Staff Report
City Council
Item No. 4.B
Meeting Date: August 26, 2026
From: Andrew Firestine, City Manager
Title: Extension and Amendment of Vehicle Tow Service Franchise Agreements
RECOMMENDATION:
Staff recommends that the City Council direct and authorize the City Manager to execute the First Amendment to the Vehicle Tow Service Franchise Agreement with South West Towing and the First Amendment to the Vehicle Tow Service Franchise Agreement with Mohica Towing for the purpose of extending the franchise agreements for a period of three years and amending the franchise agreements to:
• Include a franchise fee rate increase for years 4, 5, and 6 based on the All Urban Consumers Price index (CPI-U) for Riverside-San Bernardino-Ontario; • Adjust the towing and storage rates set forth in Exhibit B; • Permit an annual review of the towing and storage rates established in Exhibit B; and
• Delete obsolete language.
BACKGROUND:
In 2023, the City Council adopted an Ordinance adding Chapter 12.78 to the Cathedral City Municipal Code. Chapter 12.78 codifies the governing procedures for the City’s rotational tow services program, authorizes the City to grant franchises to towing companies, and to collect a franchise tow service fee to offset actual and reasonable costs incurred in connection with administering its towing program.
Following a competitive bid process in 2023, the City Council awarded nonexclusive franchise agreements to South West Towing and Mohica Towing at the August 23, 2023, City Council meeting (collectively referred to as the “Agreements”). For reference, these Agreements are attached. The Agreements were for a three-year term commencing August 27, 2023. The Agreements contain an option to renew for an additional three-year term, including options for a tow operator to request a contract extension and for the City to exercise an option to renew.
The Agreements require a tow operator to exercise its option to renew by submitting a renewal application within six months of the end of the contract term. The contract establishes that the operator-initiated renewal option shall be granted unless, within 60 days of filing the renewal application, the City Manager has found the operator to be out of compliance with the terms and conditions of the franchise agreement. The Agreements further require a tow operator to provide the City with a 60 day-notice of its desire to adjust its rates for tow and storage services.
Under the terms of the Agreements, the City may also exercise an option to renew for an additional three-year period. In such case, all terms, conditions, and provisions remain in effect, including the rate schedules, although the Agreements also stipulate that all proposed adjustments in fees, rates, and service charges must be approved by the City Council before the City exercises its option to renew.
Neither South West Towing nor Mohica Towing submitted an application to exercise their renewal option. Similarly, neither tow operator provided the City with a 60-day notice for any rate changes. On July 28, 2026, South West Towing expressed its interest in seeking a rate change as part of a contract extension through a phone conversation. Since then, Mohica Towing has conveyed the same interest.
City staff consulted with legal counsel, and letters were sent to South West Towing and Mohica Towing on August 4, 2026, attached for reference. The letters expressed the City’s desire to exercise its option to extend the Agreements for an additional three-year term while also inviting the operators to submit any requests for a modification of their rates by August 7, 2026. Both operators submitted comments. Those comments were evaluated by City staff and counterproposals were sent on August 10, 2026. These are also attached. Staff met with each operator to review the counterproposals and conducted further negotiations.
DISCUSSION:
The Cathedral City Police Department is well served by South West Towing and Mohica Towing as part of the rotational tow services program. There are no contractual compliance issues with either operator.
While the operators missed the contractual deadline to notify the City of their desire to adjust their rates for tow and storage services and while the City may have the option to extend the Agreements with no changes to the rates, it remains in the City’s interest to maintain a cooperative working relationship with each operator in support of the City’s rotational tow services program and to consider their requests.
The franchise fee, what is paid to the City, enables the City to recover its costs in connection with the towing program. The rate schedule in Exhibit B are those rates charged by the operators to vehicle owners for tow and storage services. The Agreements currently contain a 3 percent annual increase in the franchise fee the City receives from each operator, although there was no consideration for any adjustment of the rates for tow and storage services identified in Exhibit B. The rate schedule in Exhibit B has remained the same since 2023.
The table below summarizes the requests submitted by South West Towing and Mohica Towing in comparison to the corresponding rates in Exhibit B:
Exhibit B Service Current Mohica South West
Class A / standard tow $245 $315; or $285 if franchise-fee relief is granted
$290
Class B tow $300 Current CHP rate; amount not provided No request Class C/D tow $400 Current CHP rate; amount not provided No request Lockout $90 No request No request
After-hours release $90 No request No request
Outside auto/motorcycle
storage
$80/day No specific request $90/day
Inside auto/motorcycle
storage
$100/day No specific request $90; category
unclear
Trailer up to 15 feet $50/day No specific request Category not specified
Vehicle/trailer 20–30 feet $80/day No specific request Category not specified
Vehicle over 30 feet $90/day No specific request Category not specified
Both operators raised concerns about unclaimed vehicles and unrecovered costs with Mohica Towing asking for consideration of further changes to the franchise agreement for unclaimed vehicles. Through subsequent communication, the operators requested consideration for an additional three-year option and an automatic CPI-U adjustment of the rate schedule.
