April 29, 2025
Agenda Item No. 16
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
David Miner, Chief of Police - 949-644-3701, [email protected] PREPARED BY:
Jonathan Stafford, Deputy Director - 949-644-3650, [email protected] TITLE:
Amendment No. 2 to Official Police Tow Truck Service Agreements with G&W Towing and Southside Towing ABSTRACT:
The Police Department requests City Council approval to amend the service agreements with the City of Newport Beach’s two official police towing operators (Operators), G&W Towing and Southside Towing. If approved, the amendment would increase towing rates consistent with a regional average of towing rates and amend insurance requirements to require more General Liability coverage and eliminate the requirement for Excess Liability coverage. The amendment would also allow each Operator $75,000 in insurance cost offset for the remainder of the towing agreements. The insurance cost offsets would be handled as expenditures and funded with existing towing revenue.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Approve Amendment No. 2 to the Official Police Tow Truck Service Agreements with G&W Towing of Costa Mesa and PD Transport, Inc., DBA Southside Towing, of Costa Mesa increasing towing rates, amending insurance requirements, and allowing insurance cost offsets in an amount not-to-exceed $75,000 per towing operator and authorize the Mayor and City Clerk to execute the amendments.
DISCUSSION:
Background
G&W Towing and Southside Towing have been the two official police towing operators for the City since April 2016. The original towing service agreements ran through December 2021 and were extended five additional years in accordance with NBMC §5.15.080, terminating on December 31, 2026.
Increased Operating Costs
Since extension of the agreements in 2021, both Operators have reported substantial increases in operating costs, most significantly in insurance premiums, especially for Excess Liability coverage. For example, Southside paid $4,250 for its Excess Liability coverage upon initiation of the towing agreement in 2016, but its renewal for 2024 cost $87,597, an increase of 1,961%. G&W reported a 209% increase in Excess Liability premiums over the same time frame. Neither Operator had claims against their policies that would have increased premiums. Towing rates, the most significant source of revenue for the Operators, only increased 27.1% over the same timeframe. The table below shows the increases in insurance premiums compared to the increases in towing rates:
Excess Liability Costs
% Increase
2016
2024
Excess Liability
Towing Rates
G&W Towing
$ 22,552
$ 69,745
209.3%
27.1%
Southside Towing
$ 4,250
$ 87,597
1,961.1%
27.1%
Reduced Operator Revenues
Both Operators have seen reduced revenues due to changes in case law and Police Department practices. The two cases with the most impact are a 9th Circuit decision that 30-day vehicle impounds for driving on a suspended license were unconstitutional and a more recent decision from the Los Angeles Federal District Court that found vehicles could not be towed for unpaid parking citations without a warrant, except under limited circumstances. Both decisions resulted in fewer vehicle impounds by Police Department employees and a reduction in corresponding vehicle storage fees.
Towing Rates
The original agreements included towing rates the Operators can charge to owners of impounded vehicles, which have been updated annually, also in accordance with NBMC §5.15.080. A recent study of regional police agencies’ towing rates showed that the Newport Beach towing rates were $417, which is 2.6% below the regional average of $428; therefore, the Police Department is requesting to increase towing rates by
2.6% ($11). This increase would place Newport Beach’s towing rates in line with the average regional towing rates described in Attachment C.
Insurance Coverage Changes
Requested changes to the required insurance coverage are based on thorough analyses by the City’s Risk Manager and Finance Director. The existing insurance requirements mandate an Excess Liability policy with $4 million in coverage, which is not required by any of the other agencies that contract for towing services with either Operator. The coverage changes would eliminate the requirement for a $4 million Excess Liability policy, but would increase General Liability coverage from $1 million per occurrence/$2 million general aggregate to $2 million per occurrence/$4 million general aggregate.
The net effect of the insurance requirement changes is that the Operators can reduce their Excess Liability policy coverage from $4 million to $3 million, which should reduce costs as Excess policies are written on a per-million basis.
Insurance Cost Offsets
The Police Department is also requesting to allow the Operators to bill the City for some of the costs of the required insurance coverage. In order to receive the insurance cost offset, the Operators will be required to show that the costs for the insurance coverage required by the City exceed the offset amounts allowed in the amendment. This requirement is described in detail in the amendments and the costs are described in the Fiscal Impact section below.
The Police Department is requesting City Council approval to address these cost increases and reductions in revenues by increasing towing rates by 2.6%, slightly reducing insurance coverage requirements, and providing insurance cost offsets as described in this report.
FISCAL IMPACT:
The insurance cost offsets would be effective beginning July 1, 2025 to coincide with the beginning of Fiscal Year 2025-26, ending with the termination of the towing agreements on December 31, 2026. The offset amount allowed would be $50,000 per Operator in FY 2025-26, for a total of $100,000, which would be funded through existing Vehicle Release Fee revenue. Vehicle Release Fee revenue is projected to bring in $155,000 in FY 2025-26.
In FY 2026-27, the insurance cost offset would be $25,000 per Operator because the towing agreements terminate halfway through the fiscal year. Vehicle Release Fee revenues are received in Account No. 01035352-521180 and costs will be expensed within the Traffic Division of the Police Department.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A – Amendment No. 2 to Service Agreement with G&W Towing Attachment B – Amendment No. 2 to Service Agreement with PD Transport, Inc. DBA Southside Towing Attachment C – Regional Towing Fees Comparison
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Amendment No. 2 to Official Police Tow Truck Service Agreements |with G&W Towing and Southside Towing
April 29, 2025
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