SR-051468-4A
CITY OF SANTA MOIVICA
DATE: March 22, ig58
TO: The Honorable City Council
FRCM: City Manager
SUBJECT: Taxicab Rates
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THIS ii%iUBT EE
RETJ??dED `O'i'HE
CITY u'Li ~'; OFi~1CE
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The iJest Coast Transportation Company (20 cabs) and the Santa Monica Cab
Company (13 cabs) have jointly requested rate increases as follows:
Existing Rates
50~--flag drop, including the first 1/4 mile
10~--for each additional 1/4 mile
$3. 00--per hour for customer-requested waiting time
Requested Rates
50~--flag drop, including the first 1J5 mile
10~--for each additional 1/5 mile
$5. 00--per hour for customer-requested waiting time and
traffic delay
The requested mileage rate is equivalent to $1.00 per mile as opposed to an
existing rate of 80~` per mile, or an increase of 25°jo. The waiting time request
represents an increase of 100°jo.
Comparative rates for adjacent communities are shown in the green exhibit,
which indicates that current rates are generally comparable to those now
approved for Santa Monica. However, rate increase requests are pending in
Los Angeles for out-of-city or long-haul trips for all operators, as well as a
request of 'vVest Coast for a general rate increase.
This office would doubt that any claim of uniformity can be made with respect to
the basis upon which rating agencies establish maximum taxicab rates. In
earlier years, it was not uncommon to fix such rates after considering net
income and its relationship to invested capital. In more recent years, many
rating agencies have been disposed to accept a rate fixing system based on the
"operating ratios. "
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The Honorable City Council
'_vIarch 22, 1968
68-C-27
Generally the "operating ratio" system (gross cost plus income tax less interest
expense versus gross income) was accepted because of the relatively low capital
investment required by taxicab companies as opposed to either gross cost or
gross income.
Although the administration is not completely convinced that the "operating ratio"
method is appropriate, it is necessary to recognize that this system has acquired
a certain status as a consequence of continued use by reputable rating agencies.
The general position of the petitioning companies under both systems is as
follows:
Description
Santa Monica West Coast
Cab Co. Transp. Co.
Net Capital Investment
Net Income--1967
% of Capital Investment
Cost + Tax -Interest
Gross Income or Revenue
Operating Ratio
($2, 405) $110, 974
5, 221 34, 493
--- 31.08%
$336, 079 $1, 218, 493
343, 261 1, 275, 302
97. 91 95.55
( iYest Goast based on entire company operation)
The determination of an acceptable operating ratio is not, apparently, an exact
science and has not been applied uniformly by other agencies. The classic
argument is, of course, that the ratio should be based on the most efficient
operation and that competition will resolve the problems of the less efficient
operator. Rate fixing agencies, however, have not always agreed with this
position. The Los Angeles city agency, for example, has approved the following
ratios:
Company
Ratio Approved
1962 1967
Valley Gab Company
Yellow Cab Company
?+Tilmington Cab Company
San Pedro Cab Company
97.2 96. 6
97. 2
92. 7
93. 6
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The Honcrabl~ t':ity Coun_i.i
March 22, lgbc
ba••C-z7
It should be noted, however, tk:at the Los Angeles rates are uniform for all the
companies involved except Valley Cab. In short, Yellow Cab was not granted a
special rate in 19b2 because their relative costs exceeded those of the 'J7ilmingtcn
or San Pedro operations. On the other hand, Valley Cab was granted a special
rate in 19b7 although the operating ratio was not substantially better (or worse)
than that of Yellow Cab.
The attachzd financial statements (yellow for Santa Monica Gab and pink for
`Nest Coast) seem to indicate that an operating cost increase of 3'fo would
terminate the operations of Santa Monica Cab and would wipe out any return tc
the `vVest Coast Transportation Company. The administration would doubt that
either consequence is in the best interest of the City.
The administration proposes that the City Council consider establishing a Flag
Drop Rate of 55~, including the first 1/4 mile, and retaining the remainder of
the existing ratz schedule. This would provide a mileage rate of 35~ for the
first mile, or a minimum increase of b 1/4% ranging downward, depending upon
the distribution of minimum rate trips versus those in zxcess of 1 mile.
1p
PERRY SCOTT, City Ivfanager
PS/cc
attachments
c. c. City Clerk
City Attorney
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