Staff evaluated each request for rate changes to Exhibit B against the CPI-U for the period between May 2023 and May 2026 and established the compound inflation was 10.33 percent over this period. Through the counterproposal letters, staff recommended the following rates:
Exhibit B Service City Counterproposal
Class A / standard tow $270 per hour
Class B tow $330 per hour
Class C/D tow $440 per hour
Lockout $90 per event (unchanged)
After-hours release $90 per release (unchanged)
Outside auto/motorcycle storage $90 per day
Inside auto/motorcycle storage $100 per day (unchanged) Trailer up to 15 feet $50 per day (unchanged)
Vehicle/trailer 20–30 feet $80 per day (unchanged)
Vehicle over 30 feet $90 per day (unchanged)
These rate changes respond to the cost increases identified by the tow operators in their comments and adjust the 2023 rates for inflation. While an operator may suggest the CHP rates as a reference point for setting the Class B, Class C, and Class D towing and recovery service rates, staff is not supportive of amending the Agreements to default to the California Highway Patrol (CHP) rate schedule. Under California Vehicle Code §2424, the local CHP Area Commander determines and approves rotation towing rates – there is not a uniform standard.
The concerns expressed related to unclaimed vehicles and unrecovered costs go beyond the rate schedule in Exhibit B and suggest the City reevaluate the method it uses to calculate and apply its franchise fee. The franchise fee is a calculation of the costs incurred by the City divided by the annual number of tows. There are alternative ways to determine and apply the City’s franchise fee, although it is staff’s recommendation that these be evaluated in advance of a competitive bid of the franchise agreements in 2029.
The request for consideration for an additional three-year option goes back to historic contracts that were structured as a three-year term with two, three-year options. The current Agreements were not executed in this manner and were for a three-year term with a single option to renew for an additional three-year term. It is staff’s recommendation that the franchise agreements be competitively bid in 2029.
With respect to the request for an automatic CPI-U adjustment of the rate schedule in Exhibit B for years 5 and 6 of the contract extension, the current Agreements granted no consideration for any adjustment of the rates for tow and storage services identified in Exhibit B except as may be requested through the renewal process and as may be approved by the City Council. In consideration of this, Staff is recommending the addition of language to permit an annual review of the rate schedule where further changes in years 5 and 6 may be approved by the City Council. This change is responsive to the operators’ comments concerning rising labor costs, insurance, fuel, and other operating costs while ensuring that the City Council retains oversight of any rate increases for tow and storage services charged by the operators to vehicle owners.
Staff is also recommending that the contract amendment amend the Agreements to include a franchise fee rate increase for years 4, 5, and 6 equal to the CPI-U for Riverside-San Bernardino-Ontario for the 12-month period ending July of the same calendar year, not to exceed 4 percent. For instance, effective August 27, 2026, the franchise fees shall increase by a percentage equal to the CPI-U Riverside-San Bernardino-Ontario for the 12-month period ending July 2026. If the CPI-U does not change or goes down in a given year, no change shall be made to the franchise fee. If the CPI-U exceeds 4 percent, a 4 percent rate shall be applied.
Following continued negotiations with South West Towing and Mohica Towing, through which City staff rejected requests for consideration of adopting the CHP rates as the City rates for Class B, Class C, and Class D towing and recovery service; a reconsideration of the franchise fee and its applicability to abandoned and unclaimed vehicles; a further extension of the contracts beyond the single three-year option; and an automatic CPI-U adjustment for the rate schedule in years 5 and 6 of the contract extension, staff presented the following as a final counteroffer to each operator:
Exhibit B Service City Counterproposal
Class A / standard tow $285 per hour
Class B tow $330 per hour
Class C/D tow $440 per hour
Lockout $90 per event (unchanged)
After-hours release $90 per release (unchanged)
Outside auto/motorcycle storage $90 per day
Inside auto/motorcycle storage $100 per day (unchanged) Trailer up to 15 feet $50 per day (unchanged)
Vehicle/trailer 20–30 feet $80 per day (unchanged)
Vehicle over 30 feet $90 per day (unchanged)
The rate for a Class A towing service was increased in the final counteroffer to $285 from $270 in the initial counteroffer made on August 11. This rate schedule has been incorporated into the proposed contract amendment together with amendments that would permit an annual review of the rate schedule where further changes in years 5 and 6 may be approved by the City Council. The proposed contract amendment also establishes a franchise fee rate increase for years 4, 5, and 6 equal to the CPI-U for Riverside-San Bernardino-Ontario for the 12-month period ending July of the same calendar year, not to exceed 4 percent, with the provision that if the CPI-U does not change or goes down in a given year, no change shall be made to the franchise fee.
Both operators have accepted the terms of the final counteroffer.
FISCAL IMPACT:
DESCRIPTION GENERAL
LEDGER
ACCOUNT
CODES
PROJECT
CODE
AMOUNT ONE TIME or
ONGOING
2026-2027 Franchise Fee
Towing
100-900-910-
911-6356-6356 N/A If 4%,
$5700 in Year 4 ONGOING
FIVE-YEAR STRATEGIC PLAN:
N/A
ATTACHMENTS:
1. Current Vehicle Tow Service Franchise Agreement with Southwest Towing
2. Current Vehicle Tow Service Franchise Agreement with Mohica Towing
3. August 4, 2026 Letter Sent to Southwest Towing
4. August 4, 2026 Letter Sent to Mohica Towing
5. Southwest Towing Comments
6. Mohica Towing Comments
7. August 11, 2026 Counterproposal Sent to Southwest Towing
8. August 11, 2026 Counterproposal Sent to Mohica Towing
9. Proposed Amendment to Vehicle Tow Service Franchise Agreement with South West Towing
10.Proposed Amendment to Vehicle Tow Service Franchise Agreement with Mohica Towing