BACKGROUND:
California Vehicle Code Section 12110 (b) authorizes the city to grant franchises to companies providing certain towing services and to collect a franchise tow service fee to offset actual and reasonable costs incurred in connection with administering its towing program.
The first contract entered into between Cathedral City (“City”) and a towing contractor was entered into on June 1, 1983, between the City and Bois’ Low Desert Towing. This was an annual contract and renewed yearly until 1991. In 1991, the City issued a request for Proposal (RFP) soliciting companies to provide towing services to the City’s Police Department with a requirement the towing companies have their impound yard and business within the city limits. In 1991, it was the first time the requirement was listed for the impound yard and business to be within the City limits. Four towing companies responded to the RFP and the City Council awarded a three-year contract to Low Desert Towing with the option to extend two additional three-year terms. On December 29, 1994, the City Council approved a three-year towing contract with TNV Towing which was later terminated in 1995.
In 1998, the City issued a Request for Proposal (RFP) soliciting companies to provide non-exclusive franchise towing services to the City’s Police Department. The RFP was sent to thirteen (13) Coachella Valley towing companies. Two companies responded to the RFP, Mohica Towing and South West Towing. On July 8, 1998, the City Council approved Tow Franchise Agreements with Mohica Towing and South West Towing which expired in August 2001.
On August 9, 2001, the City Council approved a three-year Vehicle Tow Service Franchise agreement with Mohica Towing and South West Towing which included the option to exercise two three-year extensions. On June 15, 2004, the City extended the contract for three more years. On August 8, 2007, the City Council authorized the second three-year extension which expired on August 8, 2010. The City did not have a Vehicle Tow Service Franchise Agreement in place from August 2010 until January 14, 2014. Although no franchise agreement was in place, Mohica Towing and South West Towing continued to provide towing services to the City and did not pay a franchise fee during this time.
In October 2013, the Police Department issued a Request for Proposal (RFP) soliciting companies to provide non-exclusive franchise tow services to the City’s Police Department. The RFP was sent to twenty-nine tow companies in the Coachella Valley in which three companies responded, Mohica Towing, South West Towing as well as Yucaipa Towing of Palm Springs.
On January 15, 2014, the city entered into a three-year Vehicle Tow Service Franchise Agreement with Mojica Towing and South West Towing with the approval of the City Council. This agreement was entered into with the option to extend two additional three-year terms. On February 28, 2017, with City Council authorization, the City Manager executed the first amendment to the contract extending the Vehicle Tow Service Agreement with Mojica Towing and South West Towing for three additional years to January 15, 2020. On January 9, 2020, with City Council authorization, the City Manager executed the second amendment extending the Vehicle Tow Service Franchise Agreement with Mohica Towing and South West towing an additional three years, with a new expiration date of January 31, 2023.
As a result of the Vehicle Tow Service Franchise Agreement expiring on January 31, 2023 the City needed to negotiate a new agreement. The Police Chief, in reviewing this matter, recognized there was not an ordinance governing the award of contracts for tow franchises with the City. Police Department staff have been working with the City Attorney’s Office to review the history of this agreement and determined it necessary to seek City Council direction. To bridge the gap, the City executed with the current vendors a ninety (90) day extension of their existing contracts starting February 1, 2023 to April 30, 2023. A second one hundred and twenty (120) day extension was executed with the two current vendors that extends the contract from May 1, 2023 to August 31, 2023. Under the current terms of the franchise agreement, Mohica Towing and South West Towing are the only two companies with businesses and impound yards within the City and therefore are the only two vendors eligible to compete for the contract unless a new vendor established a business and a impound yard within the City. As such, the City is currently unable to add additional tow operators to the tow rotation list, which has restricted competition and disadvantaged the City during contract negotiations.
