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Port District does not like cab competition

I am furious yellow

 “It’s frightening to me. It means my job, probably, and I have no other means of support.”
  • “It’s frightening to me. It means my job, probably, and I have no other means of support.”
  • Image by Robert Burroughs

Right now, San Diego taxicab owners can charge any fare they like up to $1.40 for the flag drop and $1.80 a mile thereafter. Some of the city’s 892 cabs are charging the full $1.80 a mile; many more charge only $1.20 a mile. Competition reigns in San Diego’s taxi business. But the Metropolitan Transit Development Board (MTDB), which licenses and regulates taxi and jitney service, is currently being pressured to abolish competitive cab rates and establish a uniform fare system.

Lou Wolfsheimer: "It was that Libertarian Fred Schnaubelt that caused this. He convinced the city to go for this crazy idea of deregulation.”

Lou Wolfsheimer: "It was that Libertarian Fred Schnaubelt that caused this. He convinced the city to go for this crazy idea of deregulation.”

This pressure is coming from the San Diego Unified Port District, the higher-priced cab companies, the Convention and Visitors Bureau, and other entities that kowtow to tourists. Is there a problem with the laissez-faire system of taxi-fare regulation? The answer seems to depend on the financial interest of the respondent.

Parviz Ebrahimi:  “Other taxis cater to tourists and ignore our own citizens."

Parviz Ebrahimi: “Other taxis cater to tourists and ignore our own citizens."

Lou Wolfsheimer, a lawyer and chairman of the board of port commissioners — the seven-man body of builders, contractors, and other businessmen who control activities on the state tidelands surrounding the bay, including Lindbergh Field — claims San Diego's competitive taxi fares have "created chaos” at the airport. He says he’s been receiving letters of complaint about the variable taxi rates from visitors for ten years.

Yellow Cab's most memorable contribution was a bribery scandal in 1970. The mayor and seven other elected officials were indicted on bribery and conspiracy charges.

Yellow Cab's most memorable contribution was a bribery scandal in 1970. The mayor and seven other elected officials were indicted on bribery and conspiracy charges.

"We think it's a ripoff to the consumers to have all these competitive fares," he declares, incongruously. “How’d you like to fly into town with your sister and her family, you both jump into different cabs, identical '89 Fords, and you both get out at the Town and Country Hotel. She gets charged $12, and you get charged $15. Wouldn't you feel ripped off?"

Bruce Bradley with customer on a grocery run

Bruce Bradley with customer on a grocery run

“Actually,” responds his interviewer, “I’d feel glad for my sister and stupid for not shopping along the line for a cheaper cab.”

Anthony Palmeri: "We have Dial-a-Ride for the poor people.”

Anthony Palmeri: "We have Dial-a-Ride for the poor people.”

“That’s the problem! When you have 30 million people at the airport, you don’t have room to shop! This isn’t Fashion Valley! If politicians want a helter-skelter free-for-all, citywide. fine. But at the airport, we must have a standard fare, both coming and going. Right now, the multi-rate fares have caused confusion and bad will. With the opening of the convention center, this is not what we want people to see.”

Coast Cab is the second largest cab company in San Diego, with about 83 taxis. Yellow has about 300.

Coast Cab is the second largest cab company in San Diego, with about 83 taxis. Yellow has about 300.

Things could be that tidy for the port commissioners if San Diego only consisted of an airport, marinas, a convention center, and glass-walled hotels. Unfortunately for the port's overseers, there’s a whole city stretching east beyond the bayshore, and sometimes residents of that city ride taxis without ever going near the airport.

"Those of us who take cabs regularly would be hurt.”

"Those of us who take cabs regularly would be hurt.”

If the commissioners stick with the argument that variable cab rates are dauntingly confusing to cab riders, then setting a uniform rate just for rides to and from the airport would only seem to compound the confusion, right? Wolfsheimer says he can’t concern himself with that question, since MTDB, not the port district, has jurisdiction over taxicabs.

"Yellow will not take you to the grocery store."

"Yellow will not take you to the grocery store."

All he wants to do is solve the airport cab problem. The perceived assault on free enterprise and the port’s approach to the problem doesn’t bother Wolfsheimer. “Hey, I’m a conservative Republican, a free-enterpriser. I’ve spent years trying to get downtown off the ground. But certain businesses need to be controlled, and the taxi business is one of them.”

Relevant statistic: Nearly 60 percent of the visitors who ride San Diego cabs make more than $40,000 a year; 60 percent of the residents who ride San Diego cabs make less than $20,000 a year.

