CITY OF ANAHEIM
ANAHEIM TAXICAB FRANCHISE
STUDY – Final Report
April 2022
Nelson\Nygaard Consulting Associates
San Francisco, California
Table of Contents
Page
Introduction ........................................................................................................................................................... 1 Taxicab Regulation in Anaheim ........................................................................................................................ 1 Taxicab Service in Anaheim .............................................................................................................................. 5 Activity Center Perspectives ............................................................................................................................ 10 Taxi Regulation in Other Cities....................................................................................................................... 11 Legal Considerations ........................................................................................................................................ 14 Recommendations .............................................................................................................................................. 17
Table of Figures
Page
Figure 1 Taxi Companies in Anaheim ................................................................................................... 5 Figure 2 California Yellow Cab Dispatched Trips .............................................................................. 7 Figure 3 24/7 Taxi Dispatched Trips ................................................................................................... 9
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INTRODUCTION
The City of Anaheim has requested a review of its taxi regulatory process to help respond to changes in law and market conditions. Currently two companies are authorized to provide taxi service in Anaheim under franchises that were awarded through a competitive process. The City faces a decision about what to do after these franchises expire at the end of June 2022. The following report reviews the current regulatory process, changes in market conditions that have occurred in recent years, changes in State law that affect the options available to the City, and current operations of the existing companies. The report provides points of view from staff at major traffic generators where the public may be served by taxis and from managers of the two taxi companies. Information is provided about the status of taxi regulation in other cities of interest. Finally, recommendations are given for consideration by the City.
A previous analysis for the City, on the occasion of selecting franchises in 2012, provided an analysis of whether the number of taxicabs in the city was appropriate or should be expanded or reduced. Changes in State law now greatly limit the City’s ability to limit taxicab numbers, while the rise of Transportation Network Companies (Uber and Lyft) has nearly eliminated the value of any such limits. Further, market conditions are currently in a state of flux due to the continuing COVID-19 pandemic. For these reasons, only the briefest assessment of taxi supply is provided in this report.
TAXICAB REGULATION IN ANAHEIM
Until January 2021, taxicabs in Anaheim were subject to regulation by both the City of Anaheim and the Orange County Taxi Administration Program (OCTAP). Anaheim and all other Orange County cities participated in OCTAP. OCTAP issued permits for taxicab companies, drivers, and vehicles and required each of them to meet standards set out in the agency’s regulations. As part of this process, OCTAP inspected taxicab vehicles and ensured that drivers had drug tests and background checks. OCTAP also set taxi fares for the entire county.
However, OCTAP did not set any limits on the number of taxicab companies or vehicles.
The largest companies all operated countywide. Anaheim, as a destination city, needed to limit the number of taxicabs as well as set service quality standards. As part of controlling taxi numbers, the City took on the task of inspecting and issuing permits for taxicabs to be able to pick up in Anaheim.
The following sections review the recent history of Anaheim’s approach to taxi regulation, and key events that are important for deciding what changes to the City’s process may be needed.
History of Anaheim’s Taxi Regulations and Franchising Process Anaheim has for many years placed limits on the companies and the number of cabs that can operate in the city. Prior to 2002, Anaheim regulated taxicabs on the basis of “public Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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convenience and necessity.” The City Council would grant a license to any company that could make a showing that adding to the existing licensed companies and vehicles would serve public convenience and necessity. Once such a license is granted, it is generally assumed to be valid indefinitely. Applications for a taxi license could be made at any time. These provisions were contained in Section 4.72 of the Anaheim Municipal Code, which was amended in 2001 to make it consistent with the planned franchise system.
In 2002, the City adopted the current system of limited-term, non-exclusive franchises as detailed in Section 4.73 of the Anaheim Municipal Code. Under this system, the City issues a Request for Proposals and selects taxi companies that will be granted a franchise to operate taxicabs service in Anaheim for a specific term specified in the RFP. The franchises are non-exclusive in the sense that multiple companies may be awarded franchises, but only companies with a franchise are allowed to operate taxi service in the city.
The Anaheim franchises include some restrictions and requirements beyond the basic OCTAP requirements, including:
Limitations on the number taxicabs and the specific companies that can operate A response time standard (90% picked up within 20 minutes of a request for service)
A limit on the age of vehicles to five years
A requirement for two wheelchair accessible cabs per franchisee Detailed requirements for a computerized dispatch system with vehicle tracking Requirements for quarterly reporting to the City
Prohibition on exterior advertising on vehicles
Encouragement of “clean and alternative fuel” vehicles Franchises also give the City flexibility in setting fees, more than with other types of fees, so that the cost of enforcement can be at least partially defrayed. A franchise fee is a payment for the right to operate service rather than a payment for issuance of a permit.
In principle, franchises offer an orderly competition among existing and prospective companies at the time of reauthorization of the franchises, but not continually in applications to the City Council for new or expanded services as was the case in the past.
Limited-term franchises establish a monitoring process to ensure that franchisees meet the standards submitted in their bids, and give the City recourse if franchisees fail to meet their obligations.
