BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 828 Hearing Date: 6/16/2015 ----------------------------------------------------------------- |Author: |Low | |----------+------------------------------------------------------| |Version: |4/20/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Randy Chinn | |: | | ----------------------------------------------------------------- SUBJECT: Vehicles: transportation network companies DIGEST: This bill excludes from the definition of "motor vehicles" any motor vehicle operated in connection with a transportation network company (TNC), under specified conditions. ANALYSIS: Existing law defines a "commercial vehicle" as a motor vehicle used for the transportation of persons for hire or the transportation of property. This bill excludes motor vehicles operated in connection with a TNC from the definition of commercial vehicle provided that: 1)The vehicle is operated for passenger service only and is limited to seven passengers excluding the driver; 2)The vehicle is operated exclusively by the person to whom the vehicle is registered or insured; 3)The vehicle is not a paratransit vehicle; 4)The vehicle is not operated for public transit services; and 5)The vehicle is not operated for school bus services. COMMENTS: 1)Purpose. In January 2015, the Department of Motor Vehicles (DMV) announced that any passenger vehicle used for the transportation of persons for compensation is a commercial AB 828 (Low) PageB of? vehicle. A week later, after some concern from TNCs, the DMV retracted that announcement. This bill updates the definition of a commercial vehicle to clarify that it does not include vehicles used in connection with TNCs. 2)The growing TNC industry. In California, the TNC business is large and growing rapidly. A January 2015 report from Uber<1>, the largest TNC, reports 20,000 active Uber drivers in Los Angeles, 16,000 in the San Francisco area, and almost 5,000 each in San Diego and Orange County, up from zero in July 2012. Some estimates put the total number of active TNC drivers in the United States at 150,000. TNCs are successfully competing with taxi cabs, limousines, and other regulated transit operators. 3)What this bill does. By exempting vehicles operated in connection with TNCs - hereafter referred to as TNC vehicles - from the definition of commercial vehicle, this bill simply exempts those vehicles from having to obtain commercial license plates. A commercial license plate is more costly than a non-commercial plate. For cars weighing less than 3,000 pounds (e.g., Ford Focus), the additional cost is $8/year; for cars weighing between 3,000 and 4,000 pounds (e.g., Honda Accord), the additional cost is $24/year; and for cars weighing between 4,000 and 5,000 pounds (e.g., Volvo XC 90 SUV), the additional cost is $80/year. The reason for higher licensing costs for commercial vehicles is to compensate for the additional wear on the roads caused by these vehicles, which is why the cost increases as the vehicle weight increases. Commercial plates are easily distinguishable by law enforcement from regular license plates. Knowing that a vehicle is operating commercially can be helpful in the investigation of an accident, as insurance requirements are more substantial for vehicles which are used commercially. The California Public Utilities Commission (CPUC) requires that TNC vehicles carry additional insurance. 4)What else the bill does, potentially. According to supporters, classifying a TNC vehicle as a commercial vehicle may create additional problems with financing and insurance. --------------------------- <1> An Analysis of the Labor Market for Uber's Driver-Partners in the United States, by Jonathan V. Hall and Alan B. Kreuger; January 22, 2015. AB 828 (Low) PageC of? A vehicle that was originally financed as a personal vehicle may be in technical violation of the financing agreement if that vehicle becomes a commercial vehicle. The concern with insurance potentially arises because the CPUC's recent decision refers to TNC vehicles as personal vehicles, not commercial vehicles. While these concerns have not yet been raised by the financing and insurance industries, the supporters are concerned that this risk will deter potential new TNC drivers. 5)An unlevel playing field. The different types of transportation companies (e.g., TNCs, limousines, Super Shuttles, taxis) are all regulated differently. Rates, routes, insurance requirements, vehicle inspections, and driver requirements vary. State law has begun to address the biggest differences between TNCs, but there's little dispute that big differences remain. In an ideal world, companies would compete based on the differences in their business models and competence, not on the differences in how they are regulated. 6)Creating a level playing field slowly. The laws and regulations governing the provision of transportation services are many decades old. These laws and regulations have evolved slowly, as evidenced by the arcane and complicated carrier classifications. At least over the last several decades, the few new laws have focused on safety issues. The rapid growth of TNCs has disrupted this relatively quiet corner of our economy, changing the economics of transportation and challenging the economic models of the traditional transportation providers. This has upended the lives of many people in the transportation industry, while at the same time providing many benefits to transportation consumers. Regulators are struggling to keep up with the rapidly evolving transportation industry, a bit hamstrung by laws which never anticipated the different ways that TNCs operate. In September 2013, the CPUC, which has regulatory authority over much, though not all, of the passenger transportation industry, issued its first set of rules<2> intended to foster the growth of TNCs, without compromising public safety. These rules started the process of establishing a level playing field so that all transportation companies would have similar regulatory obligations, allowing them to compete based on -------------------------- <2> D.13-09-045; issued September 23, 2013. AB 828 (Low) PageD of? their business models. Among the rules were requirements for obtaining an operating permit from the CPUC, requiring criminal background checks for drivers, establishing driver training programs, implementing zero-tolerance policies on drugs and alcohol, and minimum insurance requirements. The CPUC has initiated a second phase of its investigation to look more closely at the regulation of TNCs and the traditional transportation companies, known as charter-party carriers<3>. A set of issues has been proposed and comments on the scope of those issues are due in June. As the state's expert agency over transportation matters, the CPUC is in the best position to consider whether its current regulations provide for a fair and competitive market. It can recommend specific changes to law and, in some cases, can implement changes to its own regulations to achieve the goal of a level playing field. The author and committee may wish to consider requiring the CPUC to report to the Legislature on the changes to regulation and statute that will help achieve a level playing field and foster innovation, including whether other passenger vehicles being used by charter-party carriers should also be considered non-commercial. Related Legislation: AB 1360 (Ting) - Allows transportation network companies more flexibility in how they charge multiple riders. This bill is pending in the Senate Transportation and Housing Committee. AB 1422 (Cooper) - Requires transportation network companies to participate in the Department of Motor Vehicles program for notifying employers of the driving records of their drivers. This bill is pending assignment in the Senate Energy, Utilities and Communications Committee. Assembly votes: Floor: 71-1 Trans: 14-0 FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No --------------------------- <3> Assigned Commissioner and Administrative Law Judge's Ruling Amending the Scoping Memo and Ruling for Phase II of Proceeding; Rulemaking 12-12-011; April 28, 2015. AB 828 (Low) PageE of? POSITIONS: (Communicated to the committee before noon on Wednesday, June 10, 2015.) SUPPORT: Bay Area Council Brea Chamber of Commerce Clean Coalition Internet Association Los Angeles Area Chamber of Commerce Lyft Metropolitan Transportation Commission Orange County Business Council Orange County Supervisor Michelle Steel Planning and Conservation League San Francisco Chamber of Commerce SPUR Uber OPPOSITION: California Delivery Association California Labor Federation Greater California Livery Association Los Angeles Taxi Workers Alliance Sacramento Taxi Cab Union San Francisco Taxi Workers Alliance San Jose Taxi Drivers Association United Taxi Workers of San Diego Four individuals -- END --