Lyft ride-sharing dodges City Hall clampdown with free promotion

A ride-sharing service that has rankled regulators at City Hall began operating Thursday under a two-week promotion that does not -- for now -- violate the city's taxicab ordinances.

The city's business licensing office had previously warned it would ticket and impound any vehicles associated with Lyft, since they qualify as taxicabs. The California-based company essentially allows people to become chauffeurs of their own vehicles, using a smartphone app to find passengers.

But the service launched on Thursday by giving users two weeks of free service (up to $25 per ride). That temporarily bypasses the city's "for hire" taxicab definition.

Grant Wilson, the city's head of business licensing, said they won't begin enforcement until the service begins charging customers. That gives Lyft two weeks to find a solution with the city.

The city is serious, though. Wilson said they have already tagged and impounded three vehicles run by UberX, a similar service that launched in Minneapolis this January.

Lyft says this isn't tailored to Minneapolis. Communications director Erin Simpson said by e-mail that they have launched similar promotions in nearly 20 cities.

The exact same situation is playing out in Columbus, Ohio. The city's department of public safety spokesman said they would "take enforcement actions against them if we see them operating," but the free rides gave the company a temporary buffer.

Lyft says it provides $1 million in excess liability insurance and performs background and DMV checks on drivers. Wilson said that Lyft has not provided the city with a copy of their insurance, however, and personal insurance isn't covered when a vehicle is used "for hire."

Wilson added Friday that Lyft and Uber are neither "peer-to-peer" nor "rideshare" services, as they advertise, because they involve strangers giving rides to places they would not otherwise be traveling.

"They use these terms because most state laws exempt true car pools, van pools, car sharing ([Car2Go]), etc. from licensure," Wilson wrote in an e-mail.

Wilson also said a regional group of regulators has been actively discussing these car sharing services, and may have a metro-wide regulatory program in place that could accommodate them by June.

Lyft and UberX are already operating in St. Paul, where only cars with meters are defined as taxicabs under city ordinances. So how are things going?

Similar debates are playing out in cities across the country as Lyft and Uber expand their operations into new areas -- Lyft is already operating in more than 20 communities. Seattle imposed new limitations on the services on Thursday night, allowing each of the companies to have 150 vehicles on the road.

The Seattle ordinance addresses a number of the concerns springing up in the Twin Cities:

4. The Council finds, and the demand study supports, that some companies using application dispatch technology to offer transportation services in Seattle are unlicensed and affiliated with unlicensed for-hire drivers (unlicensed drivers) and vehicles ² ; and

5. The Council finds that as the use of application dispatch technology by unlicensed companies, vehicles, and drivers raises significant public safety and consumer protection concerns; and

6. The Council finds that the use of application dispatch technology by unlicensed companies and drivers are competing with existing licensed taxicab and for-hire drivers in the transportation market and causing negative impacts; and

8. The Council finds that companies providing transportation services via application dispatch with unlicensed affiliated drivers are operating illegally without a license or regulatory oversight;