HomeMy WebLinkAboutAgenda Statement 1972/05/16 Item 15dC~.~y A~~vnney: P.~ea~se pnepane the ~.ece~~any (ne~sv.~u~~.vn1 vn (vnd~.~.av~ce)
Staff Commentary on Agenda Item No.
CHULA VISTA CITY COUNCIL MEETING OF M#ty 16, 1972
I to m Title: Report - Taxicab rate increase requast
Initiated by : Director of Finaaas
Attached is a copy of Resolution [ ]
Background:
Ordinance [ ] Agreement [ ] Plat [ ]
AA April 18, 1972, San Diego Ye11ox Cabs inc. aed the Diamond Ceb Co. had
petitioned for approval of taxicab rates guuttod by the City of Sant Diego,
The citiaa of National City, Imperial Beach, 1.a l~ssa, ~tnd 81 Ca jc~ have
approved the sa~ae rates based on a Ssn Diego s'ato rtudy,
Ws have reviewed the City of San Diego's rate study and taxicab operations
and bring the following observations to your attention.
1. The operating ratio of 96.1X, resulting in the rate increase granted
by the City of San Diego, is believed to be reasonable. Yellow Cab
accounted for approximately 3/4 of the San Diego study's statistics.
2. '1"he last rate increase granted was in October of 19b7. consumer
price indsges in San Diego have increased by I9.6X from November of
1967 - 1971 while the requested average rate incr8aee is 18.0X.
i 3. The San Diego area rates will remain amongst the lowest in the
Sots of California.
4. The rates would bs consisteat with those of surrounding coaaaunities.
5. Cab meters are operated by mechanical gears which are sealed in
the meter boxes. Rate differences within the San Diego area present
a hardship on taxicab operations.
Financial
Statement : Not applicable
See EXHIBITS [~ ] No. 1
Departmental. Report
Director of viyancs
Commission-Board
Recommendation: Not applicable
Department Head
Re commen d at;_on: Request City Attorney to prepare a resolution approving rate
increase
City Manager It is recommended that Council accept the report of the
Recommendation: Director of Finance and consider setting this matter as
an item for public hearing. ,~ ..
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UNANIMOUS CONSENT FORI~'I
IT IS HEREBY REQUESTED by the undersigned that the following
item, with the unanimous consent of the City Council of the City of
Chula Vista, be considered and acted upon by the Council pursuant
to the provisions of Section 1.16 of the Chula Vista City Code.
Resolution - Giving Notice of Tn entinn to Hn1r7 a p„hi;~
Hearing to Consider an Increase of Taxicab Fares, and Setting
a Date Therefor
(Signature)
Unan ous Conse of the City Council, a.s indicated by the following
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DCPAKTP.9CNTAL CORRCSPOND~NCE
DATE : r`.»,~ 3, 197?_
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TO • ;7onxz 'liivmscn, City .l~znager
• vi:~ Robert Lot!rcier, P.ssistant City `tanager ~~~~(/
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FROM~~";:';,,~-:-~{~o~-~doTl iC. Gxunt, Director of Finance
SUEJECT • Ta.-a-cab rate stzzdy
In accordar_ce with your memo of April 26, 1972, we have
prep~z~ed a report on requested rate increases by the Yellow Cab
Camp any and the Di.^mond Cab Company.
The report is arranged in the following sections:
Purpose
Bac icground
Summary of cab operations
Present and req~~astcd rt~tes
Result of San Diego study
Our rec onunendat i on
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SC~IEDULk: 2
CITY OF 5AN DIEGO - SUMMARY OF STUDY
All Companies in 1Fu11 Service Companies 2Yellow Cab
San Die ~o Area In San Diego Area Company
1. Statistics
No, of Cab Certific ates 355 321 280
No. of Paid Trips 3,018,800 2,746,800 2,198,800
No. of Paid Miles 10,826,000 9,420,000 7,500,000
Total tZiles 21,625,500 18,647,000 14,930,000
Average Revenue per Trip $2.02 $1.96 $1.95
2. Operating Revenues (in Thousands)
Revenues 6,090.3 5,400.3 4,415.7
Expenses 6,112.tZ 5 441..7 4 550.0
Net Income ( 22.5) ( 41.4) ( 39.3)
3. Operating Ratio 100.4% 100.8% 100.9%
4. Rate of Return ( 1.9)% ( 3.7)% ( 4.1)%
1D'ote that figures presented are taken from report submitted to City Manager and
San Diego City Council. The summary includes Yellow Cab statistics. It should
b~~ noted that Yellow Cab accounts for over three-f_ourt's of San Diego's business.
