Four New York-based credit unions that serve the taxi industry in New York City and elsewhere are reporting a rough 2015 as the impact of popular rideshare services such as Uber and Lyft continue to ripple through their fields of membership.
Those four cooperatives are the $179 million, 2,900-member Montauk Credit Union of New York City; the $271 million, 3,000-member LOMTO Federal Credit Union in Woodside; the $2.1 billion, 24,000-member Melrose Credit Union in Briarwood and the $692 million, 3,800-member Progressive Credit Union in New York City.
The credit unions have histories of lending to the New York City taxi industry, financing the purchase or leasing of taxi industry medallions (licenses to operate yellow taxis in New York City), or financing other loans with the medallions as collateral.
As of June 2015, each of the four credit unions reported capital positions with net worth ratios ranging from 10.37% on the low end to 39.94% on the high end. Nevertheless, they also saw delinquencies and provisions for loan losses climb dramatically as the taxi industries they supported struggled due to the disruption brought on by new competitors.
Melrose CU President/CEO Alan Kaufman acknowledged that the legal and commercial fights taking place between the taxi industry and ridesharing services are significant, however he downplayed the risk of the industry's changes downgrading medallion values enough to endanger the credit union.
"From our perspective, we are seeing an impact from what we view as an illegal business model," Kaufman said. "But by no means is that the only thing we do. Besides, we have one of the highest equities in the entire credit union industry."
With $2.1 billion in assets, Melrose CU's 18.04% net worth ratio equals roughly $378 million in capital, substantiating Kaufman's observation that the cooperative remains sufficiently capitalized to withstand a dip in the taxi industry.
However, taxi industry observers have been wondering whether other credit unions that are not as well-capitalized might face difficulties if the taxi industry does not stabilize quickly. With $179 million in assets and a 10.34% net worth ratio, Montauk CU, for example, has a little more than $18 million in capital and $3.6 million in its provisions for loan losses, which equals a significantly smaller cushion than Melrose CU has.
The underlying problem is that the New York City taxi industry has remained extraordinarily sensitive to small drops in revenue from lost rides, according to HVM Capital, a Boston-based research and investment company that has argued taxi medallion values and prices have been largely overstated.
In a recent white paper, HVM observed that taxi medallions have been among the safest investments in the U.S. for more than 70 years, as they have been largely shielded from wide economic swings because municipalities have maintained their taxi industries as monopolies. Local governments capped the number of medallions allowed and thus prohibited competition even as the cities' populations rose, the firm contended.
Based on their increased risk now, HVM suggested New York City taxi medallions should be valued at roughly $360,000, not $1.3 million as one source claimed as their peak price in 2014.
Read more about the taxi industry and its impact on credit unions in the Sept. 16, 2015 print issue of CU Times.
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