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Sunday, June 6, 2010

King of the Toronto Cabs

King of the cabs This man dominates Toronto's taxi industry. He is Mitch Grossman.

IT HAS BEEN said that no one gets rich in the cab business. But that was before Mitch Grossman's family came along.

In his tailored suits and year-round tan, Grossman has the look of a Bay Street executive or the owner of a successful software company.

But he is neither. Grossman is the king of the Toronto taxi industry, heir to an empire that lifted his family from poverty to privilege in a single generation.

At 40, Grossman lives a life no cabby could dream of. He drives a black BMW 740 IL, list price $93,000. He lives in a newly bought North York luxury home. His last house, where he lived for years as Mayor Mel Lastman's next-door neighbour, was purchased without a mortgage.

Grossman has never driven a cab. And even though there are at least 62 taxis in his companies' names, he admits he doesn't actually own any of them - at least in the usual sense of the word.

Yet he has made millions from the cab business.

How?

Grossman's fortune is based on cab licences, the postcard-size pieces of metal attached to the trunk of every Toronto taxi. Although they cost pennies to make, cab licences are worth $90,000 apiece today.

They fetch that kind of price because they are money-makers. They are supposed to be a licence to own and operate a taxi. Instead, most have been turned into cash cows, yielding their holders $800 to $1,200 a month.

And no one has more plates than Grossman.

According to municipal and corporate records obtained by The Star, Grossman and other members of his family, including cousins, hold 94 cab plates. At today's prices, those plates would sell for $8.46 million and yield gross annual rents of more than $1.1 million.

Until recently, the family's collection was far larger - as high as 145 plates, according to municipal transfer records examined by The Star. Those records show that Grossman, his mother and sister have sold 51 plates since 1993.

For years, the list of plate holders has been confidential. And as The Star learned after getting the list, unravelling who owns what can be complex.

Grossman, for example, doesn't have a single plate listed in his name, yet municipal records as of May show he held at least 70 through five corporations: Robinhood Taxi Ltd., Lo-Jo Holdings Ltd., Mitch and Associates Taxi Ltd., Whitedoor Cab Ltd., and 373031 Ontario Ltd. (Grossman says the records are outdated and he owns only 62 plates.)

Twenty-four more plates are held by his mother, sister and a cousin, again through named and numbered corporations.

Grossman's power in the cab industry is magnified by his role as the city's single biggest "designated agent," representing at least 172 plates owned by other people.

Agents are middlemen who manage plates, allowing holders to collect rents without any involvement with the cabs that carry their names, or the drivers who operate them.

Grossman plays a much more active role in the business than most. As well as being Toronto's biggest plate holder, he is also the operator of a number of companies, including Royal Taxi, one of the largest dispatch services in the city.

Grossman's operation is on Sherbourne St., south of Queen. Outside his office is a constantly changing line of used cars available for sale. Many are used police cruisers, the vehicle that has become almost standard issue in the Toronto taxi fleet.

Used cars are just one component of Grossman's operation. He also owns a service station, a towing company (Hallam Garage), a lease operation (Tudor Leasing) and a finance company (Symposium Financial and Management Services).

Grossman's cab plates ensure a steady stream of customers. Without a plate, a cabby can't operate a car - and plates are the only essential ingredient in limited supply.

You can get a car, a radio or a meter anywhere. But if you need a plate, the options are few.

As the man who controls close to 10 per cent of the city's entire plate supply, Grossman wields considerable power.

As cabby Surinder Kumar puts it: "If you want to work, you have to play his game. You have no choice."

For Kumar, the plate game has been a losing proposition. He became a cabby after he lost his factory job when the company folded. Now, he finds himself trapped, forced to pay a huge percentage of his fares to lease a piece of tin riveted to the trunk of his car.

"The plate system is a rip-off," says Kumar. "You can't win . . . A cab driver doesn't have a life. I see my wife in the morning and that's it. I leave in the dark, I come home in the dark."

Grossman spoke recently to The Star. At his office, which is decorated with family photos, he described himself as an above-board businessman whose greatest pleasure is watching his three young sons play sports.

"We want our side of the story told," he says. "We take our industry seriously . . . My job is to make my drivers money. I hope my peers also recognize this as their job function."

Although he could probably live off his plates without working, Grossman says he goes to the office each day out of pride and because his father trained him to work.

"My father was a proud man," he says. "Nobody gave him anything. He taught me his values."

It's clear there is a lot of money to be made in Grossman's various operations. According to cabbies interviewed by The Star, getting one of Grossman's plates usually requires joining his dispatch service, at $400 a month.

Then there is financing. Cabby Mohammed Hoque showed The Star a sales agreement for a used taxi bought from one of Grossman's companies. The contract included interest charges that worked out to 28.3 per cent annually.

UNDER THE TABLE

Many drivers voiced complaints about their dealings with agents who handle leased plates. Many said they had to make under-the-table cash payments to get a plate.

Grossman refuses to comment on specifics of his dealings with individual drivers, but confirms the existence of under-the-table payments.

"I know it happens in the business, but I don't do it," he says. "It's wrong."

Asked if his company charges interest rates of 20 per cent and more, Grossman says he "couldn't believe it would be that high.

"It's hard for me to say whether it's true or false without knowing . . . the business etiquette involved."

Grossman says offering cars and financing to drivers is a service: "The average cab driver can't walk into a bank and get a loan for a car. That's why we have cars for sale . . . We're helping people get started." Although many believe rents paid to plate holders have damaged the Toronto cab fleet by discouraging investment, Grossman disagrees.

While he concedes the fleet is in poor condition, he says plate leasing isn't the cause. "Plate leasing is a mirage," he says. "It's got nothing to do with anything."

Grossman says the real problem is bad law-making and weak enforcement that allows old cars and unlicensed taxis to stay on the road.

"There are a lot of rogue drivers out there," he says.

Grossman says the way to get old cars off the road is to institute age restrictions for cabs.

Not everyone sees it the same way. Numerous studies have identified plate leasing as a fundamental economic problem. Many connected with the industry say the rents paid to plate holders make it impossible to pay for better cars.

Carol Ruddell-Foster, who heads the Toronto Licensing Commission, says it is "hypocritical" for plate holders to say the cab fleet could be fixed simply by instituting age restrictions for cabs.

"It's easy for them to to say, because they won't be the ones paying for it," she says. "The money they take out means nobody can afford better cars."

In the Toronto cab business, a plate is the equivalent of the Holy Grail. Drivers spend decades waiting for one. A plate can mean the difference between a comfortable life and servitude.

The licensing commission issues plates for $5,681. But there is a catch: It is almost impossible to get one that way.

The supply of available plates has been declining for years. Many are passed along by plate holders to their heirs - as in the case of Grossman and members of his family.

Few return their plates to the city. Instead, they are sold on the open market to the highest bidder. Increasingly, this has put plates in the hands of wealthy investors and multiple plate holders instead of working drivers, since few could afford $90,000 to buy one.

Nor are there any newly minted plates available.

Plate holders, including both working drivers and plate tycoons, have successfully lobbied against the issuing of any new ones, since that would reduce the value of their plates.

No new plates have been approved for issue since 1993. The wait for one is now estimated to be at least 20 years. Some drivers have died before their names came to the top of the list.

DRIVERS TRAPPED

As a result of this restricted supply, the rents charged by plate holders have soared, even though cab industry revenues have fallen, owing to the advent of fax machines and courier services.

Today, the average cost of renting a plate is $1,000 a month -an amount that can represent 30 to 50 per cent of a driver's revenue.

Many drivers told The Star they find themselves trapped in a cycle of declining revenues and increasing costs, forced to pay a large percentage of their earnings to private interests that have gained control of municipal licences.

"This plate is government property," says Kumar. "Why does one man get to have so many plates, while another man has to work his whole life for nothing?"

At the root of the mess is a heavily abused bit of legislation known as Bylaw 20-85.

The bylaw is supposed to ensure a person who gets a Toronto cab plate actually owns a cab and takes care of it. But, as The Star learned, countless Toronto "taxicab owners" are owners in name alone.

Here is how it works with many drivers:

To lease a plate, a cabby has to sign over the ownership of his car to the plate holder.

Transferring the ownership means the name on the car and the plate match, allowing the plate holders to claim it is a complete taxi, not just a plate, that they are offering for rent.

For drivers, this means they don't have title to the cars they pay for and maintain.

It also means many are forced to pay dramatically more for their insurance.

Since they don't legally own their cars, they have to pay "fleet" rates, which are far higher than the rate for owner-driven cars.

Cabby Mohammed Hoque, for example, had an insurance policy that cost him $825 a month (or $9,900 a year), yet carried a $10,000 deductible - and didn't cover him when his car was stolen.

In the Toronto cab industry, there is almost no one who hasn't heard of the Grossman family. For decades, their name has been synonymous with the business - and with cab plates.

Grossman's plate collection came from his father, Sam, who got into the cab business in the '40s and began collecting cab licences a short time later.

Grossman's father and his brother-in-law, Irving Oilgisser, assembled what is by all accounts the biggest collection of plates in Toronto history.

Although they weren't particularly valuable when Grossman and Oilgisser began collecting them, the plates later became far more valuable as the practice of leasing grew, allowing holders to use them as investments.

Mitch Grossman says his father "had a vision" of the potential in cab plates.

"My dad was a very intelligent man," he says. "He was always having visions.

"My father worked hard for everything he got. Nobody ever gave him anything for nothing."

HEIR TO FORTUNE

According to municipal records obtained by The Star, Grossman and Oilgisser held 145 plates:

Ninety-four were listed in the names of Grossman and Oilgisser family members or corporations they controlled as of May. Transfer records show that family members and corporations they controlled had sold 51 others.

Sam Rampersad, a plate owner and agent, puts it this way: "The Kennedys were in booze, the Grossmans were in plates. That's the way it is."

As heir to his father's fortune, Mitch Grossman was considered the cab industry's crown prince in waiting.

His mid-'80s wedding was the industry's power event of the decade, with no expense spared.

The wedding and the preceding stag clearly illustrated the extent of the family's influence.

On hand were hundreds of cabbies, plate owners, suppliers, mechanics - anyone who had reason to curry favour.

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