In practice the franchise process has at times been contentious. There have been protests about the evaluation and award process, lengthy rehearings before Council, and multiple lawsuits. In 2012 the City conducted an RFP process that resulted in franchises being awarded to three companies, Yellow Cab of Greater Orange County (155 cabs), A Taxi Cab (50 cabs), and California Yellow Cab (50 cabs). A fourth company, 24/7 Taxi was not awarded a franchise and subsequently sued the City alleging irregularities in the process.
As a result of 24/7 Taxi’s lawsuit, the City was required to repeat the proposal evaluation Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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process and public hearing in 2016, by which time A Taxi had gone out of business. This process resulted in A Taxi’s 50 permits being divided equally between Yellow Cab of Greater Orange County and California Yellow Cab. Again, no franchise was awarded to 24/7 Taxi.
Further legal action by 24/7 Taxi resulted in a new RFP being issued in June 2020 to determine how to divide 205 permits, the 50 former A Taxi Cab permits as well as the 155 permits of Yellow Cab of Greater Orange County, which by this time had also gone out of business. California Yellow Cab was awarded 155 permits (on top of its existing 50) and 24/7 Taxi was awarded 50. Again 24/7 Taxi sued, maintaining they should have been awarded all of the 100 permits they requested. This case is still pending.
Changes in the Regulatory and Market Environments
The past ten years have been turbulent one’s for the taxi industry. Significant events have included:
The rise of Transportation Network Companies (TNCs): Uber and Lyft, which began operations 2011 and 2012 respectively, have come to dominate the market for on- demand transportation and greatly reduced the market for taxi services. Legislation passed in 2014 confirmed that regulation of these companies’ services is the responsibility of the California Public Utilities Commission, as laid out the Public Utilities Code, Sections 5430 – 5450, and is beyond the City’s regulatory reach.
Changes in State law: AB 939 of 2018,which took effect on January 1, 2019, fundamentally changed the ways in which cities are allowed to regulate taxi services, with the intent of making taxi service more competitive with TNCs. The law is codified as PUC Secs. 53075.5 – 53075.9. Key features of the new law include:
The new law is more detailed than prior state law regarding driver and vehicle permitting by local jurisdictions.
Company permitting is limited to cities where a taxi company is “substantially located,” meaning it either has its primary business address there or picks up most of its trips there.
The law allows considerable flexibility in how companies can set and advise customers about rates.
City-imposed limits on numbers of companies or cabs can apply only to use of taxi stand areas and street hails.
AB 5 of 2020 (California Labor Code Sec. 2775) codified an earlier court decision (known as Dynamex) that established a three-part test for whether a worker is an employee or an independent contractor. This law potentially altered the ability of taxi companies to maintain their long-time business model under which taxi drivers are treated as independent contractors.
More detail on these laws is provided later in the report.
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The COVID-19 pandemic: The closure of Disneyland, cancellation or postponement of conventions, and overall downtown of tourist and other travel beginning in March 2020 radically limited the market for taxi services. Disneyland reopened in April 2021 and major conventions are scheduled in coming months. Based on airport arrival data and hotel taxi receipts, visitor travel to the area is nearly back to pre-pandemic levels.
However, it is possible that health concerns could still be having some effect on the demand for taxicab service.
The disbanding of the Orange County Taxi Administration Program (OCTAP): OCTAP ceased operation effective January 1, 2021. Anaheim and all other Orange County cities participated in OCTAP. OCTAP issued permits for taxicab companies, drivers, and vehicles and required each of them to meet standards set out in the agency’s regulations. Without OCTAP, Anaheim is now fully responsible for all aspects of taxi regulation. Since January 2021, Anaheim has been the only city in Orange County with an active taxi regulation program. On January 18, Huntington Beach adopted a new taxi regulatory program, and other cities may soon follow suit.
Although OCTAP no longer exists, the most recent version of the OCTAP regulations, issued in December 2019, continues to be observed. This final version of the OCTAP regulations included provisions that conform to AB 939 and create more flexibility to compete with TNCs. Notable items include:
Taxicab vehicles are not required to have permanent markings or adhere to a company-specific color scheme. Instead, “Permittee’s Company name and/or logo shall be placed in an area visible from the interior and exterior of the vehicle at all times while in service and when soliciting passengers on behalf of Permittee.” This provision allows a driver to use their own vehicle without needing to have it repainted or permanently altered in any way, which is more like driving for a TNC.
Use of taximeters and adherence to the OCTAP-approved fare structure is required only for “on-demand (flagged) trips.” This allows a customer who orders a trip by telephone, internet, or smartphone app to be quoted a firm flat rate based on estimated driving distance and time.
Flexibility is allowed in how customers are informed about fares: “Permittee shall disclose fares, fees, or rates to the customer, and may satisfy this by disclosing fares, fees, or rates on its Internet Web site, mobile telephone application, or telephone orders upon request.”
This last item is taken directly from the language of AB 939 (PUC Sec. 53075.5(b)(2)(C)).
