BILL ANALYSIS                                                                                                                                                                                                    

                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 828            Hearing Date:     6/21/2016
          |Author:    |Low                                                  |
          |Version:   |7/14/2015    As Amended                              |
          |Urgency:   |No                     |Fiscal:      |Yes             |
          |Consultant:|Nidia Bautista                                       |
          |           |                                                     |
          SUBJECT: Vehicles:  transportation services

            DIGEST:    This bill excludes motor vehicles operating in  
          connection with a transportation network company (TNC) from the  
          requirement to register as a commercial vehicle, if certain  
          conditions are met. This bill also requires the California  
          Public Utilities Commission (CPUC) to conduct an investigation  
          to consider whether existing rules related to transportation  
          services serve the public interest, encourage innovation, and  
          create a fair and competitive transportation market between  
          companies that provide regulated transportation services.

          Existing law:
          1)Defines a "commercial vehicle" as a motor vehicle used or  
            maintained for the transportation of persons for hire,  
            compensation, or profit or designed, used, or maintained  
            primarily for the transportation of property.  (Vehicle Code  

          2)Establishes the Department of Motor Vehicles (DMV) within the  
            State Transportation Agency and charged with the  
            responsibility to issue vehicle registration and driver's  
            licenses.  (Vehicle Code 1500, et seq.)

          3)Establishes the "Passenger Charter-Party Carriers Act", which  
            directs the CPUC to regulate, require license or permit to  
            operate, require insurance and workers compensation, takes  
            appropriate enforcement action and other provisions related to  


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            transportation charter-party carriers (CPCs).  (Public  
            Utilities Code 5351 et seq.)

          4)Defines transportation network company (TNC) as a type of  
            charter-party carrier that is an organization, including, but  
            not limited to, a corporation, limited liability company,  
            partnership, sole proprietor, or any other entity, operating  
            in California that provides prearranged transportation  
            services for compensation using an online-enabled application  
            or platform to connect passengers with drivers using a  
            personal vehicle.  (Public Utilities Code 5431)

          5)Requires specified liability insurance requirements for TNCs.   
            (Public Utilities Code 5433 and 5434)

          This bill:

          1)Excludes from the definition of "commercial vehicle," until  
            January 1, 2018, unless a new statute is enacted, those motor  
            vehicles operated in connection with a TNC provided that the  
            vehicle is:
               a)     operated for passenger service only and is limited  
                 to seven passengers excluding the driver;
               b)     operated exclusively by the person to whom the  
                 vehicle is registered or insured;
               c)     not a paratransit vehicle;
               d)     not operated for public transit services; and
               e)     not operated for school bus services.

          2)Requires that changes to the definition of commercial vehicle  
            per this bill does not change the insurance requirements  
            established for TNCs under Public Utilities Code 5433 and  

          3)Requires the CPUC to conduct an investigation, in consultation  
            with the DMV and relevant local agencies, and report to the  
            legislature by January 1, 2017, to consider whether existing  
            statutes and regulations relating to transportation services  
            serve the public interest, encourage innovation, and create a  
            fair and competitive transportation market between companies  
            that provide regulated transportations services.


          Role of the DMV.  The DMV is charged with ensuring proper  


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          vehicle registration for all vehicles and licensing of all  
          drivers on California roads, per the requirements in the Vehicle  
          Code and related regulations.  The purpose of a vehicle  
          registration is to establish ownership and collect related fees  
          from motorists in exchange for the costs of maintaining public  
          streets and roads. 

          Role of the CPUC.  While the DMV is tasked with vehicle  
          registration and individual driver licensing, other state and  
          local entities issue separate permits to authorize companies,  
          including their drivers and vehicles, to transport passengers  
          for compensation.  Within the state, the CPUC regulates most,  
          but not all, of these transportation for-hire activities,  
          including those of CPCs.  The CPUC determines whether a CPC  
          meets the various requirements prior to issuing a license that  
          would allow a given CPC to operate on a for-hire basis to carry  
          passengers, these include limousines, buses (not school or  
          transit), and TNCs.  In the case of taxicab services, local  
          cities and counties issue permits to operate under those  
          activities. Whether transportation for-hire licenses are issued  
          by the CPUC or a city/county, vehicle registration is maintained  
          as the exclusive purview of the DMV and required of all vehicles  
          on the roads, with some exceptions.

