System of Tow Garage Monopolies Challenged : City Hall: Families have inherited ‘official’ police business for up to 52 years. Council plans a review.

For half a century, Los Angeles has maintained a lucrative network of private tow garages with virtual lifetime monopolies that allow families to pass the business from generation to generation, records and interviews show.

Police-sanctioned garages have collected millions of dollars each year without formal contracts, regular competitive bidding or a financial return to the city.

The 17 “official police garages” never have been independently audited, and the city does not know how much profit the firms are making through towing and storage fees charged to more than 200,000 motorists each year.

Now some city officials are saying that the system may not be legal under the City Charter. This method of handling public business, which appears unique in Los Angeles city government, has come under new scrutiny because of the city’s fiscal problems and a controversy over efforts to remove one garage accused of impropriety.

Most of the garages in the Los Angeles municipal towing system, the nation’s largest, have been performing the work for at least 20 years. Some have reaped the business for up to 52 years, operating under “designations” granted by the Police Commission.

Commission investigators say that, for the most part, the system operates very well, but has been marred by recurring problems in recent years.

Three firms lost all or part of their police tow business over problems that included complaints about service and alleged bribery of police officers with gifts. Investigators also found indications that some companies had not been paying adequate fees to the state until two years ago.

The city must have evidence of major misconduct to drop a police tow garage under the current Police Commission rules.

“The tail is wagging the dog,” said Los Angeles Police Department Detective Steve Bernard, who monitors the garages for the Police Commission.

Councilman Marvin Braude, the new Public Safety Committee chairman, said he intends to conduct a “rigorous” review of the system, with an eye toward increasing competition and recouping revenue for the city.

“There will have to be very good reasons” for leaving the system the way it is, said Braude, who plans to conduct hearings in the weeks ahead.

As a result of Braude’s inquiries, the Police Commission staff has urged an audit of the garage books. And the chief administrative officer has called for fixed terms on the towing arrangements and adoption of franchise fees that could bring the city more than $1 million annually.

The current “open-ended’ police tow arrangements may violate contracting requirements of the City Charter, according to a Police Commission staff report last month.

“The practice of lifetime designations for (a police garage) unnecessarily restricts competition” and “can cause diminished effective regulation,” the staff wrote.

Garage owners declined to discuss their income. But rough estimates--based on the number of cars towed--suggest the garages may gross close to $20 million annually from the city business, city officials said.

Owners, who have made tens of thousands of dollars in campaign contributions to City Hall officials and hired leading lobbyists in recent years, defend the system and are gearing up for a major fight.

The owners say they provide a top-notch, essential public service free to the city. They note they have invested tens of millions of dollars in land and equipment. And, they warn, competitive bidding could lead to uneven tow rates across the city and shoddy operators.

“The way I feel is we have professionals doing everything the city requires,” said Tony Torres, president of the Official Police Garage Assn. of Los Angeles. “If it’s not broken, don’t fix it,” said Torres, who took over the Foothill area’s 40-year-old Black & White Garage from his father.

Periodic calls for change in the system over the last 30 years have stalled, in part because the Police Department and the Police Commission have argued that the current system works well.

Now, the president of the reconstituted Police Commission, Stanley Sheinbaum, said the police garage system “has to be looked at.”

The interest of Sheinbaum and other key officials, including several City Council members, was heightened recently by a ferocious court and lobbying battle over a 36-year-old police garage operation in Van Nuys.

Police Commission investigators last year alleged Fox Motors Inc. in 1987 and 1988 had improperly sold impounded cars to firms owned by relatives. Henry Fox, the ailing 76-year-old owner of the company, denied the charges, but agreed to relinquish the city business in July of this year.

Fox’s son, William, operator of Fox Motors since 1989, was among several applicants for the official towing business, but was not awarded the business. During the selection process, William Fox hired former Councilman Arthur K. Snyder as his attorney and lobbyist who challenged the entire selection process.

In July, a Superior Court judge granted Fox Motors a temporary order halting the city’s removal of the police tow designation.

