By Matt Davis, The Lens staff writer |
An underground market in city-issued cab permits in New Orleans has seen more than $8 million change hands among industry leaders in the past two years with barely any revenue going to the city, records show.
The city could not easily tell The Lens who owns how many of its 1,600 cab permits because the records are kept in paper files and not computerized. Instead, we requested records showing the transfer and cost of all taxi certificates since 2009 (Excel), and found 340 transactions took place for a total of just over $8 million over the period. Meanwhile, the city made just $350 per transfer, for a total of $119,000 in transfer fees on those deals.
In other cities, permits are non-transferable and officials retain control over the process to earn more money for the public from the sale of cab permits. New Orleans city officials say they want to reform the taxi department, but it’s unclear whether a change from the market-driven system is likely.
A recent analysis in Washington, D.C., cautioned city leaders there against implementing a closed-market system such as the one in New Orleans.
Closed markets enrich the well-connected while lowering standards of service, creating longer waits for cabs, leading to higher fares, and encouraging illegal cab companies to start up because they cannot afford to enter the legitimate market, according to research by the city’s chief financial officer.
In theory, New Orleans cab drivers can purchase a Certificate of Public Necessity and Convenience — or cab permit — from the New Orleans Taxicab Bureau for $250. But city rules written decades ago limit the number of certificates to 1,600. City officials say it has been at least five years since the city sold a certificate, but most cab drivers say it has been closer to 20 years.
That gives cab drivers with a certificate a rare and valuable commodity, which they can sell on the private market. Though six sold this year for $67,000, the average transfer price in the past two years has been just under $26,000, records show.
A cab certificate is different from a driver permit to operate a cab, and one cab certificate can cover several permitted drivers working the same cab. A driver needs a New Orleans certificate to legally pick up fares in the city.
There are no test requirements to receive a cab certificate, but a separate driver’s permit costs $40. To get a permit, drivers must be 18 and pass a series of safety tests. They must also be U.S. citizens or legal permanent residents, which is also a requirement for certificate holders.
Businessman Symon Garber runs New Orleans Taxi Brokers out of the Checker Cabs building on Euphrosine Street, and is hardly your run-of-the-mill cab driver. A photo of Garber and his wife with President Barack Obama hangs on the wall, not far from a notice that shouts out: “We want to buy your CPNC. Ready, willing and able buyers. Fast transfer! We pay top $$$!! Call us now!!!”
Gene Gekker is registered with the Secretary of State’s Office as Garber’s business partner at New Orleans Taxi Brokers. Together or independently, Garber and Gekker are also associated with a string of other companies out of the same building on Euphrosine Street, including New Orleans Carriage Cabs, Yellow Cab, and New Orleans Triglobal Financial Services. Those companies have bought 91 cab certificates since 2009 for a total of $2.7 million, records show.
Gekker and Garber responded to inquiries from The Lens through their attorney Daniel Davillier, who said they now control about 300 cab certificates in total, or almost 20 percent of the New Orleans market.
“These guys run large taxi companies in New York and Chicago,” Davillier said. “If you look at what they are doing, they are trying to bring a new standard of taxi service to New Orleans.”
Davillier said all of Gekker and Garber’s cabs are less than five years old and feature modern equipment including global positioning systems, two-way dispatch and credit-card systems.
Gekker and Garber are attracting attention from cab drivers around the city. At the White Fleet cab company on Bienville Street, a handful of cab drivers expressed discontent that Gekker and Garber’s companies are driving the price of cab certificates beyond the reach of local buyers. None of the drivers wanted his name printed.
One of Gekker’s own drivers, parked outside the Hilton hotel on Poydras Street, said he was upset about his boss’s dominance of the license market, but the driver did not want his name printed because he wanted to keep his job.
“The problem is, the city gives the CPNCs to businesspeople, not to us who want to make a living driving people around,” said the driver, who works for Yellow Cab. “City Hall kills the driver. They have no respect for us. So they deal with these millionaires instead.”
Nasser Barakat is more magnanimous when discussing his crosstown rivals. Barakat runs the American Taxi company from an office on North Claiborne Avenue in the shadow of Interstate 10. Secretary of State records show he is associated with 11 broker companies. Those outfits have bought 60 cab certificates since 2009 for a total of $1.6 million, according to city records.
“They’re nice people, actually,” Barrakat says, of Gekker and Garber. “They came to New Orleans from Chicago to organize the city. They’ve brought in some newer vehicles and newer equipment.”