          Enter TNCs.  TNCs have grown dramatically, with a reported  
          120,000 drivers across the state for one company, according to  
          their testimony to this committee<1>. The entrance of TNCs into  
          the transportation for-hire market has disrupted the sector.   
          TNCs are successfully competing with taxi cabs, limousines, and  
          other regulated transit operators.  While most closely related  
          to a taxicab, TNCs prearrange transportation services via an  
          online application on a smartphone or computer.  Patrons request  
          a ride to a predetermined location, and the application connects  
          them with a TNC driver.  Payment is processed through the  
          application so that no physical financial transaction occurs  
          between the patron and driver and the TNC takes a commission on  
          each trip.  TNCs enjoy differing regulations as compared to  
          taxicabs, including the ability to set their own fares,  
          flexibility to increase supply, and, generally less stringent  
          requirements - including those related to vehicle inspections,  
          driver background checks, insurance coverage, driver training  
          <1> Uber testimony. Joint Hearing of the Senate Energy,  
          Utilities and Communications and Transportation and Housing  
          Committees. Leveling the Playing Field: Ride-hailing disruption.  
          February 2016.


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          and others. Whereas taxicabs are regulated by locals, TNCs are  
          regulated at the state level by the CPUC. 

          Commercial vehicle registration.  The Vehicle Code provides that  
          certain vehicles must be registered as commercial vehicles, with  
          specified plates and fees.  This includes vehicles used to  
          transport people or property for compensation.  However,  
          commercial registration is also required of all pick-up trucks  
          regardless of whether they are used for commercial activity.   
          Vehicles registered as commercial are required to pay an  
          additional fee based on the weight of the vehicle which is  
          generally assessed based on the gross vehicle weight and number  
          of axles.  Overall, the weight fee is designed to offset the  
          additional wear and tear that a commercial vehicle causes on the  
          state's roads and highways.  As such 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 costs is $24/year; and for cars  
          weighing between 4,000 and 5,000 pounds the additional cost is  
          $80/year.  Commercial plates are also easily distinguishable  
          from regular license plates by law enforcement.  Commercial  
          license plates use a digit sequence of NANNNNN and regular  
          plates use a sequence of NAAANNN, where N=number and A=letter.   
          This distinction can be beneficial to law enforcement in an  
          investigation of an accident or incident or as they patrol  
          vehicles on the roads. 

          Not so fast.  On January 5, 2015, the DMV issued an advisory  
          memo due to a number of dealers and customers seeking  
          clarification on how to register a vehicle that would be used to  
          provide TNC services.  These inquiries were derived from  
          purchasers buying new vehicles through financing programs  
          offered by TNCs.  The memo stated that "any passenger vehicle  
          used or maintained for the transportation of persons for hire,  
          compensation, or profit is a commercial vehicle. Even occasional  
          use of a vehicle in this manner requires the vehicle to be  
          registered commercially."  Within about a week, after backlash  
          from the TNCs, the DMV retracted the advisory memo clarifying  
          that further analysis is warranted. 

          Personal vehicle and commercial vehicle are not exclusive.  A  
          personal vehicle can have a commercial registration.  The  
          question of what defines a personal vehicle as it relates to  
          TNCs is not directly related to the question of commercial  


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          vehicle registration requirements.  For purposes of defining a  
          personal vehicle, the CPUC's Phase II decision is attempting to  
          define whether a leased or rented vehicle can be used for TNC  
          services and under what conditions.  However, the question of  
          vehicle registration is one that is the exclusive purview of the  
          DMV and that would not be directly related to the decision on  
          personal vehicle.  In fact, a separate bill has been introduced  
          to address the definition of personal vehicle as it relates to  
          the CPUC's proposed decision to place conditions on the use by  
          TNCs of leased and rented vehicles.  Whether or not the DMV  
          requires commercial vehicle registration is not hinged on the  
          definition of personal vehicle, which as noted above, other  
          personal vehicles are already required to have commercial  
          vehicle registration (e.g. pick-up trucks used for  
          non-commercial activity). 

          Transportation deficit.  As the state grapples with a  
          transportation budget deficit to maintain roads and highways,  
          the administration and legislature explore various options to  
          reduce costs and increase revenues to support transportation  
          infrastructure.  Just last week, the Senate approved a budget  
          bill that would increase the vehicle registration fee $10  
          annually for every registered vehicle, and peg the increase to  
          the consumer price index.  Yet, the administration has chosen to  
          forgo the revenues that would be derived from requiring vehicles  
          operating TNCs from commercial registration.  Assuming close to  
          200,000 TNCs on California's roads, the state is forgoing  
          upwards of $5 million dollars annually.  While not officially  
          confirmed, there are rumors that the Administration may be  
          exploring a settlement price with each of the TNC individual  
          companies, in lieu of requiring individual commercial plates on  
          each vehicle.  It would seem that such an arrangement could be  
          unprecedented, and would lack the benefits of individual  
          commercial plates that could be easily identifiable by law  
          enforcement and accurately assessed an annual fee.  However, if  
          such an arrangement is being pursued by the Administration, the  
          language in this bill that would exempt TNCs from the  
          requirement of commercial vehicle registration could directly  
          undermine those efforts.  Currently, the Governor has the  
          ability to enforce the law and require commercial registration  
          of TNCs should the companies not negotiate in good faith. 