Unfortunately for the public, most of the city’s cab companies have seized the moment to go a step further and press for a citywide uniform cab rate, which would be much simpler (and more lucrative) to administer than a separate airport rate.

Riding the coattails of the port commissioners, these companies, led by Yellow Cab. which gets about half the taxi business in the city, are making their own pronouncements about how ending variable cab rates will actually increase competition among the cab companies. When the port district, which brought us the depressing. Gulag-like West Terminal at the airport. joins forces with Yellow Cab, whose most memorable contribution was a bribery scandal in 1970 (the mayor and seven other elected officials were indicted on bribery and conspiracy charges in connection with a rate increase they granted to Yellow Cab), only two words fully describe the implications.

Uh-oh.

Commissioner Lou, meet Sue. She is placing her crutches into the back seat of Coast cab number 883, which is idling outside her Swift Street apartment in East San Diego on a recent morning. Sue has a removable cast on one knee and on a wrist because of her degenerative arthritis, but she looks much younger than her 48 years. Must be because of her job, teaching kindergarten and first grade at Los Altos Children’s Center in Pacific Beach. That’s where she’s headed.

Sue used to take three separate buses to work, until her arthritis got so bad. “I ride Coast Cab every day to work now. because it’s so cheap.” she explains. Coast and Co-op Cab have about the lowest fares in town, $1.00 for the flag drop and $1.20 a mile, and people like Sue (who didn’t want her last name published) definitely comparison shop for taxis. “For a distance like Pacific Beach. Yellow Cab ($1.20 flag drop, $1.60 a mile] would be a lot more expensive." she says.

As it is, Sue, who can’t afford a car, pays $15 or $16 for the cab ride to the school; to get back home, she walks about ten blocks to catch a bus that drops her off in Mission Valley. From there she takes a short cab ride up the hill to Swift. Total transportation costs, per day: about $20. “Food has become a luxury for me these days.” Sue remarks as the cab rolls toward the beach area. “I’ve skipped meals to make sure I have enough money to get to work.”

Is she aware of the possibility that cab rates may be standardized, as early as January of 1990? Affirmative. “I don’t know what I’m going to do when that happens." she reflects. “It’s frightening to me. It means my job, probably, and I have no other means of support.” If a uniform rate is established, it will probably be set close to the city wide average of about $1.20 for the flag drop and $1.56 per mile. For Sue, this means an increase to about $30 a day for transportation, which could come down to a choice of eating or getting to work.

Coast Cab is the second largest cab company in San Diego, with about 83 taxis. Yellow has about 300. But while Yellow captures about 50 percent of taxi business in town. Coast nets about 25 percent, a larger share than the number of its cabs would indicate. Largely, this is because of Coast’s marketing strategy, which concentrates on the elderly and low-income population. Coast cabs rarely work the airport taxi line, although they are frequently telephoned by arriving passengers who want the cheapest fare home. In these cases, the cabs must meet the passengers in the airport parking lot before they can legally do business together. Very few Coast drivers carry the MTDB-issued medallion that would permit them to work the airport.

Coast and Co-op Cab are the only two major cab companies to be officially opposed to the uniform rate. Parviz Ebrahimi, owner of Coast Cab, explains, “Other taxis cater to tourists and ignore our own citizens. I’ve got 10,000 signatures from customers on petitions protesting the uniform rate. I’m objecting to it because it will hurt my customers the most. And how can the government tell me how' much I can charge? You wouldn’t tell a department store how much they can charge for a pair of jeans. Why force me to charge a higher fare to people on fixed incomes?” Ebrahimi is offering free transportation for his regular customers to an MTDB hearing at the downtown Transit Center on November 16, when the board is to take public comments on the uniform rate proposals.

Anthony Palmeri, vice president of Yellow Cab. insists that "charging a uniform rate to get from point A to point B increases competition. It means you have to compete with a better cab, more polite drivers, and just an overall better presentation.” Palmeri says San Diego is the only city in California that doesn’t have some kind of uniform rate structure and that this only adds to the confusion of visitors, most of whom aren’t aware of our city’s deregulated rates. “Coast’s point about us is, all we care about is the tourist,” Palmeri paraphrases, accurately. “My response is, I don’t care what the rate is set at, as long as it’s uniform. If it was set at $1.20 a mile, we’d be fine. But with variable rates. Yellow can’t afford to be at $1.20, because other companies will still undersell us."

