HomeMy WebLinkAbout27- Police CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACN IAA
From: Keith L. Kilmer, Subject: Approval of a Police Operated
Chief of Police Impound Facility as Outlined in the Attached
Business Plan.
Dept: Police Department
Date: June 23, 2009
M/CC Meeting Date: 08/ 17/2009
Synopsis of Previous Council Action:
3-4-09 Concept presented to the Ways & Means Committee and directed to return with a
comprehensive business plan.
7-22-09 Business plan presented to Ways & Means Committee.
8-5-09 Ways &Means Committee recommended the item be forwarded to the Common
Council for consideration.
Recommended Motion:
1. That the Police operated impound facility be approved as outlined in the attached
business plan (Attachment B).
2. That staff be directed to prepare and bring back to Council for approval the necessary
documentation to implement the program as outlined in the business plan.
KEIT�MER, CHIEF OF POLICE
Contact person: Lieutenant Jarred Burguan Phone: 384-5771
Supporting data attached: Yes Ward: All
FUNDING REQUIREMENTS: Amount: FY 09/10 — $483 ,400 GF Savings
Council Notes: Finance
Agenda Item No. 21
04V()l
QTY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
STAFF REPORT
SUBJECT
Approval of the Police operated Impound Facility as outlined in the attached business plan.
BACKGROUND
As part of the budget savings measures approved in February of 2009, the Council approved the
concept and estimated revenues and expenditures associated with a City operated impound
facility with a January 1, 2010 implementation date.
Since that time, the Police Department, Development Services and Facilities Management have
developed the attached business plan to establish a City operated impound facility. City staff
have evaluated several similar programs in several other local communities and developed a best
practice approach for the City of San Bernardino. Other communities operating a similar
program include the City of Colton, City of Claremont, City of Upland, City of Placentia as well
as the City of Long Beach.
Highlights of this plan include the following:
♦ This plan maintains a relationship with all of the existing tow carriers that are currently on
the City's tow rotation. These independent tow carriers will continue to perform all of the
towing services they currently provide for the City.
♦ The City will acquire property and maintain possession of all "impounded" vehicles. These
are vehicles held for a legal reason such as driving with a suspended driver's license or no
driver's license or driving a vehicle with registration expired in excess of six months. The
tow carriers will maintain possession of all "stored" vehicles. Police Officers will direct the
tow carrier to the appropriate facility when towing a vehicle.
♦ A detailed revenue and expense plan, which includes initial expenses, 6 month and full year
estimates, and a summary of General Fund costs that will be shifted to the impound facility.
♦ A benefit summary sheet showing the overall financial impacts of the proposal.
♦ A comparison of towing, storage, impound and lien-sale operations as they currently exist
and under the recommended proposal.
During the planning process, staff considered proposals from the Police Department as well as
Facilities Management for operational management of the facility. For security reasons as well as
operational control and oversight it is recommended that the Police Department manage the
facility. A Police Department management plan will include the addition of several new
positions to compliment existing staff. City staff also met with the tow carvers during the
planning process to solicit their input.
City staff first presented this impound facility concept to the Ways and Means Committee on
March 4, 2009. At that time the committee asked staff to return with an actual business plan. The
Business Plan was presented to the Ways and Means Committee on July 22, 2009 and again on
August 5, 2009. The meeting on August 5" also included a presentation from a representative
from the City of Colton; following the presentation the proposal was recommended to be
forwarded to the full council for consideration.
FINANCIAL IMPACT
The 2009/2010 Preliminary Budget includes six months of estimated revenue and expenditures
for the impound facility. If the Business Plan for the facility is approved, staff will return to
Council at a later date requesting approval of the necessary documents to implement the program
(property lease, establishment of personnel, and a fee schedule).
This proposal has a positive financial impact on the City's General Fund in that many existing
expenses can be shifted to the program creating an estimated General Fund savings of$483,400
in FY 09/10 and an estimate of up to $1.4M annually thereafter as outlined in Attachment A.
