ZACK HOOPES ¦ Staff Writer
The resort’s medallion system in the resort was introduced in early 2010, in an attempt to control the proliferation of scantily regulated taxi operations.(Nov. 9, 2012) Much like the Federal Reserve Bank, the town of Ocean City may soon be buying back its own product in order to keep prices relevant.
But in the case of the resort, the product is not money itself, but the rights to operate taxi cabs, a practice that has been occurring for decades in many much larger cities around the country.
On Monday night, City Clerk Kelly Allmond requested the approval of the sale of two taxi medallions by one city taxi owner to another. The sale price was $3,000 apiece, for a total of $6,000. The city levies a 25 percent tax on all medallion transfers, meaning it took in $1,500 from the deal.
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. 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, while also limiting the number of cabs on the street.
The same theory was introduced in New York City in 1937, and has grown over the past 75 years to a remarkable scope. The city currently has 13,237 medallions in circulation; and despite the seeming overabundance of taxicabs in Manhattan, the demand for service continues to far exceed supply, driving medallion prices in the last year well over $1 million dollars.
The system, unfortunately, has created an almost-feudal structure in the Big Apple, whereby very few small cab operators have the capital available to buy medallions, and thus lease them from medallion-holding investors. This cost severely slices into cabbie’s profit margins. According to Slate.com, studies reveal that the average driver owes $130 to his medallion’s landlord as soon as he begins his 12-hour shift.
“You can’t compare New York to here, really,” said Wally Saleh, the seller of the two most recent medallions. “I think the town has handled the taxi medallions really well. I think it’s set up the right way.”
For the cabbies, yes, but from the city’s perspective, it appears that it has been unable to create a market competitive enough to drive consistent price increases, likely due to the seasonal profitability of taxi services.
Addressing that situation on Monday, Mayor Rick Meehan said, “$3,000 “is below what they have been.”
The town maintains the first right of purchase on any medallion sales, meaning sellers must sell to the city if it matches their price.
“A future council should consider that if they’re going that cheap, maybe there are too many out on the street and there should be some we should put back in the vault,” Councilman Joe Hall suggested.
The council has already tried to buoy the price of medallions by putting a $500 minimum on the transfer tax, meaning that cabbies are essentially submitting to a voluntary tax increase if they try to sell their driving rights for less than $2,000.
“If we exercise our first right, we may be able to sell these back for the right price,” Meehan agreed.