BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 650 Hearing Date: 6/28/2016
-----------------------------------------------------------------
|Author: |Low |
|----------+------------------------------------------------------|
|Version: |6/23/2016 Amended |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Urgency: |No |Fiscal: |Yes |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Consultant|Randy Chinn |
|: | |
-----------------------------------------------------------------
SUBJECT: Public Utilities Commission: regulation of taxicabs
DIGEST: This bill transfers regulatory oversight of taxicabs
from local governments to the California Public Utilities
Commission (CPUC) and generally provides for more flexibility in
taxicab operations.
ANALYSIS:
Existing law:
1) Provides the CPUC with constitutional authority to fix
rates and establish rules for the transportation of
passengers and property by transportation companies,
prohibit discrimination; and award reparation for the
exaction of unreasonable, excessive, or discriminatory
charges.
2) Establishes the CPUC's statutory authority to regulate
categories of transportation companies including
passenger-stage corporations (e.g., SuperShuttles),
charter-party carriers of passengers (e.g., limousines), and
transportation network companies (e.g., Lyft and Uber).
3) Exempts taxis from CPUC regulatory oversight.
4) Requires every city or county to adopt an ordinance or
resolution to issue permits in regard to taxicab
transportation service provided in vehicles, designed for
carrying not more than nine people with the driver, which is
AB 650 (Low) PageB of?
operated within the city or county. Establishes minimum
rules for drivers, including testing for controlled
substances.
This bill:
1) Establishes the Taxicab Transportation Services Act and
places taxicabs under the regulatory authority of the CPUC,
except in the City of San Francisco.
2) Requires the CPUC to issue permits, or renewals that are
effective for three years.
3) Maintains the current requirement on taxicab services to
include the number of its permit in every written, oral, or
electronic advertisement of the services it offers and
requires compliance with the signing requirements in the
Vehicle Code.
4) Requires the CPUC to ensure all applicants meet specified
requirements prior to issuing a taxicab service permit to an
entity, including:
a) Ensuring the financial and organizational capacity
of the entity
b) Compliance with the rules and regulations of the
Department of the California Highway Patrol relating to
safe operating vehicles
c) Commitment to observe hours of service regulations
of state and federal law
d) Establishment of an inspection program in effect for
its motor vehicles
e) Participation in the pull-notice program
f) Establishment of a safety education and training
program for all drivers
g) Establishment of a mandatory controlled substance
and alcohol testing certification program.
1) Requires every taxicab carrier to furnish a list to the
CPUC of all motor vehicles used by the carrier in taxicab
services since the last inspection.
AB 650 (Low) PageC of?
2) Authorizes the CPUC to suspend or revoke the carrier's
permit and/or impose a fine if the carrier's insurer informs
the CPUC that the carrier has failed to obtain insurance
coverage for any vehicle on the list.
3) Requires the CPUC to investigate any entity that
advertises as a taxi transportation service without the
required permit.
4) Establishes grounds by which the CPUC may cancel, suspend,
or revoke a taxicab carrier permit, including conviction of
a misdemeanor or felony for specified actions, failure to
operate and perform reasonable service, and other
violations, and authorizes the CPUC to levy a civil penalty
of up to $7,500.
5) Requires a taxicab carrier to make available for
inspection by the CPUC, upon request, a certificate of
workers' compensation coverage, a consent to self-insure
issued by the Department of Industrial Relations, or a
statement under penalty of perjury.
6) Requires a taxicab carrier to operate a motor vehicle with
the CPUC required identifying markings.
7) Requires every city or county to forward to the CPUC
licensure information for each taxicab transportation
service licensee within its jurisdiction by December 31,
2016.
8) Requires taxicab carrier to procure liability insurance
capped at no more than $100,000 for death and personal
injury per person, $300,000 for death and personal injury
per incident, and $50,000 for property damage. The CPUC may
increase these levels.
9) Authorizes the CPUC to adopt rules requiring taxicab
carriers to disclose fares, fees, and other pricing
structures for taxicabs.
10) Requires an individual who wishes to be a driver providing
taxicab services to first obtain a taxicab driver's permit
from the CPUC. The permit shall be valid statewide, except
in San Francisco. In order to obtain the permit the driver
must be 18 years or older, possess a Class C driver's
AB 650 (Low) PageD of?
license, pass a CPUC prescribed written exam, and pass a
background check through the Department of Justice's Live
Scan system.
11) Requires a taxicab carrier to participate in the
pull-notice system, and provide for a mandatory
controlled-substance and alcohol testing certification
program equivalent to that required by the CPUC of
transportation network companies.
