"Houston airport shuttle plan shifts taxi war out of idle"

Saturday, October 30, 2004

Shuttle plan shifts taxi war out of idle
Proposed airport service renews complaints of influence-peddling by Yellow
Cab
By RON NISSIMOV
The Houston (TX) Chronicle


In most cities, people who want to pay for a ride to or from the airport
have a choice. They can either hail a cab and pay a relatively expensive
fare, or they can share a shuttle ride that typically makes a few stops and
costs half a normal cab fare.

But not in Houston, the nation's largest city without door-to-door,
shared-ride shuttle service for airport passengers. A taxi ride from Bush
Intercontinental Airport to downtown costs about $40. A shared ride from
Bush to downtown would cost about $20.

City officials are considering whether to allow such a service to operate at
Bush and Hobby airports. The plan has re-started the meter on a decades-long
complaint about the muscle that Houston's dominant taxi company, Yellow Cab,
flexes around City Hall.

The loudest outcry has come from competing taxi companies that say Yellow
Cab has used its political influence to control 63 percent of the market in
the city-regulated cab industry.

Small cab companies are saying Yellow Cab persuaded city officials to write
the shuttle proposal so that Yellow Cab would get one of the lucrative
contracts to operate a shuttle service.

Yellow Cab has, since the mid-1980s, opposed shared-ride service here unless
it got the contract to run it, claiming that Houston could not support an
independent shared-ride service because of its sprawl. Many smaller cities
have shared-ride services not affiliated with cab companies, and a city
study recently concluded that Houston could sustain at least two shared-ride
operations.

"In a developing country, you give an official cash, but here you do it
through campaigns or fund raising," said Berhane "Ben" Tesfamariam, an
Ethiopian immigrant. He said his fledgling Texans Shuttle, which provides
shuttle rides from the airports but does not go door to door, would likely
be forced out of business if it doesn't get one of the proposed city
contracts for the shared-ride service.

Yellow Cab executives said competitors simply are jealous.

Joe Chernow, Yellow Cab's chief executive officer and minority owner,
acknowledged that he and other high-ranking company officials often
contribute to the campaigns of city elected officials and said donating
political money is standard practice for a successful company regulated by
the city.

Yellow Cab executives have given $5,000 to Mayor Bill White this reporting
year and $1,000 to $2,000 to most council members, according to
campaign-finance reports.

City Councilman Michael Berry, chairman of the Transportation,
Infrastructure and Aviation Committee, which oversees the city's cab
industry and airports, has received $3,500 in campaign contributions this
year from Yellow Cab officials, an amount second only to the donation given
to White. Berry said he is not influenced by political donations.

History of success

Chernow, meanwhile, said well-researched arguments are behind Yellow Cab's
success at City Hall. 

"I've been called a hit man for the company," said the feisty, Brooklyn-born
accountant. "My weapon of choice is a calculator."

Yellow Cab, which also owns taxi companies in San Antonio and Austin, was
founded in Houston in the 1920s or 1930s, Chernow said. It rose to
prominence after it was bought in 1967 by George Kamins, who had made a
fortune stocking automotive supplies in Kmart stores.

Kamins hired his brother-in-law, Stanley Danburg, to be his general manager,
then recruited Chernow in 1969.

Within 15 years, the three men persuaded city officials to increase Yellow
Cab's taxi permits from 100 to 1,400, 85 percent of the city's total at the
time, while officials often denied other companies' requests for permits. In
1970, Yellow Cab also was granted exclusive rights to provide service to the
new Intercontinental Airport.

City officials started listening to the pleas of smaller cab companies in
the 1980s and began awarding a small number of permits to them over Yellow
Cab's protests. The animosity between the company and the city grew; Mayor
Kathy Whitmire in 1984 switched seats after she found herself next to
Chernow on a first-class flight from Washington, D.C., to Houston.

No new permits

In 1990, council members in a tie vote declined to renew Yellow Cab's
exclusive contract at Intercontinental, which, at the time, guaranteed
Yellow Cab two of every three rides from the airport. 