Coast Cab drivers scoff at Palmeri’s assertion that he doesn’t care what the uniform rate is. Most of his cabs are leased to drivers, they point out, and the daily lease rate the drivers must pay to the company is determined by the mileage and flag-drop rate Yellow charges its customers. (Yellow leases its cabs for $80 a day; Coast’s lease rate is $55 a day.) “Yeah, sure, Tony’s gonna willingly lower his lease rate," cackles one Coast driver who, like many San Diego cabbies, worked for Yellow at one time. This is especially improbable since, just this year, licensing fees tripled for each cab on the road. Before last January, taxis were regulated by the City of San Diego, which charged cab companies an annual licensing fee of $110 per cab. But when taxi regulation was taken over by MTDB. the licensing fee charged by that ever-swelling bureaucracy immediately jumped to $333 per year. Yellow’s overall licensing fees increased from about $30,000 a year to $92,730. Coast’s Ebrahimi remarks, “If Palmeri doesn’t care what the uniform rate is, how come he’s raised his fares twice in the last year? He went up to $1.60 a mile in May, just so the citywide average fare would jump up, because he knows that a uniform rate is going to be set close to the average.”

Telling statistic: Average taxi fares for a five-mile trip hovered steadily between $7.80 and $8.00 for four years, beginning in January of 1985. But then between January and August of 1989, the average rate for a five-mile trip shot up to $8.70, according MTDB figures.

Palmeri says he raised his rates in order to cover the tripling of licensing fees and to offset all the taxis that were undercutting him. And, he points out. Coast raised its rates from $1.00 a mile to $1.20 in June. “Parviz says he’s for poor people, but Lou Wolfsheimer said even poor people want a uniform rate. And we have Dial-a-Ride for the poor people,” Palmeri asserts.

Mr. Palmeri, Mr. Wolfsheimer, meet Mrs. Langley. Coast driver Bruce Bradley has just pulled up to her apartment on Georgia Street in North Park, and he’s gone in to help her to the car. Bradley knows exactly where Mrs. Langley’s going: the dialysis clinic on Third Avenue in Hillcrest. She’s a regular who uses Dial-a-Ride coupons. Here she comes now, hunched and shuffling, with Bradley beside her. She’s aggressively friendly in the back seat on the way to clinic, to which she rides a Coast cab every ’Monday. Wednesday, and Friday. “I always take Coast," she smiles. “They’re nice people. They’ll help you. With Yellow, you’re pretty much on your own.”

Every month since February of 1988, Mrs. Langley has paid $8.00 for $32 worth of Dial-a-Ride coupons (all that’s allowed by the city). The coupons are barely enough to last her the whole month. If a uniform cab rate were to be set at any point higher uniform rate. Mrs. Langley responds, “No way, mister! It may be better for the airport run, but those of us who take cabs regularly would be hurt.” At the dialysis clinic, Mrs. Langley hands Bradley $3 worth of Dial-a-Ride coupons, and he gives her 20 cents’ change. She then gives him a 50-cent tip, which, under the rules of Dial-a-Ride, is illicit. Dial-a-Ride passengers aren’t supposed to be flush enough to offer tips.

Three quick points about Dial-a-Ride: The program is very restrictive as to who qualifies for the coupons. You have to be sick or disabled, with low income, and not have access to or own a car. And people like Sue, the kindergarten teacher who commutes to P.B., run out of coupons very quickly. She buys the maximum two months’ worth at a time ($64 worth), and they’re gone in four days. And the system excludes those low-income people who are not sick or disabled and, therefore, do not qualify.

Check out the young woman jockeying two toddlers into the back seat of Coast cab number 883, on 38th Street in East San Diego. It’s about nine o’clock at night, and on the way over here, driver Jim Stage (who’s a partner in the cab’s lease with daytime driver Bruce Bradley) had remarked that “you get a lot of crack runs in this neighborhood about this time o’ night." But this ain’t no drug courier. Twenty-one-year-old Sheila Smith is leaving her girlfriend’s house and taking her kids home, which is an apartment on Mansfield Avenue. Smith says she can’t afford a car. and she rides buses every day, though "bus service is horrible, especially at this hour.” She takes cabs twice a week. At Mansfield, for a $2.80 fare, she gives Stage $3.00 — and tells him to keep the change. From her, that’s a respectable tip.

Jim Stage has been driving a cab for 19 years. He started with Yellow, but for the last few years, he’s been with Coast. Even though the establishment of a uniform rate would probably mean a raise in his income. Stage has been a relentless critic of the idea. “I feel this is just a ploy for Yellow to jack up their earnings." he remarks as he heads his cab toward a call at an SDSU dorm. “But it’ll do more harm than good. The complaints about cab drivers are still gonna come, because most cabbies are uneducated assholes. Plus, how is a uniform rate going to suddenly make Yellow’s drivers know their way around town? A lotta people won’t use Yellow now under any circumstances, because there’s so much turnover over there, people know they stand a very good chance of getting a rookie driver who doesn’t know where the Food Basket is. And when they do know, they bitch and moan because it’s such a short fare.”