DISCUSSION:
Historically, the City has had Vehicle Tow Service Agreements with Mohica Towing and South West Towing. The current contract, which was entered into on January 15, 2014, expired on January 31, 2023 and has most recently been extended to July 31, 2023 to allow the Police Department to develop, in cooperation with the City Attorney’s Office, a new RFP process, including a tow franchise ordinance and model tow franchise agreement. The proposed ordinance and model agreement was presented to Council on April 26, 2023 and Council directed this item be brought back at a study session with additional information. The process contemplated is to adopt the proposed ordinance and model agreement, conduct a new RFP process, and then select and award contracts with tow companies, by September 27, 2023.
A. Reasons Supporting a Tow Ordinance
While the California Vehicle Code authorizes City to have towing franchises, the law does not specify whether the franchise must be by ordinance, agreement or both. The City Attorney recommends the City Council adopt an ordinance governing the City’s tow program for a number of reasons. The proposed ordinance, which would add Chapter
12.78, to the Cathedral City Municipal Code, is attached to this staff report for Council consideration as Attachment 1.
An ordinance preserves both the policy making function of the Council and ensures clear policy direction. This becomes more important as the City increases the number of tow franchises to avoid the inherent proclivity toward individualized agreements with terms that may drift from Council policy over time as agreements are extended or renegotiated. An ordinance establishes a clear baseline applicable to all vendors and clear criteria for city staff to apply, such as establishing a Tow Rotational Program providing for safe, efficient and rapid removal of vehicles that helps maintain safety on the roadways and throughout the City.
An ordinance also ensures members of the towing industry can participate in a rotational tow list that equitably distributes service calls and the cost of operating the Tow Rotation Program. Proposed, Chapter 12.78 provides for a fair and impartial means of distributing requests for towing services among qualified franchises and ensures that such service is prompt and reasonably priced, and in the best interests of the public as well as the interest of efficient policing operations for the removal of such vehicles from public streets. Doing so by ordinance ensures these critical elements are not changed by individual negotiation, but only upon review and approval of the Council.
Another reason to have an ordinance is that it will specify the fees that can be charged and the basis or formula for those fees. This ensures the Council establishes the basis for the fees, is satisfied the fees are adequately supported and makes the decision whether to charge fees at 100% of the fully burdened cost or some lesser amount determined to be equitable by the Council.
Finally, the proposed ordinance ensures that the selection of the franchisees is done through a competitive selection process in cooperation with the Police Chief and City Manager based on criteria set by the City Council.
B. Operational Changes in the Model Tow Agreement
Under the current franchise agreements, the tow operator’s place of business and vehicle storage facility must be located within the boundaries of the City. While this has been a term of the franchise agreement since 1991, staff have not found any administrative records (such as a resolution) mandating that tow operators be within the City limits.
Staff is proposing several changes to the new Model Tow Agreement, which are listed below. Staff is seeking the City Council’s direction on removing the requirement that the impound yard and tow business facility must be located within the boundaries of the City to increase the number of tow operators eligible to compete to be on the tow rotation list to achieve rapid removal of vehicles from public streets. Additional proposed changes establish minimum requirements for tow operators, establishes the types of tow services the City wishes to have available based on the needs of the Police Department, prohibits collusion between operators, and provides the City the authority to suspend or cancel a contract for failure to perform, the latter being a term in all current city contracts but one that hasn’t been updated in the franchise agreement.
Current Franchise Agreement Proposed Model Tow Agreement Place of business and primary storage
facility must be within the established
boundaries of the City.
Staff seeks the City Council’s Direction
Should the primary storage yard be
located no greater than approximately 30
minutes driving distance from the
Cathedral City Police Department?
Section 7(C).
Should the tow operator’s business be
located within the City limits? 1
15-minute response time. 30-minute response time. Section 6(A).
Two operators on the rotation list. No limitation to the number of operators on the rotation list. Based on operational
need.
No minimum requirement for years of for-
hire towing experience.
Operators must have a minimum of 3
years of for-hire towing experience.
Section 4(A)-(B).
Operator must possess or be able to
obtain the services or use of a Class " D"
tow truck.
Operators must possess or be able to
obtain the services or use of a Class A, B,
C, and D tow truck. Section 9(C).
