App based transportation services such as Uber and Lyft have brought increased competition to New York City's taxicab industry and have introduced an element of uncertainty into the value of New York City's taxicab medallions. The trend could potentially affect credit unions that finance medallion purchases or use them as collateral for other loans.

Taxicab medallions are the instruments New York City uses to regulate the numbers of licensed taxicabs and can serve as a source of revenue for owners, who either drive the taxis themselves or lease out their cars to other licensed taxi drivers, according to Michael Reiver, general counsel at the $2.1 billion Melrose Credit Union.

The Briarwood, N.Y.-based credit union is one of a handful of credit unions in the greater New York City metropolitan area that make loans involving the medallions, Reiver explained.

Credit union like medallions because they are worth a significant amount of money and have been prized as an investment vehicle, rising in value consistently even as other assets such as real estate and stocks have fallen, Reiver explained. However, he acknowledged medallion value can be difficult to pin down.

The New York City Taxi and Livery Commission has issued 13,605 medallions total, with 368 of them issued between November 2013 and February 2014. These 368, however, were limited in that they the commission required their associated cars have mechanisms for handicap access such as portable ramps and other modifications.

The roughly 13,000 so-called “unrestricted” medallions are divided in half, with roughly 6,500 going to independent drivers who actually drive the cars and 6,500 going to investors who often run what are called minifleets of drivers who lease their cars, Reiver explained.

However, the TLC hasn't auctioned any unrestricted medallions since 2004, according to its website. The only other market for them is private sales, Reiver said. Sales or transfers must be reported to the TLC which then can publish the price for the transaction. However, many transfers that don't carry a price, such as medallions that pass from one owner to another as part of an estate or business partnership.

Still, when the TLC auctioned off some handicap accessible minifleet medallions in March 2014, the winning bids ranged from $2.2 million to $2.4 million. When the Commission auctioned independent handicap accessible medallions in February 2014, prices ranged from almost $806,000 to $965,000.

These prices suggested that medallions are continuing to hold their value, Reiver noted, which is good because Melrose has more than $1.5 billion in loans anchored by the medallions.

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Reiver pointed to the credit union's strong performance as an indication of its lending and management prowess.

As of the end of June, the last date for which peer data is available, Melrose had a net worth ratio of 19.21%, well above its peer group along with delinquency and charge off ratios significantly lower than peers. Further, the credit union's return on average asset ratio stood at 1.45%, compared to 0.86% for peers.

The app's impact on the taxi trade and the possible worth of taxi medallions is hard to quantify.

First, the battle between traditional taxi companies and transportation apps has focused more on competition for drivers, not passengers, as was originally anticipated. Cab companies have alleged in the New York media that former TLC members have leaked cabbie's names or contact information to Uber so the app company can contact them and lure them away from driving cabs.

Ashwini Chhabra left his $160,000-a-year post with the Taxi and Limousine Commission in May, according to media outlets, and took over the as Uber's head of policy development and community engagement three days later. The New York City Department of Investigation confirmed it is looking into whether Chhabra may have violated the city's conflict of interest regulations in the days leading up to his departure.

Second, even if Uber succeeds in luring drivers away from behind the wheels of their yellow taxis, it is not clear they will stay. On Oct. 22, hundreds of Uber drivers in Manhattan and other cities turned their apps off and went on strike over the app company's policies, which drivers complain are too one-sided in favor of the company. Drivers also went on strike over the app platform's fares, which they complain are too low for them to make a living.

Uber said the strike had no impact on its New York City operations on that day.

Instant Insights /

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