RECOMMENDATION
1. That the Police operated impound facility be approved as outlined in the attached
business plan (Attachment B); and
2. That staff be directed to prepare and bring back to council for approval the necessary
documentation to implement the program as outlined in the Business Plan.
ATTACHMENT A
City Operated Impound Facility
Fiscal Year 2009-2010
Based on projected start date 1/1/10
First 6 Month Estimated
Budget Annual Budge
REVENUE
1261 General Impounds @ 5 days 252,200 504,400
882 Lien Sale Vehicles @ $778 686,200 1,372,400
352 Early Releases @ 5 days 70,400 140,800
530 30-Day Impound Releases 636,000 1,272,000
2143 Tow Fees @ $185 396,500 793,000
2143 Lien Fees @ $70 150,000 300,000
Total Revenue 25191,300 4,382,600
NEW EXPENSES
Salaries/Benefits Paid During Set-Up 55,300 -
SalariesBenefits for Operation 220,200 550,000
General Start Up Equipment 175,000
Property Lease 81,000 110,000
Office Lease 12,000 24,000
Utilities 13,600 20,000
Network Lines 5,400 15,000
Other Operating Expenses 8,000 20,000
Security- Off Hours 66,000 140,000
Set Aside Account 100,000 200,000
3025 Tow Fees @$185 559,600 1,119,200
3025 Lien Fees @ $70 211,800 500,000
Bad Debt/Uncollectible 200,000 225,000
Total All New Expenses 1,707,900 2,923,200
Current Resources Shifted to Impound Fac
Salaries/Benefits Paid During Set-Up 72,700 -
Salaries/OTBenefits/Supplies/Equip for Operations 412,800 1,414,100
City Administrative Costs 194,400 438,300
Loss in Franchise Fee (196,500) (393,000)
Total Resources Shifted to Impound Fac 483,400 1,459,400
GRAND TOTAL NEW AND SHIFTED
RESOURCES FOR IMPOUND FACILITY 2,191,300 4,382,600
City Operated Impound Facility
Fiscal Year 2009-2010
BENEFIT SUMMARY SHEET
CURRENT EXISTING OPERATIONS:
Tow Franchise Fees Paid to City $ 466,000
City Operated Impound Facility Benefit First 6-months
Existing Resources Shifted to Impound Facility Operation $ 679,900
Tow Franchise Fees Lowered for Tow Companies (196,500)
Total Net Benefit to City $ 483,400
City Operated Impound Facility Benefit 12 - months
Existing Resources Shifted to Impound Facility Operation $ 1,852,400
Tow Franchise Fees Lowered for Tow Companies (393,000)
Total Net Benefit to City $ 1,459,400
FY 2009-2010 Budget Impact If No City Impound Facility
Remove Impound Yard Estimated Revenues $ (2,015,600)
Remove Impound Facility Expenditure Budget 1,335,700
Reinstate Full Tow Franchise Fees 196,500
Total Net Negative Impact to City Budget $ (483,400)
ATTACHMENT B
CITY OF SAN BERNARDINO
CITY-OPERATED VEHICLE IMPOUND FACILITY
BUSINESS PLAN
Introduction/Overview:
The Police, Facilities Management and Development Services Departments have worked
together to propose a concept that involves operating an impound facility to maintain vehicles
that have been impounded by the Police Department. This program would allow the City of San
Bernardino to control the operations of the facility and capture revenue generated by the daily
storage of vehicles. These vehicles are currently being impounded by the Police Department but
stored at one of the six tow rotation carriers contracted with the City.
There are a number of communities in Southern California that operate similar programs. The
City of Long Beach operates a full-service operation that involves actual towing of vehicles. The
cities of Colton, Upland, Claremont and Placentia are a few of the local entities that operate a
facility similar to the model that is being proposed here.
