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Can Chicago's taxi industry survive the rideshare revolution?

As services like UberX and Lyft rev up expansion among amateur drivers, it's adapt or die for the city's cabbies.

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On an early July evening, Uber invited legislators, journalists, and business types into the cavernous confines of its midwest headquarters in the West Loop. Besides showing off the impressive new space, the rideshare juggernaut was unveiling some ambitious plans for the future. Following a video presentation fraught with attractive young people, inclusive refrains—We're all just people trying to get from one place to another, maaan—and a dose of tech worship, midwest general manager Andrew Macdonald took the mike to inform the crowd that Chicago is the lucky locale of serious rideshare growth. By 2016, he expects the Carpenter Street HQ to quadruple in size, employing 500 people, up from just 75 today. Then there are the thousands of drivers with whom the San Francisco-based company will continue to "partner"—because it's just an app, Uber doesn't actually employ drivers.

It didn't come up during Macdonald's presentation, but the elephant in the room was HB 4075, a bill that, if enacted, would drastically alter the way rideshare companies could operate in Illinois. Having passed both chambers handily, the proposal was awaiting Governor Pat Quinn's signature. The Rideshare Arrangements and Consumer Protection Act would have required companies like Uber and Lyft to abide by safety regulations that more closely resemble those applied to taxicabs. Drivers would've needed city-issued chauffeur licenses and more-comprehensive insurance, among other things.

Asked how the bill would impact his company's rosy projections, Macdonald said it would be detrimental to the current model, which relies on the fact that no one's quite figured out how to oversee rideshare, yet he was "optimistic that we can continue to work with state-level officials to try to make changes." But changes weren't necessary. Under political pressure from both parties, and with Uber's downstate lobbyists keeping after the issue, Quinn vetoed the bill on August 25.

The decision had become a political inevitability. Both Quinn's gubernatorial opponent Bruce Rauner and his political ally Mayor Rahm Emanuel—who spearheaded the passage of a relatively lax Chicago-specific rideshare ordinance—were opposed to the state legislation. In the midst of a tough reelection fight, Quinn was at risk of being painted as an enemy of job creation, progress, and the free market if he didn't veto the bill. Incidentally, both Rauner and Emanuel have ties to Uber, the former through an investment in Goldman Sachs, the latter through his Hollywood-agent brother, Ari, an investor in the startup.

The discussion about legislative regulation was typically presented as addressing consumer safety concerns. Behind closed doors, however, it was a rancorous turf war between the taxi establishment and the rideshare insurgency, with both sides accusing each other of utilizing money and clout to monopolize the public's transportation dollars and protect its profits. And right now, the cab industry seems to be fighting a losing battle. The institution that once seemed a permanent part of urban life is being threatened by rideshare's convenience and next-gen innovation. As more amateur, commercially unlicensed rideshare drivers enter the market, the taxi industry has found itself "in shambles," as veteran city cabdriver Fayez Khozindar puts it. Professional drivers are "fed up," Khozindar says, both with an industry that failed to innovate and with the encroachment of an industry that did. "The industry is now fucked-up," second-generation taxi driver Ehsan Ghoreishi says.

Ghoreishi's fear? "The profession is going extinct."

Ehsan Ghoreishi, who’s been driving a cab in Chicago since 2005, worries that the profession is on the verge of extinction. - ANDREA BAUER
  • Andrea Bauer
  • Ehsan Ghoreishi, who’s been driving a cab in Chicago since 2005, worries that the profession is on the verge of extinction.

At Uber headquarters there's a lot of talk of the earning potential of the company's UberX partners, the drivers who use private vehicles to schlep people around town—teachers who use it to make extra money during the summer, single mothers who can make their own hours and spend more time with their kids, veterans who are returning from service and are looking to transition back into the workforce. Meanwhile traditional cabdrivers—a largely immigrant workforce who drive for a living, not as an income supplement—are using the Uber Taxi platform, an e-hail option introduced to Chicago in May, to pick up fares between street hails. Those full-timers don't have much of a choice. In the Darwinian transportation landscape, it's a matter of adapt or perish.

We exist in a convenience-driven society that's generally embraced rideshare apps with enthusiasm—except during those hateful periods of surge pricing, of course. Uber and its ilk have made hailing a ride, not to mention paying a reasonably low fare, as easy as a couple of swipes on a smartphone screen—and forget the awkward dance of asking to pay with a card or subtracting the tip from your change. The ride-seeking public has been weighing in with its fingertips, and plenty of people are choosing amateur drivers over pros. In San Francisco, Uber's hometown, where the service launched in 2010, a study by the Municipal Transit Agency revealed a sharp decline in cab use between March 2012 and July 2014—cabs that were making an average of 1,424 trips per month at the start of the study were making only 504 trips a month by the study's end.

At City Hall in May, Ghoreishi was among the drivers who'd gathered to oppose Mayor Rahm Emanuel's lax rideshare ordinance, which the City Council approved that day; it quietly went into effect last week. Cabdrivers and the cab companies they've so often been at odds with both agreed that the ordinance didn't do nearly enough to even the playing field, giving rideshare drivers an unfair advantage. He told me then that he and other drivers were fighting the city ordinance because "it makes cab driving a part-time job rather than a profession."

Granted, driving is a part-time job for Ghoreishi, a filmmaker and accordionist in the punky eastern European folk band Black Bear Combo and his own group, Bad Mashadi. The Iranian immigrant has been driving a cab in Chicago since 2005, but his father has been full-time since 1989. Ghoreishi drives exclusively on weekends. For about $70 a day, the 34-year-old leases a car from Flash Cab, which means he starts each shift making up a deficit. He uses the Uber Taxi app, but he does so because he's obliged to. "It's become a necessity—as of now, I make tangibly less money working weekends [than in the past]," Ghoreishi says. "When I'm waiting in front of bars, like California Clipper or Scofflaw, people are just standing there waiting for private cars. I'm right there, and they're staring at their phones."

Ghoreishi owned his own cab, but sold the car and his medallion last December when he had a "spark" of inspiration, which happened to coincide with an influx of Lyft cars, with their goofy pink mustaches. It looks like he made the right decision: he no longer has to drive seven days a week (as many as 80 hours) just to cover a mortgage on a medallion, insurance, and maintenance costs, and the medallion market appears to be on the downswing. In August 2013, 49 medallions sold for a median price of $357,000. This August, just four medallions sold for an average price of $292,500.

In 2012, Melissa Callahan filed a federal lawsuit on behalf of her fellow beleaguered drivers. - ANDREA BAUER
  • Andrea Bauer
  • In 2012, Melissa Callahan filed a federal lawsuit on behalf of her fellow beleaguered drivers.

At the risk of dwelling on the rudiments, taxi medallions are those CD-like metal placards affixed to taxicabs' hoods. There are currently 6,735 active medallions in Chicago, and each has a number, the same one you'll find elsewhere on the vehicle. Instituted in the 1930s, the medallion system was an attempt to regulate an industry that was out of control, and to limit the number of cars that could be on the road picking up fares. The original starting price at auction: $10 a pop. It didn't take long for the system to become a way for wealthy medallion owners to exploit drivers. By the 1980s, two companies—Yellow Cab and Checker—owned the majority of the city's medallions and with a little help from Mayor Richard J. Daley had established a comfy monopoly: by city ordinance, the two companies were guaranteed 80 percent of the city's taxi business.

In 1986, Mayor Harold Washington announced a plan to release 400 new taxi medallions to give the industry an infusion of fresh owner-operators. At the time, medallion owners were charging drivers $6,000 a year to lease what cost them only $200. The plan pitted the establishment cab companies against the city, and drivers against other drivers (rumor had it that minorities would be favored—a notion that provoked the ire of many old-timers). Worried that the market would become too diluted with the additional medallions, Arthur Dickholtz, who owned Flash Cab at the time, told the Tribune that the city officials who came up with the plan "ought to be shot in the head. . . . If they succeed, there will be war on the streets. It will be a repeat of the cab wars of 1937. There were shootings, cab burnings, cabs thrown into the lake." Washington passed away before that version of the ordinance could be approved.

