CITY HALL — The City Council gave preliminary approval to a taxi cab company that’s looking to break into Santa Monica by buying up an existing franchise holder.

City Hall created a process in 2010 that awarded five companies the right to operate taxis within city limits. Other companies may drop passengers off in Santa Monica, but can’t pick anyone up.

One of those five, Metro Cab, has since indicated that it wants to sell its business to All Yellow Taxi for $2.8 million.

The franchise would be included in that sale, but only if the City Council gave the thumbs up since All Yellow did not win the post when it competed in 2010.

It came in sixth, just missing the threshold.

Metro Cab’s fleet only operates within Santa Monica. Without the franchise, All Yellow would only be buying its cars.

Under the proposal, All Yellow would continue to operate in Santa Monica as Metro and keep the green and white Toyota Priuses that the company currently uses.

Metro’s drivers would stay with All Yellow, provided that they met the new company’s standards and participate in training.

The transition could be complete within two weeks, said Salvador Valles, business and operations manager with City Hall.

Owners of other taxi cab companies came to speak against the franchise transfer, which they described as a circumvention of the competitive process which ultimately gave five companies franchises to work in Santa Monica.

“It would be fair to everyone to do the competitive bidding again,” said Yevgeny Smolyar, president of L.A. Checker Cab. The company came in 10th in the ranking city officials did to award the franchise.

Metro Cab, which couldn’t live up to the terms of the franchise, was considered the strongest of the companies that applied.

In the same span of time, L.A. Checker Cab had put in place more technology and gotten its five-year contract with West Hollywood renewed.

If the two companies, which had ranked so far apart when the franchises were first awarded, were now in vastly different positions, it made sense to put it back out to bid, Smolyar said.

City staff recommended that the City Council approve the franchise transfer, but no one seemed clear on what other options the elected officials had.

Municipal code regarding the franchise system dictates that the ability to revoke a franchise stays with an independent hearing examiner, so taking Metro Cab’s franchise away and putting it out might be impossible.

Neither the franchise or the ordinance governing it says much about the City Council’s powers during a franchise transfer, said City Attorney Marsha Moutrie.

“What else you can do in that process and whether or not that would constitute a revocation or partial revocation, that is not clear to me,” Moutrie said.

The uncertainty bothered City Councilmember Bobby Shriver, who wanted to wait to make any decisions about the franchise until after staff had clarified the council’s options.

“Various things may happen and we haven’t set ourselves up necessarily to know what our other powers may be,” Shriver said. “Do people feel confident enough to approve this without having studied those items?”

Preventing the franchise transfer would leave Santa Monica residents with approximately 60 fewer cabs at their disposal, which Mayor Pro Tem Gleam Davis feared would cause problems for people trying to get a taxi.

She stressed keeping the service to the community “seamless.”

The council passed the ordinance on first reading with a 5-1 vote, with Shriver against.

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