The City of San Bernardino has a Tow Service Agreement (TSA) with six private tow carriers
located within the City to provide towing and impound services for all City departments. Under
the current program, the carriers collectively pay a franchise fee that totals just over $38,000 per
month. The carriers are on rotation, called to all towing requests by officers (approximately
9,500 calls for service each year). All vehicles that are towed are taken to the private storage
yards maintained by each carrier.
This proposal will modify the existing process for impounded vehicles but continue to utilize our
existing carriers for towing services. Under the plan, tow carriers will deliver "impounded"
vehicles to the City- operated facility and maintain possession of all other towed and stored
vehicles. The current franchise fee will be adjusted to account for program changes.
A location for the police impound facility has been identified at the northwest corner of
Hallmark Parkway and Shenandoah Avenue. This property is a paved parking lot that was at one
time used for overflow parking at the former Wells Fargo Mortgage Services complex. The
location is available for lease or purchase. The property would require some improvements and
the addition of a mobile office building for operations. The work required for this location would
be minimal, and the program could be operational within a few months of approval by the City
Council.
This operation would require additional staff. City employees will manage the inventory of
vehicles in the possession of the City. A private vendor will be utilized for any vehicles that will
be required to be sold, during a weekly auction that will be held at the impound facility.
** City Finance staff have incorporated this plan into the proposed FY 09/10 budget. The
proposal has an anticipated start date of January 1, 2010. Revenue figures will vary depending
upon the actual implementation date. City staff feels confident that the program could be
operational by the proposed start date.
Police Department Manaeement:
Because of the nature of the operation, this facility will fall within the scope of responsibility of
the Traffic Unit. Police Department personnel will manage the day-to-day activities of the
facility, maintain inventory control and handle the daily financial matters related to the
operation.
• This option calls for the addition of a Police Lieutenant to the Police Department staffing
levels. The Traffic Unit is currently managed by a Lieutenant that also serves as a District
Commander. The Traffic Unit is an ancillary duty to that position. The addition of a
lieutenant to specifically manage the Traffic Unit will provide for a more efficient
management structure and span of control. This new position will have management
responsibility of all traffic operations to include field work, administrative functions, the
Red Light Camera program, Special Events, (permits) as well as the tow yard.
• The Traffic Unit is currently staffed with two police sergeants and a civilian supervisor.
Daily supervision of this facility will fall under the umbrella of their duties and
responsibilities.
• Administrative duties related to impounded vehicle releases are currently handled by two
Senior Office Assistants and a Community Service Officer assigned to the Traffic Unit.
Certain vehicle releases are already included in their daily duties. This program will add
considerable workload and it will be necessary to add two additional positions under the
Senior Office Assistant classification. These additional positions will handle
administrative duties related to inventory control and management, as well as duties
related to the releases, lien and auction program.
• It will be necessary to create a new classification of"Impound Facility Attendant." The
budget for this program calls for hiring two employees for this position. These positions
will handle the physical workload associated with the facility. Examples of these duties
include movement of impounded vehicles, inventory and property control, as well as
duties associated with the auction program.
• Full time personnel will be at the facility during regular business hours (Monday —
Friday). During the off hours, the facility will be staffed with security guards. These
guards will handle security at the facility to protect the inventory and allow tow drivers to
deliver vehicles during off business hours. The City already has this position
classification and a majority of the personnel that fill these positions are part-time, off-
duty or retired police officers.
Receivine Vehicles:
The facility will be a storage lot for vehicles that are "impounded." Impounded vehicles are most
often defined as vehicles that are being operated on the road with expired registration in excess
of six months, as well as vehicles that are driven by an unlicensed driver. In many cases of a
driver being unlicensed or driving on a suspended license, the vehicle is impounded for a 30-day
period (CVC 14602.6a). These violations account for a majority of impounds. There are other
reasons for impound that are less common, such as street racing violations and evidentiary
vehicles that would likely be stored at the City facility as well. Other cars that are towed by
officers are classified as "stored" vehicles. Examples of these vehicles would be vehicles
involved in traffic accidents, vehicles that are blocking traffic and deemed a traffic hazard and
long-term parking violations (excess of 72 hours). The proposed facility will not normally take
any"stored"vehicles, which will be handled by the existing tow operators.
