CITYWIDE — A member of Santa Monica’s taxi franchise system with numerous violations of its agreement with City Hall is looking to sell its business to an outside firm, preferably before it loses the most valuable part of its portfolio — the franchise itself.
Metro Cab, a local firm that operates only within Santa Monica, has approached City Hall with the desire to sell its business to All Yellow Taxi after both the company and city officials expressed concerns about Metro’s financial viability and violations of the franchise rules.
All Yellow Taxi would continue to operate under Metro’s name and use its distinctive green-and-white Priuses.
Discussions between the two companies began approximately eight or nine months ago, said David Gershwin, an attorney for All Yellow Taxi.
It’s unclear whether or not the business decided to sell because of the problems it was experiencing or if the decision was made prior.
“I don’t know if the first conversation with All Yellow or anyone else occurred after the city told us about the problems, or if there was another indication,” said Donald Burris, attorney for Metro Cab.
The franchise is the company’s most prized asset, Burris said, noting that the cars without the franchise were “of minimal value.”
The City Council has to give the go ahead for All Yellow Taxi to take over the franchise for Metro Cab, which means that the company has to convince the municipal powers-that-be that it can meet the qualifications of any company that was awarded the franchise, said Salvatore Valles, who manages the taxi franchise system for the Finance Department.
That means proof that All Yellow Taxi has the financial wherewithal to make the purchase and keep up with its requirements, amongst other things, Valles said.
Metro Cab owners Slim Said and Fouad Saneh certainly believe that the company can, otherwise they wouldn’t have selected them as a partner, Burris said.
“I can’t see a disapproval here. We’ve been very careful,” Burris said.
Prior to the franchise system, All Yellow Taxi was a licensed taxi service in Santa Monica.
The company competed for a spot in the franchise system and came in sixth. Only the top five were chosen.
High placement doesn’t necessarily connote good performance, however. Metro Cab placed first in the franchise rankings.
The company is ready to take over the 63 spaces that Metro currently holds in the franchise, Gershwin said.
“All Yellow is and has always been able to meet the needs of the City of Santa Monica,” he said.
The item is expected to go before the City Council for approval on May 22.
If approved, All Yellow Taxi has indicated that it can complete the transition and begin operating as Metro Cab within two weeks of the purchase, Burris said.
Staff raised concerns about Metro Cab in a report released in January.
Four of its drivers were cited for a lack of professionalism or poor service to customers, and it was found 23 cabs, or approximately a third of the 63 vehicles Metro operates in Santa Monica, were owned by individuals rather than an entity permitted under the franchise agreement.
Metro also did not have a system in place to make sure that its drivers were current with a required drug and alcohol testing program, that its licenses were current or that vehicles were maintained.
Finally, the company was late in paying the fines associated with those violations as well as its insurance costs. It also did not meet its business license requirements.
With a list of problems like that, other franchisees wondered why Metro hadn’t lost its franchise earlier.
“It’s a shame that Metro put in a bid for a franchise that promised the moon, scored the highest of all the applicants and a year later they’re in several violations of the franchise agreement and they’re financially upside down,” said Michael Kalin, general manager of Bell Cab Co., another franchise holder.
The franchise has had a rocky history thus far.
The City Council approved it and selected the top five bidders in December 2010, but a coalition of Armenian cab companies, called the Taxi Drivers Association of Santa Monica, sued saying that City Hall had been biased because only one of the companies selected was owned by an Armenian despite the fact that one third of the applicants were Armenian-owned.
A judge ruled against the coalition in December 2011, calling the selection process “facially neutral.”
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 grew to 522 permitted cabs, all for a city that has about 91,000 residents.
City officials felt the number of cabs was too high, creating gridlock Downtown while contributing to global warming. They were also concerned that drivers were not able to make a living wage because of too much competition. Some drivers were said to be making only $24,000 annually for working six days a week.