Earlier this week the Tribune carried a pretty good report on Chicago’s Uber vs. cab situation. Altho many of us transit-dependent mundanes may have missed the story, it seems that people who can afford cabs can also afford smartphones (or can text using dumb phones), and many of them prefer Uber as a way to get service without having to speak with a person. You can choose a taxi at regular taxi rates (but with a minimum 20% “gratuity” that the driver splits with Uber and the credit card processor), or a classier vehicle for considerably higher cost. I am surprised that folks pay such high rates to avoid dealing with traditional taxi companies. A few years ago I learned that, for those who pre-book and travel more than about ten miles, limousine service is likely to be much cheaper (even for a person traveling alone) than a conventional taxi; I suspect this is still the case.
Naturally, owners of medallions (and existing dispatch services) don’t particularly like this idea, so both sides are trying to improve their service to entice more customers have hired lobbyists to “persuade” the investment banker/politician who holds the Mayoralty to throw things their way.
I guess I’m surprised too that medallion prices are holding at high levels (most recent median price $345,000, up from $260,000 about a year before, based on data compiled by Chicago Dispatcher). Whether this is really an open market, or perhaps subject to manipulation by major owners, or another symptom of financial repression, I have no knowledge.
Of course Uber’s pickup zone doesn’t encompass the entire city of Chicago, missing much of the south side, but it does extend service beyond the City boundary into some relatively affluent suburbs.
Chicago Dispatcher reports that the City of Chicago has auctioned another 50 taxi medallions. Ten of these were reserved for working cabbies and went for $150,599 to $180,101. Of the remaining 40, half were bought by Paul Widmarck for $259,999 each, and the other half by Leonid Sorkin for prices ranging from $252,800 to $254,700. I assume that the total proceeds, something under $12 million, will be used to help plug the City’s current budget deficit. I suppose that’s better than giving medallions away, but a policy of collecting annually the rental value of a medallion would provide a continuing income stream to the City and prevent speculation.
The ten owner-operator medallions “are designated, and must remain, Owner/Operator Medallions.” It will be interesting to see how this is enforced over the years.
The speculative prices over $250,000 compare to past sales which, to my knowledge, have never exceeded $200,000. Shortly before the sale, Chicago Dispatcher provided a graph of medallion price trends. Certainly looks like a speculative bubble to me. But you probably should ignore me. Had I had been prescient enough to know what would happen to medallion prices, I would have bought a couple dozen (on credit) five years ago.
According to the June issue of Chicago Dispatcher, taxi medallion prices rose again in May, to an average of $170,000. Here’s some context:
Month Price Source
May ’09 $170,000 Chicago Dispatcher
April ’09 $164,500 Chicago Dispatcher
March ’09 $165,000 Chicago Dispatcher
February ’09 $158,000 Chicago Dispatcher
Feb ’07 $ 77,000 Chicago Tribune
2004 >$40,000 Chicago Tribune
1991 $28,000 Chicago Sun Times
(Chicago Dispatcher data are for the period ending on the 23rd of the indicated month).
I find it remarkable that this kind of real estate has continued to gain value, over 7% in 3 months, while most other kinds in Chicago seem to have declined. There was, however, considerable fluctuation recently, with sales in late April running around $145,000, increasing to $175,000 on May 19 and 20. According to ads in the Dispatcher, you can lease your medallion out for $600 to $700 per month, a yield of close to 5% (in addition to any price appreciation which might occur). There is, of course, some risk that the price might depreciate instead.