A police officer that makes a determination that a vehicle is to be towed will request a tow from
the list of rotation tow carriers contracted by the City through the TSA. If the vehicle is to be
stored by the officer, then the tow carrier driver will deliver the vehicle to the facility maintained
by the tow carrier business. If the vehicle is going to be impounded in accordance with the law,
then the officer will direct the tow carrier driver to deliver the car to the City's impound facility.
During regular business hours, the facility will be staffed with full-time police employees that
will accept the vehicle. During the hours that the facility is not staffed with full-time employees,
there will be part-time security officers in place that will open the facility to the tow driver in
order to deliver the impounded car.
The City will establish a protocol for accepting vehicles into the facility's inventory. A
computer-based tracking program will be purchased to manage the inventory and every vehicle
will be photographed to document the condition of the vehicle when delivered to the facility. The
photo documentation system will be used to provide a level of protection for the City against
claims of theft and damage.
Vehicle Release Procedures:
The Police Department already has a system in place for vehicle release procedures. Persons that
have had their car impounded currently go to the Central Police Station to obtain a release. The
person is required to pay the administrative release fee; they are provided with the necessary
release paperwork, then directed to one of the six tow carrier yards to retrieve their vehicle.
The existing system will be slightly modified in that the person arriving at the Police Station will
also be required to pay the entire amount due for the release of a vehicle in the City's inventory,
including the addition of the towing bill, storage fees and lien fees, if applicable. If the vehicle is
located at the City's impound facility, the person will be directed to the facility to retrieve their
car.
Lien Process:
There will be a need to start a lien process on many of the vehicles impounded. This process will
typically be started after 72 hours of the impound hold if the owner has not retrieved the vehicle.
This process may also be implemented on 30-day hold vehicles.
The lien process will be contracted to an outside vendor. The use of an outside vendor will allow
the City to free itself of the legal details of the process. The cost associated with the process
will be passed along to the vehicle owner when the vehicle is retrieved.
Starting the lien process is a legal requirement that will allow the City to dispose of vehicles the
owners do not intend to claim from the impound process. The value of the vehicle determines the
length of the lien process, which can be between 45 and 90 days. Anybody that has their car
impounded will have ample opportunity to retrieve their car before the lien process is completed.
Vehicles that are not retrieved by the owner will be sold through an auction process.
Auction Process:
It is estimated that the City will sell in excess of 1,800 vehicles per year at an impound auction.
These are vehicles that have been impounded by officers and never claimed by the owners after
the legal hold period has passed.
The City will maintain possession of these vehicles throughout the impound period and until the
legal time period has elapsed on the lien process. The vendor contracted for the lien process will
notify the Police Department that all legal matters are resolved and advise us as to when the
vehicle can be sold.
The City will conduct a weekly auction at the impound facility site, open to the public. Personnel
from the City will conduct the auction. Policies and procedures will be established as to how the
auction is to be conducted and who may or may not be prohibited from participating. For
example, Police Department personnel will be prohibited from purchasing vehicles that they
were involved in impounding. There will also be policies to establish payment and required pick-
up times for vehicles purchased.
Site Activity:
The City's impound facility will have a mobile office building to accommodate the employees
assigned to work at the site. This building will house the two Impound Lot Attendants and one
Senior Office Assistant on a full-time basis. The building will be electronically connected to
Police Department systems for inventory purposes.
In terms of public access, this site will only be used for the retrieval of vehicles for persons
claiming release of their vehicles, as well as the public auctions. It will not serve as a business
office for public contact with the City or the Police Department. However, the site will be
equipped so field officers will have a location in the northern area of the City to conduct some
limited business (report writing, etc...).
