SFMTA May Seek A Share Of Taxicab Advertising Revenues In The Future. By John Han.

The San Francisco Municipal Transportation Agency (MTA) may explore ways to get a share of taxi advertising revenues in the future. 

Recently, the United Taxi Workers (UTW) filed a public information request, and obtained materials regarding the City's regulation on 5% credit card fees, rear seat Passenger Information Monitors (PIMs), and electronic waybills.  

Included in the material was a copy of an email sent by MTA Deputy Director of Taxi Services Christiane Hayashi dated March 25th, 2011, and addressed to Sonali Bose, the agency's chief financial officer, and other recipients. 

In that email, Hayashi responds to two questions being posed at her by Nathaniel Ford, who was the MTA chief at the time, and backed up by Sonali Bose, regarding the distribution of ad revenues generated by rear seat PIMs. 

Bose’s first question to Hayashi was, “Who negotiated the 90%-10% split and under what authority?”  Her second question was, “Why isn’t the MTA getting a portion of the ad revenue?”

The following is an excerpt from the email in which Hayashi answers Bose’s two questions…

“As to the question of ‘who negotiated the deal,’ I guess my response is that it’s not a deal so much as a regulation – while I did my due diligence and circulated a draft memo to the TAC, it comes from a place of regulatory authority, not negotiation.  The SFMTA has no privity of contract with the equipment providers – Veriphone, Wireless Edge and CMT have contracts with the taxi companies. 

Why 10% to the Driver Fund?  Because, like the medallion sales program, I felt it important to be able to point to some benefit to drivers in order to make the very unpopular change go down more smoothly. 

If he question is why not a share to the SFMTA, I guess my answer is that this is equipment that is owned by third party vendors and being installed at no cost in privately-owned vehicles driven by independent contractors.  We come at it as a regulator, and the permit fees we receive are supposed to cover the cost of administrating our program.  I think that I would have gotten tremendous resistance from both companies and equipment vendors if I tried to demand a slice of advertising revenues for the SFMTA as part of the price for a company to get a waiver from the regulator.  It would be like granting a building permit on the condition that the Planning Department could have a share of the advertising revenues from the building.

Of course, as we have discussed previously, there may be a place for bringing taxi advertising generally into the SFMTA, but if we do it would have to be a cooperative situation with the companies, where we agree to bear the administrative burden and use our greater negotiating power to increase their revenues in exchange for a share.  That is a distinct possibility that we can continue to explore.  I think the companies would embrace it if we can improve their advertising yield and reduce their administrative costs.  I think I mentioned to you that the good time to broach this would be when we propose uniform top lights for all taxis with uniform advertising space that we could manage on behalf of the companies.  That is something we accomplish during the next fiscal year if that is the policy direction. 

I hope I have explained a very messy situation.  Let me know if you have further questions.”

A scanned version of the emails text (sometimes hard to read because it's scanned) is available and can be viewed by CLICKING HERE.  

(Before going any further, it should be noted that this is not a personal attack against any person.  Neither is there an accusation of insidious motives, maliciousness, or conspiracies on the part of an individual or an agency.  This author is not attempting to pass judgment on whether the MTA’s interest in taxi ad revenue is good or not.   

The MTA has clearly demonstrated an interest in gaining taxicab ad revenue for itself, and I thought the taxi industry would benefit to know this.  It is up to readers to decide for themselves whether they think the MTA’s interest in ad revenue is insidious, malicious, a conspiracy… or perhaps innocent and perfectly okay, or even good for everyone.)

One Important Thing To Point Out Though: 

In the above quote, Hayashi mentions to Sonali Bose that the Driver Fund would get 10% of add revenue generated from rear seat PIMs.  She said, “Why 10% to the Driver Fund?  Because, like the medallion sales program, I felt it important to be able to point to some benefit to drivers in order to make the very unpopular change go down more smoothly.”

What Hayashi is talking about here might seem okay if it actually meant what it seems to say.  In other words, if the Drivers Fund skimmed 10% right off the top of all ad revenues generated from rear seat PIMs, then that may add some appeal, and be a persuasive factor for taxi drivers to give PIM ads a second look. 

Additionally, I saw Hayashi tell taxi drivers at a town hall meeting that the Drivers Fund would get 10% of add revenue from rear seat PIMs, but without distinguishing to them whether it would be 10% of gross or net ad revenue.       

But in her October 15, 2010 memo titled, “Processing Non-Cash Payments in Taxis”, she clearly says, 

“Ten percent of ad revenues in excess of those required for equipment installation and maintenance shall be paid into the Drivers Fund.”  (Memo, “Processing Non-Cash Payments in Taxis”, October 15, 2010.  Bold text mine.) 

In other words, she means net revenue. 

There could be quite a significant difference between the dollar amount that could go to the Drivers Fund if 10% were skimmed right off of the top of all ad revenue vs. what the Drivers Fund would get from only 10% of what’s left after installation and ongoing maintenance costs have been paid for.

So which one will it be?  It's important to make the distinction, particularly when taxi drivers who cannot attend all TAC meetings, are instead being educated and given the information at town hall meetings.  

At this point, I feel it necessary to say that this is not a personal attack, a conspiracy theory, or an accusation of malicious intent.

There is clearly a discrepancy in the manner in which the 10% of ad revenue to the Drivers Fund was presented as information, and I am simply making the observation.

For example, in Sonali Bose’s May 6^th, 2011 memo to the MTA Board of Directors, she tells the Board that the Drivers Fund would receive 10% of ad revenue from PIMs, also without distinguishing whether the percentage would come from gross or net revenue.  But her words may could easily imply a percentage from gross revenue. 

She wrote…

“Subsequent to the August 18, 2010 TAC meeting, in October 2010, communication was sent to taxi companies detailing the parameters of the Program, including the elements listed above, with one change: the TAC had identified that it was administratively unworkable to allocate advertising revenue to particular drivers because drivers use different vehicles every day and may drive shorter or longer shifts each time, so the Program was amended to require instead a ten percent contribution of advertising revenues generated by the PIMs to the Driver Fund.”  (Sonali Bose, May 6^th, 2011 memo:  “Credit Card Charges:  Follow Up on Taxi Issues Raised at the April 5, 2011 Board Meeting”.  Bold text mine.)

That this distinction was not clearly made either in Sonali Bose’s May 6^th memo, or by Hayashi at town hall meetings is, in my opinion, questionable and deserves clarifying.

I should not be laughed off, dismissed, or pegged as a conspiracy theorist for seeking clarification, since it is a valid inquiry.

It may also be worthy to note, I am on the TAC and do not recall that we as a council identified that it was, “administratively unworkable to allocate advertising revenue to particular drivers “. 

Without going and checking the actual audio of past TAC meetings, my recollection is that Taxi Services had informed the TAC during a meeting that a 50/50 split with the driver of the vehicle would be unworkable, (as was originally proposed in the draft version), and that a 90%-10% split had been arrived at after MTA had had talks with company managers.