Audit Report on the New York City Taxi and Limousine Commission’s Oversight over Its Revenue Collection Practices
July 12, 2017 | FM17-082A
The Taxi and Limousine Commission (TLC) was created in 1971 by Local Law 12 to regulate and improve taxi and livery services in New York City. Its mission is to establish and enforce professional and uniform standards applicable to “for-hire” transportation service and ensure public safety. Pursuant to Chapter 65, §2303, of the City Charter, TLC is authorized to license and regulate the medallion taxicabs, street hail liveries (SHLs) (commonly known as “green cabs”), and other transportation service providers. TLC also performs safety and emissions inspections of TLC-licensed vehicles, issues summonses for TLC-related violations, and oversees the sale and transfer of medallions and SHL permits.
TLC is governed by a board of nine commissioners appointed by the Mayor, one of whom is appointed as the Chair. The Chair presides over regularly scheduled public meetings and functions as the head of TLC. The administration of TLC’s revenue is governed by Comptroller’s Directives that prescribe methods for revenue-collection and recording for City agencies.
TLC’s main revenue categories include fees paid in connection with licensing and inspections, fines, and medallion sales. For Fiscal Years 2015 and 2016, TLC reported total revenue of $95 million and $85 million, respectively. Further, TLC administers the collection of other revenue related to its Taxicab Improvement Fund (TIF) and the medallion transfer tax. TIF revenue, which is collected through a $0.30 per ride fare surcharge, is used to subsidize the cost of increasing the number of wheelchair-accessible TLC-licensed vehicles. In addition, TLC, on behalf of the New York City Department of Finance (DOF), collects a tax that is levied on all medallion transfers.
We conducted this audit to determine whether TLC has adequate internal controls to ensure that revenues are properly collected, recorded, and reconciled and that related transactions are supported by adequate documentation.
Audit Findings and Conclusion
Our audit determined that TLC has adequate controls over the core components of its revenue collection, recording, and reconciliation processes. However, we also found control weaknesses in certain aspects of TLC’s operations that have fiscal implications for the City. Specifically, we found that TLC relaxed its rules for assessing medallion transfer taxes, which resulted in under-assessments of an undetermined amount. Based on our review of 100 transfers out of 232 that occurred during our audit scope period, we identified 8 transfers that were assessed for lower amounts than required by applicable rules, which resulted in the total amount of the assessments being $29,225 less than it should have been. In addition, delays and missed opportunities in TLC’s enforcement of TIF requirements contributed to an uncollected balance, as of May 2017, of $5.7 million, or 8 percent, of the $72.7 million of TIF surcharges paid by passengers throughout the two preceding fiscal years. Finally, we found TLC erroneously classified approximately $1 million of revenue derived from fines it collected following proceedings at the City’s Office of Administrative Trials and Hearings (OATH).
To address these issues, we make a total of four recommendations, specifically, that TLC should:
- Ensure that its internal policies and procedures for the assessment and collection of the medallion transfer tax are consistently applied in compliance with applicable law, including applicable TLC rules. If rule changes are warranted, follow the procedures prescribed by applicable law for effecting such changes.
- Enforce licensees’ obligations to remit, on time and in full, all TIF surcharges, promptly commence enforcement proceedings against delinquent licensees, and take all necessary, lawful actions to collect the sums owed.
- Ensure that staff responsible for approving and recommending approval of medallion and SHL permit transfers require all prospective transferors to clear unpaid TIF balances before processing of any such transfer.
- Implement sufficient controls to ensure accurate classification and reporting of fines collected as a result of OATH proceedings and review the sufficiency of related accounting procedures and controls.
In its written response, TLC summarized its efforts and progress to date in relation to the collection of revenue generally, and referred to certain actions it planned to take to address issues identified in the audit. Although TLC responded to each audit recommendation, in most instances it neither expressly agreed nor disagreed with those recommendations. Preliminarily, in response to the recommendation that it ensure it consistently applies its rules related to the imposition of the medallion transfer tax, TLC contends that it can restore consistency between its rules and its internal policies without actually changing its published rules. With regard to the additional recommendations, TLC does not clearly state whether it will promptly commence enforcement proceedings to collect delinquent TIF surcharges as recommended. Similarly, TLC does not make clear whether it will instruct its staff to require clearance of all outstanding TIF charges before approving or recommending approval of the proposed transfer of a medallion or permit, which is also recommended.
 TLC’s authority is set forth in City Charter Chapter 65. Rules applicable to TLC are found in Title 35 of the Rules of the City of New York (RCNY), Chapters 51−84
 Medallions are aluminum plates affixed to the hood of taxicabs to represent physical evidence of a taxicab license. The medallion system was established in 1937 through the Haas Act, which was passed to limit the number of taxicabs and regulate the industry.
 The TIF initiative commenced on January 1, 2015, to generate revenue to be used to increase the number of wheelchair-accessible TLC-licensed vehicles on the road.
 SHL permittees are also required to collect and pay surcharges similar to TIF surcharges that are called Street Hail Livery Improvement Fund, or SHLIF, surcharges. Where this report refers to TIF surcharges that term also refers to SHLIF surcharges, unless otherwise indicated.
 On March 21, 2017, Local Law 58 changed the medallion transfer tax from 5 percent to 0.5 percent. The law is codified at New York City Administrative Code §11-402(a). During the audit scope period, if a medallion was sold for less than fair market value as determined by TLC, the 5 percent tax was assessed on fair market value rather than the sale price, unless the parties to the sale obtained a waiver from DOF. RCNY, Title 35, §58-45(g)(2).
 OATH is an independent administrative law court created to conduct hearings on matters pertaining to City agencies’ licensing, regulatory, and enforcement authority.