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sr-062811-11a~ Supplemental Sancta Monica City Council Report City Council Meeting: June 28, 2011 Agenda Item: II-~ To: Mayor and City Council From: Carol Swindell, Director of Finance Subject: Additional Alternative for Taxicab Franchise Credits and Fees Item 11-A Executive Summary The staff report submitted for Agenda Item 11-A included a recommendation by staff to provide apro-rated credit of two months, for all fees paid, due to the delay of the start of the franchise until March 1, 2011. The staff report also included two alternative proposals that were based on the requests of the five taxicab franchise companies. The purpose of this supplemental report is to provide a third alternative to the staff recommendation and the two alternatives already proposed. This third alternative seeks to reach a compromise by retroactively establishing a taxicab franchise/permit year of January 1St to December 31St, and changing the expiration date for vehicle and driver permits to December 31St This alternative, which is supported by staff and the five franchises, would require Council to direct staff to prepare necessary ordinances to modify the franchise terms to January 1 -December 31, and to delay by six months the collection of renewal fees. Fees would be collected after such time that Council has considered the proposed ordinances. Discussion The initial staff recommendation is based on fee payment due dates and permit expiration dates mandated by the existing Santa Monica Municipal Code (SMMC) and included in the five ordinances establishing the terms and conditions of the taxicab company franchises. The staff recommendation in the initial report requires no change to the SMMC or to the taxicab company terms and conditions. 1 The third alternative presented in this supplemental report,. which is supported by staff and the five franchises, would require Council to direct staff to return with ordinance amending: • Section 6.49.040(1)(1) approved by Council on July 28, 2009, changing the due date for all franchise fees to January 1st of each year, • Sections 6.49.040(1)(2) approved by Council on July 28, 2009, changing the taxicab vehicle permit annual expiration date from June 30th of each year to December 31st of each year, • Sections 6.49.070(e) approved by Council on July 28, 2009, changing the taxicab driver's permit annual expiration date from June 30th of each year to December 31st of each year, and • the terms and conditions for each taxicab franchise company approved by Council on November 28, 2010, changing the expiration date of taxicab vehicle and driver permits from June 30th of each year to December 31st of each year Financial Impacts & Budget Actions This alternative would result in no revenue impact to the City. The cost of reprinting permits would be approximately $5,000 which is available in account 01224.407691. Prepared by: Salvador M. Valles, Taxi Franchise Program Coordinator Approved: Forwarded to Council: °~ rS~` Carol Swindell ~ Rod Gould Director of Finance City Manager 2 City Council Meeting: June 28, 2011 Agenda Item: (, (-~} To: Mayor and City Council From: Carol Swindell, Director of Finance Subject: Taxicab Franchise Credits and Fees Recommended Action Staff recommends that the City Council: 1. Adopt a resolution approving a prorated credit formula to be applied to future taxicab franchise fees (Attachment Al and A2); 2. Adopt a resolution revising the taxicab Airport Flat Rate to Los Angeles International Airport to $35 maximum from any origination point within the City of Santa Monica. (Attachment B). Executive Summary The taxicab franchise program was scheduled to take effect January 1, 2011, giving each taxicab franchisee exclusive access to the Santa Monica market. On December 23, 2010, following a lawsuit by certain non-franchised taxicab companies, a temporary restraining order was granted, blocking implementation of the franchise system. Although the motion for a preliminary injunction was denied at the January 19, 2011 hearing, the lawsuit caused implementation of the franchise to be delayed until March 1, 2011. Although there was a delay, franchisees were still required to make full payment of all applicable franchise fees, without consideration of the delay in the franchise program launch. Franchisees have requested that fees be prorated to account for the shortened permit/franchise year. Additionally, in anticipation of the franchise program's launch in January 2011, the City had waived all driver and vehicle renewal fees that would have normally been due by October 1, 2010. Although the Request for Proposal (RFP) that the franchise companies responded to specifically indicates that fees would not be prorated, the City recognizes that there was an impact due to the delay. Each franchisee