As a driver came into the office to pay Barakat for the lease of one of his cabs, and to make an insurance payment, Barakat explained that in his view, the buoyant private market in cab certificates helps stabilize the taxi industry.
“If I spend money on this cab, I want a return on the investment,” he said. “We invest so much in the system that we want to be able to protect the value of our investment.”
Still, one of Barakat’s own drivers said he is frustrated at having to rent a cab for $350 a week, simply because he cannot afford his own cab certificate. Waiting in line at the Hilton, American Taxi driver Abdul Mohammad approached a reporter from The Lens and said he hoped that readers would hear the truth about an “unfair system.”
“If I go across the river to Jefferson Parish, I can get a CPNC straight away,” Mohammad said. “But there’s no work over there. So I have to pay $350 a week to rent a cab in Orleans Parish when the city isn’t charging anything for that CPNC.”
Asked whether he was concerned about reprisals for speaking out, Mohammad said he felt it was more important to tell the truth.
“If somebody makes money off me, then that’s not right,” Mohammad said. “It should be a fair system, for anybody who wants a certificate. The city is too close to the rich guys.”
Barakat said he is open to reforms in the system but that he spends a lot of money on lawsuits brought against his drivers, and that he does not make much money once overheads are taken care of.
“You’re killing me with these lawsuits,” Barakat told a sheriff’s deputy who happened to drop in with a subpoena during a recent interview.
Davillier said his clients have followed all of the rules and that they are doing their best to improve the image of New Orleans taxi drivers. He did not address the driver’s concerns about perceived unfairness directly but insisted repeatedly that his clients have invested heavily in the city’s cab industry.
The city could have retained control of the market for cab permits over the years and capitalized on their value to offset the cost of taxpayer-financed services such as libraries, parks, or policing.
“At a time when the city is looking for additional financial resources, we should explore all possible revenue streams,” City Councilman Arnie Fielkow wrote in an emailed statement.
The City Council’s Transportation Committee Chairwoman, Kristin Gisleson Palmer, went much further, although she would only address the industry generally, and not discuss specific companies.
“I believe the whole system needs to be reformed, and we’re working with the administration to do that,” she said. “This system with CPNCs being sold even though it’s technically the city’s property, the city of New Orleans has seen no economic benefit from those transfers, and I’m not sure whether all of those transfers have even been notified to the city.”
She said she wants changes that will make it easier for drivers to get a certificate.
“I think the process also creates a system where the little guy cannot afford to purchase a CPNC number, and has to lease out the use of the number,” Gisleson Palmer said. “So you have many drivers out there without benefits, medical, who are just leasing the CPNCs, and you create a system of indentured servitude.”
Lax regulation of driver permits has also led to a handful of alleged rapes by cab drivers over the last two years, Gisleson Palmer said.
“There’s a total lack of enforcement, background checks and everything with the transfer of these CPNCs,” Gisleson Palmer said. “These people may be leasing a CPNC number, but that doesn’t mean that their driver permit is actually on file. There’s a whole violent side of this that people aren’t aware of. There’s a shocking number of complaints against cab drivers in this city.”
In addition to working with the administration, Gisleson Palmer has introduced a series of ordinances through the Transportation Committee to improve conditions for customers. These include posting a passenger’s bill of rights in cabs, and removing a line from the city code that lets drivers charge more money for people who are disabled.
“We’re very much focused on cleaning up this industry, but there are a lot of things that we need to wait until various investigations are completed,” Gisleson Palmer said. “In the meantime, we are doing what we can.”
Deputy mayor and former State Sen. Ann Duplessis — whom the Landrieu administration brought in on a mission to clean up the taxicab bureau last year — said the city does not collect sales tax on the transfer of cab certificates because they are considered “property rights” by the city — “This is property being transferred,” Duplessis said.
Like a handful of other American cities, New Orleans has sat back for decades while cab companies have gotten rich trading cab permits.
Nothing requires a certificate holder to actually use a cab certificate. If a company chooses to stash away certificates, those in use or dribbled onto the market become more valuable. The city does not track the use of certificates.
One retired cab driver told how he sold his license to Gekker and Garber at New Orleans Taxi Brokers for $65,000 in April. He had not driven his cab in five years, but held on to the certificate and watched it rise in value.
“I just sold it to ‘em. There was a word on the street that they were buying CPNCs,” said Edward Dufaur. “My wife died four years ago. I’m 76. I was just interested in how much they were paying.”
Dufaur originally bought his certificate from another driver in the 1980s, but he said he has forgotten how much he paid for it.