No provision. Prohibits collusion between operators that would prejudice the City or other
operator(s). Section 15.
No provision. Establishes disciplinary action for
violation(s) of terms and conditions of the
agreement. Section 22. As well as, appeal
and hearing procedures for disciplinary
actions taken against operator. Section 23.
Towing Data for Cathedral City
The Cathedral City Police Department routinely requires the services of private towing companies to store and remove vehicles in emergency situations, and vehicles abandoned, involved in an accident, or constitute an obstruction to traffic. As indicated below, between 2000 and 2022, franchisees towed over 800 vehicles per year at the City’s request.2 In addition, there have been on average 227 owner requested tows per 1 This time frame is based on tow yards located no greater than 15 miles or 30-minute drive time from the Cathedral City Police Department, as shown below.
2 Police Storages: Any storage required by the department where a CHP 180 is completed. The vehicle has been removed from the roadway at the discretion of the Police Officer, Community Service Officer, Citizens on Patrol, and/or Code Compliance Officers. The removal of the vehicle could be for a multitude of purposes (proactive stop resulting arrest/ incapacitated driver/ parking violation/ blight issues) where the officer is completing a CHP 180.
year in which an owner of a disabled vehicle has requested the Police Department call for a tow.
Staff also looked at the performance of the two current operators, specifically their availability to take a tow, the availability of having the right type of equipment to be able to take the tow, and their ability to respond in less than 30 minutes.
Code Compliance: Removal of inoperable/junk vehicles from private property where the legal owner is usually cooperating with the removal of the vehicle. Recently, Code Compliance has become more involved in the removal of blight and illegally parked vehicles requiring CHP 180’s to be completed.
Citizens on Patrol: The majority of these vehicle storages are parking enforcement matters requiring a CHP 180. Costs include support service staff time and Sergeant time for processing the CHP 180 through Dispatch and Records.
Owner Request: A storage in which the operator of the vehicle is requesting to have the vehicle removed. This is often the result of an inoperable vehicle that is impeding traffic and must be removed from the roadway. If the vehicle operator does not have a preferred tow company, the police department will request towing services from a tow franchisee. These requests provide additional business to the franchisee. Though a CHP 180 is not completed, the officer remains on scene to maintain safety until the vehicle is removed from the roadway. The tow companies may charge their regular private tow rates; however, they often charge the indicated rate for a police storage under the franchise agreement.
Police/City Tows 2020 2021 2022 Per Yr
Avg
Per Mo
Avg
Police Storages 773 748 656 726 60
Code Compliance 20 24 64 36 3
COP 25 73 162 87 7
Total Tows 818 845 882 848 71
Owner Requests 134 247 299 227 19
Grand Total 952 1092 1181 1075 90
Tow Operator South West Mohica South West Mohica South West Mohica Unavailable 36 0 45 0 43 0
No Answer 7 0 13 2 13 0
Lacked Equipment 4 0 6 0 2 0
Response >30 2 0 1 0 0 0
Total 49 0 65 2 58 0
Total Calls (Police,
Code, COP 818 818 845 845 882 882
% time operator
unavailble or able to
respond or
response > 30 min 6% 0% 8% 0% 7% 0%
2020 2021 2022
i. Current Franchise Fees and Tow Rates
California Vehicle Code section 12110(b) allows a public entity to charge a franchise fee for awarding a private company the right to tow vehicles on the City’s behalf. However, the franchise fee cannot exceed the City's annual cost of administration and enforcement of the tow program. Historically, the City has charged franchisees a franchise fee to recover a portion of the costs to operate and implement a tow rotation program.
ii. Franchise Fees 2014 – 20233
Under the terms of the 2014 agreement, the Franchise Fee was calculated based on the total incurred costs, minus revenue collected (vehicle release fees, lien sales, etc.).
The Franchise Fee was then divided by the total number of tow operators, which in the case of Cathedral City was two - Mohica and South West. The Franchise Agreement provided an annual 3% increase to cover increasing costs of program operation.
