Medallion system losing to marketEDITORIAL
In 2011, a year after Ocean City government instituted its budget-boosting taxi medallion program, a limited availability permit system patterned after New York City’s, a cab company representative in the Big Apple had this to say on slate.com:
The medallion program is a feudal system that rewards government and medallion investors, but does nothing for drivers and passengers, except to make things worse.
Now, it’s making it worse for the traditional cab industry, as lightly regulated ride-sharing outfits like Uber and Lyft have broken the monopoly that the medallion system created.
This is not a situation limited to Ocean City, as the impact of these app-driven ride-hailing services is being felt across the country. Since 2014, when New York City medallions sold for as much as $1.3 million, the price there has fallen by more than 80 percent. In Chicago, which has a similar program, prices are down by roughly 60 percent.
Obviously, this huge decline in value is because the once exclusive right to drive a cab here and in certain other locations is exclusive no more, thus making medallion ownership less of a guarantee of business success. Now, it might be more of an impediment, as anyone with a car and a reasonably good reputation can pick up passengers without having to buy and annually renew a medallion at considerable expense.
Further restricting the number of available operating permits through a buy-back program, as the Ocean City Council proposes to do, isn’t going to change that and neither will it prop up prices beyond the short term, if that even happens.
What government and traditional cab companies face is a competitive circumstance that their business model can’t address. Further, it puts traditional cab companies at a disadvantage because it’s premised on complete control of a market that has become uncontrollable. In that respect, it’s like damming the stream because the river is rising.
In fairness to cab companies and their drivers, the city should get out of the medallion business and let the free market determine the winners and losers. The financial pain will be acute for medallion owners and the city budget, but that might be better than dealing with a chronic condition for which there is no remedy.