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McLaughlin out of taxi biz, has city support in beach franchises

(Jan. 11, 2012) The recent spate of activity in the city’s taxi medallion market continued this week, as embattled resort businessman Patrick McLaughlin sold all three of his fleet licenses, but said he has no plans to get out of any of his other interests on the island following his recent tax troubles.

“I made a business decision to sell the medallions. I do not plan to divest any other business interests,” McLaughlin wrote in an e-mail this week.

All three medallions sold for $5,000 each, with two going from McLaughlin to Coastal Cab and one going to Nite Club Taxi. The council approved the sale, and the city will receive a 25 percent transfer fee – $1,250 apiece, $3,750 in total – from the sale.

The medallion system in the resort was introduced in early 2010, in what the council said was an attempt to control the proliferation of scantily regulated taxi operations on the island, while also raising revenue. 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 170 medallions for $1,500 apiece, with the expectation that medallion prices would rise as market demand grew, creating a steady revenue stream for the city while also limiting the number of cabs on the street.

But prices have not been as predictable as the city hoped. In November, City Clerk Kelly Allmond described medallion prices as “all over the place,” with an almost irrelevant mean price of $2,800.

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.

Recently, the council had attempted to deny a low-priced sale and exercise its right to buy back the medallion but balked when seller Ruben Ortega explained that the intervention would compromise other business dealings he had with the medallion’s buyer.

McLaughlin has had business troubles of his own. On Oct. 5, he was sentenced to 10 months in prison for failing to file tax returns and employment tax withholdings. McLaughlin operates 85 N Sunny, the resort’s largest beach equipment rental, which had won rights to 50 percent of the beach. He also owns two beach photo companies and, until recently, a taxi business.

McLaughlin apparently dodged $20,000 in Social Security and Medicare withholdings for 85 N Sunny. His total IRS tab for all four businesses, though, was $296,701.46.

This has led several other owners of beach equipment rental operations to allege that McLaughlin’s dominance of the business is due to his tax evasion. The rights to rent umbrellas and chairs on the beach are auctioned off by the city.

But McLaughlin said he was never convicted of outright fraud and has already rectified his financial obligations.

“I was not charged with tax fraud,” he stated. “I pled guilty to two misdemeanor counts of failure to file tax returns. All returns have been filed and all tax has been paid. I am in current compliance with my federal and state tax obligations and I have worked and continue to work with qualified professionals to ensure that I remain in compliance going forward.”

Subsequently, McLaughlin actually gained rights to additional sections of beach in this year’s franchise auction. The Dec. 5 bidding saw rights to 14 of the 18 north-end parcels up for grabs, with McLaughlin winning four of the plots and optioning another, which he already holds, for a second term of three years.

According to City Clerk Kelly Allmond, the auctions results will come up for approval at the end of the month. She said she anticipated no reason for the city to reject McLaughlin’s bids.

“I have kept the city advised of my situation and I am very grateful that the city has supported my efforts to remain a viable and contributing member and employer of the Ocean City business community,” McLaughlin wrote.

“I accept complete responsibility for my conduct, I accept the consequences of my actions, and I look forward to putting this matter behind me.”

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