In what appears to be an oversight, the regulations have no provision corresponding to language in AB 939 about notifying passenger about rates for flagged trips in particular:
The taxicab company shall notify the passenger of the applicable rate prior to the passenger accepting the ride for walkup rides and street hails. The rate may be provided on the exterior of the vehicle, within an application of a mobile Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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telephone, device, or other Internet-connected device, or be clearly visible in either print or electronic form inside the taxicab. (PUC Sec. 53075.5(b)(2)(D))
TAXICAB SERVICE IN ANAHEIM
There are currently two companies that are authorized to operate in Anaheim: CabCo Inc., which does business as California Yellow Cab; and American Ground Transportation, Inc., which does business as 24/7 Taxi Cab. Their current franchise authorizations and permitted vehicles are shown in Figure 1.
Figure 1 Taxi Companies in Anaheim
Company
Number of Taxicabs
Base Authorization Actual Vehicles
with Current
Permits*
CabCo, Inc., dba California Yellow Cab 205 167
American Ground Transportation, dba 24/7 Taxi
Cab
50 18
*As of November 2021
The terms of the franchises require each company to have permitted cabs equal to at least 85% of its base authorization and to obtain permits for up to 115% of its base authorization. As a result, the total base authorization of 255 cabs can result in up to 294 permitted cabs. Additional, temporary permits are available for special events. In practice, given current economic conditions and the impact of the COVID-19 pandemic, the requirement for use of permits is not being enforced, and there has been no need for additional authorizations.
The actual number of cabs in operation is generally less than the number of cabs with permits. On any given day, some cabs may not be operating because of driver schedules, maintenance, or lack of demand. Further many of the cabs that have been permitted by Anaheim may spend much of their time in other parts of Orange County. Until recently, Anaheim appears to have been the only city in the county currently issuing taxi permits, so there has been no other place for companies to bring their cabs for permitting, regardless of where they will be operating.
Additional detail about the operations of the two companies is provided below.
California Yellow Cab
California Yellow Cab has been operating in Anaheim since 2002. The company has offices and facilities in Santa Ana.
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At the time the current franchises were awarded, California Yellow Cab was the third largest taxi company in Orange County. As of August 2011, the company had 199 OCTAP permitted cabs and 280 OCTAP permitted drivers. The company had 58 authorized Anaheim cabs (24% of the total fleet), of which about 48 were actually working.
In May 2020, the largest taxi company in the county and in Anaheim, Yellow Cab of Greater Orange County (YCGOC), ceased operations. California Yellow Cab was able to take over a portion of YCGOC’s business, employees, and drivers. As noted earlier, California Yellow Cab was then awarded 155 permits that were freed up by YCGOC’s demise. With YCGOC’s exit from business, California Yellow Cab became the exclusive operator serving John Wayne Airport.
Sources of taxi business include, not just walk-ups and phone orders, but also a significant amount contract work such as medical trips through CalOptima and others, senior mobility trips sponsored by many cities, some school transportation, a portion of paratransit trips on the Orange County Transportation Authority’s (OCTA’s) OC ACCESS paratransit program, and “Same Day Taxi” trips sponsored by OCTA. According to California Yellow Cab’s management, due to declines in hotel, bar, business travel, and other traditional sources of business, these contract trips accounted for about 70% of their business by early 2020, just prior to pandemic restrictions. By comparison, as of August 2011, the company’s management estimated that walk-ups comprised 40% to 50% of its business.
Business contracted during the period of pandemic restrictions, but has recovered significantly in recent months. However, the mix of trips is still significantly different than at the start of the current franchise period. Notably, company management estimates that about half of all trips are arranged through the RideYellow smartphone app. This app allows customers to book and pay for trips throughout Southern California. One driver, who concentrates on Anaheim and the airport, estimated the portion of trips arranged through the app as even greater. Company management reports that customers appreciate that the app provides an upfront, firm price quote at the start of a taxi trip, which eliminates any anxiety from watching the meter and concerns about whether a driver might be deliberately taking a long route to inflate the final meter reading.
As business recovers post-pandemic, California Yellow Cab has been recruiting drivers.
The company reports having added 40 to 50 drivers in recent months. Multiple factors appear to contribute to their ability to recruit drivers, including recent price increases by TNCs and relaxed requirements about marking of cabs, which makes it more attractive for a driver to use their own vehicle. The availability of app-based taxi business, which is similar to the TNC model, may also be a contributing factor.*
* Recruiting and retaining drivers is critical to maintaining a viable taxi business for multiple reasons. Of course trips cannot be served without drivers. But just as important from a financial perspective, is that taxi companies do not derive their revenue from fares paid by customers, but rather from the fees that they charge drivers for dispatch service (including access to an app), for leasing vehicles, and association with the company’s brand.
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The RideYellow app also makes it possible to observe some aspects of taxi operations.
The app shows what cabs are currently available within a given sub-area of Orange County. Within the Anaheim Resort Area and environs, the app typically shows ten or so taxis available for rides at any one time on a weekday. The only location where there are typically multiple taxis staging for rides is Disney’s Grand Californian Hotel on Disneyland Drive. Individual cabs also often wait at the Harbor Boulevard entrance to Disneyland, the guest drop off area for Downtown Disney, and the Marriott Hotel. This pattern, shown in the app, was also confirmed by in-person observation. There could be significantly more than ten cabs operating, including cabs current engaged carrying passengers. The same app also shows numerous cabs available in other parts of Orange County.
