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 --