BILL ANALYSIS Ó AB 1360 Page 1 Date of Hearing: April 20, 2015 ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE Anthony Rendon, Chair AB 1360 (Ting) - As Amended April 14, 2015 SUBJECT: Charter-party carriers of passengers: individual fare exemption SUMMARY: This bill would exempt ridesharing programs operated by transportation network companies (TNC) that arrange rides among multiple passengers who share the ride in whole or in part, from transportation charges computed and assessed on charter-party carriers. Specifically, this bill: a)Exempts a ridesharing program operated by a TNC that arranges a ride on a prearranged route among multiple passengers who share the ride, in whole or in part, from offering passengers charges computed and assessed on a vehicle mileage or time of use basis, or on a combination of the two. b)Specifies that the exemption applies provided that: 1) The vehicle seats no more than seven persons, including the driver, 2) The driver is a participating driver, as defined, and 3) The individual fare for each passenger is less than the fare that would be charged for the same ride to a single AB 1360 Page 2 passenger traveling alone. EXISTING LAW: 1)The Passenger Charter-Party Carriers' Act generally requires charges for the transportation to be offered or afforded by a charter-party carrier to be computed and assessed on a vehicle mileage or time of use basis, or on a combination therefor. These charges may vary in accordance with the passenger capacity of the vehicle, or the size of the group to be transported. (Public Utilities Code §5401) 2)Directs the California Public Utilities Commission (CPUC) to issue permits or certificates to charter party carriers (CPC), investigate complaints against carriers, and cancel, revoke, or suspend permits and certificates for specific violations. (Public Utilities Code §5387) 3)Defines "charter-party carrier of passengers" as every person engaged in the transportation of persons by motor vehicle for compensation, whether in common or contract carriage, over any public highway in the state. (Public Utilities Code §5360) 4)Defines a "transportation network company" to mean an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any 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)Restricts charter-party carriers from directly, or through an agent or otherwise, nor any broker, contract, agree, or arrange to change, or demand or receive compensation, for the transportation offered or afforded, be computed, charged or assessed on an individual-fare basis. (Public Utilities Code §5401) AB 1360 Page 3 6)Exempts contractors who are compensated by parents of children attending public, private, or parochial schools and except operators. (Public Utilities Code§ 5401) 7)Exempts a round-trip sightseeing tour service conducted with an authorized certificate or permit. (Public Utilities Code §5401) FISCAL EFFECT: Unknown. COMMENTS: 1)Author's Statement: "The primary cause of traffic congestion originates from nearly 80% of commuters traveling to work alone. Traffic results in 5.5 billion hours of productivity at a cost of $818 to the average commuter, with increased congestion generating nearly 4 billion gallons of excess fuel wasted and 56 billion pounds of greenhouse gasses. This contributes to California's transportation sector functioning as the greatest source of pollution, accounting for 40% of the state's greenhouse gas emissions. TNC's such as Lyft, Uber, and Sidecar have been extremely innovative in creating models that empower consumers and allow more ease and access to transportation alternatives. They have recently started services that allow riders with similar pick up locations and destinations to share a driver and carpool for a decreased fare. Shared rides such as carpooling decrease traffic and congestion, and ultimately cut pollution." 2)Background: California law regulates different modes of passenger transportation for compensation, including taxi AB 1360 Page 4 services, which are regulated by cities and/or counties, and CPCs and passenger stage companies (PSC), which are regulated by the PUC. Beginning as early as 2009, a new model of transportation service began springing up in cities across the United States. Known as TNCs, these companies work by allowing patrons to prearrange transportation services through an online application on their smartphone or computer. Patrons would request a ride to a predetermined location and the application would connect them with a TNC driver. Payment is processed through the application so that no physical financial transaction occurs during the trip itself between the patron and the driver. The TNC takes a commission on each trip. The development of TNCs has made the ability for passengers seeking transportation for compensation more readily available to the general public. 3)What are Passenger Carriers? The CPUC is in charge of regulating passenger carriers. Passenger carriers include services such as PSCs and CPCs. PSCs are services that provide transportation to the general public on an individual fare basis, such as scheduled bus operators, which are buses that operate on a fixed route and scheduled services, or airport shuttles, which operate on an on-call door-to-door share the ride service. CPCs are services that charter a vehicle, on a prearranged basis, for the exclusive use of an individual or group. Charges are based on the mileage or time of use, or a combination of both. The CPUC does not regulate the level of charges for CPCs. Types of CPCs include limos, tour buses, sightseeing services, and charter and party buses. The CPUC requires CPCs to meet a number of requirements until an operating permit or certificate is issued. These requirements include providing sufficient proof of financial responsibility, maintain a preventative maintenance program for all vehicles, possessing a safety education and training program, and regularly checking the driving records of all AB 1360 Page 5 persons operating vehicles used in transportation for compensation. 