City Council Meeting: June 30, 2009
Agenda Item: 7-B
To: Mayor and City Council
From: Elaine Polachek, Deputy City Manager
Subject: Ordinance to Establish Franchise System for Regulation of Taxicab Operations and Modifying Existing Provisions Applicable to Taxis and Vehicles for Hire Recommended Action
Staff recommends that City Council introduce for first reading an ordinance to establish a franchisebased system for the regulation of taxicab operations and modify existing provisions applicable to taxis and vehicles for hire.
Executive Summary
A recent study of taxicab operations in Santa Monica found a consensus among cab companies and drivers presently operating in the City, the business community, and City staff that there are too many cabs for the market. Further, there are multiple problems presented by the current open-entry taxicab permitting system which prevent the City from reducing vehicle emissions, limiting the number of taxicabs, setting uniform fares, and requiring taxicab companies to meet operating standards. The 2009 survey of Santa Monica residents identified traffic issues as a top concern.
At their February 10, 2009, consideration of the taxicab study, Council directed staff to provide information on a medallion-based system as an alternative to the recommended franchise system; and to recommend economically viable criteria for selection of taxicab operators with an emphasis on environmentally-friendly fleets, safety criteria, discounts for seniors and persons with mobility impairments, operator viability, quality of service and enforceability of standards. Staff recommends adoption of an ordinance to establish a franchise-based system for the regulation of taxicabs, which would limit the number of taxicab companies to between four and eight companies, limit the total number of vehicles in the taxicab fleet to 250, require franchisees to meet standards for their vehicles and drivers, and be self-supporting through franchise, vehicle permit and driver permit fees.
Background
In October 2006, the Task Force on the Environment recommended to City Council that it direct staff to develop an ordinance initiating a franchise system and awarding franchises only to taxi companies whose fleets met specific emission and mileage standards. At their February 10, 2009, meeting City Council commented on the excessive number of cabs, especially in the downtown area, and the need to reduce their impact on the City and on the environment. The City has also received complaints regarding taxis cruising for business; poor customer service from drivers; confusing and high fees; lack of discounted services for senior and disabled residents; and taxicabs with Santa Monica permits operating as “bandit” taxis in Los Angeles and other cities. Traffic has become an increasing concern to Santa Monica residents and in the 2009 resident survey, traffic continued to be at the top of the list of issues of most concern to Santa Monica residents. In their consideration of the LUCE, Council endorsed guidelines to manage and reduce traffic, supporting a policy of “No Net New Trips” as the basis for traffic management and promoting sustainability.
Limiting the number of taxicabs and establishing enforceable standards would promote this policy.
Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 1 of 7 7/7/2019, 11:36 AM
Since the City has no experience with alternative taxi regulatory mechanisms, a study was conducted to help assess options for regulating taxicab operations. The study, conducted by Nelson/Nygaard Consulting Associates, concluded that:
· Santa Monica has too many taxicabs and too many taxi companies for the population; · The City’s present open-entry form of regulation, which relies on market forces, does not ensure either quality taxi service or a healthy taxicab industry; · The City should establish a taxi franchise system which uses a competitive Request For Proposals (RFP) process to award franchises to at least four but no more than eight cab companies, each with a minimum fleet size of at least 25 vehicles, and which limits the total number of authorized cabs to between 200 and 300;
· Franchised cab companies should be required to meet financial, technical and service standards for themselves, their vehicles and their drivers as a franchise condition in order to ensure quality services.
At the March 3, 2009 Council meeting, staff recommended that Council adopt an emergency ordinance establishing a moratorium on the City’s approval and issuance of new taxicab licenses and permits in Santa Monica pending the establishment of a new system for regulating taxicab operations within the City. Council directed staff to return with an ordinance but chose not to impose a moratorium on new licenses in the interim.
Discussion
Santa Monica does not presently limit the number of cabs operating in the City and issues permits to any taxicab owner who meets insurance and other minimal requirements. In 2007-2008, when Nelson/Nygaard conducted its study, there were 412 cabs operated by 55 companies in the City.
Since then, the numbers have increased by 24% and there are now 511 permitted cabs operated by 55 cab companies to serve a resident population of 91,000. Twenty of these cab companies consist of a single vehicle and 23 other companies consist of 2-10 vehicles. Taxi drivers in Santa Monica currently average about $24,000 in annual income, due to the over-saturation of the market.
Despite heavy competition, taxis in Santa Monica mostly charge higher rates than taxis in other nearby cities. Compared to nearby cities, Santa Monica has a much higher cab to population ratio.
The President of the Los Angeles Board of Taxicab Commissioners informed the City that as of May 23, 2007, taxicabs with Santa Monica permits are the single highest source of “bandit” cabs found to be operating illegally in Los Angeles without meeting L.A.’s stricter standards for vehicles, drivers and cab companies.
The current open-entry system does not provide a regulatory framework to enable the City to establish requirements used by many other cities, including:
· placing limits on the number of cab companies allowed to operate in the City and establishing rules governing their operation.