Yellow’s reputation in San Diego has never quite recovered since 1970, when a San Diego County grand jury indicted eight members of the 1967 city council who had granted Yellow Cab a 22 percent rate increase. The indictments were spurred by an IRS investigation of Yellow’s practices in deducting as “business expenses” certain campaign contributions to local politicians. The company’s “political account" had been about $6500 in 1963, then it increased every year to a crescendo of $21,000 in 1967- ’68, before dropping back down to about $12,000 in 1969. Charles Pratt, who was president of Yellow Cab and whose family held substantial amounts of the company’s stock, was granted immunity in return for testimony before the grand jury. Pratt became an unindicted co-conspirator.

Indictments were handed down against Mayor Frank Curran, Assemblyman Tom Horn, County Supervisors Jack Walsh and Harry Scheidle, and Councilmembers Allen Hitch, Mike Schaefer, Floyd Morrow, and Helen Cobb. All of them were on the city council in 1967, when Pratt gave each gifts of money in return for their support (it ended up being unanimous) for the rate increase. By today’s practices, where lobbyists and political-action committees openly offer financial incentives in return for political support, the Yellow Cab indictments appear quaint and naive. The one sinister aspect to Pratt’s contributions was his insistence that his name and that of Yellow Cab never appear on campaign statements as financial contributors. All of the politicians took his money and kept his name out of their disclosure statements.

After a 15-day trial in late 1970, Mayor Curran was acquitted of the charges of bribery and conspiracy. (President Nixon phoned him from the Western White House in San Clemente to offer his congratulations.) Shortly thereafter, Tom Horn, Mike Schaefer, and Harry Scheidle were also acquitted, and charges against Cobb, Morrow, and Walsh were dismissed. Allen Hitch pleaded no contest to a misdemeanor charge of conspiracy to violate election codes and was fined $750. Pratt admitted (under immunity) in court that he gave the money to the politicians in return for support of the rate increase. He sold his shares in the company and for many years operated a bar in Hillcrest. He died in 1988.

Yellow Cab continued to hold monopoly-level dominance in the San Diego cab business until 1977, when the city allowed independent owner-operators into the market, and the number of cab companies jumped from 9 to 77. At that time, the city adopted a rate ceiling, since it had become impossible to determine separate rates of fare for each company, as the city had done in the past. When the cab industry was fully deregulated in 1980, the number of cabs on the street doubled to more than 800 in two years, and long-time cabbies started complaining that nobody was making money anymore.

Partly because of the competition, but also because it was an easy way to make a living, many drivers began concentrating on the airport, where the prospect of waiting in line two hours for large fares was preferable to having to fight it out on the streets, where too many cabs were vying to carry the elderly on $3 trips to the grocery store. The airport cab situation became a nightmare, with unkempt cabbies who didn’t know how to get to Linda Vista sometimes getting into fistfights over customers.

A few of the airport cabs charged outrageous rates, as much as $10.00 a flag-throw and $2.50 a mile, and the city was forced to set controls on airport taxi rates. Some of these gougers then moved on to other tourist hangouts and continued to charge $2.50-a-mile rates, so the city was forced to set a limit on cab fares of 20 percent above the citywide average, which is computed each January and June. This system seemed to work all right, although the port district and ConVis got letters all along from tourists claiming to feel ripped off because they didn’t know cab fares were variable.

"It was that Libertarian Fred Schnaubelt that caused this,” Lou Wolfsheimer says, referring to an ex-city councilman who does duty as the whipping boy for any city problem related to lax government control. “He convinced the city, in a moment of confusion, to go for this crazy idea of deregulation.”

Schnaubelt, a real estate agent, is as feisty as ever, and he's still proud of his efforts to deregulate the cab business. “It’d be insane to say that just because the airport can’t competently handle their taxis, the entire city of San Diego should be wagged by that little pimple on the tail of the dog," he rails. "Business always uses the political process to reduce competition. and government is usually more than glad to accommodate. Regulation is promoted in the name of protecting the public, but it’s always, in reality, to protect established business.”

Schnaubelt sneers at the port district's argument that variable cab rates prompt complaints from consumers who feel ripped off. “That’s like saying that every single store in San Diego except the Price Club is ripping people off! Anybody that goes to another store is being cheated!” Schnaubelt recalls being shoved by taxi drivers in a hallway after one of the deregulation hearings when he was on the city council; and during that fracas, the head of the taxi drivers’ union shouted, “Free enterprise, huh! It’s great for people who don’t have to live under it!”