California Yellow Cab provided data about trip volumes and response times for dispatched trips picked up in Anaheim for the period from January 2020 through November 2021, as shown in Figure 2. At the beginning of this period, the company had permits for just 50 Anaheim cabs and pandemic restrictions had not yet been imposed.
In late March pandemic restrictions took effect, resulting in a sharp drop in business.
Pandemic restrictions were eased at the end of May 2020. YCGOC ceased operations effective May 30, 2020, after which many of YCGOC’s drivers and vehicles transitioned to California Yellow Cab. By July the company’s volume of Anaheim trips expanded nearly three-fold.
Figure 2 California Yellow Cab Dispatched Trips
For the rest of 2020 and into early 2021, the company’s cabs picked up around 4,000 trips per day, with about 85% on-time performance, a little below the franchise standard
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of 90%. In March, with further relaxation of Covid restrictions, dispatched trip volume grew to around 5,000 per month. Reopening of tourist attractions, bars, and restaurants most likely also produced a significant increase in flagged trips, which do not appear in these statistics. The added trips appear to have strained the company’s ability to respond in a timely way. The number of on-time trips remained roughly constant, so on-time performance fell to around 70%.
Unlike flagged trips, which are concentrated in the Resort Area, California Yellow Cab’s dispatched trips are spread relatively evenly across the Resort Area, Central, and West Anaheim, with a smaller share from East Anaheim. There was a significant change beginning in June 2021, as trips from the Resort Area, which had been depressed, nearly doubled over a period of several months.
The on-time performance numbers in Figure 2 could be taken to suggest that there is some room to expand the supply of taxicabs. However, it is not clear if any added supply is actually needed in Anaheim or in other parts of Orange County.
Regarding the future of taxi regulation in Anaheim, California Yellow Cab’s management supports continuation of the franchise system. They suggested extending the current franchises, following the example of John Wayne Airport, at least until conditions have stabilized.
24/7 Taxi Cab
24/7 Taxi Cab operates from a facility in Orange but has applied to have its company business license located in Anaheim. According to company management, 24/7 Taxi Cab operates 28 vehicles total, of which 19 have Anaheim permits. Prior to the franchise award, the vast majority of 24/7 Taxi Cab’s fleet operated under a license from the California Public Utilities Commission (CPUC), which allows them to perform non- emergency medical transportation and similar pre-arranged, contracted trips throughout Orange County, including in Anaheim.
Legally, 24/7 is comprised of a joint venture of two companies. American Ground Transportation LLC is owned by the drivers, while American Ground Transportation, Inc. provides management services. This arrangement is intended to ensure compliance with the provisions of AB 5 regarding the status of workers as independent contractors. 24/7 Taxi Cab began service in Anaheim after it was awarded a franchise for 50 cabs in October 2020. Only two drivers have obtained licenses though Anaheim. Two drivers operating in Anaheim would be consistent with the company’s reported trip levels, which were 1,023 in October – December 2021, about 11 trips per day on average. This level has been approximately constant since April 2021. Prior to that, in the six months immediately following the franchise award, which was during the period of pandemic restrictions, the company provided very few trips originating in Anaheim, as shown in Figure 3.
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Figure 3 24/7 Taxi Dispatched Trips
The company provided a breakdown of the data in Figure 3 by Zip Code showing that very few dispatched trips are picked up in the Resort Area. Most trips originate in West Anaheim, Northwest Anaheim, and Downtown. The company also provided average response time data: 13 minutes for April – June 2021, 11 minutes for July – September 2021, and 10 minutes for October – December 2021.
As of late 2021, most of 24/7’s business was still medical transportation, especially through CalOptima, and some phone orders. Company management reported that they are having great difficulty recruit drivers, which limits their ability to serve medical trips.
In the Resort Area, they do not have access to stage at some areas controlled by Disney, such as the Grand Californian Hotel. However, Disney does allow 24/7 to respond to calls, and some 24/7 taxis were observed picking up at the Harbor Boulevard entrance to Disneyland.
Regarding the future of taxi regulation in Anaheim, 24/7’s management would like to see a more flexible system than the current franchises, possibly with a limit in the Resort Area. In particular they see no need for another RFP, since there are no other companies.
The maximum allowed vehicle age should be extended from five to ten years (which was the limit previously set by OCTAP).
Accessible Vehicles
Federal and State law prohibit discrimination against people with disabilities in providing taxi service. Taxis may not charge a higher fare or deny service to a person with a disability, including people with service animals. AB 939 requires taxi companies to maintain education programs to instruct their drivers on these requirements. There is no requirement in Federal or State law for taxi companies to provide wheelchair accessible service, but Anaheim’s taxi franchises require each company to operate at least two wheelchair accessible vehicles.
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California Yellow Cab has the following statement on its website:
“Wheelchair accessible vehicles are available at no extra charge. However, due to the limited number of wheelchair accessible vehicles that we have in our fleet, reservations should be made at least 24 hours in advance.