experienced disparate impact, depending on whether a company experienced a decrease or increase in the number of vehicles operating in .the City as a result of being granted a franchise. This allowed some companies to maintain fleet sizes that were larger than the fleet size authorized under their respective franchises, and in other cases, it denied the company full access to the taxicab market. in accordance with their franchise agreement for the two-month delay. Staff recommends adoption of a thirty-three percent credit on the $5,000 franchise fees paid for 2011 be applied to the 2012 franchise fee. This credit would provide each franchisee with a $1,667 credit towards the 2012 franchise fee. Staff also recommends adoption of a thirty-three percent credit on vehicle and driver permit franchise fees paid in 2011, less any cost savings enjoyed by the company as a result of the waiver of all renewal fees due in October 2010. Because there is now some experience with the program since implementation on March 1, 2010, staff is also recommending that the flat rate to Los Angeles International Airport be revised to $35 maximum from any origination point in the City of Santa Monica. Background On July 28, 2009, Council adopted an ordinance establishing the franchise based system for regulating taxicabs which added Chapter 6.49 to the Santa Monica Municipal Code (SMMC). The amendments to the Code included establishing the taxicab vehicle and driver's permit year as follows: Section 6.49.040(1)(2) Each taxicab franchisee shall be required annually to obtain a taxicab vehicle permit and to pay to the City an annual taxicab vehicle permit fee for each taxicab operating under its franchise. Any taxicab vehicle permit issued prior to June 30, 2011, shall expire on June 30, 2011, unless revoked or suspended prior to that date pursuant to this Chapter. Taxicab vehicle permits issued after June 30, 2011, shall expire at midnight on the June 30th next succeeding its issuance, unless revoked or suspended prior to that date pursuant to this Chapter. Section 6.49.070(e) Any taxicab driver's permit issued prior to June 30, 2011, shall expire on June 30, 2011, unless revoked, suspended or terminated prior to that date. Taxicab driver's permits issued after June 30, 2011, shall expire at midnight on the June 30'h next succeeding its issuance, unless revoked suspended or terminated prior that date. A taxicab driver's permit which has not been revoked, suspended, or terminated maybe renewed annually by paying the annual taxicab driver's permit fee and by filing with the City a verification that the driver is in compliance with the provisions of this Section and test results form a certified laboratory or testing agency proving. that the driver has tested negative for drugs and alcohol as provided by Section 53075.5(b)(3) of the California Government Code. z On November 23, 2010, Council awarded the .franchises by ordinance to five companies. The ordinances established the terms and conditions of the franchise for each company, which set the effective date for the franchise for January 1, 2011. The terms and conditions were subsequently agreed to by each company and requires payment of the annual taxicab driver's permit fee and the annual vehicle permit fee as of the effective date of the franchise, and further requires that the permits expire each June 30th thereafter. The expiration date of June 30, 2011 is consistent with Section 6.49.040 (i)(2) and 6.49.070(e) of the SMMC. The terms and conditions make payment of these fees the responsibility of the taxicab company. At the November 9, 2010 Council meeting, staff recommended and Council approved the following taximeter flat rates to Los Angeles International Airport: North of I-10 to Los Angeles International: $45 maximum South of I-10 to Los Angeles International: $35 maximum Discussion Based on the recommendations of a 2008 study by Nelson\Nygaard Consulting Associates of taxicab operations in Santa Monica, on July 28, 2009, Council adopted an ordinance establishing afranchise-based system for the regulation of taxicabs, which required the program to be self-supporting through franchise, vehicle permit and driver permit fees. In compliance with the ordinance requirements, a Request for Proposals (RFP) for citywide taxicab franchises was issued on January 14, 2010. On November 23, 2010, the Council awarded franchises by ordinance to Bell Cab Company, Inc.; Independent Taxi Owners' Association; Metro Cab Company, LLC; TMAT Corp., dba Taxi! Taxi!; and L.A. Taxi Cooperative, .Inc., dba Yellow Cab Company. The program was scheduled for implementation in January 2011 giving each taxicab franchisee access to the Santa Monica taxicab market with an established number of vehicles and all five companies paid their 2011 franchise fee of $5,000. The Request