If you pay the driver of a car to take you from one place to another, isn’t that vehicle functioning in essentially the same way as a taxi cab? And if so, shouldn’t the driver, vehicle and company involved follow the same city rules and regulations as others providing the same kind of service?
Today, the Minneapolis City Council is expected to adopt ordinances that will establish very different rules for traditional taxis vs. car-sharing services such as Lyft and UberX (also called transportation network companies or TNCs). Following several months of talks and hearings, council members will likely approve two ordinances — one to relax and update some current taxi regulations and the other to specifically govern TNCs.
The-San Francisco-based Lyft has been operating in the metro area for several months, despite not being technically legal in Minneapolis. The TNC’s arrival prompted City Hall to figure out how to regulate the as-yet-unlicensed businesses.
But even though the council has studied the issues and heard from concerned parties, questions remain, including questions about whether the TNCs will have an unfair competitive advantage over more-tightly-regulated taxis.
We believe the council should delay its vote until more of those questions are better answered. But if the new rules are approved, city leaders should carefully monitor how the TNCs operate to determine whether more should be done to equalize regulation. The leaders should remain willing to reconsider further relaxing restrictions on taxi fares, lowering licensing fees for taxis or tightening rules on TNCs.
Here’s how the new kids on the block operate: Lyft and UberX essentially allow individuals to serve as paid chauffeurs with their personal vehicles. Customers hire them through their GPS-enabled smartphones. Both the drivers and the customers are preapproved by the companies, and no money changes hands at the time of the service. The on-file credit cards of the customers are charged for the rides, and driver payments are electronically deposited into their accounts.
In contrast, traditional cab companies and drivers don’t have those electronic advance-payment arrangements, but they are required to accept credit cards.
Meanwhile, Lyft and UberX can charge whatever prices the market will bear, while taxis’ per-mile rate is capped.
Taxis must pay a $475 per-vehicle fee and a $59 per-driver fee to the city for their licenses annually, while TNCs will pay a flat operating fee. A group of local cab companies calculated that a taxi operator with 300 cabs pays about $160,000 in various license fees per year, while a TNC would pay the city only about $35,000.
On insurance, in the event of an accident or injury, a combination of the TNC driver’s personal insurance and insurance carried by the TNC is supposed to be in effect, although questions remain about exactly how that will work. Many personal insurance policies deny coverage if drivers use their vehicles as cars for hire.
The city’s 30-plus cab companies are required to carry full 24/7 commercial insurance that is in effect whether their cars are in service or not. That regulation requires taxi companies and drivers to pay thousands more in insurance costs than the competing TNCs.
We are unpersuaded that the actual differences in the service provided justify these large regulatory disparities (traditional taxis, for example, are supposed to be the only ones that can pick up passengers who hail them on the street).
Another concern about the advent of TNCs is whether the new services will provide service to customers with disabilities. Traditional cab companies provide some wheelchair-accessible cars. But if the car services are not required to offer that service, some taxi companies may also opt out, which would reduce options for the disabled. On Thursday, two disability groups asked the council to delay its vote after learning that one local cab company would no longer participate in a new wheelchair-accessible incentive program.
Minneapolis is not the only city to grapple with these questions.
Late last week, Lyft put off its scheduled launch for this week in New York City while a state judge considers a suit against the TNC. Two New York state offices, including that of the attorney general, sued just hours before Lyft was set to start operations there. The suit argues that the company operates as a traditional for-hire livery service using mobile technology, not a “peer-to-peer transportation platform” as claimed. And the suit alleges that the TNC violates state and local licensing and insurance laws.
Should Minneapolis go forward with its two sets of rules, the outcomes of that decision bear close monitoring in the weeks and months to come.