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Fair and equitable compensation for taxi plate owners.

NSW Taxi Compensation Claims

ADEQUATE taxi compensation From a taxi owner /investor

As far as my personal situation is concerned, the following is relevant:

  • I am a second generation in the taxi industry
  • I began acquiring unrestricted Sydney taxi licenses in 1990 when the Nick Greiner – NSW State Liberal Government of the day opened the industry up to investors
  • Over the past 26 years my wife and I through a family company have purchased and currently hold 25 licenses
  • The licenses have been purchased using part equity and substantial borrowings from ANZ Bank The bank also holds a mortgage over the family home and our personal guarantees
  • The current debt on the licenses is 6.5 million dollars against a market value of around 4.8 million dollars currently as at April 2016. Asset values were previously 10 million dollars
  • ANZ have advised that due to the industry changes they now ascribe zero lending value against taxi licenses. I understand that other banks are doing similar
  • My relationship manager has been in regular communication and has formally advised that our borrowing facility is in breach of its borrowing covenants due to the decline in security value as well as a large decrease in annual income. ANZ have requested that we provide a substantial reduction in the outstanding. We do not have the ability to meet that payment request
  • There is now talk of transferring the banking relationship to the bank’s ’work-out’ group
  • ANZ are awaiting the introduction of the legislation into parliament before deciding on what specific actions it will take

I imagine that there are other owners/investors who are having similar discussions with their bankers, albeit probably not with the same level of exposure.

Regards,
Name Withheld


TO:

The Hon. Andrew Constance MP on NSW Taxi Compensation Claim

I write to you as a director of a family company (myself and my wife are the only shareholders/directors) with a substantial investment in taxi licenses. As I’m sure you have previously been informed, the investment we hold involves 25 perpetual licenses and carries a bank debt to ANZ Bank of $6.5 million. The bank facility is supported by our family home and the personal guarantees of myself and my wife and is now in breach of its lending covenants. We stand to lose everything due to the halving of license values and 35% drop in rental income.

As a long term participant in the taxi industry, I can honestly say that the fear, stress and anger being felt right across the industry (but particularly by the elderly) is unprecedented.

I have reviewed all of the information that has been made publicly available by the your office, TfNSW and RMS. Unfortunately I believe that there are serious oversights with the currently proposed arrangements that will result in the demise of the taxi industry and significant hardship for many. The current proposals do not fully consider of the downstream consequences. For your benefit, I outline below the key issues that I feel require further consideration:

A) The proposal indicates the removal of some 50 ‘red tape’ regulations. Indeed, some 50 regulations have been removed from the Passenger Transport Act (“Act”), but that does not mean that they no longer apply to the taxi industry. For example, the requirements for personal cleanliness and the wearing of uniforms may well have been removed from the Act, but the taxi networks will continue to apply their standards which are equally or even more rigorous than those pre-existing in the Act. Similarly, removing the age limit of vehicles used as taxis will have little impact on a practical basis due to the well known escalation in maintenance costs once a taxi vehicle reaches 6 years of age. Again, networks will establish standards for operators to adhere to, but economics will play a significant role in the replacement of the vehicle.

B) The proposal allows exclusive ‘rank & hail’ for the taxi industry. To the unaware this appears to be a major benefit for taxis. Unfortunately, it is not what it appears. Rank & hail fares are in fact on a downward trajectory as an ever increasing number of passengers use their smart phones to pre-arrange collection from a designated point. The only fair solution to create a distinction between ‘on demand’ and ‘pre-booked’ services as is intended is for a 30 minute delay to apply to all non taxi bookings.

C) All communication released to date indicates an endeavour by the government to level the field for point to point transport. However, that is not what is occurring. For example:

i) There needs to be an annual fee of around $8,000 – $10,000 for all non-taxi point to point transport service providers. Taxi owners have paid upward of $400,000 for their licenses (now valued at $200,000 and falling) and operators who lease taxi licenses from the NSW government or privately pay some $18,500 per annum in lease fees. Apart from the annual fee for non-taxi operators being a fairer arrangement, the price signal would ensure that only those who are truly committed to working in the point to point transport sector pursue the opportunity

ii) CTP insurance – taxis pay $7,500 per annum and non-taxi vehicles pay $700 per annum

iii) Comprehensive insurance for taxi vehicles is approximately $6,000 per annum – much higher than non-taxi vehicles

iv) CCTV cameras – required in taxis but not for other providers. The purchase and installation of an onboard camera costs around $4,000

v) Network fees are a fixed cost of around $700 per month for taxis (irrespective of the number/value of bookings sent to) and a variable cost for other providers at a set percentage of actual revenue achieved

vi) Vehicle financing for taxis is typically structured on a 36 month fully amortised basis as compared to non-taxi vehicles where the typical structure allowed would be 3 years with a 50% balloon. The cash flow impact of this difference on a $35,000 vehicle is around $6,000 per annum

vii) Many license owners have taken out large loans ($300,000) to purchase their licenses and typically the lender has included a mortgage over the family home in the security taken. Apart from the negative equity now held in the license and the very real prospects of default, the monthly loan repayment of around $2,850 is unique to taxi operators only

