Stuck in the slow lane?

Publication Date: Wednesday Jan 27, 1999

Stuck in the slow lane?

Palo Alto's cab monopoly fuels complaints, calls for change

by Robyn Israel

On a busy Friday or Saturday in downtown Palo Alto, Robert Gray and his staff at the Blue Chalk Cafe rarely have time for distractions that interfere with their Cajun cooking and the needs of their young, demanding clientele.

But there's one obligatory distraction they've come to dread--calling a cab for a patron who has finished eating and wants to move on to the next phase of the evening's activities. Someone has to place the call, wait on hold for three or four minutes, then monitor the curb out front so the patron won't miss the taxi when it shows up. The last part can take up to 20.

"As a business owner, it's unfair; it's a waste of my employees' time," says Gray, general manager of the Ramona Street restaurant. "They're pretty accurate with the response time, but when they do show up, they don't come inside. They'll just pull up out front, and if no one shows up, they'll just take off. They won't verify that they're picking up the right person."

Gray identifies what he believes is the crux of the problem: "There are not enough cabs in town to handle the late-night bar crowd going home." The problem, however, has affected other businesses as well. Hotel owners, for example, say that during peak hours--the morning and afternoon rush as well as weekends--they also have a hard time getting prompt taxi service for lodgers who need transportation.

Business owners say the problem stems from a lack of competition. For the past four years, only one company, Yellow Cab Co. of Palo Alto, has been allowed to provide taxi service in Palo Alto. That compares poorly with other cities on the Midpeninsula, which typically license several companies to operate taxis.

Despite complaints from some business owners, Palo Alto officials have rejected several requests in recent years from other companies that want to tap the city's market. City officials, acknowledging the complaints about Yellow Cab, say they have no interest in maintaining the company's monopoly. They also say, however, that none of the companies that have applied for a license to operate cabs have been able to meet the city's strict requirements for providing transportation to the public. Meanwhile, Yellow Cab Co. has refused to devote more taxis to serve the city.

Taken together, it has made finding a taxi in town a tough bet if you need one on short notice during busy times of the day or night. And though the monopoly may end next week, when city officials are to decide whether to approve a license application by a second company, the question remains whether adequate cab service is anywhere within hailing distance of Palo Alto.

Business owners in several of Palo Alto's neighboring cities say they usually have no trouble getting prompt taxi service for their customers. They add that good service is not necessarily a matter of how many companies hold licenses to provide service, but how many vehicles operate under those licenses.

Currently, Yellow Cab Co. of Palo Alto devotes 36 vehicles to Palo Alto, far fewer than the number operating in neighboring cities. For example, Mountain View, which licenses four different companies to provide taxi service, is served by 58 vehicles. Redwood City licenses nine taxi companies, although the city doesn't track how many vehicles each operates.

Marcos Quinones, manager of Mountain View's popular Tied House Cafe and Brewery, says cab service can be spotty during peak periods of demand. With four companies to choose from, however, he can largely avoid those that don't provide prompt service.

"We've had some difficulties, but we've found one (taxi) service that is very reliable, so we just stick with them," Quinones said.

In Redwood City, businesses report few problems. Indeed, at the Hotel Sofitel at Redwood Shores, doormen or guests who want a cab need only step outside and wave their arm.

"We always have a couple waiting outside the hotel," said Patricia Mendoza, the hotel's concierge.

That's rarely the case in Palo Alto, where local hotel owners often have to deal with frustrated lodgers who expect taxis to be there when they need them.

"Whenever you need them, they're not here," said the concierge at one high-end hotel. The concierge spoke on the condition that neither she nor the hotel be identified out of fear that the criticism may lead Yellow Cab to provide poorer service to the hotel.

The concierge added that the service problems are more than a matter of peak-hour demand. She said the company's method of dispatching cabs often leads to multiple cars arriving to claim a passenger, resulting in arguments between the drivers about who gets the fare.

"It's horrible that we can't use any other cabs," the concierge said.

Chris Chmura, front desk supervisor at the Garden Court Hotel on Cowper Street in downtown, said taxi service is particularly bad on weekends.

"If you call last-minute, you're put on hold for five to 10 minutes. Then, it gradually takes anywhere from 20 to 40 minutes (for a cab to arrive), depending on how many they have in the area and whether they're busy or not."

Bill Schweitzer, owner of Yellow Cab Co. of Palo Alto, said he would welcome competition. But he doesn't believe the city needs another cab company. Rather, he said, the city should concentrate on eliminating so-called "bandit taxis," cabs not licensed to operate in Palo Alto.

He says it's common for these cabs to pick up fares in Palo Alto, even though they are not licensed to do so and may not comply with the city's strict safety regulations.

Palo Alto police periodically conduct sting operations on bandit cabs. In the most recent undercover operation late last year, officers cited and fined 12 companies for operating in Palo Alto without a license. The problem of bandit taxis, however, likely will never go away. A quick look in the phone book shows that several companies--ACE, Yellow Cab Bay Cities, Yellow Cab Express, Best Airport Yellow Cab, to name just a few--advertise themselves as serving Palo Alto. Customers, as a result, have no idea which company is authorized to serve the city.

While hotels and restaurants may gripe about Yellow Cab, Schweitzer says he receives only one or two formal complaints a year. The last complaint, in October 1997, was filed by a rider who said his cab was late arriving on a Friday night. Schweitzer responded to that complaint by having his drivers work more weekend shifts.

