BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS Senator Ben Hueso, Chair 2015 - 2016 Regular Bill No: AB 2763 Hearing Date: 6/27/2016 ----------------------------------------------------------------- |Author: |Gatto | |-----------+-----------------------------------------------------| |Version: |4/18/2016 As Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Nidia Bautista | | | | ----------------------------------------------------------------- SUBJECT: Transportation network companies: personal vehicles DIGEST: This bill would define a personal vehicle as a vehicle that is used by a participating driver to provide prearranged transportation services for compensation, is owned, leased, rented, or otherwise authorized for use for any period of time by the participating driver, meets all inspection and other safety requirements imposed by the California Public Utilities Commission (CPUC), and is not a taxicab or a limousine. ANALYSIS: Existing law: 1)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 transportation charter-party carriers (CPCs). (Public Utilities Code §5351 et seq.) 2)Defines transportation network company (TNC) as a type of CPC 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) AB 2763 (Gatto) Page 2 of ? 3)Requires specified liability insurance requirements for TNCs, which requires the TNC insurance coverage to be the primary insurance and in the amount of one million by for death, personal injury, and property damage when a participating driver accepts a ride request until the driver completes the transaction and $50,000 for death and personal injury per person, $100,000 for death and personal injury per incident and $30,000 when the participating driver logs on to the TNC online-enabled application until the driver accepts a ride. (Public Utilities Code §5433) 4)Provides that a participating TNC driver's personal automobile insurance may not provide any coverage when the participating driver logs on to the application until the driver logs off. (Public Utilities Code §5434) 5)States that an owner of a motor vehicle used in the transportation of persons for compensation by a CPC of passengers means the corporation or person who is registered with the Department of Motor Vehicles (DMV) as the owner of the vehicle, or who has a legal right to possession of the vehicle pursuant to a lease or rental agreement. (Public Utilities Code §5362) 6)States that an owner is a person having all incidents of ownership, including the legal title of a vehicle whether or not such person lends, rents, or creates a security interest in the vehicle. (Vehicle Code §460) 7)States a "legal owner" is a person holding security interest in a vehicle under a lease, lease-sale, or rental-purchase agreement which grants possession of the vehicle to the lessee for a period of 30 consecutive days or more. (Vehicle Code §370) 8)Defines a lessee as a person who leases, offers to lease, or is offered the lease of a motor vehicle for a term exceeding four months. (Vehicle Code §371) This bill defines "personal vehicle" as a vehicle used by a participating driver to provide prearranged transportation services for compensation, that is owned, leased, rented, or otherwise authorized for use for any period of time by the participating driver; meets all inspection and other safety requirements imposed by the CPUC; and is not a taxicab or AB 2763 (Gatto) Page 3 of ? limousine. Background TNC vehicle rental and leasing programs. There is a growing market of companies who provide participating TNC drivers with vehicle leases and rentals. Some existing car rental companies have established exclusive relationships with given TNCs and offer car rental packages that are tailored for driving for a TNC activity. Under these programs, the rental/lease payment is deducted from the driver's earnings. These programs include one offered in partnership with a car rental company for $210 per week, plus $40 startup fee and additional fees. Other third-party rental and lease companies can connect participating drivers to either TNC. These vehicle rental and lease arrangements range from months-long leases to an hourly rental arrangement. CPUC action. In January, the CPUC proposed in its Phase II decision related to TNCs define "personal vehicle" as it applies to TNC operations may include a vehicle that is not registered in the driver's name, or a vehicle pursuant to a lease agreement and limited to the existing definitions in statute. When the item was heard for adoption in March, the commissioners engaged in discussion regarding the proposed approach on defining a personal vehicle with some commissioners expressing concerns about ensuring the definition was adequate for purposes of insurance, public safety and related matters. In June, the assigned commissioner issued a ruling inviting comments on the concept of personal vehicles to assess how expansively the term should be defined. The ruling includes a series of questions related to minimum time periods, insurance issues, safety concerns, adequate procedures, etc. As of the date of this analysis, the ruling is open for comments with reply comments due by July 11th. However, the passage of this bill may eliminate the need for the CPUC to conduct this investigation. Economic opportunity or exploitation? By providing access to vehicles through leases and rental arrangements for qualified participating drivers, someone who may not own a vehicle, or own a vehicle that does not meet the requirements of the TNC, has the opportunity to become a participating driver and earn income as a driver. The car rental companies with contractual arrangements with TNCs would bear responsibility to maintain the vehicles and provide the CPUC-required 19-point Bureau of AB 2763 (Gatto) Page 4 of ? Automotive Repair vehicle inspection. Since state law prohibits a car from being rented for longer than 30 days, it may be that the car rental company may do a better job at maintaining the vehicle inspection schedule for their vehicles than it would be for someone driving their own car. However, in the case of a long-term lease, the individual would bear the responsibility for the vehicle inspection. Since insurance requirements for TNCs are established in statute, all vehicles conducting TNC operations would be subject to these requirements, regardless if the vehicle is rented, leased or owned. While there are some potential pluses with short-term car rentals and leases, participating drivers would bear the risk of paying for a car rental or lease for TNC activity that may not produce enough income to offset the costs. The driver's profitability will depend on how many rides they provide and how much they make on each ride. The price of some of the rental arrangements contracted with TNCs currently in the market include: approximately $200 per week car rental fee, $250 refundable deposit, $43 non-refundable startup fee, and other fees. The price of a car lease arrangement includes approximately $150 per week fee, $250 security deposit and requires a 3 year contract. These costs are not insignificant upwards of $1,000 plus per month. Clarifying amendments. In order to ensure the vehicles this bill references are not buses and larger vehicles. The author and committee may wish to amend this bill to ensure vehicles the provisions of this bill only apply to vehicles of eight persons or less, including the driver. Consistent with existing law, the author and committee may wish to amend this bill to ensure rented vehicles may not be rented for a term that exceeds 30 days. Prior/Related Legislation AB 828 (Low, 2016) would exclude motor vehicles operating in connection with a TNC from the requirement to register as a commercial vehicle. The bill is in the Senate Committee on Appropriations waiting to be considered. AB 1360 (Ting, 2015) would allow CPCs of passengers, including TNCs, 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 2763 (Gatto) Page 5 of ? AB 1422 (Cooper, Chapter 791, Statutes of 2015) required TNCs to participate in the DMV employer pull-notice system to regularly check the driving records of a participating driver. 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.: No Local: No SUPPORT: Bay Area Council California Chamber of Commerce California League of Conservation Voters Circulate San Diego City of Beverly Hills Electric Vehicle Charging Association Enterprise Holdings Evercar Greenbelt Alliance Lyft Planning and Conservation League SPUR San Diego Regional Chamber of Commerce Silicon Valley Leadership Group TechNet The Internet Association TransForm Uber Technologies, Inc. Volta OPPOSITION: California Teamsters Public Affairs Council, unless amended Oklahoma Limousine Association San Francisco Taxi Workers Alliance Four Individuals AB 2763 (Gatto) Page 6 of ? ARGUMENTS IN SUPPORT: In support of this bill, Uber states: AB 2763 is an important step in ensuring access to the economic opportunities provided by TNCs. It recognizes that more and more people are unable to afford or are deciding to forgo car-ownership, but that these individuals should not be precluded from becoming driver-partners with a TNC. ARGUMENTS IN OPPOSITION: In opposing the language of this bill, the Teamsters are concerned that "absent adding basic consumer protections for the drivers, this would legitimize a practice that can be very exploitive of drivers. Long lease periods with very high lease payments can tie a person into one of these jobs with little hope of economic mobility, especially if the promised income doesn't pan out." -- END --