BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 650|
          |Office of Senate Floor Analyses   |                              |
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                                   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  








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          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  







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             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  







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             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  







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             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  







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          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  







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          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  







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          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







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          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.







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          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


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