more than 16,000 drivers in San Francisco.

For medallion holders, taxi work remains attractive because they can make money even when they’re not driving. Some choose to be independent owner-operators like Rowland, buying or leasing their own cab, finding drivers for the shifts they don’t want, and handling insurance and car maintenance themselves. In that case, they pay a cab company about $1,000 a month to use its branding and dispatch system.

Others rent the medallion to a cab company, which provides the car and handles scheduling, insurance, maintenance and other overhead. Medallion holders in that situation still need to drive a certain number of shifts themselves.

While Uber and Lyft haven’t lowered the cost of a medallion, they have reduced the amount of money one can generate.

Yellow Cab Cooperative, the city’s biggest fleet with 600 cabs, paid around $2,100 a month for a medallion two years ago, said general manager Jim Gillespie. Last year it paid $1,800 a month. In February, that will fall to $1,400.

“We’ve taken a really big hit” financially from UberX and Lyft, Gillespie said. With fewer drivers, about a fifth of shifts aren’t filled. The net result: About $360,000 a month less revenue, he said.

An MTA report found that the average number of trips per taxi slid steadily from 1,424 a month in March 2012 to 528 in August 2014. That decline takes into account all the idle cabs, Toran said. The ones on the road haven’t seen business fall that precipitously.

The right to buy a medallion is determined by seniority among cabbies who must have driven at least 800 hours in four of the five preceding years.

“Meeting the driver requirements kept me from working full time in other occupations,” said Barry Korengold, who got a medallion in 2008 after a 15-year wait. “It’s a hard job, where you can get robbed or assaulted, and without a medallion, you don’t make that much money. People don’t understand the sacrifices you make to get one.”

Solomon Hagos, 36, said he spent almost 10 years on the wait list until his turn came up a year ago.

“When I finally got the call, I said, 'Let’s go,’” he said.

He’s hopeful that the medallion will provide security for his two kids, ages 8 and 9. “The money it can bring is a blessing,” he said.

Hagos operates his own cab. It’s hard to find drivers for the less-lucrative day shifts, so he took those himself. He drives at least five 10-hour shifts a week. “Right now with Uber, it makes me a little worried, but I’m not complaining,” he said. “You just have to work more.”

Rowland likewise said it’s challenging to find drivers. “If you don’t have drivers, you lose money big time,” he said.

Like other cabbies, he blames government regulation that dictates how cabs operate while giving an easier road to UberX and Lyft on such issues as insurance, vehicle inspections and driver background checks.

Cities limit the number of medallions they issue, causing passengers to complain that there aren’t enough taxis, and paving the way for the new competitors. In response, the MTA is now adding medallions. All 900 drivers on the waiting list last month were offered a chance to buy a medallion. Next, the MTA will open up medallion sales to all 9,000 licensed taxi drivers in order of seniority — providing an even better test of demand.

“The investment will remain strong as the taxi industry continues to adapt,” Toran said. “Adopting e-hail apps, improving customer service, improving response times on dispatch trips will all work to keep the business solid.”

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid