Utilize the Home Field Advantage

How one San Francisco credit union met the needs of the taxi driver community, increased public safety, and drove home new loan opportunities.


It’s not easy being a cabbie, at least according to the Bureau of Labor Statistics. Start out with higher rates of illness, higher on-the-job injury than most professions, and a median salary for 2008 of approximately $21,000. Factor in the fact 26% are self-employed and it becomes clear that some benefits, such as retirement, are not always attainable.

Since 1978, the city of San Francisco has been one of eight cities and municipalities to utilize a medallion program for its licensed taxi drivers, with the permits issued according to a waiting list. For years, when medallion holders retired, the city required them to return their medallion, leaving the cabbies without a viable income. This pushed many to keep driving until they became a danger to themselves and their community.

This month, to give drivers the equity needed to retire, the San Francisco Metro Transit Authority launched a trial program to buy back medallions from disabled holders or drivers older than 70. The city then will sell the recovered medallions to qualified drivers, starting with those on the waiting list.

“It was a driving issue a few years ago,” says Richard Smith, senior vice president of finance and lending at San Francisco Fire Credit Union ($649M, San Francisco, CA) about the program’s development, but it is also expected to provide “a significant source of revenue for the city.”

As few drivers are likely to have the cash to purchase a medallion outright, the director of taxis for SFMTA considered several options for financing. Realizing the loans would all be distributed to local drivers, the city decided financing should be provided through local, community-based organizations rather than outside corporate competitors.

“That revved up as a great possibility for us,” Smith says. Utilizing its position as a financial resource for the community, San Francisco Fire kept close tabs on the developing program and was ultimately selected over competing institutions to provide financing.

The SFMTA had 60 medallions at the program’s launch date and will have at least 300 available during early stages of the pilot program, Smith says. In total there will be 1,500 medallions up for sale over the course of the program, but it is still unclear as to the structure of their release.

For initial sales, medallions are guaranteed a maximum value of $250,000, but future sale values may be influenced by the market. Drawing on his experience in New York’s medallion program, Smith says the medallions in that market originally sold for approximately $200,000 but have since reached up to three times that amount in the open market.

San Francisco Fire initiated financing discussions with the city but other financial institutions including Montauk Credit Union ($115M, New York, NY) will also originate loans.

According to the structure of San Francisco Fire’s medallion loan program, borrowers are required to put 20% down and the credit union will finance the remainder at around 7%. As with most loans, the credit union will run a credit check on applicants. Applicants also must be a credit union member with a basic share account, says Smith, although they don’t need to be member for a set amount of time or sign up for any additional services.

“We’re expecting to fund through July about $4 million,” says Smith. Throughout the course of the program, which he says might span years, the loans will generate an estimated $375 million, to be split among the participating credit unions.

To expand loan opportunities, “being connected with local government is always positive,” says Smith. “They know who you are and that you’re interested in helping however you can.”

By utilizing its proximity to the community and by paying attention to local developments, San Francisco Fire was able to tap into a viable, long-term niche lending market and put the city on the fast track to buying back medallions.

Note: According to Medallionsholders.com, although the program has launched and medallions are ready for processing, the SFMTA has delayed the sale of any medallions until August. The delay is due to contractual issues concerning SFMTA liability should the program end and the SFMTA need to buy medallions back.


As of August 3, the SFMTA Board approved the contract to allow for medallion sales, which have now begun.