Color Wars: Curbing the Underground Taxi Market

Thirty-six years in the cab business have left Richard Hybels with a jaundiced view of his competitors. “You'll never find anyone more dishonest than in this industry,” the brusque 69-year-old says, leaning over a desk at his Bayview office, a cluster of portables shared by several local taxi companies. Hybels parks his Ford Crown Victoria amid rows of identical cabs, some bearing the tomato-red color scheme of his modest company, Metro Cab, others with the more ubiquitous yellow of Town Taxi. He skulks in a doorway and crosses his arms, adopting the prepossessed look of a TV cop.

He suspects many of his brethren aren't playing by the rules.

Hybels used to be a broker, meaning he mostly traded in taxi permits — or medallions — rather than actual taxis, often leasing them to drivers for months at a small profit margin. He quit the long-term lease trade after acquiring Metro, but says other companies use leasing as part of their business model; it's easier to traffic in medallions than to maintain a fleet. Although that model is currently legal, it's made the whole cab system much harder to monitor. It's also enabled long-term medallion “managers” to run their own underground cab businesses, often without an official roster of drivers. Over the last decade, the underground medallion market swelled in San Francisco, bedeviling regulators at the San Francisco Municipal Transportation Agency. Underground brokers routinely hire drivers who can't get jobs elsewhere, charging them well above the standard $109 “gate” fee to rent a cab for an eight-hour-shift. (Hybels says that if he bent rules and overcharged drivers, he could pull an extra $85,000 a year.) When drivers' names aren't on an official payroll, it's harder for consumers to file complaints against them.

This week, the SFMTA proposed a series of policy changes to curb the underground medallion market. The new laws will prohibit taxi companies from renting to anyone except the drivers on their payrolls. If as many cab companies are running schemes as Hybels suspects, then much of the industry will feel a pinch.

Hybels generally supports the idea. Counterintuitively, so does Mohammad Iqbal Khan, an erstwhile medallion kingpin who was last year investigated by the SFMTA after officials discovered he was managing perhaps 30 medallions within Luxor Cab Co. and leasing them at inflated rates to unregulated drivers. Khan purchased his own small fleet and paid Luxor for rights to the color scheme and dispatch service, so his cabs were indistinguishable from Luxor's.

Khan recently departed Luxor and became co-owner of Gold Star, a 21-cab fleet that shares its lot with Metro. He says he's following the rules now, even if it's harder to turn a profit. Hybels, ever wary, keeps an eye on Gold Star at all times. He's still dubious the SFMTA can legislate corruption out of the industry.

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