4)What are Not Passenger Carriers? Taxis are excluded from the definition of CPCs and are regulated by cities or counties. The key distinction between CPC rides and taxis is that CPC rides must be prearranged, while taxis are allowed to pick up passengers via street hails. Other examples of transportation services that are not considered charter party carriers include: transportation services licensed and operating wholly within the limits of a single city or city and county, transportation services contracted to transport school pupils, publicly owned transit systems, passenger vehicles carrying passengers on a noncommercial enterprise basis, vehicles used exclusively to provide medical transportation, among others. 5)What are Transportation Network Companies? In September 2013, a CPUC decision put TNCs under the purview of the CPUC, allowing it to exercise and enforce regulatory and safety requirements against TNCs. The CPUC defined TNCs as an "organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any 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." The CPUC decision requires TNCs to obtain a permit from the CPUC, conduct criminal background checks of drivers, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, conduct vehicle inspections, and obtain authorization from airports before conducting any operations on or into airport property. Subsequently, the legislature passed AB 2293 (Bonilla) Chapter 389, Statutes of 2014, which codified the CPUC's definition of TNCs and imposed certain liability and other insurance coverage for TNCs and their participating drivers. The bill AB 1360 Page 6 defines when personal and commercial auto insurance come into effect, and at what levels, when the driver logs onto the application until the driver accepts a ride request, and for when a ride request is accepted until the passenger exits the vehicle. The bill sought to make a clear distinction between when a vehicle is being used for TNC business activities and must require commercial insurance, and when a vehicle is not being used for TNC business activities at which time the driver's personal auto insurance is in effect. 6)CPC Permits: The CPUC authorizes six types of certificates and permits for CPCs. The CPUC authorizes three types of transferable certificates: Class A certificates allows charter service between any point in the state, such as roundtrip sightseeing service, Class B certificates allows charter service between any point within a 125 miles of the carrier's home terminal, Class C certificates transportation services that apply to commercial balloon operations, and commercial river rafting or skiing. The CPUC also authorizes three types of nontransferable permits. These permits include: P permits which allows charter services using only vehicles that can seat under 15 passengers, S permits which authorizes vehicles to provide round-trip sightseeing services, and Z permits which authorizes specialized services not offered to the general public; namely, transportation incidental to another business, transportation under contact with specific entities, and transportation of agricultural works to and from farms. 7)Transportation Network Companies & Charter Party Carriers: Although TNCs do not neatly fall into the conventional definition of either taxis or limousines, the CPUC does believe that TNCS are currently providing passenger's transportation for compensation, and reasonably concludes that TNCs are charter party passenger carriers, therefore, falling under the CPUC's existing jurisdiction over these services. Because the CPUC considers TNCs as a form of CPC under its AB 1360 Page 7 regulatory purview, a company who wishes to operate as a TNC must apply for a TNC subclass of a CPC - P permit. These CPC - P permits are only granted to companies utilizing smartphone technology application that facilitate transportation passengers in the drivers' personal vehicle. TNCs are not permitted to own vehicles used in their operations or own fleets of vehicles. However, there is no limit to the number of drivers a TNC can have under one permit. Individual TNC drivers do not have to apply for their own CPC permit, but would need to complete the TNCs process to be enrolled as a driver under a TNC. 8)Vehicle Requirements for TNCs: The CPUC only allows TNCs to use street legal coupes, sedans, or light-duty vehicles, including vans, minivans, SUVs, pickup trucks, as well as hatchbacks and convertibles. TNC vehicles must not be significantly modified from factory specifications. TNCs are allowed to operate vehicles with a seating capacity of up to seven passengers, including the driver, if they have a $1 million commercial liability insurance on file. They are allowed to operate a vehicle with a seating capacity of up to ten passengers, including the driver, if they carry a $1.5 million commercial liability insurance on file. TNCs are not allowed to operate vehicles with a seating capacity of more than 10 passengers, including the driver, which is legally defined as a bus. The author may wish to consider an amendment to further clarify that TNCs may not use vehicles to provide transit service or to carry passengers over a fixed route, provide school pupil transportation services, and provide public paratransit services. 