Chicago cabbies say industry is teetering toward collapse

Aamer Madhani | USA TODAY

Show Caption Hide Caption How ride-share services are killing taxi cabs Gary Karczewski is veteran Chicago cab driver who has seen the value of his taxi medallion plummet with the rise of ride-sharing companies.

CHICAGO — Operators of the nation’s second-biggest taxi fleet are now accelerating toward their long-rumored extinction, edging towards becoming virtual dinosaurs in the era of ride-sharing monsters Uber and Lyft.

Cabbies have long grumbled that the sky is falling as they lose ground to ride-sharing companies. Now, cabbies in Chicago are pointing to new data that suggests the decline could be speeding up.

About 42% of Chicago’s taxi fleet was not operating in the month of March, and cabbies have seen their revenue slide for their long-beleaguered industry by nearly 40% over the last three years as riders are increasingly ditching cabs for ride-hailing apps Uber, Lyft and Via, according to a study released Monday by the Chicago cab drivers union.

More than 2,900 of Chicago’s nearly 7,000 licensed taxis were inactive in March 2017 — meaning they had not picked up a fare in a month, according to the Cab Drivers United/AFSCME Local 2500 report. The average monthly income per active medallion — the permit that gives cabbies the exclusive right to pick up passengers who hail them on the street — has dipped from $5,276 in January 2014 to $3,206 this year.

The number of riders in Chicago hailing cabs has also plummeted during that same period from 2.3 million monthly riders to about 1.1 million.

Declining ridership for Chicago’s taxi industry comes as foreclosures are piling up for taxi medallion owners who aren’t generating enough fares to keep up with their loan payments and meet their expenses.

More than 350 foreclosure notices or foreclosure lawsuits have been initiated against medallion owners already this year, compared to 266 last year and 59 in 2015. Since October, lenders have filed lawsuits against at least 107 medallion owners who have fallen behind on loan payments, according to the union’s count.

The union is calling on the city take several actions to provide relief for the city’s struggling taxi industry, including changing rules so taxi drivers aren’t required to replace their vehicles as often, waive an annual $1,176 per taxi ground transportation tax fee, and eliminating a city medallion license renewal fee that costs owners $1,000 every two years.

“When they opened up ground transportation and taxi market to thousands of for-hire vehicles like Uber, Lyft and now Via . . . taxi driver income has been decimated and owner-operators are unable to keep up with loan payments for their medallions plus their high-operating costs,” said Tracey Abman , associate director at AFSCME. “As a result of that, hundreds of taxi owner-operators are facing foreclosures on their medallions and thousands more foreclosures are likely unless the city takes substantial action to reduce the financial burden on small taxi owners.”

Chicago cabbies aren’t alone in feeling the pinch.

In New York, ridership in the city’s iconic yellow cabs has fallen about 30% over the last three years. Last year, San Francisco’s Yellow Cab — the city’s largest taxi company — filed for Chapter 11 bankruptcy protection. Los Angeles taxi ridership fell 43%, and revenue was down 24%, between 2013 and 2016.

Chicago's Department of Business Affairs and Consumer Protection said in a statement that it is prepared to continue talks with cab owners and operators on ways to reduce the regulations on the industry. But the city agency noted that it also has already taken a series of actions to try to help the bottom lines of owners and operators, including hiking taxi fares by 15%, reducing credit card transaction fees on rides, and reducing the medallion transfer tax by 80%.

“Transportation companies compete for customers, and ultimately it is the consumer who makes the choice,” the city agency said.

The value of Chicago medallions hit a median sales peak of $357,000 in late 2013, just before Uber arrived on the scene in Chicago. In April, one medallion sold for just $35,000, according to city data.

About 39% of Chicago’s medallions are owned by individuals or groups with four or few fewer medallions, while the majority of medallions are owned by companies that maintain large fleets of taxis and lease the permits and vehicles to licensed operators.

Veteran Chicago cabbie John Aikins,67, who is facing foreclosure on two medallions for which he owes more than $330,0000, said he has little hope that the industry can be saved.

"It feels like the city is just watching us collapse," Aikins said. "Right now, there are a few people, the elderly and some others who refuse to take Uber because they are uncomfortable with it, that keep us going. But how many of those people are out there to sustain us?"

Taxi operators have long complained since the emergence of Uber that they face an uneven playing field with the ride-share companies, which don’t typically face the same permitting and fee rules. The Illinois Transportation Trade Association of Illinois unsuccessfully sued the city of Chicago, arguing that Chicago had unconstitutionally enforced two sets of rules for taxi and ride-sharing industries and made it impossible for cabbies to compete with Uber and Lyft.

But the U.S. 7th Circuit Court of Appeals ultimately rejected the taxi industry’s argument. Cabs and ride-hailing, the court ruled last October, are distinct services and could thus be regulated differently. In April, the Supreme Court declined to hear the case and the 7th Circuit’s finding stood.

"Were the old deemed to have a constitutional right to preclude the entry of the new into the markets of the old, economic progress might grind to a halt," Judge Richard Posner wrote in the 7th Circuit decision. "Instead of taxis we might have horse and buggies; instead of the telephone, the telegraph; instead of computers, slide rules."

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