City Council Report

City Council Meeting: March 17, 2015 Agenda Item: 4-A To: Mayor and City Council From: David Martin, Director of Planning and Community Development Subject: Taxicab Franchise Program Regulations, Non-Taxi Vehicles for Hire Regulations, and Curb Space Allocation to Non-Taxi Vehicles for Hire (e.g. Uber, Lyft)

Recommended Action Staff recommends that the City Council review and comment on vehicles for hire and direct staff to:

1) Include both taxi and non-taxi vehicles for hire when allocating curb space. 2) Research and consider amendments to the taxicab franchise program. 3) Draft an ordinance to amend the taxicab franchise program rules and regulations. 4) Draft an ordinance to amend the vehicle for hire regulations to establish minimal regulations on in-city vehicles for hire. 5) Return to Council with recommendations on franchise renewals and vehicle allocations.

Executive Summary The transportation system in Santa Monica is in a rapidly evolving environment with immediate and ongoing transportation initiatives, such as light rail, car sharing, and new vehicles for hire and valet smartphone technologies. An integrated and coordinated circulation system is critical to the successful management of parking, circulation, and public resources in Santa Monica; particularly in downtown and other areas that serve as visitor destinations. Staff is seeking comment and feedback concerning the proposed allocation of public assets such as curb space for vehicles for hire.

Staff is also seeking direction on establishing minimum regulations on vehicle for hire operations that operate solely within Santa Monica, such as minimum insurance requirements, and amendments to the taxicab franchise program in light of the introduction of Transportation Network Companies, such as Uber and Lyft, as well as other changes such as the arrival of Expo Light Rail Service.

Background Council adopted the Land Use and Circulation Element (LUCE) at its July 6, 2010 meeting. The LUCE set the framework for the Draft Downtown Specific Plan (DSP) to 1 engage the community in a dialogue about the future of the City’s shared downtown. The LUCE specifies that the DSP should address community concerns related to traffic, congestion and pedestrian safety. Priority was specified for public improvements that would enhance the pedestrian experience and for standards and programs to foster vehicle trip reduction goals by encouraging transit, walking, and biking as well as transportation demand management strategies.

Circulation and connectivity, the ability to move around the Downtown freely and conveniently between destinations, is cited as the top issue that residents want the DSP to address. The Plan enhances movement for cars, bikes, pedestrians and public transit services and all the supporting services. Allocation of curb space is critical to achieving goals set out by the DSP. Particularly because multiple competing demands for curb space exists with new demands on the horizon.

Examples of the existing demands for curb space include: • Public On-Street Parking • Bus Stops and Layover Zones • Commercial Loading/Unloading Zones • Passenger Loading • Taxis Zones • Tour Buses Loading/Unloading • Valet Parking Zones • Bike Valets and Corrals • Pedicabs • Travel Lanes for Automobiles • Bus Only Lanes

Examples of scheduled or potential demands for curb space include: • Car Sharing • Bike Sharing 2 • Private Corporate Shuttles Not Available to the Public • In City Shuttles Available to the Public • Bike Parking • Downtown Circulator • Parklets • Consolidated Valet • Kiss-and-Ride for dropping off and picking up light rail passengers

Discussion The transportation system in Santa Monica is in a rapidly evolving environment with immediate and ongoing transportation initiatives, such as light rail, car sharing, and new vehicles for hire and valet smartphone technologies. An integrated and coordinated circulation system is critical to the successful management of parking, circulation, and public resources in Santa Monica; particularly in downtown and other areas that serve as visitor destinations. In support of sustainable transportation and a multi-modal system, the City accommodates and encourages new modes of alternative transportation options. These immediate, ongoing and longer term transportation initiatives will increase competition for access to curb space. Examples of new transportation modes include the Light Rail, Transportation Network Companies (e.g. Lyft, Uber1,2), Bike Share, Shuttles, and Carshare.

The items discussed in this staff report should be considered taking into account the following policies and plans:

1 Uber signed a 10-year lease in December 2014 for about 40,000 square feet at 1733 Ocean Avenue in Santa Monica 2 For purposes of this report, Uber refers to both the Uber and UberX services. UberX is distinct in that it provides what is most commonly knows as “ridesharing” services. UberX vehicles are personal vehicles and are categorized by the State of California as Transportation Network Companies (TNC). Uber provides what is commonly known as “town car” services. Uber vehicles are commercial vehicles are categorized by the State of California as Transportation Charter Party (TCP) carriers.

3 • Land Use and Circulation Element • Draft Downtown Specific Plan • Big Blue Bus Expo Integration Plan • 4th and Colorado Interim Use Study Session • February 2016 Downtown Expo Terminus Station Opening

This report is presented in two parts. Part 1 discusses the allocation of curb space to non-taxi vehicles for hire, such as Transportation Network Companies (TNC) and in-city shuttles. TNCs are defined more below and in Attachment A. Part 2 discusses in more detail specifics related to the regulation of vehicles for hire.

PART 1 - Allocation of Curb Space to Non-Taxi Vehicles for Hire Curb space is limited and valuable, and is required for buses, bikes, passenger drop-off and pick up, valet, shared cars and bikes, bike parking, and loading and unloading of goods and services. Curb space must be allocated thoughtfully and designed to ensure visibility and discourage people from using the space in unintended ways that impact adjacent traffic flow and pedestrian activity. The most common use of curb space is for on-street parking and bus stops. Currently Downtown has significant areas of on-street parking and bus stops and layover space for both Metro and BBB (Big Blue Bus). The draft DSP specifically notes that as mobility diversifies with the arrival of Light Rail, the curb space will be used less as a transition for people from individual cars, and more for people coming from buses, shuttles, taxis, and bikes, and in some cases Parklets, which are mini-landscaped pockets or extensions of outdoor space that provide places for pedestrians to rest and gather.

The draft DSP states that priority in the allocation of curb space will be given to activities such as consolidated valet, car share, bike share, public bike parking, taxis, and shuttles. However, even with this suggested guidance, staff seeks input from Council to ensure that curb space is allocated in a manner that best serves the interests of the community, particularly as it relates to alternative forms of for hire vehicles.

4 Decisions related to curb space allocation are determined by Transportation Planning staff and the Traffic Engineer as part of both the land use planning process and to effectuate City goals. When considering the allocation of curb space in lieu of off-street parking spaces, staff has considered whether the space:

• Contributes towards Sustainable City Plan Transportation Goals; • Reduces Vehicle Trips in Support of LUCE Goals; • Is a Green Low Impact Transportation Mode in Support of DSP Goals; • Serves a Bona Fide Transportation Need (non-recreational); or • Provides another benefit and/or meets a need, such as commercial loading zones.

When considering these guidelines, other forms of vehicles for hire, which provide similar services as taxicab companies, would meet the City’s goals, as well as other types of “ridesharing” services. For example, carpooling services that dynamically link passengers together to share a ride when they are traveling in the same direction. This is similar to when two people who are traveling in the same direction (e.g. from Santa Monica to Downtown Los Angeles) agree to travel in the same taxicab and split the cost of the trip. UberPool and Lyft Line, through their smartphone apps build routes and search for users going in the same direction to share a ride and split the cost. The theory being that these carpooling services will reduce the need to own a vehicle by making it cheaper to carpool. As these types of new technology driven services continue to emerge and evolve, it is essential that the City of Santa Monica maintain flexibility to incorporate these new services into its system when they contribute to the City’s goals.

Following is a summary of vehicles for hire and the shuttle program that could potentially be granted additional curb space primarily in the downtown and Main Street areas.

5 Vehicles for Hire In most cases individuals and businesses providing the transportation of passengers for compensation (aka Vehicles for Hire) require operating authority from the California Public Utilities Commission (CPUC) such as:

• Passenger Stage Corporations (PSC) - A PSC provides transportation service to the general public on an individual-fare basis. Most PSCs operate a fixed route, scheduled service, or an on-call, door-to-door airport shuttle-type service.

• Transportation Charter Permit (TCP) vehicles - A TCP charters a vehicle, on a prearranged basis, for the private exclusive use of an individual or group. Charges are based on mileage or time of use, or a combination of both. Also falling under the TCP category are round-trip sightseeing services, and certain specialized private services not offered to the general public. TCPs are officially known as Charter-Party Carriers and are commonly known as “town cars” or “limousines”. Although these vehicles are referred to as town cars or limousines, a variety of vehicle models are used as TCPs, including hybrid vehicles such as Toyota Priuses

• Transportation Network Companies (TNC) - A TNC provides prearranged transportation services for compensation using an online-enabled application (App) or platform to connect passengers with drivers using their personal vehicles. Well known providers include Lyft and Uber.

Vehicles for hire (including TNCs, TCPs and PSCs) are generally regulated by state law and by the California Public Utilities Commission (CPUC). State law substantially preempts the City’s ability to regulate vehicles for hire. There are some specific exceptions set forth in Public Utilities Code Sections 226 and 5353. One is taxicab service, which is subject to local regulation by cities and counties.