2Adjustments have been made by San Diego's rate consultant by disallowing goodwill
atn~rti~ation, eliminating the effects of bus strike additional revenues, allowing
an R% revenue downtrend adjustment, depreciation adjustment for straight line de-
preciation of all assets, disallowing any speculative wage and fringe benefit
changes, and various other adjustments as deterniined to be necessary or in accord-
ance with general rate-setting procedures.
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SCHEDiJLF, 1
CALIFOI:NIA 'Tt'~.lZCAB RATES
February 22, 1972
Initial Additional Rate per Effective Date
Cif G Miles C Miles Additional Mile of Current Rate
Oceanside 70 1/7 20 2/7 70~ Jan '72
Sacramento 60 1/6 10 1/6 60~ Jan '71
San Francisco 50 1/8 10 1/6 60~ Feb '71
Oakland 50 1/6 10 1/6 60~ Apr '69
San Jose 50 1/6 10 1/6 60~ Nov '69
Long Beach 60 1/5 10 1/5 50~ Dec `71
Pasadena 60 1/5 10 1/5 50~ Feb '69
Los Angeles 60 2/5 20 2/5 50G Jan '72
San Diego 50 1/5 10 1/5 50~ May '72
Chula Vista
Present 50 1/4 10 1/4 40~ Oct '67
Proposed 50 1/5 10 1/5 50C ---
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approved the rate increase by Council Resolution ~~143.72. A public
hearinb has been set for Plsy 9 in the City of La Mesa for approval.
It is to be noted that-the San I>iego Resolution becomes effective
clay 5, as do those of the Cities of National City, Imperial Beach
and El Cajon. It caould be beneficial, therefore, to have Chula Vista's
increase become effective as soon as possible to avoid confusion.
4. Cab meters are operated through the use of mechanical gears which are
sealed in the meter boxes and are not easily changed. If operators
are required to have different rates in Chula Vista it would inflict
an extreme hardship upon taxicab operations.
S. The last rate increase was granted in October 1967. The Consumer
Price Index for the San Diego rletropol.itan Area indicates an increase
of 19.6% from Povember 1967 (101.3) to ,November 1971 (120.9). There-
fore the average estimated rate increase of 18% falls below the
percentage of increase in the Consumer Price Index of the Department
of Labor as reported by the San Diego Chamber of Commerce.
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1. The approximate increase of. fares is 18%.
2. The estimated additional gross revenue is $1,097,300.00.
3. The operating ratio will be decreased from 100.4% to 96.1%. (This
ratio is the ratio used as a guide in the transportation field as
to reasonable earnings of a public utility. It is the ratio of
expenses after income taxes, but before interest payments, to total
revenue. The City of San Francisco advised San Diego that they use
the operating ratio as follows: belos~ 95% earnings is too great,
96% to 98% is reasonable, above 98.6% is confiscatory. San Diego's
rate consultant considers the 96% to 98% rate to be reasonable,
above 99% indicates a need for rate relief, and 95% and below indi-
cates that rates are too high.)
4. The estimated rate of return on capital will increase by 25.1% from
(1.9)% to 23.2%. (This shows the percentage relationship of net
revenues, before interest or dividend payments to depreciated invest-
ment in plant and equipment necessary to render the public service.
For a transportation company it is ~istomary to rely more on the
operating ratio, because small changes in expenses can cause a wide
swing in rate of return and they generally turn their capital over
several times per year.)
It should be noted that the San Diego rate study recommended a
flag drop rate of 50~ for the first two--fifths of a mile and 10~ for
each additional one-fifth mile. However, in negotiations with the
City Council it was agreed that compensation insurance increase would
be allowed the Yellow Cab Company, and the rate finally adopted allowed
for a flag drop rate for the first one-fifth of a mile.
