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
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          |Author:   |Low                                                   |
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          |Version:  |6/23/2016    Amended                                  |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Randy Chinn                                           |
          |:         |                                                      |
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          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 --