The practice of selling off cabs and permits has created a virtual taxi black market in San Diego.
On February 22, former San Diego city councilman Ben Hueso, then a member of the California Assembly, introduced a bill to make clear that “the driver of a taxicab is an independent contractor rather than an employee of the taxi company.” If passed, Assembly Bill 1243 could benefit Hueso’s brother Antonio, owner of USA Cab, one of the largest cab companies in town.
The possible conflict of interest grabbed the attention of the Sacramento Bee’s Laurel Rosenhall. In a March 17 article, Rosenhall quoted Hueso saying, “My family went through a very horrific lawsuit that spanned about six years. And they won [in 2009], but it came at a great cost to the company.”
The lawsuit charged that USA Cab treated its drivers as employees while calling them independent contractors, thus avoiding requirements to provide workers compensation insurance, withhold taxes, and pay a minimum wage.
As an assemblyman, current state senator Ben Hueso sponsored legislation some say will directly benefit family members who own a taxi company.
Mikaiil Hussein, director of United Taxi Workers, wants the city to take over management of taxis.
Hueso went on to argue that his legislation is needed to protect taxi companies, though it would not benefit his brother’s company. According to the Bee, “Hueso says his brother’s company won’t be affected because it already is protected by the 2009 ruling.”
That opinion is not shared by Peter Zschiesche, founder and director of the San Diego Employee Rights Center. Because USA Cab prevailed in its defense against the class-action lawsuit, Zschiesche tells me by phone, does not mean personal lawsuits against the company on similar grounds can’t succeed.
The new law proposed by Hueso, who became the District 40 state senator in a special election on March 13, also appears intended to head off unionization of cab drivers anywhere in California. The legislation is opposed by United Taxi Workers of San Diego, which notes on its web page that Hueso was supported by organized labor in his recent election.
Mikaiil Hussein is the director of United Taxi Workers, having founded the organization in 2009 after angering industry leaders. He emigrated from Somalia in 1993 and eventually earned a college degree in computer science. “After I spoke out at a city-council meeting,” he tells me by phone, “I was told to turn in the keys to the cab I was driving. I was then blackballed by the other companies I tried to drive for.”
The cab owner who released Hussein owns 27 cabs, he says. They appear on the streets as belonging to Yellow Cab’s fleet, although they were purchased by their owner from the parent company and labeled by number and new names. About ten years ago, Yellow Cab sold all its cabs to individuals who could afford the rising prices. Permits to operate the cabs accompanied the sales.
The practice of selling off cabs and permits has been adopted by the other large taxi companies in San Diego — USA Cab is thought to still own about 40 cabs — and has driven up prices dramatically. A demand for ownership prompts even smaller owners to market their permits in hopes of making huge profits. The Taxicab Administration, a subdivision of the San Diego Metropolitan Transit System, says it does not have jurisdiction to control the sales, which critics argue have created a virtual black market.
Industry rumors suggest that permits to operate taxis at the airport have been sold for as much as $160,000.
The City of San Diego’s Office of the Independent Budget Analyst looked into the matter in February 2012. It noted, on the basis of a consultant’s report, that neither the city nor the transit system earns “direct revenue” from sales of taxicab permits. “Although the City of San Diego owns the permit, and issues a privilege to participate in the San Diego taxicab market, permit holders profit from the transfer of these permits by charging a premium to the recipient of the permit. According to the consultant report, the price paid for permits ranges between $35,000 and $110,000.”
According to scuttlebutt in the industry, those prices have reached as high as $160,000 in some recent cases of permits to operate at Lindbergh Field. As I discovered one Sunday afternoon by walking the lineup of cabs waiting for passengers at the San Diego Zoo, many local taxi drivers would love having permits to operate their own cabs but despair of ever being able to afford them. Occasionally, the Taxicab Administration holds a lottery to allow new qualified owners into the market at the original permit prices of $3000. The price is somewhat higher for permits to operate at the airport.
The drivers also gave me a range of how much they pay cab owners for weekly leases, which the ongoing sales of permits keep driving up. The leases of the Yellow Cab companies, at $840, seem to be the highest, largely because of a computer system Yellow uses for passengers to “hail” cabs. The lowest lease I heard was $455 per week. The drivers, none of whom would state their names, reminded me not to forget what they pay for gas. The consensus was about $210 per week.
The California Assembly bill that Ben Hueso submitted in February to help taxi owners had no provisions to improve the difficult working conditions drivers face. The legislation maintains the status quo of lease drivers remaining unable to become their own permit holders.
But United Taxi Workers, which has paid staff, and a newer organization called Unified Taxi and run exclusively by volunteering drivers, have been lobbying Mayor Filner for big changes. They want the City of San Diego to take over management of the taxi industry from the transit system’s Taxi Administration and open up the market for original permits, ending the explosion of prices that accompanies permit transfers.
The organizations say they have gotten a good response from Filner, who has granted them several informal conferences to discuss the relevant issues. At its February meeting, the transit system’s board of directors acknowledged that the city is likely to directly take over running the taxi business. But board members voted to renew the contract the Taxi Administration has with the city for another year, noting that the city has created no new agency to do the work.
The date of the board’s meeting was February 21. Hueso submitted his Assembly bill the following day. ■