· limiting the total number of taxicabs that can operate in the City in order to allow both Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 2 of 7 7/7/2019, 11:36 AM
companies and drivers to achieve reasonable earnings.
· establishing either a single fare structure or a maximum fare. · limiting the age of taxi vehicles and/or establishing strict standards for appearance and safety.
· requiring each company to have a distinctive name and color scheme, with unique vehicle numbers, so that customers can easily distinguish among companies and City staff can more easily enforce rules and investigate complaints.
· requiring effective radio/computerized dispatching to avoid drivers cruising/waiting for walkup business, ensure service to customers and improve driver/customer security. · requiring driver training and testing in order to meet standards for knowledge of City rules, geography and English.
· requiring each company to provide wheelchair accessible vehicles · encouraging or incentivizing the utilization of vehicles that promote better air quality and/or fuel efficiency.
· encouraging or incentivizing the provision of discounts for seniors and persons with mobility impairments.
Medallion-Based Systems
At their February 10, 2009, meeting, Council directed staff to explore a medallion-based system as a possible alternative. Medallion systems, like those used in New York, Boston or San Francisco, impose a cap on the number of vehicles with provisions for the automatic renewal of vehicle licenses and for the transfer/sale of licenses between vehicle owners, conditioned only on City approval of the new owners' qualifications. The initial sale of the medallions would provide one-time revenues to the City, but the medallion would then become a commodity to be re-sold by the owner at market rates. Medallion systems are most common in large, dense cities with the need for large, economically viable taxi fleets.
While the medallion system would limit the number of taxicabs, it makes enforcement of service standards difficult as the City would continue to have the labor-intensive task of enforcing service standards on the individual vehicle owners and individual drivers as opposed to a limited number of companies under a franchise system.
In addition, the medallion system does not provide a structure to increase the taxicab driver’s income. It is common for multiple medallions to be purchased by companies or individuals acting on behalf of companies, who then lease the medallions to individual drivers. It has been suggested that the City could establish a medallion system that limits medallion sales to single driver-owners, using increased driver incomes as a means of assuring quality customer service. However, there is no mechanism whereby the City could ensure that individuals purchasing medallions are not acting as agents for other entities. Medallions are usually sold through auction by the local government.
The most recent auction held by New York City resulted in average winning bids in excess of Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 3 of 7 7/7/2019, 11:36 AM
$413,000 per medallion from a minimum bid requirement of $189,000. With the high value of medallions as a limited commodity, financing models have arisen, such as the Medallion Financial Group, a publicly traded specialty finance company. With the cost of a medallion controlled by the market, medallion owners often raise lease fees making it harder for drivers to make a profit.
Proposed Changes to Current Taxi Ordinance and Creation of New Taxi Chapter Staff is proposing the creation of a new chapter of the Municipal Code (6.49) that establishes a franchise-based system for taxi operations as well as regulations applicable to taxis. Chapter 6.48 of the Municipal Code would be revised to contain only the most basic requirements pertaining to all vehicles for hire such as insurance, business license and direct routing.
The proposed taxi franchise provisions specify criteria for franchise applicants, establish a process for granting and revoking franchises, and list basic rules applicable to operating taxis in the City.
The ordinance limits the number of franchises awarded, the total number of taxis in the City and sets a process by which those numbers can increase or decrease.
The proposed ordinance would strengthen current provisions prohibiting illegal taxi operations and impose additional requirements on franchised companies. Specifically, the proposed ordinance established the following standards and requirements:
1. Use a competitive RFP process to award franchises to at least one but no more than eight cab companies, each with a minimum fleet size of at least 25 vehicles and each with a minimum percentage of vehicles that can accommodate a wheel chair;
2. Establish an initial total limit of 250 vehicles permitted to operate in the City;
3. Structure the competitive RFP process so as to encourage the greatest use of fleets consisting of SULEV and other fuel-efficient vehicles and encourage bidding companies to propose enhancements beyond the minimum requirements, as a means of selecting the franchisees and determining how many cabs each company could operate;
4. Require that companies make available discounts to senior and persons with mobility impairments;
5. Require that each company have a distinct name, color scheme and unique cab numbers;
6. Require a centralized dispatching system, based either on radio or computerized technology; record keeping with both dispatch logs and driver logs; and a staffed place of business (not necessarily in Santa Monica) where records are kept and may be inspected and where customers may contact the company to make complaints or retrieve property;
7. Require that companies provide training to their drivers on City requirements, company procedures, defensive driving, map reading, local geography, customer relations, personal hygiene, security and public safety, and non-discrimination in the treatment of customers based on age, disability, ethnicity and gender;
8. Require that companies ensure that drivers are proficient in English so they can communicate directly with customers without the aid of cell-phone calls or other translation assistance;
9. Require that companies be responsible for their drivers’ compliance with City regulations Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 4 of 7 7/7/2019, 11:36 AM
and state and local laws, including provisions for company-specific fines and penalties for a persistent pattern of driver violations, including franchise suspension or revocation for failure to enforce compliance;
10. Require documentation of the cab firm’s financial stability adequate to meet the franchise standards, with a liability insurance coverage requirement of no less than $350,000 combined single limit per vehicle;
11. Require vehicles to be no older than a specific number of years and be certified by a Citydesignated inspection facility for safety, mechanical reliability, meter reliability, markings and required signage;
12. Establish a single metered fare rate equivalent to the prevailing fare set by the Los Angeles Department of Transportation; and two flat rates for trips to LAX, one for trips originating north of the I-10 freeway and one for trips south of the I-10 freeway;
13. Establish annual franchise, vehicle permit and driver permit fees to cover all City costs of administering the taxicab franchises; and