12) Prohibits a taxicab carrier from employing or contracting
drivers who have been convicted during the preceding seven
years of any offense relating to the use, sale, possession,
or transportation of narcotics: any act involving violence;
any sexual offense, fraud, felony offense, or offense
involving possession of a firearm; and other actions.
13) Requires a taxicab carrier to inspect each of its motor
vehicles or have each vehicle inspected at a facility
licensed by the Bureau of Automotive Repair, and requires
the inspection to cover 19 specified components of the
vehicle.
14) Preempts all other regulation of taxicab transportation
services, including those by local agencies.
COMMENTS:
1) Purpose. According to the author, California's current
taxi regulation process is antiquated and extremely onerous.
Taxis are the only for-hire transportation model that is
fully regulated at the local level, while other for-hire
transportation models have one set of statewide requirements
governing their operation. This disparity places taxis at a
severe competitive disadvantage. In order to compete in the
changing for-hire transportation ecosystem, taxis should be
regulated by one statewide set of standards because the
current system restricts competition by setting different,
more onerous rules for taxis, according to the author.
2) Flipping the script. Passenger transportation had long
been a highly-regulated service provided by professional
drivers with a strong emphasis on driver and vehicle safety
and regulated prices. The recent emergence of Lyft and Uber
has flipped that perspective. The public now seems
comfortable with passenger transportation as something
nearly anyone can do. Drivers don't need to be
professional; they don't even need to own a car. (The
AB 650 (Low) PageE of?
lodging industry has been similarly transformed with the
emergence of AirBNB.) This puts the highly-regulated,
professional taxi industry at a big competitive advantage to
their lightly regulated TNC competitors. This bill
represents the response of the taxi industry to that
disadvantage.
3) History of taxi deregulation. Taxicabs have been
regulated since the 1930s. This regulation was in response
to conditions which the Washington Post characterized in a
1933 editorial as chaotic: "Cut-throat competition in a
business of this kind always produces chaos. Drivers are
working as long as sixteen hours per day, in their desperate
efforts to eke out a living. Cabs are allowed to go
unrepaired ? Together with the rise in the accident rate
there has been a sharp decline in the financial
responsibility of taxicab operators. Too frequently the
victims of taxicab accidents must bear the loss because the
operator has no financial resources of his own and no
liability insurance."
Beginning in the 1970s, some cities deregulated taxis. An
academic review of these efforts found them to be failures,
so unsatisfactory that every city jettisoned deregulation in
favor of resumed economic regulation.<1> A study in 1993 by
Price Waterhouse reached similar conclusions, finding that
in many cities that deregulated, the supply of taxicabs
increased, fares increased, service quality declined and
there were more trip refusals, lower vehicle quality, and
aggressive solicitation of customers. As a result, many
cities have since re-regulated.
Why repeat this effort if the history is so poor? Because
competition from TNCs like Lyft and Uber makes the existing
taxicab model of local regulation, restricted pick-up rules,
regulated fares, and duplicative regulators untenable. As
this Committee heard in the February 17, 2016, informational
hearing on the for-hire transportation market, taxi trips
and revenues have declined 20%-30% in San Francisco and Los
Angeles, even though the demand for for-hire transportation
services increased. Taxi drivers testified that their
incomes are off as much as 40%. Crafting a new regulatory
structure for the taxi industry is essential to providing it
a fair chance to compete against the new competition. But
-------------------------
<1> Paul Stephen Dempsey, McGill University: published in the
University of Denver College of Law, Transportation Law Journal,
Vol 24, Issue 1 (1996).
AB 650 (Low) PageF of?
in crafting those regulations, avoiding the failures of past
deregulation efforts must be kept in mind.
4) Criteria for change. In the Committee's informational
hearing, the Transportation Research Board of the National
Academies of Science, Engineering and Medicine presented its
findings on the regulation of taxis and TNCs. Its
recommendations for fair competition are below:
a) Entry controls/pricing: Examine minimum regulation
necessary
b) Regulatory Authority: Balance the benefits of
uniformity responsiveness to local needs; ensure
on-the-ground regulatory enforcement
c) Driver background checks/insurance requirements: Be
consistent across each type of service, gauged to risk
d) Wheelchair-accessible service: Ensure access
through regulation, incentives, mandates and/or
subsidies; apply across each type of service
Entry Controls/Pricing . Cities typically limit the number
of taxi licenses and establish fixed rates for service.
This bill removes the limits and the local regulation of
taxi prices. While the CPUC has the authority to set rates,
given that they have refrained from rate setting with the
TNCs, there is every reason to believe that taxis will
benefit from much of the same regulatory forbearance.