6 While in the recent past there had been some ambiguity regarding local governments’ ability to substantially regulate TNCs (e.g. Uber, Lyft) because of their similarity to taxicabs, recent state action, judicial decisions and PUC regulations have made increasingly clear the State’s virtually exclusive authority to regulate such carriers. These recent state regulatory pronouncements have also produced certain positive outcomes, such as addressing certain local governments’ concerns about the lack of insurance requirements for TNCs. More information regarding vehicle for hire regulations is provided in Part 2 of this report.

Currently the City provides 35 taxicab zones, and only 5 zones for other type of vehicles for hire via a 15 minute parking zone. TCPs and TNCs are not authorized to pick up passengers unless the trip is prearranged, meaning that these for hire vehicles cannot legally accept a passenger who simply approaches the vehicle or hails the cab from the sidewalk or street. Therefore, zones that might be created for these types of vehicles would likely need to be set up as loading and unloading or for a short time limited parking depending on the location of the zone. Electronic hailing apps make providing such a zone more plausible, since the CPUC defines an electronic hail through an app as “prearranged”. This would in theory allow a person departing a train station or a restaurant to electronically call a vehicle through their smartphone app, and be picked up at a designated passenger loading zone.

Uber claims that this is already happening in San Diego. In a recent analysis by Uber of its ridership patterns in San Diego, Uber claims that “Gaps in public transportation become hubs for Uber”. The company also claims that their service “complement[s] public transit”, essentially filling in what is commonly referred to when discussing light rail in Santa Monica as the first and last mile. In a recent survey3 conducted by the University of California Transportation Center that was published in August 2014 on

3 App-Based, On-Demand Ride Services: Comparing Taxi and Ridesourcing Trips and User characteristics in San Francisco; University of California Transportation Center UCTC-FR-2014-08; Lisa Rayle, Susan Shahee, Nelson Chan, Danielle Dai, and Robert Cervero, University of California, Berkeley, August 2014

7 TNC trip purpose in San Francisco, trips were mainly social and leisure in nature. The survey notes, “Of all responses, 67% were social/leisure (bar, restaurant, concert, visit friends/family). Only 16% were work, 4% were to or from the airport, and 10% were other (doctor’s appointment, volunteer). A large percentage (47%) of trips began somewhere other than home or work, a restaurant, bar, gym, etc., and 40% were home- based. Although the survey did not ask about connections with public transit, 4% named a specific transit station as their origin or destination, suggesting that many respondents used [TNCs] to access transit. Almost half (48%) occurred on Friday or Saturday. While evening hours are heavily represented, the survey did capture trips at times throughout the day and night.” The dense urban nature of San Francisco in comparison to the suburban layout of San Diego may account for the differences and the report authors also noted that interviews with drivers seemed to reflect that more passengers were beginning their trips from public transit than the surveys represented.

Theoretically taxicabs should be able to fill any of the demands that a TNC can fill; however, the smartphone app enables TNCs to operate more effectively in this space. Without a uniform App and a commitment to more predictability, taxicabs appear to be at a competitive disadvantage. In the same University of California Transportation Center survey, 25% of respondents who said that taking a taxicab would have been their choice had TNCs not existed indicated that their top choices were about convenience – 25% said ease of payment, 17% said short wait time, and 11% said easy to call a car.

In-City Shuttles As of June 2013 new low speed electric vehicles, similar to a golf cart, began operating in Santa Monica. This alternative passenger vehicle transportation service meets a need for short distance trips in the central business district of the City more effectively than taxicabs. They also address other environmental concerns, since the vehicles are small and zero-emission and are free to the general public. There are currently eight shuttles operated by Free Ride Santa Monica with three of the vehicles serving as part

8 of a Santa Monica Convention and Visitors Bureau (SMCVB) program described more in the following paragraphs.

Santa Monica Convention and Visitors Bureau Hotel Shuttle Program Certain hotels in the Downtown and coastal areas are required through Development Agreements (DA) to provide an alternative shuttle service to certain Santa Monica destinations or pay an in lieu fee to cover this service. The City had been exercising its rights under the agreements to require hotels to pay the in lieu fee, which funded the Tide Shuttle. The Tide Shuttle was eliminated as of September 2010 due to low ridership and high cost. Since the elimination of the Tide Shuttle, staff set aside the in lieu fees while an alternative service delivery method was established.