A handful of other cab certificate brokerage companies are also capitalizing on a recovering market for cab certificates since Hurricane Katrina. The storm slashed values in New Orleans from around $60,000 before the storm, to around $10,000 in 2006, several cab drivers said.
These brokerages are sometimes affiliated with cab companies, but usually registered as separate entities with the Secretary of State’s Office.
New Orleans cab permits are sometimes called medallions, but the certificates are not quite the same thing. Medallion systems are in operation in Chicago and New York City, and drivers are able to borrow against their value at a bank. But for reasons that remain unclear, drivers are not able to borrow against the value of a CPNC even though the pieces of paper clearly have a monetary value. None of the people we spoke to for this story was able to explain why.
Barakat is hopeful that New Orleans will move to a medallion system soon, both so that he can borrow against the value of it but also, so that the city can reap more revenue from cab regulation.
“If they would make them into actual medallions, which we hope for, then we could borrow against the value of the medallions, instead of just these pieces of paper,” he said. “And the city could take a bigger cut from selling the medallions, too. They’re not getting very much revenue out of the deal right now.”
Davillier said Garber and Gekker would also support a move to a medallion system with a 5 percent transfer fee going to the city, providing that they were reimbursed for the value of the certificates they have already bought, or if the ownership was transferred from certificates to medallions.
Other cities have found that the system used in New Orleans is a bad idea for taxpayers. For example, a proposal to institute such a system in Washington, D.C., stalled recently after a damning report from the office of city’s Chief Financial Officer Natwar Gandhi.
“High lease amounts for medallions wipe out any above-normal earnings for drivers who lease medallions, and deprive them of the chance of accumulating long term wealth through ownership,” Gandhi’s analyst concluded.
As a result of the report, the city continued issuing unlimited taxi licenses, said Dena Reed, general counsel for the Washington Taxicab Commission. Enrollment for licenses opens and closes periodically, depending on a city council vote, but when enrollment is open, licenses cost just $200 a year, and are non-transferable. About 7,800 licensed taxicabs are on Washington’s streets.
By comparison, the closed-market New York City system of medallions created a market where these change hands for more than $700,000, freezing out small business people and encouraging unlicensed private cabs to take their chances on the streets, Gandhi’s analyst wrote.
Jefferson Parish offers unlimited non-transferable cab licenses. A certificate costs $200 a year, and the licenses are always available, a spokeswoman for the taxicab department said.
“Anyone who meets the criteria can come get a CPNC in Jefferson Parish,” said Tiffany Wilken.
The Landrieu administration still is uncertain whether it will put a stop to its closed-licensing program in New Orleans.
Deputy Mayor Duplessis said the administration is reviewing the section of city law that governs cab regulation to see what changes might be made. But the review will not be complete until sometime in 2012 and even then, Duplessis isn’t sure whether the city should change.
Duplessis said one of the priorities for the overhauled department was “building a brand” for the city’s cab industry, and that opening up the market for cab certificates may, or may not, come later.
“But we’re definitely going to look at it,” Duplessis said.
One reason it is difficult to reshape the system is that private interests stand to lose a great deal of money from any reforms, and the administration has been meeting with cab companies as it looks to shape its new approach.
“There will always be people in these entrenched industries with interests at the table,” said Landrieu spokesman Ryan Berni.
Whatever the city decides to do about its cab certificates, the taxicab bureau is unlikely to be spared from controversy over the coming months. Three inspectors have resigned from the bureau since Landrieu brought in Duplessis, and two more remain on emergency suspension.
Neither U.S. Attorney Jim Letten nor the administration would confirm or deny reports that the department is under federal investigation. Duplessis said the administration is cooperating with an investigation being conducted by city Inspector General Ed Quatrevaux, who confirmed that an investigation is being conducted at Landrieu’s request, but declined to go into details. It is expected that the investigation will be released to the public in early November.
Back on the street, cab driver Mohammad is skeptical about the reported investigations.
“I hear that the feds are investigating, but they don’t seem to have come up with anything,” he said. “All I know is that those people at City Hall don’t care about us. They don’t want us to make a living.”
Duplessis recently hired a new director for the bureau, Malachi Hull, from Atlanta. Hull replaces former director Mike Lentz, whom Duplessis fired in early August for unspecified reasons, after his emergency suspension in mid-April.
Hull said there are closed-markets in cab licenses in other cities but he would not say either whether the idea is a good practice, or be drawn on whether it should continue in New Orleans.
If it is any indication of how taxicab licenses might be regulated in the future, the city just started issuing licenses for pedicabs. They are non-transferable.