But once the industry was deregulated, the city won a U.S. Department of Transportation award for having some of the lowest taxi fare rates in the country. The city’s own studies also showed that response times of taxis had improved, and more low-income people were using cabs as a result of the free-market competition. “Establishing a uniform rate will simply allow the least competent cab drivers to make a living,” Schnaubelt concludes. “It enables a guy to come in part time, go to the airport and smoke a cigar, and make a decent wage. There will be no incentive to hustle.”

As the fall of 1989 approached, the port commissioners envisioned the opening of the convention center (latest estimate: mid-November) taking place amid an economic free-for-all in the cab business. The district panicked and ran a resolution over to MTDB. The resolution should be filed in the San Diego archives under the heading "Tourism, civic bootlicking of." In the document, the port board represents itself as a body devoted completely to tourist protection, with no recognition that anyone but tourists or business travelers ever sets foot in a cab. After six whereases about how confusing it is for tourists to be faced with the awful choice of variable taxicab rates, and just before the Be it resolved part, insisting on an end to free-market competition, the port-meisters assert that anything that “detract(s) from the local area’s attractiveness as a center of tourism and commerce” must be avoided at all costs.

Pesky statistic: MTDB says that only 5.8 percent of Lindbergh Field’s deplaning passengers used a taxicab in May, June, and July of this year.

No matter what MTDB decides, the Port District will have its way. “If in fact nobody will listen to us,” Wolfsheimer warns, "the port has the option of granting a contract to one or more taxi companies for service to and from the airport. I don’t really favor this; it’s not my first choice, but if pushed to the wall. I’d recommend that we go that route." In other words, the port would take its bag of marbles home and only play with invited guests, further isolating port district doings from the rest of San Diego. The next step, of course, is a Berlin wall surrounding the airport. Harbor and Shelter Islands, Seaport Village, and the convention center, with guards at the checkpoints inspecting port-issued passes. You’d have to make more than $40,000 a year or be from outta town to qualify for entrance.

Reality check: The City of Seattle deregulated its taxi-cab business at about the same time as San Diego. A few years later, because of the confusion about variable rates expressed by tourists at Seattle-Tacoma International Airport (which is not within Seattle city limits). King County established a uniform taxi fare for cabs leaving the airport. Currently, that rate is $1.20 for the flag drop and $1.40 a mile. This has had a twofold effect on the cab industry in Seattle, according to city officials there. It has segmented the cab business into two groups: those who work the airport and charge that standard rate for all trips, no matter where they pick up a passenger, and those who don’t work the airport and can charge, in theory, a lower fare. But the mandated airport rate has in fact become the average rate that nearly every cab charges, even those that don’t work the airport, and cab rates in Seattle have risen as a result. If the same thing were to happen in San Diego, it would mean that the port district, if it contracts with a cab company and sets an airport rate, might become the city’s de facto cab-fare regulator.

But the next step in the evolution of cab regulation in Seattle is a prospect that should give the cab owners pause. “We found that in order to improve service and driver quality, you have to increase driver income," reports Walter Tank, assistant director of the department of licensing and consumer affairs in Seattle. "But every time the average fare goes up. the taxicab owners increase their lease rate, and the drivers don’t make any more money, no matter what the fare is. The argument that a standardized rate will give you better service just hasn’t correlated here. So the next part of the equation is probably some form of regulation of the owners’ lease rates." It will be fun to hear taxicab owners suddenly squealing about free enterprise when MTDB starts wondering how to limit lease rates in the not-so-imaginary future.

Coast cab number 883 pulls up to an apartment house off Charger Boulevard in Clairemont on a brassy afternoon. Kathleen Fitzsimmons, 59, who is legally blind, gets into the back seat. She is smiley and articulate, on her way to the Kaiser Hospital on Clairemont Mesa Boulevard. "I used to be loyal to Yellow, but they got me late to a meeting one time, and I’d called an hour ahead," she relates. “And they will not take you to the grocery store. I called for two hours once, and they simply ignored me."

Fitzsimmons says she takes a cab about twice a week now, and occasionally she must use one to get to her eye doctor in El Cajon. She’s an implacable foe of ending price competition in the taxi business. “Prices will undoubtedly go up,” she predicts. “And can you imagine what that trip to El Cajon will cost then?” At the hospital, driver Bradley helps her out of the seat. She gives him $5.00 for a $3.20 fare and tells him to keep the change. Before going into the hospital, she explains that she likes Coast for several reasons, including the low price, but also because “their ethics are high” and they don’t work the airport. “There’s a whole city out here,” she declares. “There’s more than just the airport.”

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