Given the high demand for these vehicles, it can be challenging at times to get one reserved, so we really appreciate your patience.” 24/7 Taxi Cab provided a vehicle inventory showing two ADA compliant cabs.
ACTIVITY CENTER PERSPECTIVES
Representatives of major activity centers where taxi services may be of concern were contacted. Potential issues at locations like this, at least at times in the past, have included either insufficient cabs to meet demand or excessive numbers of cabs competing for walk-up business. Representatives were contacted from Disneyland Resort, the Anaheim Convention Center, the Hilton and Marriott Hotels, Garden Walk, Angels Stadium the Honda Center, the Anaheim Regional Transportation Intermodal Center (ARTIC), and the Packing House. Five responded, and their perspectives are summarized here:
Disneyland Resort
Disney has an agreement with California Yellow Cab that gives them exclusive access for staging at the Grand Californian Hotel, which is the only location on the Disney properties where taxis are allowed to wait for walk-up passengers.
Disney’s transportation and parking manger has a good relationship with the company and has very few complaints about service. In the past, when multiple companies provided service, there were problems due to drivers competing for fares.
Other taxi companies and TNCs can and do drop off or respond to calls, but are supposed to do so only at designated locations. TNC drivers and customers are directed to these locations in the app, and experienced taxi drivers have learned to use them as well. Disney staff provide training to new drivers about traffic patterns in the Resort.
Although demand for taxis is much less than in the past, many guests like the convenience of being able to walk up to a waiting cab. They also appreciate the clearly stated flat rates to locations within the Resort Area and mileage rates beyond that.
Disney also uses California Yellow Cab to provide transportation for employees who need an unplanned ride home, for example due to illness, or (prior to the pandemic) if they missed their vanpool ride home.
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ARTIC:
Overall traffic is very light. One or two taxis wait there sometimes, but don’t seem to get any business.
Anaheim Convention Center:
Their main concern is TNCs. They don’t see many taxis at the convention center itself. Taxis mainly serve the Hilton and Marriott, and wait at the curb in front of Morton’s Steak House.
Hilton Hotel (interviewed parking and valet managers):
They don’t see many taxis anymore. The valet manager estimated around five per day. Mostly they see people waiting for Uber or Lyft, for whom they have a designated locations.
Honda Center:
Staff at the Honda Center do not see any taxis picking up at the Honda Center.
There is no marked area for taxis or TNCs, but customers requesting a TNC are directed within the app to the southwest area of the Honda Center parking. Some patrons walk south to Katella or to ARTIC to catch TNCs.
In summary, the supply of taxicabs at these locations is not currently an issue at all.
There is no apparent demand for more cabs, and few cabs attempt to pick up at locations other than Disneyland. While activity at some locations, such as ARTIC, still appears to be reduced as a result of the COVID-19 pandemic, activity at others, such as the Honda Center, is at or near pre-pandemic levels. (These interviews were conducted prior to the recent Omicron wave.)
TAXI REGULATION IN OTHER CITIES
Taxicab operations in cities throughout the United States have been affected by similar changes in market conditions as in Anaheim. Within California, all cities are subject to the same changes in State law. How these cities have responded may provide useful ideas for Anaheim. Information was gathered from a sampling of other cities, include several that currently or previously had franchise systems similar to Anaheim.
Huntington Beach
Like other cities in Orange County, Huntington Beach formerly relied on OCTAP for most aspects of taxi regulation. Recently, the City was contacted by two companies that wanted to become licensed taxi operators in the city. In response, staff prepared a new ordinance and associated administrative rules. According to the staff report to City Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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Council, “The Taxicab Program establishes minimum safety and service standards for the provision of taxicab services in the City of Huntington Beach. Staff developed regulations to define minimum taxicab company, taxicab vehicle, and taxicab driver permitting requirements. The regulations were developed using OCTAP’s regulations as a base template with modifications for the City of Huntington Beach’s needs and operations.” There are no limits on numbers of companies or vehicles. The new program was approved by the City Council on January 18, 2022.
Los Angeles
Los Angeles is replacing the franchise system it has had for many years with an open- entry system. Under the franchise system, companies were selected in a competitive process, but the same nine companies held franchises for decades. Each company was assigned a specific number of allowed permits and a primary service area where it was allowed to provide non-dispatched service (i.e. street hails and trips at taxi zones).
Companies were required to report extensive data on trips and response time. Current franchises expire in February.
Under the planned system, any company can provide taxi service if it meets certain requirements. Taxi companies must operate at least 100 vehicles, except for one grandfathered existing company. E-hail/ apps must comply with a Mobility Data Specification (MDS) that the City has adopted and provide accessible Application Programing Interfaces (APIs) that meet the requirements of the MDS. This will let the City track vehicles and trips. Rates will not be regulated, but customers must be given an up-front price. Color schemes no longer required. Cars can have factory paint, but with required signage and decals. All vehicles must be zero emission, plug-in hybrids, or gasoline-electric hybrids, except for wheelchair-accessible vehicles which must comprise at least 2% of each fleet.
