BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS 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. ANALYSIS: 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 §260) 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 AB 828 (Low) PageB of? 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 5434. 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. Background Role of the DMV. The DMV is charged with ensuring proper AB 828 (Low) PageC of? 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. AB 828 (Low) PageD of? 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 AB 828 (Low) PageE of? 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 AB 828 (Low) PageF of? 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 AB 828 (Low) PageG of? SUPPORT: 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 Lyft National Association of Mutual Insurance Companies Orange County Business Council Pacific Association of Domestic Insurance Companies Personal Insurance Federation of California Planning & Conservation League SPUR San Francisco Chamber of Commerce Travelers United Uber OPPOSITION: 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. AB 828 (Low) PageH of? 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." -- END --