          The requirement in this bill to exempt TNCs from commercial  
          vehicle registration seems premature at best.  The current  
          statute is not being enforced by the Administration so there's  


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          no demonstrated need for this bill.  Furthermore, the DMV has  
          not finalized a decision or made a recommendation about  
          commercial plates on TNCs.  On the other hand, the request for  
          the study by the CPUC, in consultation with DMV and others,  
          seems timely and appropriate to help inform this issue and  
          others as it pertains the disparate regulations on similar  
          transportation services.  The author and committee may wish to  
          amend this bill to remove the provisions related to exempting  
          TNCs from the commercial vehicle registration requirements. 

          Technical amendments.  The author and committee may also wish to  
          narrow the requirement that the CPUC, in consultation with DMV  
          and others, conduct an investigation and report by narrowing the  
          report to regulations and rules related to transportation  
          for-hire services

          Prior/Related Legislation
          AB 1360 (Ting, 2015) would allow charter-party carriers of  
          passengers, including transportation network companies, to  
          charge individual fares, rather than a single group fare when  
          providing carpool services.  The bill is scheduled to be heard  
          by this committee on June 27, 2016.

          AB 1422 (Cooper, Chapter 791, Statutes of 2015) required  
          transportation network companies to participate in the DMV  
          employer pull-notice (EPN) system to regularly check the driving  
          records of a participating driver.

          AB 1610 (Committee on Budget, 2016) would among other items,  
          increase the annual vehicle registration fee by $10 per  
          registration to fund state highway and local road construction,  
          maintenance and mitigation and associated administrative costs.   
          The bill is in the Assembly awaiting a concurrence vote.

          AB 2293 (Bonilla, Chapter 389, Statutes of 2014) established  
          guidelines for insurance coverage for TNCs to ensure personal  
          and financial safety of consumers. 

          SB 1035 (Hueso, 2016) would have instituted a number of public  
          safety and consumer protection requirements on TNCs.  The bill  
          failed passage in the Senate Committee on Transportation.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             Yes          Local:          No


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          American Insurance Association
          Association of California Insurance Companies
          Bay Area Council
          Brea Chamber of Commerce
          Clean Coalition
          County of Orange Supervisor, 2nd District
          Los Angeles Area Chamber of Commerce
          National Association of Mutual Insurance Companies
          Orange County Business Council
          Pacific Association of Domestic Insurance Companies
          Personal Insurance Federation of California
          Planning & Conservation League
          San Francisco Chamber of Commerce
          Travelers United


          California Bus Association
          California Delivery Association
          California Labor Federation
          Greater California Livery Association
          San Francisco Taxi Workers Alliance
          San Francisco Yellow Cab Co-Op

          ARGUMENTS IN SUPPORT:    According to the author's office: "this  
          bill will affect users of TNCs by increasing access to a driver  
          in a timely manner without additional hurdles for the operator  
          of the TNC to jump through.  This bill also helps other  
          industries that provide similar services by requiring the CPUC  
          to do a study on how to best serve the public interest.  Once  
          the CPUC has concluded their study, recommendations will be  
          given to the legislature on how best for all the companies to  
          serve the users of these services."  

          Lyft and Uber both assert that requiring TNC drivers to register  
          their vehicles as commercial vehicles is an onerous requirement  
          that would likely deter part-time drivers - who represent the  
          majority of TNC drivers - from participating in the sector.   


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          These companies argue that the law must be clarified to provide  
          certainty for the TNC sector.
          ARGUMENTS IN OPPOSITION:    In opposition to this bill, the  
          California Delivery Association states: "Our industry is  
          comprised of small businesses that have been creating jobs,  
          contributing to our economy and supporting our communities, many  
          for nearly half a century, in California.  While we realize that  
          every business must work hard to compete in the marketplace, we  
          oppose "carve-out" exemptions created by government or any other  
          entity that unfairly gives one segment of our industry the upper  
          hand and leaves many struggling family businesses at a  
          competitive disadvantage." 

          The San Francisco Taxi states "there is no reason to exclude TNC  
          vehicles from commercial registration while not excluding other  
          vehicles that are used commercially in the same manner.  Many  
          taxi drivers and small business owners also use their vehicles  
          for personal purposes and work part-time, yet must register  
          their vehicles commercially.  It is a simple and inexpensive  
          process: a single visit to a weigh station, which may charge  
          $25, and payment of an additional registration fee of $8-24 for  
          a small or medium-sized sedan."


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