for Proposals documents and all communications to-the taxicab companies consistently included information that the first year's franchises would be January -June 2011 and 3 would not be prorated. No taxicab company paid fees for the first six months of FY10- 11. On December 23, 2010, following a lawsuit by certain non-franchised taxicab companies, a temporary restraining order was granted, blocking implementation of the franchise system. Although the motion for a preliminary injunction was denied at the January 19, 2011 hearing, the lawsuit caused implementation of the franchise to be delayed until March 1, 2011. Due to the delay in the program launch, the City has received requests from all five franchise companies to prorate the FY10-11 fees based on the shortened permitfranchise year including the annual franchise fee of $5,000. Franchisees argue that these fees are annual fees and the permit/franchise year for FY10-11 has been for four months instead of a full twelve. Since the program originally approved by Council included fees for apermit/franchise year of January 2011 to June 2011, with a permit expiration date of June 30, 2011, the proposed credit formula utilizes a prorated amount of two months, which is equal to thirty-three percent based on a six-month permitfranchise year instead of a twelve-month permitfranchise year. The proposed credit formula is designed to also take into account the disparate economic impact felt by each franchisee, due to the delay in implementation. Franchisees have experienced disparate impacts in part because, prior to implementation of the program, each company had a different number of vehicles deployed. In one case a company awarded a franchise was required to reduce its fleet doing business in Santa Monica and in other cases a franchisee was required to increase its fleet doing business in Santa Monica. Although the franchise fees paid by each company were annual fees, the first fee covered only asix-month permiUfranchise year with a full vehicle deployment as granted to each company by Council. Therefore, a company that was required to increase its fleet paid a vehicle fee for taxicabs that were unable to operate in Santa Monica during the two-month delay. Consequently, a company that was required to reduce its fleet enjoyed greater access to the market. No company was required to pay any driver permit fees under the old system, providing cost savings for companies. with existing fleets licensed in Santa Monica. Companies 4 continue to be responsible for paying the business license fee of $250 per vehicle: Consequently, companies that had fleets larger than the number granted by Council through the franchise program, enjoyed greater access to the market than its franchise allowed without payment of licensing fees. The credit formula proposed by staff considers all of these factors in its recommendation resulting in a credit that recognizes the delay in implementation as well as the different economic impacts for each company. Alternative Proposals Staff met most recently with the franchise companies on June 20, 2011, to provide each company an opportunity to amplify their position concerning a twelve-month permit/franchise year versus asix-month permitfranchise year when considering any proration formula, and the application of an adjustment factor to account for the disparate impact caused by the delay. The companies have proposed two alternatives, outlined below, that would effectively create atwelve-month permitfranchise year for the first permit/franchise year, instead of a six-month permit/franchise year established by the five ordinances adopted in November 2010 that granted taxicab franchises to the companies. It is necessary to note that, changing the first permitfranchise year from six months to twelve months does not have a specific relationship to the delay in the franchise effective date, since the six month permitfranchise year was not a direct or indirect result of the delay. Proposal one is a request to modify the SMMC to retroactively change the permit/franchise year from July 1St to June 30t" of each year, to March 1St to February 28t"/29t" of each year, and to change the first permiUfranchise year from a six month permit/franchise year, as defined by ordinance, to a 12 month permitfranchise year. This proposal would. eliminate the need to provide a credit and would shift the end of the permiUfranchise year to February 28t"/29t", at which time permit fees would be collected for renewals. The proposal would require an ordinance to change several sections of 5 the SMMC; it would require five additional ordinances to change the terms and conditions for each of the five companies, to retroactively adjust the permitfranchise year. Administratively, this option would also require the City to reissue new permits to all