viii) Industrial relations arrangements – taxi operators are required to provide holiday pay, sick pay and hold a current workers’ compensation policy for their drivers whilst non-taxi operators are not required to provide any of these entitlements for ‘contractors’

ix) Taxation arrangements – all taxi drivers are required to hold an ABN and be registered for GST. They are required to complete a quarterly BAS and forward 10% GST to the ATO irrespective of taxi earnings. Whilst the ATO has ruled that similar arrangements are to apply to other point to point transport operators, this matter is being contested in the courts and the outcome is not certain

x) The NSW government currently controls some 800 taxi leases directly in competition with the private sector. This resulted from the misguided recommendations of IPART to TfNSW, for additional licenses to be issued. We now have the absurd situation where across the taxi networks there are around 300 privately owned perpetual taxi licenses that are unable to be leased

xi) Taxis should be provided with exclusive pick up rights at airport(s), the central rail station and the central interstate bus station. This is not proposed and if not adopted will result in chaos, touting and a potentially volatile situation in those locations. Taxis should remain the front line transport service for international and interstate/intrastate arrivals

xii) Fares – maximum taxi fares are regulated (as they should be), whilst non-taxi operators manipulate supply to instigate surge pricing algorithms onto unsuspecting customers. Hardly an ethical business practice but an all too common occurrence

xiii) Whilst there is a proposal to create a new Commissioner and remove the law enforcement activities from RMS (a move that is welcomed due to their incompetent enforcement whilst UberX was illegal), there is no detail around the very critical issue of how private vehicles will be monitored and exactly what will be monitored. Apart from vehicle condition, driver suitability etc, the identification of illegal picking up of taxi fares needs an immediate solution. The solution however cannot allow visible markings on non-taxi vehicles or this will further undermine the rank & hail exclusivity of taxis and actually increase the compliance burden. Where transgressions are identified, penalties must include large fines as well as driver demerits to avoid the ridiculous situation of Uber (or similar) paying the fines.

D) The proposal indicates that there will be no increase in the number of taxi licenses over the next 4 years. Well that is hardly a concession as there are already hundreds of licences that are ‘sitting on the shelf’ across the various networks. What is needed is an immediate decrease of 400 – 500 licenses that the government leases to operators directly in competition with the private sector.
In addition, there needs to be certainty about what will happen after 4 years. The value of existing licenses will continue to be eroded as potential purchasers of licenses (owner drivers, operators, and investors) determine their financial decision based on a fixed term annuity with a potential zero value after 4 years. This will obliterate the superannuation of many license owners and force existing self funded retirees onto the pension. How can this be considered a good result for anyone?

E) The NSW taxi industry is directly responsible for some 17,000 full time jobs whose livelihoods are being put in jeopardy to accommodate part-time non-taxi drivers seeking to ‘top up’ their existing incomes. It seems a strange priority that government policy would favour the casualisation of labour and redistribution of income from the most vulnerable to those seeking supplementary income.

F) Finally there is the issue of the inequity and inadequacy of the proposed compensation to existing license owners. Sydney unrestricted taxi licences have decreased in value by $225,000, yet the proposed compensation is only $20,000 per license for a maximum of 2 licenses. There is no plausible justification for only including 2 licenses as all perpetual licenses are of equal value and were originally auctioned/tendered by the NSW government. It is also unreasonable for a government to effectively undervalue the assets that through its own actions (and misdeeds) resulted in substantial reductions in value and income to license owners. Governments must be held accountable and have a moral if not legal obligation to not impact a small segment of the people they represent in such an adverse way.

I provide the information above so that you are aware of the pertinent issues. Providing choice to customers via non-taxi transport services is a fine objective, but the alternates should complement the existing taxi industry, not decimate it.

I would be happy to provide any clarification or additional information as required.

Yours Faithfully,
Name Withheld


Elderly mother 82 years of age affected by loss in taxi income

Attn : Glenn Brookes Member of Parliament  East Hills

East Hills 20 Revesby Pl,
Revesby NSW 2212 Phone:(02) 9772 2774

Dear Glenn,

Thank you for seeing my mother and I on the 14th of April 2016 at your office at Revesby.

In Summary (extract):

• As discussed out our meeting with my mother, as her representative, it is clear there is the issue of the inequity & inadequacy of the proposed compensation to existing NSW taxi license owners.

It is also unreasonable for NSW State Government to effectively undervalue taxi assets that through its own actions (and misdeeds) resulted in substantial reductions in value and income to license owners such as my elderly mother.  The NSW State Government must be held accountable and have a moral if not legal obligation to not impact a small segment of the people they represent in such an adverse way.

My mother’s taxi lease income in her old age of 82 has deteriorated significantly as a result of the devaluation of taxi assets which is extremely stressful emotionally; especially losses to her weekly taxi income and her retirement has suffered as a result in the drop in value of her taxi plate because the two issues (value of plate and weekly lease) are dependent upon each other. This is her only life savings inherited from her deceased husband. 

Sincerely Son of Elderly Mother, Widow

(name withheld)

 


 

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We are representing the interests of all taxi plate owners in response to financial losses in income and asset value forced upon us by the NSW Mike Baird Liberal State Government and other NSW parliamentarians.

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