In 2017, the City wished to extend the agreement for an additional three-year term. At the time, the City changed its calculations from a straight hourly cost for personnel to a fully burdened rate. That same year, the City collected less revenues than in the prior year, which would have resulted in an overall increase to the franchise fee of $64,943 in one year or a $32,471.50 increase per operator. To ease the burden to the franchisee, the City established a flat rate increase of $12,000 in year 2017, and $4,000 per year in years 2018 and 2019. This formula was continued during a second extension of the agreement executed in January 2020 - a flat $4,000 per year increase to the Franchise Fee with no change to the incurred cost. In 2023, the City needed to negotiate a 120- day extension since the contract had lapsed. The negotiated rate with the operators was $148 per vehicle towed.
iii. Tow Rates Charged by Contractor 2014 – 2023
3 Data from Tow Franchise Agreement and Amendments from 2014 to 2023.
Year Incurred Cost Revenue Collected Franchise Fee
Franchise Fee Per Operator Total Paid By Franchisees Notes2015 156,039$ 89,721$ $66,318 $33,158.96 $66,317.92 3% increase2016 160,720$ 92,412$ $68,308 $34,153.73 $68,307.46 3% increase2017 206,751$ 73,500$ $133,251 $46,153.73 $92,307.46 Flat increase = $12,0002018 206,751$ 73,500$ $133,251 $50,153.73 $100,307.46 Flat Increase = $4,0002019 206,751$ 73,500$ $133,251 $54,153.73 $108,307.46 Flat Increase = $4,0002020 206,751$ 73,500$ $133,251 $58,153.73 $116,307.46 Flat Increase = $4,0002021 206,751$ 73,500$ $133,251 $62,153.73 $124,307.46 Flat Increase = $4,0002022 206,751$ 73,500$ $133,251 $66,625.50 $133,251.00 Flat Increase = $4,0002023120 Day Extension $148 per tow The Franchise Agreement also specifies the amount that can be charged by the tow companies for hourly rates to tow a vehicle based on the class of tow vehicles used and storage fees.
Yearly Tow
rates
Class A tow
Trucks
Special Duty
Hourly Rate
Heavy Duty
Hourly Rate
Class B
Heavy Duty
Hourly Rate
Class C and D
2014 $170 $250 $250 $350
2015 $170 $250 $250 $350
2016 $170 $250 $250 $350
2017 $195 $250 $300 $400
2018 $205 $250 $300 $400
2019 $215 $250 $300 $400
2020 $215 $250 $300 $400
2021 $215 $250 $300 $400
2022 $215 $250 $300 $400
2023 $245 $250 $300 $400
iv. Storage Rates Charged by Contractor 2014 – 2023
Year
Storage
Fees
Outside
storage:
Motorcycles,
passenger
cars
and trucks
20' or less
Inside
storage:
Motor-
cycles,
passenger
cars
and trucks
20' or less
Trailers 15'
or less
Trucks,
Trailers,
and other
vehicles 20’
to 30’
Trucks,
Trailers,
and other
vehicles of
30’ or more
2014 $50 $80 $50 $80 $80
2015 $50 $80 $50 $80 $80
2016 $50 $80 $50 $80 $80
2017 $62 $100 $50 $80 $90
2018 $67 $100 $50 $80 $90
2019 $72 $100 $50 $80 $90
2020 $72 $100 $50 $80 $90
2021 $72 $100 $50 $80 $90
2022 $72 $100 $50 $80 $90
2023 $80 $100 $50 $80 $90
Personnel Costs Hourly rate Hours (per tow) Tows Total Cost 2022Police Officer (80% of total Police tows) 174$ 0.5 525 45,675$ Community Service Officer (20% of total Police tows) 104$ 0.5 111 5,772$ Dispatcher 127$ 0.5 882 56,007$ Records Clerk 118$ 0.5 882 52,038$ Code Compliance Officer 133$ 0.5 36 2,394$ Citizens On Patrol (COP) -$ 162 -$ # of tows requiring 180 form* 882 Total Personnel Cost 161,886.00$ Program Administration AnnualProfessional Services -Legal (hrs/yr) 290$ 13 3,770.00$ Sergeant (hrs/yr) 248$ 52 12,896$ Police Chief (hrs/yr) 369$ 0 -$ Commander (hrs/yr) 287$ 13 3,731$ Analyst II (hrs/yr) 146$ 24 3,504$ Building Maintenance 2.50% 532,775$ 13,319$ Information Systems 2.50% 763,641$ 19,091$ Supplies 1,000$ 1,000$ Total Administrative Costs 57,311$ Total Tow Program Costs 219,197$ Revenues FY 21/22 (91,306)$ Total Franchise Cost 127,891$ 2 Total Franchise Cost/# of Operators 63,945.70$ If the City elects to use the same formula as in the past for determining Franchise Fees, the proposed Fee for 2023/2024 is below:
There are some changes reflected in the newly proposed franchise fees. The Police Department began a Community Service Officer (CSO) program in 2023. The CSO’s perform the same types of duties as a Police Officer in regard to vehicle tows – they are actively involved conducting vehicle collision investigations; notifying dispatch; completing the CHP 180 form; remaining on scene until the vehicle is removed; and assisting with traffic control associated with collisions until the vehicle is removed from the roadway. When the CHP 180 form is completed, the CSO returns it to the station for entry by the Police Dispatcher. Costs for the use of CSO’s have been included. Costs for Code Compliance staff have also been included. The Code Compliance program was formerly part of the Police Department but has since been reassigned to Development Services. Code Compliance Officers are responsible for the removal of inoperable/junk vehicles from private property where the legal owner is usually cooperating with the removal of the vehicle. Recently, Code Compliance has become more involved in the removal of blight and illegally parked vehicles requiring CHP 180’s to be completed. Staff have also reviewed the overhead costs and made some slight adjustments to lessen the program administration costs.
Additionally, Staff proposes elimination of the Vehicle Impound Recovery Fee. With the passage of Assembly Bill 60 in 2015 making it easier for people to obtain drivers licenses, the amount of 30-day impounds reduced significantly. With this reduction in 30- day impounds, the need for this fee has been virtually eliminated.
Alternatives to Franchise Fees
Under the proposed franchise fee, the City would recover the entire cost of operating a tow rotation program. However, as described above in the franchise fee chart, the City has previously subsidized the franchise fee. From 2017 to 2021, the fee payable to the City by each tow operator was less than the total cost of operating the tow franchise program.
Below are cities that have adopted similar subsidized tow franchise fees:
•City of Baldwin Park – Franchisee pays (1) an administrative fee ($118.05) per vehicle towed at the request of the police department; and (2) a percentage (25%) of gross revenue received from owner or resident requests, vehicles stored over 30 days, and all vehicles sold at lien sales. https://www.riversidesheriff.org/
•City of Riverside – Tow operators pay a per tow fee for each vehicle towed at the request of the police department, rather than a franchise fee. Chapter 5.15 Riverside Municipal Code.
•City of El Monte – Franchise fee is a percentage (25%) of franchisees gross revenues attributable to towing, storage and impound services provided to the City under the towing services agreement.
Status of Tow Services in Greater Palm Springs
The City of Palm Springs and the City of Desert Hot Springs are the only cities in Greater Palm Springs with tow franchise ordinances. A notable provision to highlight under each ordinance is the requirement that tow yards be within or near city limits.
Section 11.82.130 of the Palm Springs Municipal Code requires the vehicle storage facility to be located within the corporate city limits of the City of Palm Springs. In contrast, the Desert Hot Springs Municipal Code does not require tow yards to be within the City limits. However, a 2019 Request For Proposal (RFP) for towing franchise services for the City of Desert Hot Springs included a tow services agreement requiring operators to maintain a place of business and primary storage facility within the city limits. The agreement also states that if an operator stores vehicles at a different location from the primary location, the additional location must be located not greater than ten (10) miles from the city limits. Based on the 2019 RFP, two tow operators were awarded franchises.
