BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 650| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 650 Author: Low (D) Amended: 8/19/16 in Senate Vote: 21 PRIOR VOTES NOT RELEVANT SENATE ENERGY, U. & C. COMMITTEE: 9-0, 6/13/16 AYES: Hueso, Morrell, Cannella, Gaines, Hertzberg, Hill, Lara, Leyva, McGuire NO VOTE RECORDED: Pavley, Wolk SENATE TRANS. & HOUSING COMMITTEE: 9-0, 6/28/16 AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Mendoza, Roth, Wieckowski NO VOTE RECORDED: Leyva, McGuire SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/11/16 AYES: Lara, Beall, Hill, McGuire, Mendoza NO VOTE RECORDED: Bates, Nielsen SUBJECT: Public Utilities Commission: regulation of taxicabs SOURCE: Taxi Paratransit Association of California DIGEST: This bill enacts the Taxicab Transportation Services Act and by January 1, 2018, largely transfers most regulatory oversight of taxicab transportation services from local governments to the California Public Utilities Commission (CPUC), except taxicab transportation services originating in the City and County of San Francisco which would continue to be AB 650 Page 2 locally regulated or curbside pickup permits in cities or counties that choose to permit these taxi services. This bill enacts various provisions relating to background checks, insurance, vehicle inspections, requirements of taxicab drivers and carriers, services for disabled population, enforcement, and other matters, and make conforming changes to related provisions. Senate Floor Amendments of 8/19/16 delay implementation of the taxicab permitting by six months, to January 1, 2018; delete the requirement on taxicab drivers to adhere to a LiveScan fingerprint Department of Justice criminal background check; and make other clarifying changes. ANALYSIS: Existing law: 1) Provides that the CPUC may 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. (Article XII, §4 of the California Constitution) 2) Establishes the CPUC's authority to regulate, require license or permit to operate, require insurance and workers compensation, take appropriate enforcement action and other provisions related to passenger stage corporations (Public Utilities Code §1031, et seq.) and transportation charter-party carriers of passengers (Public Utilities Code §5351), including transportation network companies. (Public Utilities Code §5431) 3) 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 operated within the city or county. Establishes minimum rules for drivers, including testing for controlled substances. (Government Code §53075.5) (Vehicle Code §21100) 4) Requires taxicabs to maintain proof of financial AB 650 Page 3 responsibility of at least $15,000 for each person injured or killed, of at least $30,000 for the injury to, or the death of, two or more persons in any one accident, and for damages to property of $5,000 and obtaining a bond of a specified amount. (Vehicle Code §16500) This bill: 1) Establishes Taxicab Transportation Services Act and places taxicabs under the regulatory authority of the CPUC. Authorizes the CPUC to issue permits or renewals for dispatched service, whether requested by phone or internet or online-enabled application. 2) Exempts taxicab transportation services originating in the City and County of San Francisco from most of the provisions of this act. 3) Authorizes cities or counties that choose to oversee curbside pickups to regulate these through the issues of curbside operating permits, including the ability to limit the number of vehicles permitted. 4) Prohibits cities or counties from instituting requirements, fees or standards beyond those required by the CPUC and limits cities and counties from charging more than $50 to cover the regulatory costs related to the issuance of a permit. 5) Maintains the current requirement on taxicab services to include the number of its permit every written, oral, or electronic advertisement of the services it offers and requires it complies with signing requirements in the Vehicle Code. 6) Requires the CPUC to ensure all applicants meet specified requirements prior to issuing a taxicab service permit to an entity, including: ensuring the financial and organizational capacity of the entity, compliance with the rules and regulations of the Department of the California Highway Patrol relating to safe operating vehicles, commitment to observe hours of service regulations of state and federal AB 650 Page 4 law, establishment of an inspection program in effect for its motor vehicles, participation in the pull notice program, establishment of a safety education and training program for all drivers, establishment of a mandatory controlled substance and alcohol testing certification program, and others. 7) 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. 8) 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. 9) Requires the CPUC to investigate any entity that advertises or holds itself as providing services that may be considered to be taxicab transportation services without the required permit and issue civil or criminal proceedings as warranted. 10)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 levy a civil penalty of up to $7,500. 