Salt Lake City
In 2014 Salt Lake City adopted an ordinance requiring “contracts” awarded through a competitive process to operate taxi service. Contracts were awarded at one point, but following legal challenges have never been operational. A separate ordinance section on ground transportation is the only one currently in use. “Taxicab” is not recognized as a category distinct from other for-hire ground transportation.
The current system is open-entry, subject only to basic vehicle inspection, background checks, payment of fees, and compliance with rules on driver appearance and behavior.
There are no limits on size of company, total number of taxis, or fares (except for flat rates from the airport). There are no requirements for dispatching or meters.
Santa Monica
Santa Monica established a taxi franchise system in 2009 in response to an extreme oversupply of taxicabs competing for on-street business, and in order to establish environmental standards for taxicabs. In November 2018, the City modified its taxi Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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ordinance in response to the changes in State law. The franchise system is still in place but has been modified so it only applies to use of taxi stands.
At the time of the ordinance changes, there were four franchised taxi operators. The staff report for the Council meeting that modified the taxi ordinance noted that Taxi, Taxi! was the only company that met the definition of “substantially located” in Santa Monica under the new law. Taxi, Taxi! was only company allowed to continue as a franchised taxi operator. Under the new taxi regulations, Santa Monica no longer has a competitive bidding process and will only grant a franchise to a taxicab company that is substantially located in the city and meets requirements consistent with State law.
Per State law, taxi companies licensed anywhere in Los Angeles County may pick up pre- arranged trips, but only taxi companies holding a City of Santa Monica franchise may pick up at taxi stands. Two of the prior Los Angeles-based franchisees requested to be allowed to continue taxi stand operations. This request was rejected as having limited benefit and being administratively burdensome.
Beverly Hills
A franchise system, with a competitive selection process, was established in 2015. Five companies were awarded franchises, with a total of 185 authorized taxis. The franchise awards were for three years, extendable up to ten years in two-year increments. The police department is responsible for permitting drivers and vehicles, but none are currently permitted and no companies have current valid franchises.
As background, at the time the franchise system was established, there were no taxi companies that would have qualified as substantially located in Beverly Hills, including Beverly Hills Cab. It appears that Los Angeles-based cabs pick up pre-arranged trips and possibly trips at hotels where they have historically had exclusive arrangements to pick up on the hotel grounds.
Riverside
The municipal code requires that companies obtain a franchise to operate taxicabs in Riverside. It appears that applications for a franchise could be made at any time, based on a showing of public convenience and necessity, without any competitive process or limit on the total number of authorized cabs. As of 2017, three companies held expired franchises for which they continued to pay fees. (More recent information is being sought.)
In 2017, the Public Safety Committee of the City Council recommended that Riverside eliminate its franchise system but continue to require that companies obtain more general vehicle-for-hire permits. The intent was to create a system that would allow taxi companies to compete more effectively with TNCs. The Committee recommended that the City eliminate regulation of meter rates, but retain vehicle inspections, driver background checks, and insurance requirements.
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As a result of staff turnover, the Committee recommendation was never presented to the Council. As of late 2021, staff were aware of the need to revise the City’s regulations, but had not yet taken action.
LEGAL CONSIDERATIONS
Taxicab Permitting and Licensing
State law limits how Anaheim can regulate taxicabs. A key concept in the law is “substantially located,” which the law defines as follows (Government Code Sec. 53075.5(k)(5)):
“Substantially located” means in reference to a city or county that the taxicab company meets either of the following:
(i) Has its primary business address within that city’s or county’s jurisdiction.
(ii) The total number of prearranged and nonprearranged trips that originate within that city’s or county’s jurisdiction account for the largest share of the taxicab company’s total number of trips within each county where the taxicab company operated over the previous calendar year, as determined annually.
For new companies, only the test in (i) applies. Companies are required to collect and report the data required for the test described in (ii). Neither of the current franchisees has a business address in Anaheim, but 24/7 Taxi Cab has stated that it has applied to have its company business license located in Anaheim. Whether either company qualifies as substantially located in Anaheim remains to be determined and is a matter for legal interpretation.
Some key items from Government Code 53075.5 as amended by AB 939 (emphasis added):
(a)…every city or county in which a taxicab company is substantially located…shall protect the public health, safety, and welfare by adopting an ordinance or resolution in regard to taxicab transportation service…. (b) Each city or county that adopts an ordinance pursuant to subdivision (a) shall provide for, but is not limited to providing for, the following in that ordinance:
(1) A policy for entry into the business of providing taxicab transportation service. The policy shall include, but need not be limited to, a permitting program for taxicab drivers…, (2) The establishment or registration of rates,…(3) A mandatory controlled substance and alcohol testing certification program.
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(c) Each city or county may levy service charges, fees, or assessments in an amount sufficient to pay for the costs of carrying out an ordinance or resolution adopted in regard to taxicab transportation services pursuant to this section. (d) (1) The city or county may issue to a taxicab company that complies with all provisions of this section…and with all applicable local ordinances or resolutions of that city or county, an inspection sticker, photo permit, or other inspection compliance device. A taxicab driver shall display the applicable inspection sticker, photo permit, or other inspection compliance device in a place visible to a passenger.
