If you hop into a Chicago taxi cab this week, don’t be surprised if the driver makes small talk about some big numbers. The City of Chicago just closed an auction for taxi cab medallions; basically, the license to operate a cab. Medallions can easily sell for $200,000. Cab companies and investors will likely have the highest bids. But the city is putting some aside for independent cab drivers who don’t already own one.
Driving a cab in Chicago is a tough way to make a living.
JOHN: It’s very very heavy and very, very stressful.
John Henry manages Gold Coast Taxi. He drives me around and tells me there’re all kinds of expenses: gas, taxes and fees. And for some, they have to pay off a big loan to own their own taxi cab medallion.
JOHN: For one month alone I spend over $6,000 for repairs and that is a heavier responsibility for a medallion owner. That is why most of the people don’t like it, and they sell off.
You can’t drive a cab without a medallion. So, drivers buy their own or they rent from other people or cab companies to work under their medallions. In other words, if you’re a cabbie and want to be your own boss, you buy your own medallion.
Right now, the going price is $200,000. Still, Henry pushes other cabbies to make the investment.
JOHN: I have to nurture them talk to them, convince them why. Because if you don’t own a medallion you gonna pay lease if you own a medallion you pay lease. So you better off to owning and paying to yourself.
Henry’s advice only goes so far. The economics of the industry are not in cabbies’ favor. Again, anyone can buy a medallion – that includes investors and cab companies. Drivers are usually out-bid.
The City of Chicago thinks this is a problem. So, for the latest medallion auction, it did something different. It offered 40 medallions that anyone can buy, but it restricted 10 medallions just for cab drivers. And those medallions had a lower starting bid.
Commissioner Norma Reyes regulates Chicago’s cab industry.
NORMA: We want to give the opportunity to those individuals who have made a commitment to this industry to create this opportunity for them to have a medallion and run their own business is I think a good thing for the industry.
Reyes says the 10 medallions set aside for drivers could cost less than the other, unrestricted medallions. But it’s not clear whether the city’s gesture will make a difference. Cab industry experts say fleet operators and investors pay a lot for medallions so their demand will keep prices high. That could raise prices for all medallions in the current auction, even for ones restricted to drivers.
Michael Levine runs Taxi Medallion Management, a company that buys and leases medallions.
MICHAEL: I’ve got a back log of people, investors who want to buy medallions of 20 to 30 pieces right now, there’s just not a whole lot for sale in the city. And I know there are others that are not buying from me that are lookin for medallions as well so i don’t think there will be any trouble finding buyers unless something drastic happens
Some cabbies figure Levine is right. So, for this auction they’ll bid as much as they can regardless of the medallion set-aside.
STEVE DEI: I’m looking in the neighborhood of $130,000…
Steve Dei drives for Chicago Carriage Cab. He’s bid for cab medallions in the past, but lost. Dei still gives the auction another shot. Here’s why: each week he pays about $650 to lease his car.
STEVE DEI: For example for the five or six years that I have worked all I have to show is just receipts so i see a tremendous benefit to me if I were to win the medallion because I would essentially be working my self and just paying off the loan and be able to get something in return for the work that i put in to it.
Most people have a hard time putting a price on intangible things like independence. But for Chicago cab drivers like Steve Dei, they’ll have an exact figure.
The city will settle bids for medallions early next year so some cabbies will have exact prices for medallions and their freedom.