Site Location:
The Police Department, with the assistance of the City Manager's office, Development Services
and the Economic Development Agency, have evaluated several property options within the City
of San Bernardino. It was determined after careful analysis that the requirements of the property
include the capacity to accommodate 600-700 vehicles, be approximately 5-7 acres in size and
have an office facility on-site. A facility with indoor vehicle storage would be desirable. We
focused our efforts on areas that were zoned as light industrial, heavy industrial or commercial
heavy, as these are the requirements for the Conditional Use Permit that will be required.
Several potential locations were evaluated. The site that was identified as being the most suitable
is a paved parking lot on the northwest comer of Hallmark Parkway and Shenandoah Avenue.
This site is a 7.3 acre parcel, of which 5.38 acres is an improved parking lot. This site was
originally developed as a site for overflow parking for GE Capital and later Wells Fargo
Mortgage Services. The site currently has wrought iron fencing along the street frontages and
chain link fencing along the interior boundaries. The site has lighting in place and irrigation for
existing landscaping. The existing landscaping has not been maintained for quite some time.
The fencing and landscaping setbacks on the property will remain.
This parcel of land is zoned light industrial, which will satisfy the needs of the Conditional Use
Permit. The site will store vehicles for long periods of time but will not have the environmental
impact that a regular tow yard will have. The vehicles impounded at the facility will be operable
vehicles, with no repair/maintenance activity and leaking fluids will not be an issue. Therefore,
site screening and a clarifier will not be required.
It is recommended that the City purchase/lease a modular office building for staff use at the
facility. All necessary utilities are available on-site. The site will require the removal of some
trees, tree wells and landscaped islands. There will also be the need to repair some of the fencing
and gates, as well as reestablish some landscaping. The remaining 1.92 acres that is currently
undeveloped could potentially be developed to accommodate the future needs/capacity of the
facility.
The owner of the property is Nowakowski Properties, L.P., which previously leased the lot for
the use of GE Capital/Wells Fargo. EDA, Development Services and the Police Department have
met with an agent of the property owner and have determined a fair market lease amount for a
period of five years, subject to the approval of the Mayor and Common Council. As proposed,
the first year's lease would be $108,000,payable in monthly rent of$9,000. In the second year of
the lease, the rent would be increased to $120,000 payable at $10,000 per month. For subsequent
years, the rent would be increased by 3% each year. The City would have the option to extend
the lease for two additional three-year terms, or have the option to purchase the property at the
end of the first lease term of five years. No lease agreements have been entered into at this time.
Actual negotiations will take place following Council action.
Tow Carrier Impact:
The City of San Bernardino has a Tow Service Agreement (TSA) with six carriers located in the
City. These carriers are: Big Z Towing, Wilson Towing, Danny's Towing, Tri-City Towing,
Hayes Towing and City Towing. Under the requirements set forth in the TSA, the carriers
respond to all requests for tow services by the Police Department, equating to approximately
9,000 — 10,000 calls for service annually. Of that total, approximately 6,000 vehicles are
considered "impounded," meaning that the vehicle owner must satisfy some requirement to
obtain a release for their vehicle. For instance, an owner with a vehicle impounded for expired
registration in excess of six months will be required to pay the fees due to the Department of
Motor Vehicles to bring the registration current and valid before an impound release will be
granted. These are among the types of vehicles that will be delivered to the City impound
facility. The remaining calls for service that the carriers receive from the Police Department
(3,500+) are stored vehicles or owner request tows. The carriers will maintain possession of
these vehicles.
Throughout the planning of this proposal, it has been the desire of the Police Department to
create a system that will retain the current tow carriers and maintain the existing good working
relationships in place.