And the City Council has agreed to hold off on the city’s attempt to remove Fox Motors until it reviews the entire police garage system.

The police garages and their lobbyists have bolstered their political profile at City Hall in recent years by making more than $42,750 in campaign contributions to city candidates since 1984, records show.

In addition, The Times found, they funneled $41,000 to a special-interest political action committee called Taxpayers for Responsible Government during a three-year period ending in 1987. The PAC, which also drew funds from lobbyist, cable television and development interests, in turn made tens of thousands of dollars in political donations to city officials. In the 1985 mayor’s race, for example, the PAC gave $10,000 each to Mayor Tom Bradley and his challenger, City Council President John Ferraro.

The PAC was affiliated with the firm of the late City Hall lobbyist Phil Krakover, who represented the police garages, records and interviews show.

Ferraro said there is no connection between the contributions and any council actions or inactions involving the police garage system. He said he was unaware Krakover was associated with the garages. “You guys may think we have a book we carry and look at to see if (people) contributed, but that’s a bunch of bull,” he said.

Bradley declined comment.

Several garage owners said they could not recall details of the PAC donations.

One, Tom Keyser, who has had a police tow garage in South-Central Los Angeles for more than 20 years, said the various contributions do keep the garages in good standing at City Hall. “The opinions of public officials are extremely important to us as an association,” Keyser said. “You don’t want to bite the hand that feeds you, so to speak.”

As the police garages gear up for the coming legislative battle, their lead lobbyist will be Ken Spiker, the City Council’s former legislative analyst. Spiker, who until 1984 was the top executive adviser to the council, said he will be lobbying all of his former bosses.

“There’s no question that for government towing (the police garages) have a monopoly,” Spiker said. But he said the association opposes franchising, auditing of its books or competitive bidding.

Many competing tow operators will be eyeing the debate over the coveted, high-volume Los Angeles police garage designations. Each ensures exclusive towing rights for all calls from police and parking officers in each of 18 police divisions.

Cars are towed because they are illegally parked, abandoned, involved in crimes or immobilized by accidents. Owners of cars involved in accidents have a choice of using official police garages or other tow companies. Most use the police garages, officials said.

Some tow truck operators say that being designated an official police garage is a gold mine.

“It’s like . . . instant millionaire,” said Hal Present, a La Crescenta tower and past president of the Los Angeles chapter of the California Towing Assn. Present wants Los Angeles to break up its current monopolies.

Los Angeles police garage owners insist that the high costs of towing and disposing of thousands of abandoned wrecks, meeting strict Police Commission operating standards and providing elaborate security cut heavily into their profits.

“I’ve made a living,” said Richard Viertel. “I certainly haven’t gotten rich over the thing.” Viertel has held two of the city’s busiest police towing designations--downtown and the Rampart area--for 41 years.

Snyder and Fox Motors are parting ways with the rest of the OPG owners, arguing that the police garages are in effect franchises that have operated in violation of the City Charter. Snyder says his client is entitled to a second chance at the contract under a new, formal franchising system.

“It’s just been sort of a comfortable buddy-buddy system,” Snyder said.

Viertel complained that Snyder’s campaign may end up ruining the whole system.

Viertel and Spiker insist that they have a model police tow system that keeps rates down and is largely problem-free. They say the system benefits from the stability and experience of the open-ended, family-run police tows.

Detective Bernard said some garages apparently had not been paying adequate fees to the state. The garages sell cars that are not claimed. After towing and storage fees are recovered, all excess fees from the sales are supposed to be sent to the Department of Motor Vehicles, officials said.

But payments to the state from some Los Angeles area tow garages, including the police garages, were much lower before the probe of Fox Motors, said Diane Runyan, a DMV technician who handles lien sales. “All of a sudden . . . we started getting a lot from all of them,” Runyan said.

The Fox Motors probe had included allegations that Fox had not sent required excess sales profits to the state. No charges were filed.

