BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 828 Hearing Date: 7/7/2015 ----------------------------------------------------------------- |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: Author's Statement. According to the author, TNCs are at the cutting edge of transportation innovation. The convenience of TNCs has led to many more people using them, which cuts down on AB 828 (Low) PageB of? traffic and emissions from cars. Exempting TNC drivers from the commercial vehicle registration process encourages the expansion of TNCs, which reduces vehicle trips, total vehicle miles driven and the carbon emissions that contribute to climate change. 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 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. 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. 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 --------------------------- <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? Utilities Commission (CPUC) requires that TNC vehicles carry additional insurance. 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. 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. 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. 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 AB 828 (Low) PageD of? 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 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 have been submitted; a decision on the scope of issues is expected shortly. As the state's regulatory 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. If it looks like a duck ? There is no question that TNC drivers, like drivers of taxis, limos, and shuttles, do it to make money; they are "commercial" by definition. So it is hard to see how a full-time TNC driver should be treated any differently than a full-time taxi driver or full-time limousine driver; they do the same work and perform the same service. The argument for exempting vehicles used by TNC drivers from the definition of a commercial vehicle is that many of the drivers are part-time, driving their personal cars infrequently just to pick up a few dollars. The January 2015 Uber report cited above notes that 55% of their drivers drive 15 hours/week or less. Given this, it may be reasonable to limit the exemption from the commercial vehicle definition for part-time drivers, just as it is reasonable not to regulate the lemonade stand on the corner. Some may question whether a part-time exemption can be enforced. But this can be dealt with just like any other commercial vehicle. If that individual's vehicle happens to be a part of --------------------------- <2> D.13-09-045; issued September 23, 2013. <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? any law enforcement inquiry, say because of an accident or driving infraction, the investigating officer can inquire about the status of the vehicle. While this may not be perfect, it is at least a concrete step towards establishing a level playing field. The author and committee may wish to consider exempting TNC drivers whose vehicles are driven 10 hours or less per week in connection with any TNC from the definition of commercial vehicle. Double referred. The Rules Committee has requested this bill if it passes out of this committee. Related Legislation: AB 1360 (Ting) - allows transportation network companies more flexibility in how they charge multiple riders. This bill is pending in the Senate Energy, Utilities and Communications 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 in the Senate Transportation and Housing Committee. AB 2293 (Bonilla, Chapter 389, Statutes of 2014) - requires specified levels of insurance coverage for TNCs and their drivers. Assembly votes: Floor: 71-1 Trans: 14-0 FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, July 1, 2015.) SUPPORT: Bay Area Council Brea Chamber of Commerce AB 828 (Low) PageF of? 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 Westward Liberty 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 Numerous individuals -- END --