However, the author and committee may wish to consider
requiring that a taxi passenger is provided with a fare
estimate or a rate schedule before accepting a ride, as they
are today.
Regulatory authority . By transferring regulatory
responsibility for taxis from cities to the CPUC, this bill
provides taxis with substantial regulatory relief. City
regulation requires a taxi company to be permitted in each
city and be subject to city-specific rules. Under this
bill, the taxi company applies for a statewide license
(excluding San Francisco) from the CPUC, which gives the
taxi company the authority to pick up and drop off anywhere.
It also means a single license fee, background check, and
set of rules. Another benefit of state jurisdiction is that
the CPUC will now have all forms of for-hire passenger
AB 650 (Low) PageG of?
transportation under its purview. Theoretically, this will
give the CPUC the perspective to ensure regulatory fairness
and competitive outcomes that benefit passengers.
Driver background checks/insurance requirements . Under this
bill, taxi drivers will be subject to a Department of
Justice background check, which is more stringent that the
background check required for drivers of other
CPUC-regulated services. The bill does not attempt to make
the driver background check consistent across all
transportation companies. The insurance requirements are
initially set for each taxicab carrier at more than $100,000
for death and personal injury per person, $300,000 for death
and personal injury per incident, and $50,000 for property.
The CPUC may increase these levels. In its review of the
bill, the CPUC staff recommends that the insurance
requirement be raised to $1 million, in line with what is
required of TNCs.
Wheelchair-accessible service/discrimination . This bill
does not address wheelchair-accessible service, and does not
change the existing mechanisms for funding or providing the
service. However, as all transportation providers would be
under the jurisdiction of a single regulatory agency, there
would be an opportunity for the CPUC to consider wheelchair
accessibility in a comprehensive way.
Local governments typically have rules to ensure that taxis
provide service throughout their jurisdiction and prevent
discrimination. This bill shifts that important
responsibility to the CPUC. While the CPUC is
constitutionally authorized to prevent discrimination, and
public utilities, such as taxis, are statutorily prohibited
from discrimination in their provision of service, these
protections only work if they are enforced. Using history
as a guide, prior deregulation efforts led to unauthorized
taxis, discrimination, and unsafe practices. Strong
enforcement can protect against those outcomes. The bill
envisions a shared enforcement responsibility between the
CPUC and local government. The CPUC has a modest
enforcement staff; utilizing local law enforcement would
seem to be more efficient. A capable consumer complaint
intake process is also necessary. The CPUC currently has
some capacity for this as they receive complaints about
companies under their purview. While the CPUC's consumer
affairs staff has at time been effective, their recent track
AB 650 (Low) PageH of?
record has been mixed. Some reinforcement of this capacity
may well be necessary.
1) Implementation. This bill provides the CPUC with
substantial additional responsibilities. Taxi companies may
not operate without CPUC authorization, so the author may
wish to work closely with the CPUC to facilitate a rapid
ramp up of their capabilities. It may also be advisable to
permit existing taxi companies to operate temporarily while
the CPUC develops its processes. Implementation issues will
need much more attention before this bill is finalized.
2) San Francisco exemption. This bill applies statewide
except for San Francisco, where competition between taxis
and TNCs is most fierce. This exemption was requested by
the San Francisco taxi industry and taxi workers. It's not
clear how this will help the San Francisco taxi industry
unless the local taxi regulations are significantly revised.
3) Managing congestion. Local governments are responsible
for developing regional transportation plans. Data from the
taxi industry is important input. The author should
consider requiring the taxi industry to acquire and submit
trip data to the CPUC and/or local governments for this
purpose.
4) Sort of the same but still different. While this bill
starts to level the regulatory playing field between taxis
and TNCs, important differences remain. TNCs serve
customers with smart phones, good credit, and high rankings
from drivers. From a financial perspective, these are the
best customers. Customers without credit, without a smart
phone, or who have been ranked poorly can only be served by
taxis.
5) Double-referral. This bill was heard by the Senate
Energy, Utilities, and Communications committee on June 22,
and passed on a 9-0 vote.
Assembly Votes:
Previous votes not relevant
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: Yes
AB 650 (Low) PageI of?
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 22, 2016.)
SUPPORT:
CityWide
Fiesta Taxi
Silicon Valley Cab Co. Inc
SouthBay Yellow Cab Co-Op
Taxicab Paratransit Association of California
Yellow Checker Cab Company, Inc.
13 individuals
OPPOSITION:
California Regional Council of the Taxi Workers Alliance
Flywheel Taxi
Green Cab of San Jose
Taxi Workers Alliance of Silicon Valley
2 individuals
-- END --