first published in BeyondChron.org, February 14, 2007

THE MAKING OF A DEBIT CARD MONOPOLY by Matt Gonzalez

SAN FRANCISCO’S TAXI PARATRANSIT program has long been a blessing for our disabled citizens. Since 1979—more than a decade before the federal ADA law of 1991—our city government has provided subsidized transportation for frail seniors, wheelchair users, dialysis patients and others with serious disabilities. Its innovative use of taxicabs for paratransit has been emulated nationwide.

The program works by utilizing taxis to transport the program’s participants. Users receive discounted coupons known as taxi scrip to pay for these trips. Taxi drivers can then redeem those coupons for cash.

As one might imagine, the use of paper coupons for payment has been a serious flaw in the program, leading to high administrative overhead and fraud by a small but significant minority of users and drivers.

So when MUNI, which runs the program, captured federal funds to replace paper coupons with an electronic payment system – i.e. debit cards – the concept was well received. MUNI sought contractors to design and deploy a city-wide taxi paratransit debit card system. The taxi community, in virtual unanimity, endorsed a local contractor – GPS Data Solutions – who had partnered with two experienced and reputable firms that promised stakeholder participation and involvement throughout the project’s duration.

What was attractive about their proposal was the ability for taxi-operators to choose equipment best suited for their businesses, and that the equipment was able to accept payment not just from debit cards but also credit cards and TransLink “smart cards”—the same pre-paid cards already used by BART and AC Transit.

As expected the contractor was awarded the project, but what followed is an example of how even well intentioned and strongly supported plans can be open to corruption and self-dealing.

GPS Data Solutions, after promising quality and choice, took a different path. Those partners who helped design and win approval were replaced by a Canadian equipment manufacturer – Digital Dispatch Systems, Inc. – who, in return for $300,000 in compensation and bonding responsibilities, would get an exclusive right to sell its proprietary equipment to the project and assume control. (Pricing sheets showed they expected to receive up to two million dollars in profit on the three million dollar project.) The commitment to TransLink capability was scrapped, as was the choice in equipment promised to taxi-operators.

Meanwhile, in partnership with a well connected City Hall insider and Newsom fundraiser – John Lazar, President of Luxor Cab Company – the reconfigured GPS Data Solutions created a second business called GPS Dispatch that planned to use, with MUNI’s approval, the debit card project’s equipment to sell computer dispatch services to its competitors—in effect, creating a MUNI-sanctioned monopoly in taxi dispatching.

By allowing GPS Data Solutions to use the city-owned and mandated equipment deliberately chosen by them to benefit its other private business enterprise – GPS Dispatch – MUNI would be complicit in creating a unique and unfair advantage for its contractor. (GPS Data Solutions’ business office is even located on Luxor Cab’s property and its owner, Ed Burke, currently works for the taxi company.)

In response to the contractor’s actions, all notable taxi-interest groups including the San Francisco Taxi Association, the Medallion Holders Association, and the United Taxicab Workers withdrew their endorsement and a formal complaint was submitted to the US Department of Transportation’s Office of Inspector General, which has since opened an investigation.

So why is the city still pushing this discredited plan?

One obvious reason could be the pressure to complete a long-delayed project more than ten years in development and six years behind schedule. A second is simply the difficulty of a large bureaucratic agency like MUNI, with layers of management, to acknowledge and rectify its own mishandling of the project.

But a more disturbing possibility is the use of political pressure to reward someone with strong financial ties to the Mayor. It turns out that Luxor Cab’s President, John Lazar, raised considerable monies (tens of thousands of dollars) for Newsom’s 2003 mayoral campaign and is expected to do so again in the coming year.

The Mayor’s connection and involvement in this matter highlights not only his use of influence to benefit his donors but also his misuse of executive power to influence policy decisions made by what is supposed to be independent commission—in this case the taxi commission. This was exemplified this past year by his removal and replacement of taxi commissioners after dangling their reappointments for months. The press seemed unaware that one of Newsom’s so-called reform commissioners is actually employed by Luxor Cab and is John Lazar’s cousin.

Mayor Newsom has portrayed himself and his administration as battling to reform a wayward and backward taxi industry for the benefit of the public. Not acknowledged, however, is his own culpability in maintaining the status quo and stalling progress for the benefit of his taxi industry sponsors—while completely failing to address the fundamental and chronic problems plaguing San Francisco’s flawed taxi system such as medallion issuance and driver disability.

Real progress for the paratransit program would be expanding the use of debit cards immediately. Astonishingly, a successful debit card pilot program has already been underway for several years at Yellow Cab, the city’s largest taxi-operator, and the two largest San Francisco taxi companies, which service 80% of all paratransit calls, have had the capability to process debit cards using their existing credit card devices for even longer.

This low-cost and obvious action, which should have been done years ago, would get debit cards in the hands of the majority of paratransit users, start to mitigate fraud, and weed out most of the paper coupons while a proper plan is vetted to equip the taxi-operators that service the remaining 20% of paratransit calls.

Faced with a revolt by major players in the industry, Newsom has done what he has often done when in a bind – he has called upon former Mayor Willie Brown to lead negotiations or in this case, recommend a plan. Unfortunately insiders fear Brown has simply been called in to bolster the already discredited GPS Data Solution plan.

If this expected outcome is where things are headed, you can expect a fight and further revelations that Newsom isn’t showing the necessary leadership to manage city concerns. A rare unified taxi industry will likely take their battle into the courts.