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Photo by Jack GouldFirst District Supervisor Chuck Smith recently proposed that the county create its own power utility. The value of this idea can be summed up in just two words: "county bankruptcy." Or how about "toll roads"? Or "El Toro"?
Add a new infamy to that list: American Taxi, the company that enjoys a lucrative monopoly on cab service at John Wayne Airport (JWA). On April 10, the county's most powerful taxicab company filed for Chapter 11 bankruptcy, finally confirming what most in the local cab industry knew all along: the darling of airport officials can't pay its own bills.
The filing lists 19 unsecured claims totaling nearly $7 million. Half that amount—$3,369,000—is owed to Ford Motor Credit for financing the company's cab fleet. This presents a special problem because the fleet's book value listed in the filing is just $2.2 million.
Other debts include $57,000 to the company's two natural gas providers; $650,000 for a former partner's ownership claim; $650,000 to well-heeled lobbyist and current partner Lyle Overby for a loan to American Taxi; $64,881 for "insurance-premium financing"; and the $912,000 American still expects to pay the county by the end of its three-year contract.
Airport director Alan Murphy announced the bankruptcy in an April 11 memo. He was strangely upbeat, saying the airport "may continue to expect the same high level of service while the company resolves this matter" and noting that American Taxi is "current on all fees and charges payable to the county."
Interestingly, Murphy's memo didn't go out to the five county airport commissioners. They had to get the bankruptcy news through their own sources.
For Weekly readers, none of this is surprising. Company president Rick Schorling has spent the past 20 years racking up an impressive record of bounced checks, bogus deals and unsatisfied customers. During the 1980s, Schorling's work as an international helicopter broker got him close to Panamanian strongman Manuel Noriega and contra leader Eden Pastora, but Schorling's most notorious work was a series of bogus helicopter deals in 1992 that bilked numerous customers out of hundreds of thousands of dollars.
After his disappearance and eventual re-emergence in Orange County as a cab boss, Schorling managed to secure the JWA taxi monopoly in March 2000—a stunning move since his American Taxi didn't even come close to meeting the county's five-year experience requirement and was already $130,000 in the hole.
The only reason American got the contract was because county officials dropped the winning bidder after discovering he carried bad insurance. But documents obtained by the Weekly showed the county had no idea what kind of insurance American had when it obtained the contract.
Since then, American Taxi has found itself in court suing Pickens Fuel Corp.—its own natural-gas provider—to prevent that company from shutting off American entirely for failure to pay its bills. That lawsuit is still pending. And in October 2000, LA taxi officials showed American the door after it placed dead last in a competition to grab a share of that city's lucrative taxi franchise. The chief reason American lost: "lack of management experience."
"When I read months ago that American couldn't pay its own fuel provider," said airport commissioner David Markley, "I knew bankruptcy was a foregone conclusion."
American's bankruptcy leaves the county in a precarious position. When they selected American, county officials drafted a contract that doesn't specify a backup cab provider.
The American debacle raises an important question: Does Orange County really need a taxi monopoly? Put another way, why can't just any cab pull up to the terminal and snag a fare?
"That's a very good question," said good government advocate Shirley Grindle, who's currently overseeing a county committee dedicated to reforming procurement practices. "It's been the county's practice for years."
The standard argument from airport officials is that the airport's small size and virtually nonexistent growth potential prevented more than one firm from operating there comfortably. When the airport is running at its normal, meager capacity, this is no problem. But on a day like Dec. 8, 2000, when a Delta MD-80 blew out three tires during a hard landing and blocked all airport operations for four hours, the monopoly taxi system collapsed. Passengers stood in line at the taxi queue for hours, waiting for a slow trickle of American's red-and-white cabs to get them to LAX. Despite the emergency, airport officials stood by their ban on competitive cabs.
But having just one operator running cabs in and out of JWA also produces a revenue stream flowing into the county's treasury. "Having just one company means the airport achieves revenue," said Markley. "It also allows the airport to keep some level of control over things like quality of service and the age of the cabs."
That revenue stream to the county is substantial: $3.4 million over five years. Having just one slot open forces a bidding war among competing cab operators—each promising higher monthly payments to the county.
But the county could easily produce revenue with a market-driven strategy: cabs entering the airport would simply pay an entrance fee. And when it comes to safety, is the county really suggesting that the only people with a stake in taxi safety are air passengers at John Wayne? That everyone else can—and likely will—die in less strictly regulated cabs?
This raises the possibility that the cab monopoly at John Wayne exists because the county supervisors who ultimately approve a contract derive some benefit—like campaign contributions—from the fight over the monopoly. In the months leading up to the March 2000 JWA taxi-contract decision, taxi executives—including Schorling—beefed up their contributions to the county supervisors.
"We really need to stop these sole-source practices," said Grindle. "Our committee will be proposing changes in May."