Less than a year into a new system, the city intends to terminate its contract with an exclusive vendor for police-initiated motor vehicle tows on Oahu, acknowledging that changes have to be made before a new one is awarded.
City officials Tuesday said the five-year deal with Leeward Auto Wreckers — which in November took over towing responsibilities for the entire island and was found to be overcharging motorists during the first few months — will be discontinued by mutual agreement once a new contract is awarded.
Despite the overcharging problems Leeward Auto initially encountered, the company has resolved them, is not in default of the contract and will not be prevented from bidding when new specifications are issued in about three weeks, city officials said.
Leeward Auto, which beat out several other bidders for exclusive rights to handle accident, parking violation, stolen-vehicle and other tows, was the first to operate under a new system in which a single vendor covered the entire island.
Previously, Oahu was divided into zones, and the city issued separate contracts for each zone.
The planned contract termination follows concerns raised last year by other towing companies that the terms of the new contract, including a $60,000 monthly premium and a cap on mileage and hookup charges, would not be sustainable financially for Leeward Auto.
"We knew this would not end well for the city or the contractor," said Paul Perry, owner of All Island Automotive Towing, which teamed with several other companies to submit one of the unsuccessful bids for the contract in November.
The problems started from the get-go.
The Star-Advertiser disclosed in December that Leeward Auto, which had no experience with police-initiated tows, routinely overcharged customers because it didn’t stick to the mileage and hookup rates it agreed to and in some cases charged more than the $165 cap — excluding storage fees. The company previously told the Star-Advertiser that the overcharging was unintentional.
The city, which was unaware of the excessive charges until they were uncovered by the Star-Advertiser, subsequently ordered the company to give refunds to affected customers. City officials Tuesday said they were satisfied that all the required refunds — more than $10,000 in total paid to 643 customers — have been made.
Adding to the company’s woes, Leeward Auto fell behind on rent payments at several of its storage lots and was evicted from one of them earlier this year.
A company representative could not be reached Tuesday for comment.
Sheri Kajiwara, director of the Department of Customer Services, said the city has not decided whether to stick to the single-vendor system or contract with multiple companies.
But given the difficulties Leeward Auto was having in managing the contract and the greater-than-expected time city workers were taking to monitor it, some changes will be made in soliciting bids for a new agreement, she said. The changes still are being discussed, she added.
"Our priority is going to be to ensure that the public gets the best rate," Kajiwara told the Star-Advertiser.
Brian Kunishige, owner of Kuni’s Automotive, which led the bidding team that included Perry, said a single-vendor system is not workable financially unless the city makes some key adjustments.
The city needs to reduce the monthly premium, eliminate the cap and allow the vendor to charge what state law permits for towing charges, Kunishige said.
If the city is not willing to drop the premium, it must compensate the vendor when its drivers respond to towing calls that are subsequently canceled, he said.
"Otherwise, the economics will not work out," Kunishige said.
The economics of the contract were causing troubles for Leeward Auto.
It still owes the city $105,000 for the January and February premiums but has started paying an extra $15,000 a month to cover those arrears, city officials said.
Once the city stepped up its spot checks of Leeward Auto invoices in mid-March, reviewing roughly 100 per week compared with five to 10 previously, the overcharges disappeared, the officials said. In May they found no problems.
After the new contract specifications are issued, the city typically takes a minimum of three months to select a vendor, so the earliest a new contract will be awarded — assuming no delays — is mid-October, according to city officials.
The city’s towing services have been a source of controversy for years.
Stoneridge Recoveries, the company that previously handled the island’s largest zone under the old system, became the target of a criminal fraud investigation by the state Insurance Division. But the division eventually decided not to file charges.
