Taxi Franchises

Council moves to franchise taxi companies
By Melody Hanatani

Taxi cabs line up along Santa Monica Boulevard on Wednesday morning. Cab companies will now have to battle for the right to pick up customers in Santa Monica after the City Council on Tuesday established a more stringent licensing system to relieve a notoriously overcrowded taxi population. photo by BRANDON WISE.
July 02, 2009
CITY HALL — Cab companies will now have to battle for the right to pick up customers in Santa Monica after the City Council on Tuesday established a more stringent licensing system to relieve a notoriously overcrowded taxi population.

The new franchise structure, which will officially take effect after the council approves it upon a procedural second reading, creates a competitive bidding process for a cab license, a major shift from the existing open-entry system in which all operators who meet insurance and other basic requirements are allowed to conduct business in the city.

The franchise system is expected to cut the number of cabs by more than half. Between one and eight companies will receive a franchise agreement.

In order to even qualify for a franchise license, companies must meet a set of criteria, such as have a minimum fleet size of 25 vehicles, operate a centralized dispatching system, and have drivers who are proficient in English. The bidding process will be structured to give weight to companies that are local, use SULEV or other fuel-efficient cars and offer discounts to seniors and persons with mobility problems.

The proposal for a franchise structure came after the Task Force on the Environment in 2006 recommended the development of an ordinance that creates a franchise system awarding licenses to companies whose cars meet certain emission and mileage standards. A study by Nelson/Nygaard Consulting Associates followed two years later, finding that at the time, there were 412 cars operated by 55 companies in the city.

That number has since grown to 522 permitted cabs, all for a city that has about 91,000 residents.

"This has really been a long time coming," Councilman Richard Bloom said. "I do think we're going to achieve a number of goals by moving to franchising, not the least of which are moving further along toward our goals for sustainability, reducing the amount of chaos on our city streets that I think will measurably improve traffic congestion."

Some taxi company owners asked that council consider a medallion system, which imposes a cap on the number of cars but allows vehicle licenses to be automatically renewed and transferred or sold to other cab drivers as long as city officials determine that the new owner meets qualifications. The system is used in New York, Boston and San Francisco.

City officials said they decided not to go with the medallion system because it poses challenges with enforcing service standards. It also does not increase cab drivers' income, officials said.

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There was also concern that the franchise system could lead to unfair control over the cab industry by a select group of companies.

Betty Hung, an attorney with the Inner City Law Center which represents the Los Angeles Taxi Worker Alliance, said that a recent UCLA study exposed problems in the franchise system in Los Angeles, including shredding of financial documents and misclassification of political contributions.

"This system unfortunately continues and we believe that it's critical for you to take into account the findings of the UCLA study," Hung said.

The new system is expected to weed out the majority of current operators. City officials believe that 47 of the 55 companies would not meet the minimum fleet requirement of 25 cars.

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