11)Requires a taxicab carrier to file 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, with the CPUC. 12)Requires a taxicab carrier to operate a motor vehicle with the CPUC required trade dress. 13)Requires the CPUC to require the 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, and provides that these requirements shall only apply to motor vehicles while providing taxicab services. 14)Authorizes the CPUC to adopt rules requiring taxicab carriers to disclose fares, fees, and other pricing AB 650 Page 5 structures for taxicabs. 15)Requires a taxicab carrier, in addition to the above requirements, to: a) Participate in the pull-notice system b) Provide for a mandatory controlled substance and alcohol testing certification program equivalent to that required by the CPUC of transportation network companies c) Ensure that taxi drivers meet specified criteria, including: they are 18 years or older, have a Class C driver's license. d) Prohibits a taxicab carrier from employing or contracting drivers who have been convicted during the preceding seven years of any offense relating to use, sale, possession, or transportation of narcotics, any act involving violence, any sexual offense, fraud, or felony offense, or offense involving possession of a firearm, and other actions. e) Requires taxicab carriers 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. 16)Preempts most regulation of taxicab transportation services by local agencies, except allows cities to choose to oversee permitting of curbside pickups, and repeals a number of sections of the Government Code that provide local agencies specified authorities related to taxicab services, as specified. Background Purpose. 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 transportation network companies (TNCs), including 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. This puts the highly-regulated, professional taxi industry at a big competitive disadvantage to their lightly regulated TNC AB 650 Page 6 competitors. This bill represents the response of the taxi industry to that disadvantage. CPUC oversight of transportation. Since its inception in 1911 (then as the Railroad Commission), the CPUC has regulated private companies and individuals that own, operate, control or manage transportation of people and property. However, taxicabs have been regulated by local cities or counties for most of the CPUC's one hundred year history. An essential distinction of a taxicab from other transportation services is the ability to have the service hailed from the street. Currently, the CPUC's remaining authority over on-the-road transportation services is limited to non-rail for-hire passenger carriers and household goods movers. Under state law, the CPUC is required to license carriers, and investigate and enforce safety and consumer protection laws for the following surface transportation carriers: passenger stage corporations (PSCs), such as airport shuttles; transportation charter-party carriers (TCPs) such as tour buses, limousines, and TNCs, (including Uber, Lyft); private carriers of passengers (PCPs) such as church buses; and household goods carriers - moving truck companies. Regulatory authority. By transferring regulatory responsibility for taxis from cities and counties to the CPUC, this bill significantly alters the regulatory oversight of taxi services. Local government regulation often requires a taxi company to be permitted in each city or county and be subject to city/county-specific rules, in some cities that includes restricting the number of taxis that can operate. Under this bill, the taxi company applies for a statewide license from the CPUC, which gives the taxi company the authority to pick up and drop off dispatched requested services anywhere. This bill exempts services originating in San Francisco and also allows local governments that choose so to oversee permits for curbside pickups. Absent these exceptions, this bill results in a single license fee, background check, and set of rules for taxi carriers. Another benefit of state jurisdiction is that the CPUC will now have all forms of for-hire passenger transportation under its purview. Theoretically, this will give the CPUC the perspective to ensure regulatory fairness and competitive outcomes that benefit passengers. However, as was shared earlier this year at an oversight hearing of this committee, experts warned on the importance of a fingerprint criminal background check for street hails to ensure public AB 650 Page 7 safety. This bill would prohibit fingerprint criminal background checks and, thus, undermine public safety. San Francisco - an island. This bill exempts taxicab service originating in the City and County of San Francisco from CPUC regulations, and preserves local authority. San Francisco maintains the only medallion system for taxicab service in the state, whereby a medallion is owned as property with the ability to lease the service to other drivers. Due to the issues related to handling property rights and values, while not ideal, it seems reasonable that San Francisco