(2) A city or county may accept a taxicab company or driver permit issued by another city or county as valid, and may issue to that taxicab company an inspection sticker or photo permit that authorizes that taxicab company or driver to operate within the county.
(e) A city or county shall not require a taxicab company or driver to obtain a business license, service permit, car inspection certification, or driver permit… unless the company or driver is substantially located within the jurisdiction of that city or county.
(f) A taxicab company permitted by a city or county may provide prearranged trips anywhere within that county.
Government Code 53075.51 allows limited regulation regarding use of taxi stands and street hails:
(a) Any city or county, regardless of whether a taxicab company is substantially located within its jurisdiction…, may adopt, by ordinance, operating requirements for taxicab companies and taxicab drivers that do not relate to permitting or business licensing, including, but not limited to, all of the following:
(1) Limits on the number of taxicab companies that may use taxi stand areas or pickup street hails within that city’s or county’s jurisdictional boundaries. If a city or county chooses to limit the number of taxis that use the stand areas or pick up street hails, the city or county shall identify those vehicles with a window sticker and shall not establish additional requirements or costs to the taxis beyond that authorized by Section 53075.5 or this section.
(2) Requirements on a taxicab company to provide services in a manner that provides equal accessibility for all populations within the jurisdictional boundaries of the city or county.
(3) Other public health, safety, or welfare ordinances relating to taxicabs. (b) Compliance with requirements adopted pursuant to subdivision (a) shall not be a condition for issuance of a permit.
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In summary the code requires Anaheim to license taxicab companies that are substantially located in the city and prohibits the City from licensing any other taxicab companies. Sec. 53075.51 lets the City limit the number of companies or taxicabs that pick up at taxi stands or on the street, but specifically disallows using this provision as a back door for licensing companies that are not substantially located in Anaheim.
The law does not elaborate on what “other public health, safety, or welfare ordinances relating to taxicabs” might be relating to picking up at taxi stands or on the street. Some provisions that have been common in the past include restricting where pickups can occur, limits on drivers soliciting business, and rules about multiple cabs waiting at one location.
Driver Employment Status
AB 5 of 2020 (California Labor Code Sec. 2775) codified an earlier court decision (known as Dynamex) that established a three-part test for whether a worker is an employee or an independent contractor. This law potentially altered the ability of taxi companies to maintain their long-time business model under which taxi drivers are treated as independent contractors.
Labor Code Sec. 2775 provides that “…a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The law and later amendments provide a number of exceptions to these tests, for example for certain state-licensed professions and workers in the creative arts.
Currently, taxi drivers are independent contractors who pay a taxi company for use of vehicle and/or for dispatching service and affiliation with the company’s brand, and whose income consists entirely of the fares they collect from riders. If taxi drivers must be classified as employees, they would be entitled to a minimum wage, expense reimbursements, health insurance, rest breaks, and the other benefits afforded to employees under California state law.
The two taxi franchisees in Anaheim have reacted to AB 5 in different ways. California Yellow Cab provided the following statement: “As for AB 5, our ownership group and counsel have spent a great deal of time exploring the Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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ramifications on our business and have determined that at least for now, our business model fits the “carve outs” provided by both the legislation and the Dynamex case that led to AB 5.”
24/7 Taxi is comprised of a joint venture of two companies. American Ground Transportation LLC is owned by the drivers, while American Ground Transportation, Inc. provides management services.
Proposition 22, passed by the voters in November 2020, overrode AB 5 for “app-based drivers.” Proposition 22 was declared unconstitutional in an August 2021 court ruling.
The final status of the proposition is still in the courts. Proposition 22, if it finally becomes law, would most likely not apply to taxi drivers.
The proposition defines “app-based driver” as an individual who is “a DNC courier, TNC driver, or TCP driver or permit holder” who meets the following conditions:
a) The network company does not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the app-based driver must be logged into the network company’s online-enabled application or platform. (b) The network company does not require the app-based driver to accept any specific rideshare service or delivery service request as a condition of maintaining access to the network company’s online- enabled application or platform. (c) The network company does not restrict the app-based driver from performing rideshare services or delivery services through other network companies except during engaged time.
(d) The network company does not restrict the app-based driver from working in any other lawful occupation or business.
Taxi drivers who obtain business via a taxi company app, might satisfy tests (a) – (d), but would not qualify as “a DNC courier, TNC driver, or TCP driver or permit holder.” Public Utilities Code Sec. 5431 defines a “transportation network company” (TNC) as “an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any other entity, operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.” Critically, the same code section provides that a “personal vehicle” must not be a taxicab or limousine.
If Anaheim were to continue a franchise system, and one of the franchisees later was required to treat all or most of its drivers as employees, that would be a concern for Anaheim residents and visitors who rely on that company’s services. Beyond that, the City would need to determine what involvement it should have in this issue.
RECOMMENDATIONS
Cities have a clear interest in regulating some aspects of taxicab operations, in particular those relating to safety and protecting customers from deceptive or otherwise unfair Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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pricing. These are the kinds of regulations that the State law requires for companies substantially located in a city.