This proposal continues the use of our current carriers to perform all towing operations generated
by field and investigative operations of the Police Department. Under the proposed arrangement,
carvers will be required to deliver specified vehicles to the Police Department facility
(impounded vehicles) and continue to operate in their existing business model with the
remainder of the vehicles towed. Revenue currently generated by impounded vehicles collected
by the tow carriers will be retained by the City. However, the carrier will continue to realize all
revenue from other towed and stored vehicles and will realize the towing fee for all vehicles
delivered to the City's facility.
Under the guidelines of the TSA, the tow carriers pay the City a franchise fee for performing
towing services. Under the current plan that fee is a flat rate of $38,838 per month divided
among the six carriers, or $6,473 each. This fee was established using a formula of$48.31 per
vehicle that had been towed during a previous year's analysis. With the understanding that the
lost revenue from the storage of vehicles impounded by the Police Department will impact the
financials of each carrier, it is recommended that the franchise fee be adjusted. Therefore, it is
recommended that the current flat rate be amended and a new franchise fee model of 10% of
gross tow revenue generated through City business be adopted. This proposed franchise fee
model will be more labor intensive, but it is believed that it will provide a more equitable
business environment for the carriers. This plan would allow the carriers to pay a franchise fee
that will be adjusted based upon their gross revenues each month and not be bound to a flat fee.
This aspect of the plan should be evaluated by the City Attorney. One of the tow carriers raised
the concern during a recent meeting that "the fee is the fee," indicating that if the City is
charging the fee then that is simply the cost of doing business. Legally, the City may charge a
franchise fee to recover actual and reasonable costs associated with the program. This fee
adjustment is similar to the fee structure adopted by the City of Colton. It is the opinion of the
Police Department that the functions of the impound facility will recover some of the costs in the
existing program, and therefore, it would be reasonable to alleviate some financial impact against
the carriers.
The existing TSA has been evaluated by the Police Department and suggested changes that
include the above information have been submitted to the City Attorney in order to draft a new
agreement. This new agreement will be submitted to the Mayor and Common Council for
approval when completed and before operations commence at the City impound facility.
Members of the Police Department, Development Services, Facilities Management, City
Attorney and City Manager have met with the carriers to discuss their concerns. Collectively,
they have stated that this program will have a devastating impact on their financials. They have
reported that approximately 45% of their gross revenues come from storage fees and taking this
revenue from them will create a financial hardship. Another issue raised was that each carrier is
operating under restrictions (property capacity and response time) set in place by the City under
the agreements of the TSA. Because they invested in the infrastructure requirements of the TSA,
they are unable to reduce their costs. The carriers also reported that the existing economy would
not allow them to divest themselves of excess equipment and land.
It is difficult for the City to be in a position to know exactly what the actual impact will be to the
carriers. The concerns of each carrier have become part of the overall evaluation of this proposal.
However, in the research conducted with other communities that have implemented this type of
program, it was reported that the primary resistance to change would come from the existing
carriers. In many of the cases, similar claims were made by carriers in other communities. We
have not found a case of a tow carrier that could not sustain business operations in other
communities after this type of operation was implemented.
POLICE IMPOUND FACILITY
CURRENT STRUCTURE vs. RECOMMENDED STRUCTURE
Current Structure Proposed Structure
Towing Services • 6 tow carriers • Carriers will continue to
• 9,000 tows annually perform all towing services
• $185 per tow • Annual revenue - 1,665,000
Storage& Impounds • Carriers store/impound all • All impounds (approximately
vehicles 6,000) to city facility
• All stored vehicles (approx.
3,000) to carriers.
• Annual revenue to carriers
$607,500 based on 5-day
average storage at$40.50
per day
Lien Sales • Carriers lien sale unclaimed • City will assume lien sales of
vehicles unclaimed impounds
• Majority 30-day impounds • Carriers will continue to lien
• Carriers claim most are low sale unclaimed stored
value vehicles vehicles. Financial impact is
unknown to the carriers.
