Why Philly cabbies want PPA to greenlight a driver-owned taxi co-op

By • on March 30, 2014

Mar. 18, 2014

By Randy LoBasso
Philadelphia Weekly

Photo by J.R. Blackwell

Photo by J.R. Blackwell

Some 20 cab drivers approached the Philadelphia Parking Authority in 2009 with a big idea they’d been kicking around for about four years, ever since the PPA took over regulation of Philly’s cab industry. They wanted to start a new dispatch company, one that existed in competition with the city’s other cab owners, but they wanted to do it differently: Theirs would be a co-op, committed to providing "lower costs, steady employment and a decent living for drivers" —in other words, the exact opposite of what they’d experienced in the business as it currently existed. Employees would act as co-owners, serving on the company’s board. It would be called Alliance Taxi Co-op, and it would be similar to taxi co-ops in cities like Madison, Wis., Denver, Colo., and Alexandria, Va.

They even had a seller lined up they wanted to purchase a dispatching service from—for $35,000. "We approached the Parking Authority and told them what our intentions were," says Ronald Blount of the Philadelphia Taxi Alliance association, who intended to manage the new company, "and they said, ‘We’re probably not going to approve the sale."

The PPA said they weren’t approving any new dispatch companies at the time. "It was a period in which our technology system, which our dispatchers are really the most integral part of, was not operating the way it should have been," says Jim Nye, director of the PPA’s taxi and limousine division. "So, we weren’t going to bring any new dispatchers in that environment."

It was a bummer, but a year later came a ray of hope: The PPA called Blount and his crew to tell say if they were still interested in submitting the application, they should go ahead and do so.

The Alliance team spent a couple years conducting research, shaping a business plan and crafting bylaws before formally applying to the PPA in 2013. Soon they began going through hearings concerning the price of their leasing application and whether the PPA would accept it.

It’s been a painstaking process: "When they first started this process [in 2009], the filing fee was $5,000," says Michael Henry, an attorney who represents several taxi-related clients in the city, including Alliance and Germantown Cab. That fee has since tripled, and Henry is trying to help Alliance get it back to the original price cited.

As Nye puts it, the PPA wants "an application that is acceptable for filing, basically, acceptable for our rules and regulations."

In the meantime, the drivers wait. If the co-op is approved, they’re hoping to change the city’s taxi landscape forever.

Of the 1,600 taxi-license medallions in the city, about 500 are owned by dispatch companies, 400 are owned by drivers and the remaining 700 are owned by private owners and investors. The Alliance co-op, Blount says, would attempt to unify the 400 drivers who own their own medallions.

One of those drivers is Tekle Gebremedhin, a Sudanese refugee originally from Eritrea, a small country on the horn of Africa, who came to Philadelphia in 1981 with nothing but "the clothes on my back," he says. Gebremedhin saved his taxi earnings and bought a medallion in 2000, when it cost him $70,000. He’s been able to send his two children to college with the cash he’s earned from driving. And he’s helped Blount shape the idea for Alliance and propose it to about 20 other drivers in 2009.

"I love to drive. I cannot work another job. I drive for 17 years, and if you are foreigner, this is best job for you. I tell you the truth I don’t know how to count, spell," he says with a laugh. "All I can do is drive."

Gebremedhin is among the 85 percent of Philadelphia taxi drivers who are first-generation immigrants. His story exemplifies why so many immigrants got into the taxi industry in the first place: He was able to save up for 16 years and then become his own boss. Today, with medallions selling for half a million dollars, that’s virtually impossible.

He intends to serve on Alliance’s board of directors, believing there’s opportunity to be found not just in Philly’s provider market, but—and perhaps even more importantly—in the customer market. "South Philadelphia, North Philadelphia, no [drivers] want to go there," he says. "They judge a book by its cover. They make money so they don’t want to go outside Center City, Old City. The cab should benefit the customer. This is what transportation is. It’s supposed to get to everybody."