Suffice it to say that the taxi industry had its issues well before the Ubers, Lyfts, and Sidecars of the world entered the fray. But even though the medallion system has been susceptible to chaos and corruption, there's an underlying logic to limiting the number of taxis that can operate: if there are too many cars on the streets picking up fares, no one can make a living.

Cabdriver Peter Enger has been on the front lines of fellow drivers' struggles against the city, taxi garages, and medallion owners since 2008. As a cofounder of the United Taxidrivers Community Council, he fields complaints and advocates on behalf of drivers who've received traffic or parking tickets they think are unfair or claim they've been overcharged for a medallion lease or fined for bogus consumer complaints to 311. (Enger says he's seen cases where customers didn't even correctly identify the race of the driver they'd reported for one offense or another, from discourtesy to reckless driving.) More recently, the UTCC's Bucktown office has been hearing from drivers who've left the traditional taxi industry to switch over to the UberX platform. "This rideshare option comes into town, and ever since we've been getting complaints from drivers," Enger says. "They heard reports of how much money you could make driving your private car, but there's no limit on how many drivers can be in the field—it's Economics 101."

Peter Enger advocates for cabdrivers from the United Taxidrivers Community Council office in Bucktown. - ANDREA BAUER
  • Andrea Bauer
  • Peter Enger advocates for cabdrivers from the United Taxidrivers Community Council office in Bucktown.

The rideshare industry makes bold claims about the earnings potential of its drivers. Lyft guarantees new drivers $6,000 in their first month, so long as they drive at least 50 hours a week, pick up a minimum of 50 fares a week, and accept 90 percent of all requested rides. The subject line of an Uber ad on Chicago's Craigslist site—one posted at least 20 times a day—says UberX drivers can make $1,200 a week. "Our partners typically make $50k per year," the ad says, "and some make as much as $100k+ per year." Pushed for specifics on those income figures, Uber spokesperson Lauren Altmin replied simply, "Drivers with a fully utilized vehicle on the Uber platform have access to significant earning potential as mentioned in the [Craigslist] ad."

The projection seems a little far-fetched. For instance, UberX's base fare is $1.70 (compared to $3.25 for a traditional taxi). Riders are charged 90 cents a mile and 20 cents for every minute of the trip (again, this is roughly half what taxis charge: $1.80 a mile, and 20 cents every 36 seconds). Then there's Uber's 20 percent commission—up from 15 percent just months ago—and the $10 a week it charges drivers for the data package required to use the company-provided phone. And there's gas, insurance, maintenance, and wear and tear on the car. And UberX drivers don't get tips. According to an income study Uber posted on its website in May, the median driver on UberX who lives in Chicago earns more than $16 an hour, which the company points out is "almost twice the local minimum wage." According to a chart of hourly incomes dispersed throughout Chicago neighborhoods, only one driver reported making more than $30 an hour.

City-licensed taxi drivers who supplement flag fares with Uber get a better deal. Sort of. The company charges those drivers 5 percent of each fare, which is the same fee they're hit with to run a passenger's credit card anyway. (Ever have a cabdriver not so subtly encourage you to use cash? That's why.) Granted, taxi drivers are also paying leases (or mortgages on medallions), paying to keep their chauffeur licenses current, taking annual drug tests and physicals, attending continuing education courses every two years, and shelling out untold amounts of money to the city for citations, fees, and fines. With a 15 percent difference between commission rates, Uber has plenty of incentive to bring taxi drivers over to the X side. And fed-up cabbies aren't exactly reluctant to go.

Many of them leave "for emotional reasons," Enger says. "They don't like having a target on their backs. You see the stickers on cars that say 'Call 311.' That means if you see a cab and you don't like the way that guy's driving, [you can call and complain]. Every citizen in the city of Chicago has become a traffic cop—all you have to do is write on a piece of paper, 'I saw this—' and I get hit with a bill saying if I don't deal with this, I'm liable for $3,000 in fines and $40 in court costs."

