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City buys back taxi medallion, looks to raise fee minimum

ZACK HOOPES ¦ Staff Writer

(Nov. 30, 2012) In an effort to prop up taxi medallion prices, the City Council voted 5-2 this week to exercise its right of first refusal in a medallion transfer, with officials suggesting that more will need to be done to stabilize the price of cab rights in the resort.

City Clerk Kelly Allmond, who oversees the medallion system, sought approval for two medallion sales. The first, from Wayne White of City Cab to independent driver Ahmad Khan at a price of $5,000, was approved.

But it was the second transfer, from independent driver Ruben Ortega to Grazyna Soboczynska of Nite Club Taxi at a much lower price of $3,000, that raised concern from Mayor Rick Meehan.

“It seems that the market for these has been set between $5,000 and $6,000, and the amount the city receives from these depends on the sale price,” Meehan said. “It just seems conspicuous to me.”

The medallion system in the resort was introduced in early 2010 in an attempt to control the proliferation of scantily regulated taxi operations on the island and to generate revenue for the city. Possessing a medallion gives one the right to operate a cab, but it also comes with both a financial cost and certain restrictions – most notably, cabbies being subjected to random drug testing.

When first implemented, the city sold 175 medallions for $1,500 apiece, through an initial lottery system, although five of those sales were rejected due to non-compliance.

City officials expected medallion prices would rise as market demand grew for the 170 active medallions, creating a steady revenue stream for the city, which takes a 25 percent cut every time a medallion is sold from one taxi service to another.

The city’s fee also has a set minimum of $500, meaning that cabbies will essentially have to pay more than 25 percent if they sell their medallions for less than $2,000.

But Allmond presented council with a graph indicating that sale prices have been wildly inconsistent and average out just above the line of diminishing return.

“As you can see, the prices are all over the place and the mean is around $2,800,” Allmond said. She suggested cab owners may simply be unaware of the price structure. But Meehan said he was sure that cabbies were fluent in the market.

“Trust me, they know,” he said.

Councilman Doug Cymek then moved that the city exercise its right of first refusal. Under the taxi ordinance, the city itself can supersede any sale and buy the medallion for itself, as long as it matches the seller’s price.

“In effect, we would be buying it for $3,000, right Guy?” Cymek confirmed with City Solicitor Guy Ayres.

Meehan also suggested that, for future medallion transfers, the city raise the stakes.

“Maybe another way to address this would be to raise the minimum, to raise what we’re receiving on the transfer fee,” he said.

But Councilwoman Margaret Pillas cautioned against the city trying to adjust the market. Just because it could didn’t mean it should, she said.

“Regardless of how suspicious it sounds, I don’t think we have the right … unless this person is shown to be making a deal under the table,” Pillas said. “It’s a matter of free enterprise.”

“I’m not accusing anybody [of underhandedness],” Meehan replied. “But maybe we need to do something to balance it a bit for the taxpayers.”

Pillas said she was also concerned how such a move would be seen by the taxi industry. “One thing they were concerned about when we introduced these [medallions] was that we would manipulate this,” she said.

However, both Cymek and Councilman Joe Mitrecic said that the city wouldn’t be short-changing anyone.

“I don’t think this disadvantages anybody, apart from the purchaser who can probably buy one elsewhere if he’s that interested,” Mitrecic said.

Council Secretary Mary Knight also followed up on Meehan’s suggestion, recommending that the city keep its standard cut at 25 percent, but raise the minimum from $500 to $750. This would put any sales below $3,000 at a disadvantage.

The council voted to exercise its right and buy back the medallion for $3,000, with Pillas and Councilman Brent Ashley opp

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