A public-private partnership plan to help debt-burdened New York City taxi drivers is being revived by a city councilman and the founders of a mobile app designed for the taxi industry.
Many of the loans were made by two failed credit unions and were secured with taxi medallions.
New York City Councilman Ritchie Torres has joined with Mihir Dange and Zahid Biviji to try to help thousands of taxi drivers by reducing their loan payments. Torres is a Democrat who is running for his party’s nomination to replace retiring House Democrat Rep. Jose Serrano. Dange and Biviji are the founders of Wapanda, an app that connects passengers with taxis or ride-sharing companies.
“The crisis is deepening amid COVID-19,” Torres said, adding that few taxis are in demand amid the pandemic. “The city has an obligation to save the medallion industry.” For decades, city officials inflated the price of medallions, he added. “The medallion is a creature of the City of New York,” he said.
“Drivers are under water on their loans,” said Mihir Dange, who founded Wapanda with Zahid Biviji. “If we could help the drivers, we could rebuild the industry from the ground up.”
Torres said their proposal is modeled on the Home Affordable Refinance Program (HARP), which was created during the housing crisis. The Medallion Affordable Refinance Program (MARP) would require the city to create a “backstop” pegged at $250,000 for each medallion.
That would allow owner-drivers to restructure their loans at more affordable rates. Currently, some 6,250 medallion owner-drivers have an average debt of $550,000 and pay an average of $3,123 a month. The loans carry a 4.5% interest rate over 20 years.
Under MARP, drivers would pay $1,021 a month, with an average term of 30 years. With an expected default rate of 5%, the program would cost the city about $19.1 million over five years.
The key, Torres said, is that the city would be the loan guarantor. “Without a guarantee, the medallion is a distressed asset,” he said, “Only a government guarantee can restore confidence.”
Supporters of Torres’ plan said that taxi drivers should be included in New York Mayor Bill de Blasio’s plan to offer zero-percent loans to help small businesses weather the pandemic.
A previous attempt to form a partnership failed earlier this year, when the National Credit Union Administration sold thousands of taxi loans to Marblegate Asset Management, a Connecticut private equity fund. City officials had asked the NCUA to wait to see if they could put together a partnership that would have allowed the taxi drivers to make lower monthly payments.
The NCUA was left managing the loans following the failure of two credit unions, Melrose Credit Union and LOMTO Federal Credit Union. Those two credit unions made thousands of loans to drivers who needed the money to purchase taxi medallions required by the city. The city’s taxi business thrived for decades and city officials were able to sell medallions at high prices. Many cab drivers took out loans as high as $1 million to help finance the purchases.
Dange said that Marblegate officials have said that they like the proposal, although they have not said so publicly. “It’s not necessary for them to participate,” Dange added.
Torres and Dange said they are putting the finishing touches on the proposal, which then will be taken before the city council.
“There needs to be a lot of interest in it,” he said, adding that he believes city officials will buy into it. “For the city, this is fantastic.”