"Because we're the only licensed cab company in Palo Alto, we try to be responsive to any concerns that customers have," he said. "Right now, we're comfortable that, for 95 to 98 percent of our activity, we are able to meet our service demands without our customers waiting unduly."

Schweitzer acknowledges that during peak periods of demand, his cabs may not respond to calls as quickly as he would like. He said Palo Alto's taxi market, as is the case everywhere, is one of slow, steady demand, interspersed with a few hours of frantic activity. While he is licensed to operate 45 cabs in Palo Alto, he's made the decision to put only 36 on the street.

"We can't base adding more cars on the fact that our response time goes from six to 15 minutes at 4 p.m. on a Friday afternoon," he said. "The car has to have business all day long to justify having it at rush hour."

Schweitzer, a former dispatcher for the Palo Alto Police Department, has owned Yellow Cab since 1991. His company--which also serves Mountain View, Los Altos and Stanford--has had a monopoly in town since 1995. At that time, Merit Taxi pulled out because the city raised the amount of liability coverage that cab companies must carry.

Since then, three companies have applied for licenses to operate in Palo Alto, including Silicon Valley Checker Cab, whose application is now being considered for city approval.

The other two applicants either failed to meet the city's standards or became too frustrated with the process to continue. The operators of both companies complain that the city nitpicks license applications and sets requirements that far exceed those of other cities. Some cities, for example, only require that a company have a business license and pass various state requirements.

Palo Alto's municipal code, by contrast, requires taxicab operators looking to do business in the city to demonstrate that there is a public demand for additional service, or that service to the public will be improved by the issuance of a certificate to the applicant; that the applicant has sufficient experience and assets to properly conduct such a business; and that traffic conditions or hazards will not be appreciably increased or parking problems made worse by an increase in service.

Judy Glaes, code enforcement officer for the Police Department, agrees the city sets a high bar and that its requirements--particularly in insurance coverage and an applicant's financial track record--are more demanding than those in other cities.

"There's a higher duty of care with public transportation," Glaes said. "It's my experience that when a company doesn't have a solid financial base, service starts to erode in terms of safety. They cut corners. Tires start getting bald, insurance isn't paid."

Bikram Jeet Singh, owner of Yellow Cab Co. of the Peninsula, has submitted several applications since 1994--including two in 1998--that have all been returned as incomplete.

Singh did not question the return of his initial applications, understanding that the city may have had reservations about licensing a company that, at the time, had limited assets--only 10 to 15 cabs.

Today, however, Singh operates an established, 5-year-old company with 35 cabs, gross annual receipts totaling nearly $500,000 and contracts with major agencies. His Belmont-based company serves about 10 Peninsula cities, most of which just require a business license, and has earned a profit over the past three years. There is no reason, he said, why his recent applications to Palo Alto should not have been approved.

"In my humble opinion, we've met the city's requirement that a cab company be a going concern," said Singh's attorney, Alex Berline. "The feeling I'm getting from Palo Alto is that they're looking for a way to find a problem, as opposed to looking for a way to find a solution."

Glaes, however, said Singh's applications had inadequate or conflicting financial information, including different figures for the same expenditures.

Roger Barnes, owner of Mountain View-based Ace Cab Co. of the Peninsula, said Palo Alto's taxicab licensing process is too strict.

"You have to make a marketing case to prove that the city requires another cab company," Barnes said. "That's unheard of in the United States. Even in the airline industry, it's not a requirement. That's ensuring there's always going to be a monopoly."

Barnes said he submitted separate applications in 1996 and 1997. The first year, he allowed the application to lapse after the city auditor reviewing his paperwork raised questions about Barnes' role in the viability of his company. In 1997, he again allowed the application to lapse, this time after he lost a contract he was counting on to provide service to the Veterans Affairs Hospital in Palo Alto.

Glaes, however, said the city took no action on Barnes' applications because, in 1996, he did not submit the application fee and, in 1997, failed to complete the financial portion of his application.

Glaes welcomes having another taxi company in Palo Alto, although she believes Schweitzer's company is doing a good job.

"(Yellow Cab Co. of Palo Alto) has served the community well. But I believe the community is at risk with only one company legally providing service. If the existing company sold the business or took a turn for the worse, there could be a delay in bringing on a new provider."

If the city approves Silicon Valley Checker's application to operate in Palo Alto, it will devote 35 cabs to the city.

The company, owned by Don and Larry Silva since 1977, operates about 245 cabs and serves about a dozen local cities under the name Yellow Checker Cab Co.

Larry Silva, who spoke for the company at a meeting with city administrators to review the application, said he frequently hears about long waits for cabs in Palo Alto.

"The need for a second cab or alternate cab company is not being met at this time," he said.

Schweitzer, who also attended last week's meeting, delivered a highly critical presentation of Silva's company. In particular, he alleged that Silva provided false information to the city about the number of local organizations that have requested the services of Silva's company, including the Palo Alto Veterans Affairs Hospital and Children's Hospital.

Further, Schweitzer said Silicon Valley Checker has not proven that having a second cab company would benefit the public.

"As with other sole-source providers of service in the city (Palo Alto Sanitation Co. and Cable Co-op), the public has benefited from the reinvestment that can be made in state-of-the-art equipment when competition is controlled. The results are a higher level of public service," Schweitzer said.

City officials said a decision on whether Silicon Valley Checker will be granted a license in Palo Alto should be made by next week.

Weekly editorial intern Karen Willemsen contributed to this report.

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