The City of Indio requires the tow company’s primary physical facility with an impound yard be located within the City limits.
Below is a breakdown of the charges each City has adopted:
City # tow
operators
Franchise Fee VTACR Fee
charged to
registered
Owner
Vehicle
Impound Cost
Recovery Fee
City # tow
operators
Franchise Fee VTACR Fee
charged to
registered
Owner
Vehicle
Impound Cost
Recovery Fee
Cathedral City 2 2022 rate:
$133,251 total
$66,625 per operator
$225 $11.50 per day –
vehicles
released to
owner before 30
days
$345.00 paid by
tow operator
after 30 days if
lien sale
exceeds 985.00
Lien sales by
tow operator,
prorated to
reflect 1/4 or
25% of total
proceeds of sale
(between
600.00-984.99)
less cost of the
Operator tow fee
and lien fee as
stipulated in fee
section. The city
receives zero
dollars if lien
sale is under
600.00.
Palm Springs
*Currently in
negotiations for
a new
agreement
3 No charge to operator –
full cost recovery passed
on to registered owner
Previously charged
$50,000 annually to the
operator (equivalent to
$50 per tow)
Adopted in 2020
$235.10 based
on 627 vehicles
towed
Desert Hot
Springs
*Currently in
negotiations for
a new
agreement
2 $158,364 total
$52,788 per operator
226.71 $226 per
impound (paid
by tow operator)
Vehicles sold by
operator
prorated to
City # tow
operators
Franchise Fee VTACR Fee
charged to
registered
Owner
Vehicle
Impound Cost
Recovery Fee
reflect 1/3 or
33% of total
proceeds of sale
less cost of the
Operator tow fee
and lien fee as
stipulated in fee
section; 3%
increase per
year
Indio 3 Operator charged 8% of
annual towing cost =
$75,000 or 33% of the
total program cost
$18,650 per operator
$108 per vehicle towed
$265
Riverside County Sheriff’s Office – Indio Station
La Quinta
Coachella
Unincorporated
$214
$210
$92
Riverside County Sheriff’s – Palm Desert
Rancho Mirage
Palm Desert
Indian Wells
None $145
$165
$150
Tow Companies in Greater Palm Springs
There are ten tow companies within 15 miles and under 30 minutes driving distance from the Cathedral City Police Department 4:
4 Whether companies have sufficient tow operators to meet 24/7 requirement, and/or insurance, permit, and other qualifications is unknown.
Tow Operator Address Distance to
Cathedral City
Police
Department
Drive Time
Between Police
Department and
Tow Operator
Mohica Towing 68315 Kieley Rd.
Cathedral City
.7 miles 3 minutes
South West Towing 36069 Campbell St.
Cathedral City
.7 miles 2 minutes
TNV Towing 74-894 42nd Ave, Suite B
Palm Desert
8.6 miles 17 minutes
Plaza Towing 74823 Velie Way
Palm Desert
8.6 miles 17 minutes
Advanced Towing 42200 Beacon Hill, Ste A
Palm Desert
8.9 miles 18 minutes
Palms to Pines
Towing
74883 Velie Way
Palm Desert
9.1 miles 18 minutes
Dave’s Towing
Service
370 W. San Rafael Dr.,
Unit 9, Palm Springs
9.4 miles 20 minutes
Affordable Desert
Towing
401 W. Radio Rd., Ste
B19, Palm Springs
9.7 miles 21 minutes
Flat Rate Towing 15775 Palm Dr.
Desert Hot Springs
12.1 miles 24 minutes
E & C Towing 17448 Ben-Mar 13.2 miles 25 minutes
Desert Hot Springs
Aarco Towing 14350 Little Morongo Rd.
Desert Hot Springs
14.3 miles 25 minutes
FISCAL IMPACT:
Adopting the Ordinance as proposed will have no impact on the Fiscal Year 2023-2024 operating budget. However, if the City Council wishes to adopt a franchise fee that collects less than full cost recovery, there could be an impact to the budgeted revenue depending on the direction of the City Council.