drivers, a reprinting of all vehicle permits to account for the new permiUfranchise year, and various other administrative documents, forms, and files. There would be no revenue-based fiscal impact to the City, since payment of permits would be delayed, but would still be paid in FY11-12. Proposal two is a request to modify the term and conditions for each franchise, to provide asixty-seven percent prorated credit for all franchise and permit fees paid to date, which would be applied to future fees due. This proposal would effectively convert all fees paid to date to count towards a 12 month permiUfranchise year instead of the 6 month permitfranchise year established by ordinance, and be prorated accordingly to adjust all fees to be equal to sixty-seven percent of the fee (i.e. 4/12th). For example, the franchise fee paid would be adjusted retroactively from $5000 to $1667, vehicle fees would be adjusted retroactively from $1200 to $400, and driver permit fees would be adjusted retroactively from $150 to $50. If this proposal is adopted, the credits to each company would be: Bell Cab Company, Inc. $ 56,515 Independent Taxi Dwners' Association $ 61,942 Metro Cab Company, LLC $ 55,510 TMAT Corp., dba Taxi! Taxi! $ 65,761 L.A. Taxi Cooperative, Inc., dba Yellow Cab Company $ 59,530 Total Fiscal Impact $299,256 The fiscal impact to the City of applying asixty-seven percent prorated credit on FY10- 11 fees to future fees would be a reduction in FY11-12 revenue by $299,256, and would be an increase of $214,093 more than what Staff has recommended. Net revenues for FY11-12 are estimated to be $252,807 when credits are applied. 6 The franchisees have also requested, in conjunction with either of the two proposals, that the terms and conditions of the franchise for each franchisee be changed to extend the expiration of each franchise from 11:59 pm PST on December 31, 2015, to 11:59 pm PST on February 28, 2016. Taximeter Airport Flat Rate Staff recommends an adjustment to the flat rate to Los Angeles International Airport, based on feedback from major Santa Monica hotel operators, the -Santa Monica Convention and Visitors Bureau and the taxicab franchisees. The current maximum rates of $35 and $45, based on boundaries North and South of I-10 in Santa Monica, create confusion for the passengers regarding what rate is available to them and encourage drivers to charge the higher rate regardless of the origin point of the trip. Although the two rates were recommended by the 2008 study that was conducted by Nelson\Nygaard, the rates are perceived as arbitrary by consumers and hotel operators. Financial Impacts & Budget Actions Credits recommended by Staff are based on fees paid through June 15, 2011, and are as follows for each company: Bell Cab Company, Inc. $16,217 Independent Taxi Owners' Association $27,766 Metro Cab Company, LLC $2Q,581 TMAT Corp., dba Taxi! Taxi! $ 2,472 L.A. Taxi Cooperative, Inc., dba Yellow Cab Company $18,127 Total Fiscal Impact $85,162 Based on initial estimates, the impact from the proposed credits in FY10-11 would be a reduction in franchise/permit fee receipts of $85,162. Net revenues are estimated to be $381,738 in account number 01224.407691 when credits are applied. 7 Prepared by: Salvador M. Valles, Taxi Franchise Program Coordinator Approved: ~~ Carol Swindell Director of Finance Forwarded to Council: Rod Gould City Manager Attachments: A1. Resolution - granting a prorated credit to each franchisee towards future fees A2. Taxicab Franchise Credit Calculations B. Resolution -revising the fee schedule for taxicab fees s City Council Meeting 06-28-11 Santa Monica, California RESOLUTION NUMBER (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA GRANTING A PRORATED CREDIT TO EACH TAXICAB FRANCHISEE TOWARDS FUTURE FEES WHEREAS, the City of Santa Monica manages taxicab franchises to ensure an effective and efficient taxicab fleet that meets a common standard of care; and WHEREAS, the City Council of the City of Santa Monica ("Council') is authorized to set annual taxicab franchise fees, annual taxicab vehicle permit fees, and annual taxicab driver permit fees; and WHEREAS, the January 1, 2011 implementation date for the taxicab franchise system was delayed through no fault of the taxicab franchisees; and WHEREAS, despite the implementation delay, all franchisees paid the full franchise fees for the fiscal year, even though they were unable to operate pursuant to their franchises for part of the year; and WHEREAS, the implementation delay impacted the five taxicab companies' franchise fees differently, depending in part upon changes in fleet size established by Council; and 1 WHEREAS, in fairness, since the taxicab franchisees did not cause the implementation delay, the City wishes to provide prorated franchise fee credits to each franchisee; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The following credits shall be credited to future fees for each taxicab franchisee on a prorated basis, effective immediately. Bell Cab Company, Inc. $16,217 Independent Taxi Owners' Association $27,766 Metro Cab Company, LLC $20,581 TMAT Corp., dba Taxi! Taxi! $ 2,472 L.A. Taxi Cooperative, Inc., dba Yellow Cab Company $18,127 Total Fiscal Impact $85,162 SECTION 2. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. APPROVED AS TO FORM: MARSHA JONES MOUTRIE City Attorney 2 ATTACHMENT A2 Taxicab Franchise Credit Calculations (fees paid as of June 15, 2011) BELL CAB 2011 Driver and Vehicle Franchise fees Paid 65 Driver Permit Fees Paid 58 Vehicle Permit Fees Paid Total Driver and Vehicle Permit Fees Paid Credit Factor of 33.33% $87,450 ADJUSTMENT -FEES NOT COLLECTED Credit with Adjustment of $11,487 (49 permit fees at $234.43 each not collected) $14,550 2011 Franchise Fee Paid $5,000 Credit Factor of 33.33% Total Credit to be Applied to Future Fees ITOA 2011 Driver and Vehicle Franchise Fees Paid 119 Driver Permit Fees Paid $17,850 58 Vehicle Permit Fees Paid $69,600 Total Driver and Vehicle Permit Fees Paid Credit Factor of 33.33% ADJUSTMENT -FEES NOT COLLECTED Credit with Adjustment of $3048 (13 permit fees at $234.43 each not collected) 2011 Franchise Fee Paid Credit Factor of 33.33% $9,750 $69,600 $79,350 $26,447 $1,667 $16, 217 $29,147.09 $26, 099 $5,000 $1,667 Total Credit to be Applied to Future Fees $27,766 ATTACHMENT A2 METRO CAB 2011 Driver and Vehicle Franchise Fees Paid 119 Driver Permit Fees Paid 50 Vehicle Permit Fees Paid Total Driver and Vehicle Permit Fees Paid Credit Factor of 33.33% $17,850 $60,000 $77,850 $25,947.41 ADJUSTMENT -FEES NOT COLLECTED Credit with Adjustment of $7033 (30 permit fees at $234.43 each not collected) $18,915 2011 Franchise Fee Paid $5,000 Credit Factor of 33.33% $1,667 Total Credit to be Applied to Future Fees TAXI TAXI 2011 Driver and Vehicle Franchise Fees Paid 117 Driver Permit Fees Paid 63 Vehicle Permit Fees Paid Total Driver and Vehicle Permit Fees Paid $17,550 $75,600 $93,150 $20,581 Credit Factor of 33.33% $31,046.90 ADJUSTMENT -FEES NOT COLLECTED Credit with Adjustment of $30,241 (129 permit fees at $234.43 each not collected) $805 2011 Franchise Fee Paid $5,000 Credit Factor of 33.33% $1,667 Total Credit to be Applied to Future Fees $2,472 ATTACHMENT A2 YELLOW CAB 2011 Driver and Vehicle Franchise Fees Paid 95 Driver Permit Fees Paid 58 Vehicle Permit Fees Paid Total Driver and Vehicle Permit Fees Paid Credit Factor of 33.33% $14,250 $69,600 $83,850 $27,947.21 ADJUSTMENT -FEES NOT COLLECTED Credit with Adjustment of $11,4878.07 (49 permit fees at $234.43 each not collected) 2011 Franchise Fee Paid Credit Factor of 33.33% $16,460 $5,000 $1,667 Total Credit to be Applied to Future Fees $18,127 City Council Meeting 06-28-11 Santa Monica, California RESOLUTION NUMBER (CCS) (City Council Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA MODIFYING TAXIMETER RATES WHEREAS, the City of Santa Monica manages taxicab franchises to ensure an effective and efficient taxicab fleet that meets a common standard of care; and WHEREAS; the City Council of the City of Santa Monica ("Council") is authorized to set taximeter rates by resolution; and WHEREAS, on November 9, 2010, Council adopted Resolution No. 10542 (CCS) establishing annual taxicab franchise fees and taximeter rates; and WHEREAS, experience in administering the taxicab franchise program thus far has shown that having two flat rates for taxicab transportation services to the Los Angeles International Airport depending on whether the trip originates north or south of the Interstate 10 (I-10) highway creates confusion for passengers regarding what rate applies to them and encourages taxicab drivers to charge the higher rate regardless of the origination point of the trip; and WHEREAS, adopting a .single flat rate for trips to Los Angeles International Airport without regard to the origination point would more effectively and efficiently serve 1 the public's taxicab transportation needs, improve customer service, discourage taxicab drivers from improperly charging a higher rate, and thereby promote the general welfare; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES RESOLVE AS FOLLOWS: SECTION 1. The following flat rates are hereby adopted, effective as of the effective date of this Resolution: Airport Flat Rates: Santa Monica to Los Angeles International Airport $35 maximum Santa Monica to Bob Hope Airport $75 maximum SECTION 2. If there are any conflicts between the rates adopted in this Resolution and any adopted prior resolution or schedule, the rates adopted through this Resolution shall take precedence. SECTION 3. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. 2 APPROVED AS TO FORM: Reference Resolution No. 10591 (CCS)