Police garage representatives acknowledged there was an increase in payments to the state, but they denied it was a result of concerns prompted by the Fox Motors investigation.

Torres, the group’s president, said the fees went up after the garages started to publicize and formalize their car auctions at the suggestion of the Police Commission. Previously, only a few junk-yard buyers would show up at the informal sales and bids often did not even cover the towing and storage fees, he said.

Now crowds are coming to the auctions, boosting the bids, she said. “It tends to bring the prices up.”

Police Tow Garages

Los Angeles’ system of private police tow garages, the largest in the nation, is coming under scrutiny at City Hall. The 17 “official police garages” have held the lucrative city monopolies an average of 30 years without competitive bidding, independent audits or any financial return to the city. The garage owners, who are fighting to hold on to their exclusive business, argue that they run the best police impound system in the country at no cost to the city.

The garages are listed in the box at left below, according to the police districts they serve (1-18), the number of years each garage has served the area and each garage’s number of city tows in 1990. City-regulated rates are $65 a tow and $12 per day for storage fees.

CENTRAL BUREAU

* 1 & 2--Viertel’s Automotive Service, Central City and Rampart areas; 41 years. Number tows: Central, 15,684; Rampart, 19,244.

* 4--Hollenbeck Automotive Service, Hollenbeck area; 52 years. Number tows: 14,023.

* 11--ATS Northeast Towing, Northeast area; 3 years. Number tows: 9,225.

* 13--Swanney & McDonald Inc., Newton area; 40 years. Number tows: 10,505.

WEST BUREAU

* 6--Hollywood Tow Service, Hollywood area; 30 years. Number tows: 16,604.

* 7--Hank’s Wilshire Tow, Mid-Wilshire area; 24 years. Number tows: 15,363.

* 8--Rheuban Motors, Inc., Westside area; 50 years. Number tows: 8,600.

* 14--Bruffy’s Del Rey Tow, Marina/Venice area; 7 years. Number tows: 7,549.

VALLEY BUREAU

* 9--Fox Motors Inc., Van Nuys area; 36 years. Number tows: 12,989.

* 10--Howard Sommers Towing Inc., West Valley area; 29 years. Number tows: 11,799; firm also had 513 heavy-duty tows in districts 6, 7, 8 and 14.

* 15--Archer’s Vineland Service, North Hollywood area; 32 years. Number tows: 10,099.

* 16--Black & White Garage, Foothill area; 40 years. Number tows: 11,464.

* 17--Ross Baker Tow Service, Northridge area; 22 years. Number tows: 8,193.

SOUTH BUREAU

* 3--Swanney & McDonald Inc., Southwest area; 40 years. Number tows: 9,424.

* 5--Seventh Street Garage Inc., Harbor area; 38 years. Number tows: 6,423.

* 12--Keyser Tow Service, 77th Division in South-Central area; 21 years. Number tows: 11,039.

* 18--Kelmark Tow Service, Southeast area; 4 years. Number tows: 7,928.

CENTRAL and SOUTH BUREAU

Continental Towing, heavy-duty towing throughout L.A. area; 23 years. Number tows: 692.

Comparisons of police towing operations in selected major U.S. cities.

Cars ’90 Net City Tow Fee Towed System Income L.A. $65 200,000 Contracts with None 17 private companies Chicago $100 140,000 City operated $205,000** New York $150 100,000 City operated None San Fran. $80 60,000 One private company None with a 5-year contract San Diego $60 50,000 One private company None with a 5-year contract Long Bch. $70 22,300 City operated $855,000 Wash. DC $75 17,012 One private company $1.3 mil.* with a 3-year contract Detroit $35 13,000 Contracts with 27 $74,388 private companies Houston $57 4,000 Contracts with 75 None private companies

* Revenue only.

** Approximate figure. The Department of Streets and Sanitation took over the running of Chicago’s towing operation from the Police Department in April, 1991. The towing of abandoned autos is handled by a private company with a 3-year contract.

Compiled by Times editorial researcher Cecilia Rasmussen