14. Establish mandatory record keeping requirements to ensure accountability.
Impact on Presently Permitted Taxicab Drivers and Companies In order to reduce taxicab numbers to a reasonable ratio which will serve the City’s transportation needs, the number of taxicabs now permitted to operate will need to be reduced by 50%. This would result in a decrease of 250 taxis. Of the 55 companies now permitted to operate, 47 would not meet the suggested minimum fleet size of 25 vehicles per company under the recommended franchise structure. However, as the drivers and small companies themselves suggested at the workshops, independent drivers, single owner/operators and small companies have the option of forming their own cooperatives or associations and submitting eligible bids, thus not limiting franchise eligibility to the larger taxicab companies. At least one taxi cooperative, consisting of drivers who own and operate their own taxi vehicles, is currently operating in Santa Monica.
Vehicle Emission/Fuel Efficiency Standards
At its December 15, 2008 meeting, the Task Force on the Environment reviewed with City Attorney’s Office staff the issue of federal pre-emption of local standards for vehicle emissions and fuel economy and adopted a motion stating its support for the establishment of a taxi franchise agreement that would maximize criteria for pollutant reduction, greenhouse gas emission reduction, and petroleum displacement for future taxi operations in Santa Monica. Staff has reviewed the legal implications of setting specific vehicle emission/fuel efficiency standards and has found that attempts to impose stricter regulatory standards than those authorized by the federal Clean Air Act and Energy Policy and Conservation Act have been overturned by courts based on the doctrine of federal preemption. However, other cities, including San Francisco and New York, have been able to achieve the goals of reducing emissions and dependence on carbon-based fuels through incentives. Rather than limit taxicab fleets to compressed natural gas-powered vehicles or hybrid electric vehicles, staff recommends a more flexible approach that would evaluate proposals in a Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 5 of 7 7/7/2019, 11:36 AM
way that rewards bidders that commit to using fleets consisting of SULEV and other fuel-efficient vehicles.
Discounted Fares for Senior and Customers with Disabilities Residents have requested that discounted taxi service be available to seniors and persons with mobility impairments. Bid evaluations will include points for companies that commit to providing discounts to seniors and persons with mobility impairments.
Alternatives
As an alternative to adopting a franchise-based taxicab ordinance, Council could adopt a medallionbased system as described above.
Financial Impacts & Budget Actions
There is no legal limitation on the amount of franchise fees that the City may impose for the exclusive/limited privilege of operating a taxicab business on public city streets. The costs to support, administer and enforce a franchise system can be recovered through franchise, permit and inspection fees paid by the taxicab companies and drivers.
The following taxi and driver fees are currently in place:
Taxicab
- Taxi Decal Fee: $ 75.60
- Processing Fee: $144.61
TOTAL: $220.21
Taxi Driver (new)
- Processing Fee: $144.61
- Photo Badge: $ 84.55
- Fingerprint: $102.70
TOTAL: $331.86
Taxi Driver (renewal)
- Processing Fee: $144.61
- Photo Badge: $ 84.55
TOTAL: $229.16
Staff recommends that the franchise fee and vehicle and driver permit fees be established at rates both comparable to surrounding cities as well as to fully cover the costs of administering the franchise operations. At this time, it would appear that fees in the following range would meet these objectives:
Annual franchise fee per cab firm: $10,000
Annual vehicle permit fee per taxicab: $ 875
Annual driver permit fee per driver: $ 150
Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 6 of 7 7/7/2019, 11:36 AM
Administration of the proposed franchise system would be performed by the Traffic Division of the Police Department and would consist of annual review of the franchise-holder’s performance, ongoing processing of vehicle and driver permits, and supervision of the vehicle inspection/certification process by a City-designated facility.
Prepared by: Pamela McGarvey, Acting Revenue Manager
Approved: Forwarded to Council:
Elaine Polachek
Deputy City Manager
P. Lamont Ewell
City Manager
Attachment 1 - Taxicab Ordinance
Taxicab Franchise - City of Santa Monica https://www.smgov.net/departments/council/agendas/2009/20090630/s2... 7 of 7 7/7/2019, 11:36 AM