Franchise Fee • $466,000 annual flat fee • Restructured to provide a
• Equally divided between reduction to carriers
carriers • Adjusted monthly based on
• Based on 2007 tow data actual number of tows
NOTE: The information above is based on Police Department data and does not include
any financial information supplied by tow operators.
Tow Service Agreement Chances:
In 2005, the existing Tow Service Agreement (TSA)between the City of San Bernardino and the
six tow carriers that perform towing operations for the Police Department was approved by the
City Council (Resolution 2005-286). This current agreement updated the previous agreement
from 1999 (Resolution 99-86). In 2008, the current agreement was amended to include a minor
language change that impacted the annual date to review the franchise fee. The amendment also
updated the current franchise fee to $38,841 per month divided among the current tow carriers on
the Police Department rotation (Resolution 2008-347).
In preparation for this City impound facility operation, there was a full review of the TSA by
Police Department staff. Changes have been noted that will accommodate the program and cause
for a new agreement to be established.
The following is a synopsis of the significant changes that are recommended:
• Requirement that the towing carrier photograph vehicles when taking possession in order
to document the condition of the vehicle. This is a mechanism being put into place to
effectively deal with claims of damage and theft.
• Language that will allow for impounded vehicles to be delivered to the City's Impound
Facility while stored vehicles continue to be maintained by the towing carrier. This rule is
a general guideline as final authority on where a vehicle is to be taken to will rest with the
impounding/towing officer.
• Amending the franchise fee that is currently paid by the carriers. The new language will
establish a franchise fee of 10% of the base tow rate generated by City ordered business.
This language will include a requirement that each carrier provide an itemized list of each
vehicle and applicable charges related to that vehicle for each service call.
• Establishing language that will allow the City to collect tow charges for vehicles in their
inventory and reimburse the carrier for those charges.
08-17-2009 10:14 TFE MCGOUFRN LAW FIRM sGsse71732 PAGF1
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August 17, 2009
Via telefax#909-384-5105 only
The Honorable Patrick J. Morris and the Common Council
City of San Bernardino,City Hall
300 N. "D" Street
San Bernardino, California 92402
RE: Common Council Meeting; August 17,2009; Agenda item#27
Police-operated vehicle impound facility
Dear Mayor Morris and Members of the Common Council:
I have been contacted by the six private towing companies that presently contract with
the City to perform vehicle towing and storage services on behalf of the City. Those companies,
and other concerned towing companies throughout California,have organized under the name
California Towing Operators for Private Enterprise(CATOPE). They called me because my law
practice is concentrated in matters relating to the automotive towing industry. Working in
association with local attorneys,I have represented many Cali fornia towing firms over the last 25
years. I also attended the informal meeting between city officials and the city towing vendors
held on July 140i at City Hall.
The Common Council has been asked to approve a proposal from the Police Department
to operate its own vehicle impound facility, The matter is Item#27 on this allemoon's Council
agenda.
The City's six towing contractors strongly object to that proposal for practical,financial,
and legal reasons.
As noted above,under the current Tow Service Agreements(TSAs),the six private
towing companies perform towing and vehicle storage services whenever a vehicle impound is
needed by the Police Department. An"impound,"as defined in the Staff Report,occurs
whenever"the vehicle owner must satisfy some requirement to obtain a release for their
vchlcic,"e.g. a 30-day impound for driving without a license or current registration. The Report
indicates that there are approximately 6,000 annual "impounds"made by the Police Department.
Presently,vehicles are impounded at the private, secured storage facilities operated by
those six towing vendors. The towing firms charge the vehicle owners the contract-regulated
towing and storage fees for their services. In addition to towing and storage lees, the lowing
firms generate ancillary revenues on impounded vehicles, including lien fees and revenues from
the auction sale of unclaimed impounded vehicles. The viability of most, i f not all,of the six
towing vendors depends on the revenues generated from City impounds.
