Audit calls for Taxicab Authority be dissolved or replaced

CARSON CITY — State auditors released a scathing report Tuesday on the Taxicab Authority that regulates the industry in Southern Nevada, faulting the agency for excessive fees that cost riders tens of millions of dollars and an overbearing board that exceeds its statutory role and could expose the state to liabilities.

The internal audit recommended the Taxicab Authority be dissolved. It suggested Clark County or the Nevada Transportation Authority, which regulates ride-sharing companies, taxis and limos throughout the rest of the state, assume Las Vegas-area oversight as well.

"I don't know if I've ever seen a more critical audit in my experience," said Gov. Brian Sandoval, who chairs the Executive Branch Audit Committee.

The authority in fiscal year 2015 had funding revenue of $11 million and expenditures of about $6.1 million, the audit said.

Among other things, the audit criticized excessive credit card fees and a fuel surcharge approved in July when gasoline prices were declining.

The 20-cent-per-mile fuel surcharge equates to about $27 million annually, which goes to the industry, auditors said.

A month after the surcharge was approved by the board, it was reallocated, with 8 cents made part of the permanent fare structure.

"We noted there was unfortunately little documentation to support not only the surcharge, but the reallocation that occurred after that," said Warren Lowman, executive branch audit manager.

The audit noted gasoline prices dropped about 10 cents per gallon over the summer of 2015 and the number of visitors to Las Vegas was up 2 percent over the same time the year before. Additionally, passenger traffic at McCarran Airport was up more than 7.2 percent, resulting in a 1.2 percent increase in taxicab trips.

"In summary, industry fuel costs were down and revenues were up," the audit said.

The fuel surcharge was implemented soon after ride-hailing companies such as Uber and Lyft were given authority by state lawamkers to operate in Nevada

Credit card charge criticized

Besides the fuel charge, the audit said a $3 fee for using credit cards "exceeds all the operational costs to the industry" for providing the convenience and amounts to an "unsupported revenue" for the industry of $14.2 million to $20.3 million annually.

It recommended reducing the fee to 90 cents or eliminating it all together, noting that cabs in Clark County are the only ones to charge for using a credit card.

About 25 percent of cab trips in the county are paid by credit card, and the fee accounts for 17 percent of an average fare for a 5-mile trip, the audit said.

According to statistics reported by the Taxicab Authority this month, annual revenue hit a record $425.1 million for Clark County's 16 cab companies and was up 4.1 percent over the previous year.

Besides fees, the audit said the taxicab board routinely adheres to industry positions and oversteps its authority to dictate administrative functions.

"Board decisions have minimized authority staff work, relied on taxicab industry representation, changed established procedures, and countered decisions made for the welfare and safety of the public," the audit said.

It cited a board decision to overrule the agency's denial of permits for two drivers who had criminal records.

"The administrator considered the evidence and concluded applicants violated … criteria for sexual and drug offenses," the audit said. "The board concluded on appeal that extenuating circumstances and conditional privileges were sufficient deterrent and issued a drivers permit to both applicants."

Auditors said, "The board's appellate decisions of the administrator's conclusions on fitness for driver's permits may expose the state to liabilities."

Inspection intervention

The board also intervened in the administrator's inspection schedule "at the expense of one company over another" on New Year's Eve in 2014, the report said.

"As a result … the owner who failed to follow procedures but was helped by the board obtained an advantage over other taxicab owners who followed procedures during the holiday season but were unable to put taxicabs in service," the audit said.

The audit was advisory only and some of the recommended changes, such as to fees and credit card charges, require approval by the Taxicab Authority board before they can go into effect. Dismantling the agency would need legislative approval in 2017.

Bruce Breslow, director of the Department of Business and Industry, and Ron Grogan, authority administrator, accepted the audit recommendations. No board members attended Tuesday's meeting, though they were notified of it, Breslow said.

Breslow said the board's chairwoman, Ileana Drobkin, told him auditors have no authority over her regulatory board and she wouldn't attend.

"Technically she's correct. They're not bound by this," Sandoval said. But he said he would have liked to have heard from board members.

He added, "I just wanted to make it clear the board members were notified of the time and date,"

Drobkin did not immediately return a phone call seeking comment.

Grogan said the taxicab board is expected to discuss the audit at its next meeting.

Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb