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Council approves sale of Ortega’s taxi medallion to original buyer

(Dec. 21, 2012) After three weeks in cab driver purgatory, Ruben Ortega has been set free.

The City Council voted this week to approve the sale of Ortega’s taxi medallion to its original buyer, a transfer it moved to deny three weeks ago in favor of exercising its right of first refusal buy back the medallion for itself.

The initial sale price of $3,000, it was said at the time, was “conspicuous” in its low value and was far under what the city was trying to establish as a market price of between $5,000 and $6,000. By exercising its right of first refusal, the city would essentially be buying the medallion from Ortega for the $3,000 asking price, and then holding on to it to reduce the supply of medallions and, the council hoped, drive up demand and price.

But the council caved slightly the following week, after Ortega spoke before the body regarding the nature of the sale and the adverse effect that the city’s move would have on him.

The sale, Ortega, said, was prompted by his loss of two vehicles – one personal and one a taxi – during Hurricane Sandy. With the loss of all his capital in a business that was not that lucrative to begin with, Ortega said he had decided to get out of the taxi industry.

“It was a total loss … so I decided to sell my medallion,” Ortega said at the time. “It was a matter of urgency as opposed to trying to get the maximum amount of dollars that I could.”

However, Ortega said, the sale of his medallion was also linked to two other transactions. Nite Club Taxi, the buyer of the medallion, was also buying his damaged cab for $1,000, since the company has a repair shop to fix the vehicle. The company was also allowing Ortega to use one of its cars as a personal vehicle until he received an anticipated payout from other business interests, which would allow him to buy a new vehicle for his family and move on financially.

“The three transactions were independent, but obviously the one wouldn’t go without the others,” Ortega said.

Further, it was noted that Nite Club would be paying the $750 transfer fee, which is typically borne by the seller, putting Ortega at a further disadvantage if the city instead adopted the sale.

However, city officials argued that Ortega should have listed his entire benefit from the transaction at the outset, as the city’s taxi policy requires sellers to identify “the full consideration of the sale.” But Ortega countered that the city was unclear in where exactly to draw the line in what was considered to be associated with the sale. It was not reasonable, he said, to assume that everything he had or would have gained from the transfer was subject to a dollar value.

“Yeah, they’re joined together, but there’s not a part on the form where you list all the other things that you’ve done in the taxi business,” Ortega said.

The council moved to allow Ortega to revise his value and re-submit the form for a second consideration, which came up at this week’s meeting. Although City Clerk Kelly Allmond said that Ortega had been asked to revise his value to $3,750 to account for Nite Club absorbing the transfer fee, there was some confusion on this point.

“I do not recall any instruction for him to put any amount in there. He made several utterances as to the possible value,” said Councilman Doug Cymek. “We should never be involved in instructing someone what the exact value is.”

Councilwoman Mary Knight said she recalled making a motion at the prior meeting to accept the transfer if the value was changed to $3,750, but that that motion had never been voted on.

“If that wasn’t the intent, it was my mistake,” Allmond said.

Regardless, Knight said, “we’ve set a precedent, and we’ve noted that everything has to be considered on the transfer, so I’m going to try to get a motion that we go ahead and approve the transfer at $3,750.”

The council voted with four members in favor of the motion. Cymek was opposed, while Councilman Brent Ashley was absent. Councilman Joe Mitrecic abstained from the vote because he was absent from the meeting in which Ortega made his case.

The medallion system in the resort was introduced in early 2010, in what elected officials said was an attempt to control the proliferation of scantily regulated taxi operations and to add revenue to the city’s treasury. 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 that 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 taxi service to taxi service – while also limiting the number of cabs on the street.

The city’s fee also has a set minimum of $500, meaning that cabbies will essentially have to pay a higher tax rate if they sell their medallions for less than $2,000. It has been previously discussed that the minimum should be raised, in order to raise the margin floor on transfers.

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