If you live in a neighborhood outside Center City and have ever waited an hour or more for a cab, you know what he’s talking about. About 45 percent of Philadelphia taxi fares are dispatch calls; another 20 percent are pickups from taxi stands, and 35 percent are street hails. One big reason you wait a long time for a cab after calling: Dispatch companies in Philadelphia, and elsewhere, virtually always send their drivers to take the calls from corporate clients, like big law firms already in the Greater Center City area, before picking up individuals callers. Corporate clients pay an upfront cost to have a pre-paid account with the dispatch company, and drivers often deal with it; rides booked with corporate vouchers usually mean high-end riders, which increases the chance of taking a long trip to rich parts of Chestnut Hill or the suburbs, and the fare is inevitably high.

Alliance thinks they can change this equation to benefit both drivers and individual fares. Right now, there are cab companies from out of town and on the outskirts of the city—Germantown Cab, some Bucks County companies—who operate in North, Northwest and Northeast Philadelphia outside the medallion/dispatch system and the regulatory jurisdiction of the PPA. (Which turned into a problem for Germantown Cab, specifically, last week; see more at phillynow.com.) Those companies, Blount says, are making profit from the territories that Philly cabs aren’t chartering.

Blount says he wants to create specific incentives for drivers to stake out West Philadelphia instead of sitting outside the airport or the Four Seasons all day. Those would include offering senior-citizen discounts to elderly citizens who live in outskirt neighborhoods—as do the majority of the 200,000 elderly counted here in the 2010 U.S. Census—and enabling drivers to utilize new cell phone-app technology, like that used by such startup car companies as Uber, to correspond with customers directly instead of cruising the streets for fares.

The latter prospect has drivers particularly excited. The PPA has allowed cab companies to use new technology in their cab fleets since June 15, 2013—though companies have barely begun using it.

So when 28-year veteran taxi driver Joseph Stumpo, a Northeast Philly resident, sits down to chat at a coffee shop in Fishtown, he’s not just sporting Phillies sunglasses, Flyers earrings and an Eagles jacket. He’s also carrying a Hailo flier.

Hailo is an app-based dispatch company now operating in several cities; though it has an office in Philadelphia, it hasn’t begun operating here. Stumpo, who’s worked at several local cab companies over the years, says at this point, he’s interested in moving to a new-technology business. "It’s 100-percent credit card," he says. "There’s no ifs, ands or buts on who you’re getting in the cab. And, the way it was explained to me, it could be a 40 percent increase in our business."

Stumpo tells me how the company he works for was supposed to unleash a cell-phone-based app system earlier this year—but the date came and went. "It was supposed to happen March 1, but I haven’t heard anything. We’re putting a new cab on the street—maybe then, we’ll see. But I don’t know if any drivers have signed up yet."

Today, Blount says, 60 drivers are on board with the co-op idea—20 of whom, like Gebremedhin, own their own medallions—and each have put up $1,000 as startup cash. That represents about a third of the funding they need to launch the operation; the rest they’re working to bring in from both grants and loans from industry, co-op and worker-aligned groups in Philadelphia and around the country.

Like lots of modern startup companies, part of Alliance’s business plan—and why they believe they can get the cell-phone app system up and running quickly—relies on the fact that they’re not encumbered by pre-existing, out-of-date technology that needs reinventing or replacing. Alliance Taxi plans to launch with next-generation credit-card equipment and won’t need to interface with a patchwork of dispatchers that have been conglomerating piecemeal for years.

But can it really work? Alliance’s lofty goals include gaining 25 percent of the market in four years—that means 400 of the city’s 1,600 medallions—while sharing profits between company members; going out of their way to serve parts of the city where cabs are currently reluctant to go; using environmentally conscious vehicles; and providing employee benefits in an industry where, currently, there are none.

For drivers like Gebremedhin, it’s about much more than competing with area businesses. "This is for true," he says. "I fight until end. We fighting, fighting, fighting. Some people, they have dream to drive cab—like they dream for anything … this is a billion dollar business, and we want it to go to work for us."

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