Cab drivers aren’t the only ones struggling amid the era of Uber and Lyft — so is the bank that funded their city-issued permits, according to a lawsuit filed on Wednesday.
The San Francisco Federal Credit Union is suing the San Francisco Municipal Transportation Agency, saying that the agency’s scant regulations of ride-hail companies destroyed the taxi industry and cost them millions of dollars.
The local bank loaned says it $125 million for more than 700 taxi medallions, that are worth significantly less as a result of Lyft and Uber’s prevalence. Hundreds of drivers don’t want their medallions anymore, and the bank has had to foreclose on at least 99 of them, according to the lawsuit.
“The credit union realized that despite what it was repeatedly promised, the SFMTA was not going to enhance or reinvigorate the medallion market,” the lawsuit states. “Instead, [SFMTA] has elected to stick its head in the sand while the credit union and hard-working taxi driver medallion owners are saddled with all the burdens.”
In compensation, the credit union is asking for $28 million in damages, on top of the millions needed to buy back the medallions — which cost a whopping $250,000 each. Strangely, once-free medallions required drivers to take out loans as Uber and Lyft began taking off.
To make up for a budget shortfall from the recession, then-Mayor Gavin Newsom initiated a plan to have the city sell off its taxi medallions à la New York City — which once had its medallions valued at $1 million. In 2010, it sold 700 medallions and made about $64 million until April 2016.
Individual taxi drivers didn’t just go to the credit union for financial help. It became a lending partner for the SFMTA’s new system, in return for the agency’s promise to ensure that the medallions stayed valuable.
But Uber and Lyft came along, turning the medallions into a hot-potato asset that the city hasn’t sold itself in nearly two years thanks to its own inaction, the lawsuit alleges.
With banks cautious of lending amid the recession, the transit agency agreed to guarantee the medallions’ worth. Even while Uber and Lyft were taking off, permitted cab drivers could make an average of $9,500 a month — enough to assure S.F. Federal Credit Union that the loans could be paid.
The lawsuit alleges that it didn’t take enough steps to protect the program while taxi driver wages fell dramatically and couldn’t support the cost of the medallions — despite additional assurances. Months after the city’s largest taxi company, Yellow Cab, filed for bankruptcy, SFMTA would sell its last medallion in 2016.
“Until we’re able to have a level playing field for all commercial drivers, we have existing San Francisco drivers that are being gouged,” Peskin told the Examiner in a statement. “For many, it is a tremendous burden and I hope that The City can be a partner in offering some relief to the little guy.”
The credit union attempted to file a claim against the SFMTA in November, but the agency denied it three weeks later. If the lawsuit is ultimately successful, SFMTA will have even more budgetary issues.