A plan to save the financially periled L. A. Taxi Co., which was hailed as the savior of the Los Angeles cab industry when it began last summer, got a boost Thursday when the city Transportation Commission endorsed a proposal to allow the firm’s 300 employee drivers to become independent contractors.
The change, if approved by the City Council, would no longer require L. A. Taxi to pay for drivers’ Social Security contributions and other employee benefits.
By shifting those costs to drivers, L. A. Taxi officials said, the losses the company has sustained since it began operations last July--about $1.4 million--can be stemmed. Reports submitted to city transportation officials indicate that the company expects to initially save nearly $500,000 by the end of the year if the proposal is adopted as early as mid-August.
“I feel like we’ve been given a new lease on life,” said Mitchell Rouse, a part owner of L. A. Taxi, after the commission’s 5-0 vote. Rouse has indicated that the company may not survive if the rescue proposal is rejected by the city.
The fact that the drivers will have to pay for most of their own benefits--L. A. Taxi will continue paying for workmen’s compensation and for some medical insurance coverage--did not worry those who testified before the commission Thursday.
Glenn Pfundstein, 44, who has driven for L. A. Taxi since last August, echoed the sentiments of fellow drivers, saying, “I’d like to see the company make it and I’d like to be part of it.”
City Transportation Department General Manager James Howery said the rescue effort was recommended by his staff because L. A. Taxi has helped improve local cab service since the firm began operation during the Olympic Games last summer.
Faced with growing complaints about unsafe taxis, price gouging and trip refusals, the city granted a franchise to Rouse and the Cincinnati-based ATE Management Co. in an effort to shake up the taxi industry in Los Angeles.
Armed with an initial investment of $4.1 million, L. A. Taxi bought brand-new Ford LTDs, ordered its drivers to wear uniforms and promised to live up to the city’s demand that no price-gouging or discourteous service take place.
Although L. A. Taxi’s existence forced other cab operations to shape up to stay competitive--complaints about cab service have dropped since last summer--the company got off to a slow start during the Olympics and soon began losing money.
Rouse said it would be “highly unlikely” for the company to turn a profit as long as it was burdened with large employee costs. He and other company officials then went to the city Transportation Department to seek changes that were already granted to two local cab associations, made up of taxi drivers who own their own cabs.
The city’s support for the change for L. A. Taxi was opposed by representatives of the taxi associations, which have insisted that the creation of L. A. Taxi put too many cabs on the streets. At present, about 1,200 cabs are authorized in Los Angeles.
But the commission members were unswayed by the opponents’ contentions and adopted the proposal with little discussion.
The plan is expected to go to the City Council’s Transportation and Traffic Committee on June 12.