merits this proposed separate treatment. Removing entry caps. Currently, many cities manage the number of taxicab permits that are distributed within their jurisdiction. The local cities and counties often manage the supply of taxicabs in order to mitigate against the failures of market oversupply which in previous efforts to deregulate taxi service have resulted in driver confrontations, poor service and undermined public safety. On the other hand, TNCs receive licenses at the CPUC with no restriction on the number of vehicles and drivers they can place on the roads and no limitations to operate in a given city or county. This bill largely mimics the current licensing of TNCs for dispatched service, a request that is phoned or requested via internet application. However, cities that choose to can continue to oversee permitting of curbside pickups, including establishing entry caps on taxicabs to enter the market. However, no local government would be able to regulate other permitting functions overseen by the CPUC or charge more than $50 for these permits. Is the CPUC the right agency? The sponsors of this bill attempt to level the playing field among the competing transportation for-hire services by shifting regulatory licensing and enforcement from local cities and counties to the CPUC. In light of the many areas of oversight the CPUC oversees - electric and natural gas investor-owned utilities, telephone services, water agencies, and others - and the identified shortcomings of the agency's existing oversight of the transportation for-hire program, as noted in a recent State Auditor's report, the question must be raised whether the CPUC is the appropriate agency to also handle taxicab services. Unfortunately, these are all compelling reasons to not include taxicab services under the AB 650 Page 8 regulatory umbrella of the CPUC. However, an argument for including taxicab services may be to better align the existing transportation for-hire services and better respond to the lack of regulatory fairness among the services. 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. Handcuffing local cities/counties. This bill prevents local cities and counties from instituting rules beyond those adopted by the CPUC. While such action may be beneficial to leveling the playing field for carriers, such handcuffing could jeopardize public safety by prohibiting locals from taking necessary action, including increasing fees to cover their costs, instituting the expert recommended criminal background checks, or placing necessary rules to address local needs appropriately. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee: One-time costs of approximately $200,000 (Transportation Reimbursement Account) to the CPUC for information technology updates. Ongoing costs of approximately $2.8 million annually (Transportation Reimbursement Account) for staff to implement the program. Some or all of these costs will be offset by permit application fees. Unknown increase in penalty and application fee revenue. SUPPORT: (Verified8/12/16) Taxi Paratransit Association of California (source) American Cab CityWide Fiesta Taxi AB 650 Page 9 Silicon Valley Cab Company, Inc. Yellow Cab of Los Angeles Yellow Checker Cab Company, Inc. 17 Individuals OPPOSITION: (Verified8/12/16) California Regional Council Taxi Workers Alliance (AFL-CIO) League of California Cities USA Cab LTD An Individual ARGUMENTS IN SUPPORT: 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. The laws and regulations governing the provision of transportation services are many decades old and have evolved slowly. As with many new technologies, the rapid growth of TNCs has created a disruption in the taxi's archaic model of transportation. While this change has created many benefits to transportation customers, it has also created an unfair disadvantage for taxis to compete in the market. 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." ARGUMENTS IN OPPOSITION: The League of Cities in opposing this bill states "the regulation of taxis has been a municipal affair for nearly a century, yet the emergence of new business models has challenged the traditional structure of for-hire transportation services and regulations? this measure [AB 650] strips their [cities] authority and reverses their advancements." They raise a number of concerns, many of which the author has attempted to address in recent amendments. However, it is unclear if the issues have been addressed to the satisfaction of the League. AB 650 Page 10 The Taxi Workers Alliance argues "it would be a grave mistake to place taxi regulation in the hands of the CPUC, an agency that doesn't want it and even more importantly lacks the resources to assume it. Such deregulation of the industry will create a race to the bottom to the detriment of the public as well as taxi drivers." They argue that taxi regulation should be transferred to the county level which would eliminate the need for permits for each city but not ignore legitimate local concerns. ASSEMBLY FLOOR: 80-0, 5/14/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107 8/22/16 20:38:08 **** END ****