In April 2014, staff conducted a Request for Applications (RFA) process to grant funds to administer a shuttle program on behalf of the hotels. The SMCVB was awarded a grant. The SMCVB program was launched May 2014. SMCVB contracts with Free Ride Santa Monica to provide the service. The hotels work directly with the SMCVB as the shuttle program administrator.

The free hotel-sponsored service transports riders to destinations, including Downtown Santa Monica, the Santa Monica Pier, Main Street, and Montana Avenue. The shuttle consists of electric vehicles wrapped in Santa Monica destination branding that are regularly available at Shutters on the Beach Hotel, Double Tree Santa Monica Suites and Loews Santa Monica Beach Hotel. The service runs seven days a week from 11:30 a.m. until at least 8 p.m., later on weekends and for special events. The program has proven to be very successful with approximately 50,000 rides from May 2014 through December 2014. Although the SMCVB program sponsors three shuttles, Free Ride Santa Monica has an additional five for a total of eight vehicles that operate in Santa Monica, the company anticipates adding two additional vehicles by June 2015 that would not be part of the SMCVB program. The company is also testing a consumer app that could be used to request a pick up.

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Currently one space is allocated for loading and unloading outside of Shutters Hotel that the SMCVB hotel sponsored shuttle is able to utilize through a permitting process. All other staging is provided by the hotels on private property.

PART 2 – Vehicle for Hire Regulations In-City Vehicles for Hire Currently, local law requires that a vehicle for hire company that operates solely within Santa Monica secure a business license; however, no other operational regulations exist (e.g. vehicle standards, driver permits, minimum insurance standards). Therefore, in-city vehicle for hire operations, such as Free Ride Santa Monica, and other potential in-city vehicle for hire operations that would seek to operate within the City have no regulatory requirements4. Establishing regulations proactively on vehicles for hire that operate solely within Santa Monica will help to ensure that as Santa Monica continues to be a popular destination for new and novel types of business models, regulations will assist with mitigating a “wild west” environment, similar to what the City experienced prior to the launch of Taxicab franchise program.

Staff recommends that Council direct staff to draft an ordinance to eliminate the gap in vehicle for hire regulations that currently exist for in-city only vehicles for hire with guidance to establish minimal regulations to address public safety and circulation, such as an operating permit, minimal insurance requirements, and driver permits.

Taxicabs On July 28, 2009, Council adopted an ordinance establishing the franchise-based system for regulating taxicabs, which added Chapter 6.49 to the Santa Monica Municipal Code (SMMC). On November 23, 2010, Council awarded the franchises by

4 Pedicabs in Santa Monica are currently subject to regulations, including driver permits and insurance requirements; however, Pedicabs are not technically vehicles for hire as defined by state law or local law because they are not motor propelled.

10 ordinance to Bell Cab, Independent Taxicab Owners Association (ITOA), Metro Cab, Taxi! Taxi!, and L.A. Taxi Cooperative, Inc. (dba Yellow Cab Company). On December 14, 2010, Council adopted an ordinance increasing the maximum number of taxicabs permitted to operate from 250 to 300.

Staff recommends amendments to the taxicab franchise rules and regulations to address changes in the vehicle for hire market. Due to the disruptive nature of TNCs on the vehicle for hire market, it is necessary to examine adjustments to the franchise system before it is renewed. To determine what amendments should be brought forward in an ordinance, staff would:

1. Evaluate the total number of taxicabs authorized to operate in Santa Monica, taking into consideration the following: a. The percentage of full time vs. part time taxicab leases b. The effects of Duel Licensing with Los Angeles c. The effects of Transportation Network Companies (e.g. Uber, Lyft) d. The effects of Shuttle services e. The effects of the Metro Light Rail opening in 2016 f. The ability of drivers to earn a livable wage 2. Identify taxicab company and driver rules and regulations for repeal that do not specifically address the following: a. Public Safety b. Consumer Protection 3. Evaluate options to require taxicab companies to utilize a smartphone app to “hail” a taxicab. 4. Evaluate options to allow taxicab franchisees to dynamically adjust the number of taxicabs to address cyclical demands for service. 5. Evaluate options to provide more flexibility in pricing for special events and flat rates. 6. Evaluate establishing a two-year driver permit instead of a one-year permit.

11 7. Evaluate establishing either a driver permit fee that is pro-rated depending on the number of months into the permit year the application is filed or an rolling one year permit that is renewed annually on the original application date or other date such as the drivers birthday.

