Title
Briefing on Transportation Network Companies
Recommended Action
Move to allow staff to work with regional partners on ordinance changes to allow Transportation Network Companies to operate in Olympia. Once completed, forward proposed ordinance changes to Council for discussion/action.
Report
Issue:
Whether or not to allow Transportation Network Companies (Uber, Lyft) to operate in Olympia. What changes are needed to existing City ordinances to allow Transportation Network Companies to operate in the City of Olympia?
Staff Contact:
Jay Burney, Assistant City Manager, (360) 753-8740
Presenter(s):
Jay Burney, Assistant City Manager, (360) 753-8740
Background and Analysis:
Uber, Lyft and Sidecar are Transportation Network Companies (TNC) that use a smart phone application to connect drivers and riders within an online marketplace. The marketplace then manages the scheduling, rates, fare calculation and pricing, payment, customer communication, rider and driver ratings, and the actual connecting of drivers with riders.
The latest available statistics indicate Uber is making over 2 million rides daily, with about half occurring in China alone. In larger communities in the U.S., they are heavily used as a transportation alternative, referred to as “ridesourcing.” The peak hours for Uber are midnight to 2 a.m. when people are seeking rides home as the bars close. Uber is not authorized to initiate service in Thurston County, although Uber vehicles might occasionally be in the County as a result of originating from cities where they are licensed to operate.
Uber has requested approval to operate in Thurston County, specifically in Olympia, Lacey, Tumwater and Yelm. Local organizations and businesses, particularly those related to tourism have supported TNC expansion into the area. When Uber arrives, other TNCs typically follow.
While TNCs could operate under the existing taxi regulations, Uber has stated they need a faster review process for drivers and want to do their own background checks. They estimate that 40-50 drivers would operate in north County with 10-15 new drivers per week. Uber drivers are frequently college students and retirees whose hours fluctuate considerably. Drivers set their own times ranging from full-time to part-time. As a result, there is a high turnover of drivers and high frequency of new drivers entering the system.
Security and customer service in the TNC system are ensured two ways; traditional background checks by Uber and by social reviews. Uber conducts background checks by means of a third party company. It is generally considered a more comprehensive review than the reviews done by local government through the NCIC system. Uber also has each vehicle inspected by a third party mechanic and requires insurance from the drivers. Because the Uber system does not have drivers and riders directly exchanging money, there is less risk associated with cash management. Riders know the cost of a trip at the start and can manage it during the ride via their smart phone.
Taxi regulation by communities derives from the police power to protect the public from unsafe drivers and also consumer protection to avoid getting charged unfairly. In larger communities, taxis are heavily regulated, even more than in Thurston County. Three years ago, the four major cities in Thurston County agreed to a shared taxi regulatory system where a driver would obtain an occupational license in any of the four communities and the license would apply in all four cities (Olympia, Lacey, Tumwater and Yelm). The city issuing that occupational license would keep the revenue to cover costs. Applicants would also be required to have a business license in each community where they intend to do business. The occupational permit review by any of the cities uses the less comprehensive NCIC system and does not include a review of the vehicle, proof of insurance, or management of fares. Current staff in the three largest cities do not recall receiving complaints about taxi service.
The other source of security and customer service management in TNCs is the online social review. That same system underlies online retail companies like eBay and Amazon or service companies like Yelp, TripAdvisor, and Open Table. Drivers and riders are required to publically post an online review of the other. Successful drivers and riders carefully manage their online ratings. Uber will supervise driver ratings to ensure they only drive if they meet minimum rating requirements. Taxi companies are slowly coming around to using similar technology approaches to remain competitive. In larger communities, there is significant political pressure from the taxi industry to keep the TNCs out in order to minimize competition. That is becoming a difficult argument to sustain as the popularity of TNCs mount.
Two similar communities have been working with proposed regulations; Vancouver, Washington and Bellingham, Washington. They use the same approach to TNCs except that in Vancouver, they required the taxis to convert to the new licensing and regulatory system. In Bellingham, they created dual systems, allowing taxis to keep their existing system and the TNCs use the new one. Copies of their newly adopted ordinances are attached.
In those two cities, a TNC company and all drivers would be required to have business licenses in the cities where they are doing business. A TNC would also have to obtain a TNC license based on compliance with the City regulations. Drivers authorized under that TNC license would have to be 21, have a valid driver’s license, proof of vehicle registration, and proof of insurance. Drivers would not have their own business license. The TNC would report and pay all B & O taxes. The TNC would maintain the records of the drivers and be responsible for conducting background checks as prescribed by the city. TNC vehicles are also required to meet safety standards by a certified mechanic, including the foot brakes, steering, windows, lights, speedometer, and other important systems. Under both the Bellingham and Vancouver models, the City biannually audits the TNC driver records to ensure that at least a sample of the drivers are in compliance. Penalties are in place in both models for drivers found to be in non-compliance.
The regulations also create procedures for how the smart phone application will work, the data that needs to be available to riders, a prohibition on street hails, and provision of zero tolerance policy on drugs and alcohol for drivers.
The Cities of Lacey, Olympia, Tumwater and Yelm could either follow the Bellingham model or the Vancouver model, depending on the desire to convert the taxis. Regardless of which option, the Cities could also continue to collaborate on a shared licensing program.
Observations
1) Technology has created a new method to arrange transportation, ridesourcing, which creates travel options for people to reduce car ownership and improve accessibility. The technology creates some problems (universal access, dynamic pricing which fluctuates with supply/demand) and solves others (customer service reviews, expense documentation, location tracking, cashless transactions, price awareness).
2) The long-term implications of this highly competitive environment on access, price, driver compensation, and availability are not known. This is new territory.
3) The presence of TNCs in the community has shown to have value to the tourism industries, reduced DUIs, reliance on parents for child transport, and creating part-time income for drivers (avg. $19/hr.).
4) Both the current system to regulate taxis and the current practices for regulating TNCs lack total security and each relies on some form of sampling for compliance with regulatory criteria.
5) A Vancouver-type model which treats the taxi industry the same as TNCs forces change among taxi operators, who have historically opposed the introduction of TNC’s in service areas. The Bellingham model allows the taxi industry to remain unchanged unless they begin to operate more like a TNC.
Neighborhood/Community Interests (if known):
Allowing TNCs to operate in Olympia will provide more transportation options for our residents. They will also create competition for traditional taxi companies that does not currently exist.
Options:
1) Move to allow staff to work with regional partners on ordinance changes to allow Transportation Network Companies to operate in Olympia. Once completed, forward proposed ordinance changes to Council for discussion/action.
2) Move to allow staff to work with regional partners on ordinance changes to allow Transportation Network Companies to operate in Olympia. Once completed, return to General Government for review.
3) Do not move forward with new ordinances allowing TNCs to operate in Olympia.
Financial Impact:
Staff does not anticipate needing additional resources to manage the addition of TNCs in Olympia. Additional B&O tax may be generated through the use of TNCs.