Local towing companies are pursuing all legal options to prevent
the city from opening up a vehicle storage program that they say
would impound the profits they need to stay in business.
Local towing companies are pursuing all legal options to prevent the city from opening up a vehicle storage program that they say would impound the profits they need to stay in business.
Four tow truck operators that do business with the city filed a lawsuit that says the Morgan Hill Police Department’s proposal to implement a vehicle storage program violates the state vehicle code. The lawsuit, which requested a judge’s order to stop the program, was rejected in Santa Clara County Superior Court but the companies plan to continue fighting.
Under state law, cities may operate programs that levy fees for motorists who flout the law, but they may only recover the direct costs of the program, according to the attorney representing the private companies.
Based on a staff report outlining the proposal presented to the city council June 17, the program could generate enough profits from an impound yard to maintain traffic safety programs and hire a full-time officer after the initial cost of $365,500 to set up the program is recovered.
The tow companies’ lawyer said planning to secure these profits is “illegal and irrational.”
“(The vehicle storage program) would tend to put my tax-paying clients out of business, robbing the city of the money it needs to keep going,” said Bruce Tichinin, attorney for California Tow & Salvage, Ponzini’s Community Garage, Inc., All Day & Night Towing, and Bracco’s Towing & Transport.
The code Tichinin cited in the legal brief, section 22850.5, says public agencies may adopt tow yards “for the imposition of a charge equal to its administrative costs relating to the removal, impound, storage, or release of the vehicles.”
The companies filed an injunction to stop the tow yard’s implementation July 23, but the request was denied because details of the program have not been finalized and presented to the public and council for approval.
“The lawsuit is premature, if not ill-founded,” said City Manager Ed Tewes, who is named as a defendant in the lawsuit. “The police department is still planning on doing what the council asked them to do.”
The council approved funding for the tow yard June 17, and asked police department staff to come back with a detailed program. Those details are expected to be reported to the council at its Oct. 7 meeting, Tewes said.
If the city’s finalized plan to run a towing yard still includes recovering more than the costs to implement the program, the companies will continue to seek a trial date for their lawsuit, Tichinin said.
In the meantime, the city purchased property adjacent to the police station on Vineyard Boulevard for the impound yard earlier this month. The city paid about $200,000 for the property. The tow companies included a failed request to stop the purchase of this property in their lawsuit.
Furthermore, the city’s response to the injunction, also filed in Superior Court, says the same section of the state vehicle code cited by the plaintiffs upholds the city’s plan because it says “the administrative charges ‘shall be in addition to any other charges authorized or imposed pursuant’ to the Vehicle Code.”
Police presented the idea of running their own tow yard as a way to recover costs, and potentially hire more officers, when the economic downturn has dried up other funding sources. The program would allow the department to store vehicles that are subject to a 30-day impound – primarily because their owners have been suspected of driving without a license or with a suspended license. Revenue would come from the motorists paying a fee to reclaim their vehicles, and the sale of unclaimed vehicles at public auction, according to the June 17 staff report.
Now, the four Morgan Hill towing companies provide this service under contracts with the city, and the companies gain the revenues from daily storage fees. If the city proceeds with its own storage site, the companies would still provide towing services for transport and removal of the vehicles.
But the tow truck owners say that won’t be enough, as the revenue lost from storage would cause them to lay off employees, or even pull their business out of Morgan Hill completely.
Dion Bracco, of Bracco’s Towing & Transport, said there is a “statewide movement” among tow truck companies to prohibit the kind of publicly-run vehicle storage program the city has proposed. He said the local lawsuit has the backing of the California Tow Truck Association, which represents about 1,000 towing companies throughout the state.
“The city argues that we can’t sue them because they haven’t damaged us (yet). When they start storing cars, we have to sue again,” Bracco said.
Bracco, who is also a Gilroy city council member, added that southern California cities that have implemented tow yards in recent years haven’t fared as well financially as Morgan Hill officials expect.
Morgan Hill police impounded an average of 418 vehicles per year for the last three years, according to the June 17 staff memo. The department arrived at its revenue projections based on information provided by local towing companies, and assumes a vehicle storage fee of $56 per day.