9)Exemptions: Current law provides two types of exemptions from the prohibition against CPC vehicles from charging individual-fares. These exemptions include, school buses who are contacted and compensated by parents of children attending public, private or parochial schools, and certified operators AB 1360 Page 8 of roundtrip sightseeing tour services. This bill would include a rideshare program operated by a TNC to this list of exemptions, provided that the individual fare for each passenger is less than the fare that would be charged for the same ride to a single passenger traveling alone. The distinction between the current list of exemptions and TNCs is the fact that for school buses and sightseeing tour services, the stop locations are dictated by the driver or the company in advance. Whereas for TNCs, the passenger dictates the stop locations, which can change each time a TNC driver picks up a new patron. 10)CPUC Letter to TNCs: In September 2014, the CPUC sent letters to the three major TNCs, Uber, Lyft, and Sidecar, regarding their intent to add carpooling service to their transportation service. The CPUC stated that this model is in violation of existing law that prohibits CPCs from calculating charges on an individual-fare basis. The CPUC found that CPCs "cannot change an individual fare when carrying multiple person in a vehicle, and therefore, a person chartering a [CPC] vehicle must have exclusive use of the vehicle." 11)TNCs and Carpooling: As the number of TNC drivers continue to increase, offering carpooling services may be beneficial for patrons because it allows them to share and reduce the cost of a single ride for each passenger because TNC fares for the most part are dictated by the demand during a specific time or location. TNC carpooling services may also have the added benefit of reducing the number of vehicles on the road. However, if this service serves to provide an additional incentive for more drivers to join TNCs, it is unclear whether or not carpooling will have the desired effects of reducing emissions as it might have the contrary effect of adding more TNC drivers on the road who otherwise would not be driving, instead of reducing the number of drivers on the road. 12)Suggested Amendments: AB 1360 Page 9 5401. (c) A rideshare program operated by a transportation network company subject to this chapter that arranges a ride on a prearranged route among multiple passengers who share the ride in whole or in part, provided that (1) the vehicle seats no more than seven persons, including the driver, (2) the driver is a participating driver as defined in subdivision (b) of Section 5431, (3) the vehicle is not used to provide public transit services or to carry passengers over a fixed route, (4) the vehicle is not used to provide school pupil transportation services, (5) the vehicle is not used to provide public paratransit services, and(3)(4) the individual fare for each passenger is less than the fare that would be charged for the same ride to a single passenger traveling alone. 13)Arguments in Support: According to the Internet Association, "this measure is squarely in line with well-established California public policy that broadly encourages carpooling to reduce traffic congestion and air pollution. AB 1360 also furthers California's commitment to the environment on other fronts, such as by enhancing our State's greenhouse gas reduction efforts. Consumers also benefit from greater transportation options. Multiple passenger ride sharing services provide greater affordability and flexibility for consumers." 14)Arguments in Opposition: According to the California Teamsters Public Affairs Council, "under current law, when a person engages a 'charter party carrier,' they rent the entire vehicle for a set period for a single, undivided cost. If rates splitting is allowed, ? the transportation agreement effectively ceases to be a charter and patrons are charged an individual rate. Thus, unlike a 'common carrier,' such as a public transit operator, they will be able to serve the public but be able to get away with rate discrimination, geographical discrimination, and constantly changing costs of service." 15)Related Legislation: AB 1360 Page 10 AB 24 (Nazarian) 2015: This bill would require charter-party carriers and transportation network companies to participate in the Department of Motor Vehicles Employer Pull Notice System and submit all drivers to a Department of Justice criminal background check. AB 828 (Low) 2015: This bill would exclude from the definition of "commercial vehicle," for purposes of the Vehicle Code, any motor vehicle operated in connection with a transportation network company. AB 1422 (Cooper) 2015: Authorizes TNCs to participate in the Department of Motor Vehicle Employer Pull Notice System. 16)Prior Legislation: AB 612 (Nazarian) 2014: Requires charter party carriers to participate in the Department of Motor Vehicles Employer Pull Notice system and submit all drivers to a Department of Justice criminal background check. Held in Assembly Committee on Transportation. AB 2293 (Bonilla) 2014: Establishes guidelines for insurance coverage for Transportation Network Companies to ensure personal and financial safety of consumers. Chaptered by the Secretary of State - Chapter 389, Statutes of 2014. 17)Double Referred: This bill is double referred to the Assembly Committee on Privacy and Consumer Protection. REGISTERED SUPPORT / OPPOSITION: AB 1360 Page 11 Support The Internet Association (Co-Sponsor) TechNet (Co-Sponsor) Bay Area Council Clean Coalition Coalition for Clean Air Environment California Environmental Defense Fund Orange County Business Council Planning & Conservation League San Francisco Planning and Urban Research Association (SPUR) TransForm Uber Technologies, Inc. AB 1360 Page 12 Valley Industry & Commerce Association Opposition California Conference Board of the Amalgamated Transit Union California Conference of Machinists (IAM) California State Council of the Service Employees International Union (SEIU) California Teamsters Public Affairs Council (ATU) San Francisco Taxi Workers Alliance Analysis Prepared by:Edmond Cheung / U. & C. / (916) 319-2083 AB 1360 Page 13