Are NYC banks behind Alderman Beale’s ridesharing changes?
By Ken Hare
Chicago Defender Staff Writer
It was just a matter of time before the truth really came out and now you will know quite possibly who and what is behind the push to abolish ridesharing in Chicago. All you have to do is look to the east coast where trends usually start and work their way towards mid-America. In New York City for the past year and a half, the taxi industry has been fighting the ridesharing companies Uber and Lyft – no surprise there. But you might be surprised to learn that the taxi industry has a once silent partner – the banking industry.
According to the Wall Street Journal, ridesharing companies like Uber and Lyft have put pressure on the taxi industry lenders’ portfolios. “Big and small lenders are being pressed by a steep drop in the value of cab licenses, known as medallions,” the news agency reported last year. The value of an NYC cab medallion has fallen from a high of $1.3 million to between $700,000 and $800,000 according to industry estimates.
In Chicago, the value of a taxi medallion has fallen from $375,000 to $150,000 accordingly. Due to the exorbitant pricing, medallion holders sought financing from specialty lenders including credit unions; one such lender was the NY-based Montauk Credit Union. Montauk’s loan portfolio was listed at $166.2 million and the bulk of the loans were geared towards taxi medallions.
However, although based in NY, Montauk’s loans were to medallion owners primarily in Chicago. As Uber, Lyft and other ridesharing programs began to gain ground in Chicago, the taxi industry began to lose business, therefore causing some medallion holders to start defaulting on their loan payments.
Citibank is reportedly foreclosing on 89 medallions in NYC worth over $30 million. And in Chicago, 53 medallions have been foreclosed on as reported by HVM Capital, LLC (HVM), which publishes activist research on the taxicab medallion industry and capital markets. HMV listed the value of a Chicago medallion at $150,000 as of last May 2015, significantly down from a high of $375,000 in 2014.
Montauk Credit Union had $50 million in medallion loans on their books, $18 million in capital and $6 million in reserves. The default rate among the Chicago medallion owners was so high that it outstripped Montauk’s reserves and put it at risk. The New York state, Department of Financial Services stated that Montauk operated in an “unsafe and unsound” manner.
By September 2015, their operations would be taken over by the feds – National Credit Union Administration – and their assets merged into Bethpage Federal Credit Union of Bethpage, New York, in March of this year. Other taxi medallion lenders have also taken a hit, among them Bank United in Florida, Progressive Credit Union, and Melrose Credit Union just to name a few.
Melrose Credit Union disclosed last year that its medallion delinquencies totaled nearly $400 million — a sum that nearly equaled its capital reserves. This prompted their attorney Todd Higgins to write a letter to NYC’s corporation counsel stating “The imminent risk of cascading medallion foreclosures, followed by the collapse of the medallion market, and by extension the entire taxicab industry, is no longer a threatened harm—it is a reality that is already unfolding.” He asserted that if the New York City didn’t intervene and stop ridesharing companies, the New York taxi industry could collapse.
As the fight made its way to Chicago, Aldermen Edward Burke and Anthony Beale both introduced resolutions to change ridesharing in Chicago, back in February 2015. Both aldermen have received donations from the Illinois Transportation Trade Association’s Political Action Committee (PAC) last year and also this year.
Ald. Burke received $10,000 on 11/6/15 and Ald. Beale received $3,000 on 10/14/15 and $5,000 on 3/24/16, according to illinoisunshine.org which tracks political contributions. The objective of the PAC is to “garner support for the Illinois taxicab industry.” At least 11 other aldermen who are supporting Ald. Beale’s proposal to change ridesharing rules accepted donations from the taxi industry‘s PAC.
Could what happened in NYC be the thrust behind Ald. Beale’s push to impose changes to the ridesharing industry in Chicago? Changes that include checking for fingerprints, marijuana possession and child support debt. In a meeting with the Chicago Defender’s editorial board last week, Ald. Beale stated “. . .the city of Chicago has a responsibility to level the playing field before the federal courts steps in and mandates changes.”
Former U.S. Attorney General Eric Holder wrote a letter to Ald. Beale asserting that fingerprint checks would disproportionately harm communities of color and so has Congressman Danny Davis. Community activist Sharon Ngwen sums it up “This fight is the same as all the others,” she says. “It’s the banks versus the working class people.”
Click on the link below to locate your alderman’s contact information. Call today to voice your concerns either for or against Ald. Beale’s proposed ridesharing changes which go before the entire City Council for a final vote on June 22, 2016.