The increase authorized is cost-based and does not reflect future
inflationary expectations. Therefore, the price increase is within the
guidelines of the Federal Yrice and Wage Regulations, requiring only
the approval of the governing agency, in this case the city, for increases
in price structures.
RECQrIMF.NDATIONS
It is my recommendation that the cab operators' request for rate
increase be granted by the City of Chula for the following reasons:
1. The San Diego study found the rate increase to be justifiable on the
basis of the 96.1% operating ratio.
2. San Diego area rates will remain amongst the lowest in the state.
3. The requested rate would be consistent with those of other surrounding
communities. National City and Imperial Beach require that rate in-
creases need only be filed. with the City Clerk. The City of'E1 Cajon
t.
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Both ai:e "full service" cab companies. Full service companies have
radio dispatc}ing. Their cabs are equipped with two-way radio sets, and
therefore have the additional expense of maintaining radio dispatching
equipmezit. On the average their trips are shorter, and average revenue
per trip is less than for the "limited service" companies.
The percentage of business performed within the city limits of
Chula Vista are estimated by each company as follows:
1. Yellow Cab to be less than 2% of the Company's total business,
and ranging from 1.7 to 1.9% based on the number of telephone
trip requests originating within the City of Chula Vista as
compared to the total telephone trip requests received by the
Company.
2. Diamond Cab to be 30% to 40% based on telephone requests. Of
the Company's fleet of 42 vehicles, six are located permanently
in the Chula Vista area.
PRESENT AND REQUESTED RATES
The present rate of 50~ for the first one-quarter mile plus 10~ for
each additional orie-quarter mile was accepted by the City of Chula Vista
on October 31, 1967, per Resolution No. 4584.
The requested rate is 50G~for the first one-fifth mile plus lOfi for
each additional one-fifth mile or fraction thereof. This represents an
increase from 80Y to 90C for the first mile, and an increase for each
additional mile from 40~ to 50~ (an increase of 25%).
The average rate increase, based on the San Diego study of the
average trip ($1.61 to $2.64), would result in increases ranging from
1.8% to 21% respectively. The rate of increase,' therefore, increasing
with the increased length of the trip.
The requested rate increase would maintain the cab rates position
amongst the lowest in the State of California (see Schedule 1).
RESULT OF SAIV DIEGO STUDY
The Gity of San Diego found the rate increase granted to be "just
and reasonable fares for the hire of taxicabs within the City of San
Diego The increase is the minimum required to assure continued,
adequate and safe service while providing for future expansion to meet
future requirements" (per San Diego Resolution ~~205283).
The effect of increases on group operations in San Diego as a
whole are estimated to be as follows (see Schedule 2)~:
PURPOSE
To provide City Manager with information pertaining to request
of cab operators for an increase in taxicab rates.
n n~uron~tn!n
In written communication to the City Council of the City of Chula
Vista, San Diego Yellow Cabs, Inc., and Diamond Cab Company petitioned
for a rate increase for cabs operating within the city. This request
was based on the approved increased fares granted by the City of San
Diego. A detailed study was performed by Mr. Manley W. Edwards, Utility
Rate Consultant for the City of San Diego, with the assistance of Mr.
Ken Clark of the same city's Auditor and Comptroller's Department. This
study was the basis for granting the increased rates in San Diego.
SCOPE
1. Meeting with Messrs. Edwards and Clark, abroad review of the City
of San Diego's position was determined and certain aspects of their
study were discussed.
2. Meeting with Messrs. Bill Hilton of Yellow Cab and Lee Moore of
Diamond Cab Company, a review of cab operations within the city
was determined, and the Yellow Cab position on the San Diego study
was ascertained.
3. A review of the San Diego Taxicab Rate Study was made. A summary
of the statistics presented are reported in Schedule 2.
4. A review of the financial statements of the two cab companies
involved was performed for the fiscal year ending 1971.
SUMMARY OF CAB OPERATIONS
There are two taxicab companies operating within the City of Chula
Vista:
1. The Yellow Cab Company which serves Chula Vista, the surrounding
communities of National City, Imperial Beach, Lemon Grove, Spring
Valley and Bonita.
2. The Diamond Cab Company which serves Chula Vista and the surround-
ing communities of National City, Imperial Beach, Lemon Grove,
Spring Valley and Bonita.
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