I didn't speak to a single driver who wasn't intimately familiar with 400 W. Superior, where administrative hearings are held. Because Uber cars aren't marked—although you can't say the same for Lyft—taxi drivers who have converted to Uber feel like they'll no longer be taken advantage of as an "ATM for the city," as one driver put it.

But what about the drivers who don't own cars? Uber wants them too.

As part of a program about which a company spokesperson would divulge few specifics, the app has partnered with, well, "several partners" to lease vehicles to people who might not qualify for traditional car loans. After a down payment of a couple thousand dollars, a program participant pays something like $500 a month for four years, and at the end of the lease, he or she can purchase the car for a small sum—no credit check required, supposedly. When I first spoke with Eric P. Martin, a cab driver and filmmaker—he recently made a short documentary called Cab Slaves that's critical of the taxi industry and the city's treatment of drivers—he was seriously considering participating in Uber's lease-to-own program.

"I'm spending around $3,000 a month to rent a cab I don't own," Martin says. "It's too late for [the taxi industry]. This happened to newspapers, television, and music—technology is changing industries, but it's too late. [The taxi industry] had a chance to adapt to the technology, and they failed."

A week later, Martin had done the math and had a change of heart. "I decided that wasn't the best thing for me to do," he said. "I looked at the amount of money that I would pay over 50 months, how many miles that would probably be on my vehicle, and how much the vehicle was worth after four years. I also looked at the amount of money that a regular fare is in Chicago compared to what Uber pays and decided that it wouldn't work." He says he estimates he'll wind up spending more on continuing to lease a taxi than he would've had he leased-to-own his own car, "but what can you do? You lose either way." Martin is silent for a moment. "I think I'm just stuck."

Driver and filmmaker Eric P. Martin considered becoming an UberX driver. - ANDREA BAUER
  • Andrea Bauer
  • Driver and filmmaker Eric P. Martin considered becoming an UberX driver.

Among Chicago's taxi drivers, there are differing opinions about what should be done to save the profession. The industry encompasses people from an array of cultural backgrounds who are always on the move. And for almost a century, this loose community has found it difficult to successfully unionize. In 2012, when the rideshare menace had yet to fully rear its head, cabdriver Melissa Callahan filed a lawsuit against the city that questions whether cabdrivers shouldn't be considered city employees who are guaranteed a minimum wage. "[Rideshare] was like the icing on the cake," she says with a laugh. "This just made a really bad situation even worse. Everything that I'm fighting for, Uber is saying they'll serve up on a platter." Callahan says the goal of the lawsuit isn't necessarily to become municipal employees—it's not exactly like the city could suddenly afford 12,000 new workers—but rather to get City Hall to reach some sort of arrangement with drivers that would make driving a taxi a reasonable full-time job again.

The lawsuit has put Callahan at odds with members of UTCC, who don't want the restrictions or oversight that might accompany whatever deal is struck with the city. The UTCC drivers have come up with their own self-preservation proposal, one that might sound familiar: an app.

"UTCC has come up with a plan to combat this whole mishegas," Enger says. He describes a system that would blend phone dispatching (for the people who still call for cabs) with e-hailing through a smartphone and allow better access to handicapped-accessible vehicles than rideshare can provide.

As this story went to press, Mayor Emanuel's office announced that the city is beginning the process of implementing a universal taxi smartphone application that will "help level the playing field between taxis and rideshares." The city also plans to reduce maximum lease prices for alternative-fuel vehicles, decrease fines for taxi offenses, and lower the credit card transaction fee from 5 to 3 percent.

The gesture seems to indicate the administration feels that the cabdriving profession is essential to Chicago's transportation landscape. "Ultimately, there's no way that Uber can be the only transportation provider in Chicago," says Callahan. "I don't think a lot of people have considered that technology is not perfect. People need cabs."

"The model of having unregulated drivers cannot survive long-term without professional drivers," Enger says. "If you have only amateurs who are just doing it on the weekends, a few days here and there, that's not a sustainable model for the long term."

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