BILL ANALYSIS                                                                                                                                                                                                    

                              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  

          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.

          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.


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            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  

          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.


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            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:  


          <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.


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            POSITIONS:  (Communicated to the committee before noon on  
                          June 10, 2015.)

          Bay Area Council
          Brea Chamber of Commerce
          Clean Coalition
          Internet Association
          Los Angeles Area Chamber of Commerce
          Metropolitan Transportation Commission
          Orange County Business Council
          Orange County Supervisor Michelle Steel
          Planning and Conservation League
          San Francisco Chamber of Commerce


          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

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