A New York City taxi medallion is a tin plate that grants a person the right to operate a yellow cab. On Wednesday, two medallions were sold for $1 million each, the highest price ever. In 1937 when the first medallion was issued, it went for $10.
Driving a taxi cab in New York City is often seen as an entry position for new immigrants who want to get a foot in the city's bustling lifestyle. But it's become a very expensive foot in the door these days and it's bound to accentuate the division between owners and drivers.
You would never think when hailing a yellow cab in New York City that the owner of that vehicle had to pay a fortune for it. But the New York Timesreports that the sale of two medallions Wednesday night for $1 million apiece is the culmination of decades of amazing growth for the humble taxi industry.
Still the rise in medallion price is considered beyond stupendous. In the past 30 years, the Dow Jones industrial average has risen 1,100 percent. Yet, during the same period, the value of a NYC taxi medallion is up 1,900 percent. That's quite a return, beating gold, oil and new homes.
Today's situation is a far cry from what happened in the city during World War II. The demand for taxis dropped as did most activity in the city, and many drivers simply returned their medallions to the agency to avoid having to pay the annual $10 renewal fee.
David Yassky, current chairman of the city's Taxi and Limousine Commission says,
“It’s a lot of money, and it is an investment that someone would not make without being confident in the industry and the future of the city."
The broker for the million dollar sale was Nat Goldbetter, who was a taxi driver in the 1960s. In 1969, he bought his own medallion for just $25,000, but then sold it a few years later. He says,
“I could have made a zillion dollars, but I did O.K.”
The latest sale plan was hatched earlier this year, when Mr. Goldbetter was visited by an old friend who wanted to sell two medallions he's bought in the 1980s for $80,000 apiece. An offer came in for $975,000 apiece, but the seller wanted more.
It turns out many owners are not willing to sell right now, so the hope was great that a price would come in above that. It did. And Mr. Goldbetter was very pleased.
“Nobody ever thought the medallion would get to this point. It was pretty cool. It broke up the boredom of my work."
Mr. Goldbetter was actually seeing history repeat itself. In 1985, he handled the transaction of the first $100,000 medallion.
“It’s kind of history repeating itself, only multiplied by 10."
New York City has sold 13,237 medallions over the years. The new ones, when issued, are sold at auction. What this means is that the largest fleets, which often control hundreds of medallions, can easily secure financing. Medallion sales are one of the city's big businesses. In fact, the biggest lender, Medallion Financial, is a publicly traded company and shares a Madison Avenue skyscraper with the Rockefeller Family Fund.
The two medallions that sold on Wednesday are known as Corporate medallions, so they are not likely to be driven by their owners, but will probably be leased out 24 hours a day by drivers. There are individual medallions, which by law have to be driven once in a while by the owner, and the going price for these is a bit less, about $700,000.
So what will this incredible rise in taxi medallions mean for the long haul? Graham Hodges is a professor at Colgate, who wrote a history of NYC's taxi industry.
"No one is very good at forecasting the economic future right now, but I would say no.”
Mr. Hodges also says that nowadays, the investment in a medallion is comparable to purchasing an apartment in Manhattan.
“It will always make good money and pay for itself. There are certain things that are just gilt-edged assets, and this is one of them.”