In 1999, shortly after Mayor Lee Brown issued about 250 taxi permits to
Yellow Cab's competitors, Yellow Cab persuaded city officials to toughen the
standards for issuing permits, and none has been granted since then.

Today, Yellow Cab's parent company, the Greater Houston Transportation Co.,
owns 1,419 of the city's 2,245 permits, or 63 percent of the total. The
city's second-largest company owns 237 permits, and the rest are scattered
among 100 other companies.

Greater Houston Transportation, which also includes Fiesta Taxi, United Cab,
Towne Car and Airport Express Shuttle, provides 2 million rides a year,
primarily through Yellow Cab. Chernow declined to disclose the income of the
privately held company, which has 250 salaried employees and 1,500 contract
drivers.

In 1996, Kamins and Chernow sold the business to Coach USA for stocks valued
between $25 million and $30 million, and a year later the company was
acquired by Stagecoach. In 2003, Chernow and two other investors, Steve
Harter and Raymond Turner, bought Yellow Cab for $28 million.

Chernow said Yellow Cab was the only taxi company willing to invest millions
of dollars on a sophisticated dispatching system.

A 300-foot transmission tower juts out from the company's expansive
headquarters in the 1400 block of Hays on Houston's near northside. Every
vehicle is tracked with a satellite navigation system and has a digital
security camera. A classroom for prospective drivers includes a taxi meter
at every desk, and a large generator can keep the company running for five
days in the event of a natural disaster.

Competitor's lawsuit

But it's Yellow Cab's investment in politics that the company's critics say
is also paying dividends. 

Months before the recent shuttle controversy, Tesfamariam filed a $15
million lawsuit claiming Yellow Cab and city officials concocted a story
that Yellow Cab's sister company, Airport Express, had an exclusive contract
to serve major business centers inside the Loop.

After Texans Shuttle was kept out of the lucrative market for 10 months,
Richard Vacar, the city's aviation director, agreed that the contract with
Airport Express was not exclusive, and in May 2003 Texans Shuttle was
allowed to serve that area.

Vacar said the contract language was ambiguous. Chernow declined to comment
on the lawsuit.

Tesfamariam welcomed Vacar's initial proposal for shared-ride shuttle
service in August because he proposed using competitive bidding to hire two
companies that don't have Houston taxi permits, which would have given
Texans Shuttle a much better chance to compete.

Yellow Cab complains

But one month later, after Yellow Cab fired off angry letters to officials
that a city consultant underestimated the impact shuttles would have on the
city's taxi industry by $4 million a year, Vacar unveiled a plan that would
virtually assure Yellow Cab one of the lucrative contracts. 

The second proposal would guarantee one of the contracts to a taxi company,
and only Yellow Cab has the resources to qualify to bid.

Vacar denies he is being influenced by Yellow Cab, saying he offered his
second proposal to try to help the city's cab industry, which has seen a 20
percent drop in business after the terrorist attacks of Sept. 11, 2001.

Because Yellow Cab owns more than 90 percent of the dispatched business in
the city, most of its competitors rely on airport business.

"The contract was written for Yellow Cab," said Jerry Brady, president of
the city's second-largest taxi company, Liberty Cab, which has donated about
half as much money as Yellow Cab executives have to Houston politicians this
year.

FACTS ABOUT YELLOW CAB

. Majority of permits: Its parent company, The Greater Houston
Transportation Company, owns 63 percent of the city's taxi permits.
. Annual ridership: Yellow Cab and its sister companies provide 2 million
rides a year in the Houston area. The companies have 1,500 drivers and 250
salaried employees.
. Political donations: This reporting year, Yellow Cab executives have given
$5,000 to Mayor Bill White's campaign and $1,000 to $2,000 to most Houston
City Council members. Councilman Michael Berry, chairman of a committee that
oversees the city's cab industry, has received $3,500.


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