In the case of taxi stands and street hails, cities have an interest in avoiding excessive concentrations of taxis could cause congestion and unsafe traffic conditions on public thoroughfares. At major tourist destinations, in the absence of any limitations on taxicabs, there have been cases of annoying solicitation of business and even violent confrontations between taxi drivers. Price regulation is useful for these trips too, since a customer hailing a cab has no effective way of comparison shopping and it is very easy to post misleading price information on the exterior of a cab. Numerical limits applying to taxi stands and street hails are the ones specifically permitted by State law. In the case of fares, in the latest OCTAP regulations, fare rules applied only to “on-demand (flagged) trips.”
In the case of prearranged trips (by phone or now using an app), in the past, some cities have justified limits on taxi companies and numbers of cabs on the grounds of avoiding “destructive competition.” Since companies make their revenue from leasing cabs and access to dispatch service, it can be in their interest to recruit as many drivers as possible, regardless of whether there is sufficient demand for these drivers to make a living. At least in some labor markets, no many how many drivers quit after discovering that they cannot make a living, there has been a steady supply of naïve drivers with limited alternative job prospects willing to give taxi driving a try. In this situation, there can be a downward spiral of service from companies that are unable to ensure a quality service for the public or have no interest in doing so.
The current State law may still allow numerical limits on taxi companies or cabs.
However, regardless of what a given city allows, the principal competition for any taxi company or driver is not from other taxis but from TNCs, principally Uber and Lyft, which cities in California have no authority to limit. After AB 939, cities in California cannot even limit competition for prearranged trips from other taxi companies, as long as they locate in another city within the same county. In addition, because of competition from TNCs and app-based delivery services, taxi companies no longer have access to an unlimited pool of drivers.
Cities have also justified limits on taxi numbers as a way to impose requirements for items that market competition by itself would be unlikely to ensure, for example meeting on-time standards, limits on vehicle age, requirements for “green” vehicles, service to areas that would otherwise be neglected, and wheelchair-accessible service. In effect there is a deal made in which companies provide an extra level of service in exchange for being given a monopoly. However, with the rise of TNCs and the changes in State law, cities no longer have the ability give a company a meaningful monopoly.
The effectiveness of these arrangements varies greatly. Anaheim has been able to enforce a five-year vehicle age limit, and Los Angeles and Santa Monica have been able to enforce green-vehicle requirements. However, on-time rules have been hard to enforce.
Cites have been able to ensure that companies have wheelchair-accessible vehicles, but Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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actual availability of usable service to wheelchair users has been very limited. Los Angeles taxi companies have had to provide monetary incentives to drivers to take wheelchair accessible cabs, and even then drivers are reluctant to accept requests for accessible rides.
Given these circumstances, there two paths that City could follow to comply with State law while continuing to promote safe, quality taxi service:
Option A
1. Allow the current franchises to expire in June 2022.
2. Adopt revisions to Section 4.72 of the Anaheim Municipal Code pertaining to taxicabs to bring it into conformity with current State law, in particular limiting the requirement for city-issued operator’s and driver’s permits to companies that are substantially located in Anaheim, as defined by Government Code 53075.5, and allowing for provision of pre-arranged trips by operators and drivers permitted by other Orange County cities.
3. Adopt administrative regulations to replace those of OCTAP and modify references in the Code accordingly.
4. Remove provisions from Section 4.72 limiting the number of taxicabs except in the case of operations at taxi stands and street hails.
5. Replace the franchise system, as defined in Section 4.73 of the Anaheim Municipal Code, with a system for issuing stickers for operations at taxi stands and street hails, with flexible limits on how many stickers may be issued to allow expanded capacity for special events.
6. Remove the provisions of Section 4.72 regarding fares in favor of more flexible rules in the administrative regulations, similar to those in the former OCTAP regulations.
7. Add provisions that would reduce drivers’ dependence on taxi stands and street hails, for example by requiring availability of an app with specific capabilities and implementation of an effective marketing program for pre-arranged service. To ensure that companies have capacity to implement these programs, establish a minimum fleet size for companies to obtain an Anaheim license.
Option B
Implement the recommendations of Option A, except as regards franchises (Items 1 and 5 in Option A). Establish a modified system of franchises that applies only to non-prearranged trips provided by companies regardless of where in Orange County the company is substantially located. Only companies with an Anaheim franchise would be permitted to service non-pre-arranged trips in Anaheim.
Either for all taxicabs with Anaheim permits, or only for cabs that will have stickers for taxi stands and street hails, consider whether to add provisions Anaheim Taxi Franchise Study | Final Report, April 2022 City of Anaheim
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limiting vehicle age, requiring environmental standards for vehicles, establishing response time standards, and requiring some number or percentage of wheelchair accessible vehicles.
Obtain a legal opinion as to whether the City can establish and enforce a requirement for response times (which would apply only to pre-arranged trips) for companies permitted by cities other than Anaheim, including any that have franchises for non-pre-arranged trips in Anaheim.