08-17-2009 10:14 THE MCGOVERN LAW FIRM 8656971732 PAGE3
The Honorable Patrick J. Morris and the Common Council
City of San Bernardino, Cali fornia
August 17,2009
Page 2
Assuming that the figures in Attachment A to the Staff Report are accurate,the six
private towing companies can anticipate total revenues of$4,382,600 in Fiscal Year 2009-2010
from the towing, storage,and possible auction sale, of impounded vehicles,or an average of
$730,433 per towing vendor.
The proposal now before the Council calls for the Police Department to go into the
vehicle impounding business to the exclusion of the private towing companies. Instead of
towing impound vehicles to their private storage lots,the City towing vendors would be directed
to tow impounds to a new City-tun storage lot. The towing companies would be paid their
contract towing fee;however,the Police Department would collect the daily vehicle storage fees
along with any other ancillary revenues. The proposed plan would completely gut the private
towing firms' impound storage-related revenues.
If approved,the plan would transfer all of the expected revenues indicated on Attachment
A, except for the $793,000 in towing fees,from the private sector to the public sector. 'to the
point,the plan will take a total of$3,589,600 in revenues right out of the pockets of six small,
mostly family-owned businesses in San Remardino.
It is important to note that nowhere in the Staff Report is it reported that there have been
any safety or security problems associated with the current private-sector impound storage
system. This proposal is 100%revenue-driven—in the words of the Staff Report. "to capture
revenue generated by the daily storage of vehicles."
From a socioeconomic standpoint, the city storage lot proposal is nothing short of
offensive. While the members of CATOPF are sympathetic to the City's budget crunch,they
object to any solution that comes at the expense of a select group of private businesses.
Financially,the adoption of this plan would be devastating to the current towing contradors.
The Staff Report makes clear that the six private sector towing firms will suffer wmbined
revenue reductions of$3,589,600 in the first year alone,an average of almost$600,000 per
company. In the current economy, what business can withstand such a loss of revenue?
Just as importantly,the city-run storage lot proposal suffers from obvious legal
infirmities. First,the governmental conflict of interest is glaring, if the City has a direct
financial interest in the revenues generated from vehicle impounds, the Police Department will
necessarily be motivated to increase those impound& i understand that the statistics from
existing municipal city-run tow lots bear that out. ilowever,even if the volume of impounds
does not increase as the result of the City's financial incentive,the mere appearance of
impropriety runs afoul of the spirit, if not the express language, of conflict of interest
jurisprudence.
08-17-2009 10:14 THE MCGOVEPN LAW FIRM 8656871732 PAGE4
The Honorable Patrick J. Morris and the Common Council
City of San Bernardino, California
August 17, 2009
Page 3
Furthermore,a city-run storage facility for impounds—operated to the exclusion of
private sector companies—raises serious antitrust issues. While municipalities arc not
generally precluded from proprietary activities in competition with the private sector, a city-rum
storage lot for impound vehicles is of a different stripe. That is because the City controls the
"product,"i.e., the vehicles to be impounded. In other words, there is no other source for vehicle
impounds other than the City Police Department. Private sector towing firms are unable to vie
for the service of storing`impounded"vehicles because the entity with which they might
compete—the City—enjoys an absolute monopoly on the market for vehicles to be
impounded. My research has revealed no California statute that expressly and affirmatively
authorizes a California municipality to act in such an anticompetitive manner.
On behalf of CATOPE,I urge the Council to reject the proposed plan for a city-ntn
storage facility I'or vehicle impounds. The proposed plan is extremely unfair, impractical,and
probably illegal. In short, it is just plain bad government.
Thank you for your attention to these comments and to this important matter. Please feel
free to contact me if I can be of any assistance to you in your consideration of this issue.
Sincerely yours
Michael P. McGovern
MPM:bcc
cc: California Towing Operators for Private Enterprise
California Tow Truck Association
James F. Penman, City Attorney(via telefax 4909-384-5238)
Brooks Ellison, Esq. (Sacramento)
Keith Kilmer, Chief of Police