Outreach Staff conducted outreach to Downtown Santa Monica, Inc. Access and Circulation Committee and to the Downtown Santa Monica, Inc. Board of Directors. The committee did not take official action on a recommendation. However, members of the committee expressed support for providing curb space to non-taxi vehicles for hire, particularly TNCs and for as much coordination with the Los Angeles Department of Transportation taxicab program. At its February 26, 2015 meeting the DTSM Board of Directions voted to submit a letter to Council with specific positions on Curb Space allocation in the downtown.

Outreach was also conducted with the five taxicab franchisees. The franchisees have provided written comments regarding taxicab regulations. Staff recommendations include some of the same requests being made by the taxicab companies. Letters from the taxicab companies are provided as attachments to this report.

Through the SMCVB, an email survey was sent to the General Managers of local hotels. Four hotels provided feedback, including Shutters on the Beach, Wyndham – At the Pier, Shore Hotel, and the Georgian Hotel. Two hotels indicated support for the allocation of curb space to non-taxi vehicles for hire and two did not support providing curb space. The primary reasons given by the two hotels opposed were congestion and too many loading/unloading zones already.

12 Conclusion In both the allocation of public curb space and the modification of taxicab regulations, a key element needed is flexibility to adjust and react to the rapidly emerging mobility market place that includes various forms of new shared transportation. Based on the information provided in this report, staff recommends that the Council direct staff to:

1. Include all forms of transportation modes when allocating curb space, with additional priority given to vehicles for hire that are subject to greater local control and/or directly support the guidelines outlined earlier in this report. 2. Research and consider amendments to the taxicab franchise program that allow for flexibility in the system and taking into consideration the impacts of the following: a) adjusting the total number of taxicabs authorized to operate in Santa Monica, b) modifying company and driver rules that do not specifically address public safety, consumer protection, and customer service, c) requiring a smartphone app to “hail” a taxicab, d) implementing more dynamic adjustments to the number of taxicabs in service, e) more flexible pricing options; f) modifying the length of driver permit periods; and g) a method that provides for a pro-rated driver permit fee or the equivalent, 3. Draft an ordinance to amend the taxicab franchise program rules and regulations that provide flexibility and adjust to the changing vehicle for hire market as outlined earlier in this report no later than July 2015. 4. Draft an ordinance to amend the vehicle for hire regulations to establish minimal regulations on in-city vehicles for hire, consistent with State law no later than July 2015. 5. Return to Council with recommendations on franchise renewals and vehicle allocations no later than September 2015.

13 Financial Impacts & Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action.

Prepared by: Salvador M. Valles, Acting Chief Administrative Officer

Approved: Forwarded to Council:

David Martin Elaine Polachek Director of Planning and Community Interim City Manager Development

Attachments: A. Transportation Network Companies B. Taxicab Factors C. Letter from LA Taxi Cooperative Inc (dba Yellow Cab Company), Bell Cab, Independent Taxi Owners Association (ITOA), and All Yellow Cab (dba Metro Cab) D. Letter from TMAT (dba Taxi! Taxi!)

14 Attachment A - Transportation Network Companies

What are commonly called “Ridesharing” companies such as UberX and Lyft are changing the vehicle-for-hire landscape and compete directly with taxicab companies. These new companies, deemed Transportation Network Companies (TNC) by the CPUC, utilize smartphone apps that allow customers to order a vehicle, get a quote of the cost for the requested trip, and pay using a credit card. The strong support of venture capitalists1 and comments in 2013 by the Federal Trade Commission that “these are innovative forms of competition that may enable consumers to more easily arrange and pay for… transportation,” suggest that the vehicle-for-hire market is undergoing a fundamental transition that has accelerated and is likely to continue on this trajectory. It is important to stress, however, that the market continues to evolve.

The City has received complaints from taxicab drivers and companies about the prevalence of TNCs and what they consider to be an unfair competitive landscape due to the level of regulations that TNCs must comply with. Over the past year, taxicab drivers have held protest demonstrations in major cities across the world, including Los Angeles, Cincinnati, San Francisco, Washington DC, London, and Paris, against TNC companies for what they claim to be unfair competition.

The CPUC claimed jurisdiction over TNCs in 2013. Local governments do not have jurisdiction to impose any regulations on TNCs, as they do currently with taxicabs, with the exception of requiring a business license if the TNC has a business location in the city, as Uber does2.

On September 23, 2013, the CPUC implemented rules on these TNC services, including background checks, insurance, and annual reporting; however, the bar to

1 Uber has received $3.3 Billion in 8 Rounds of funding from 38 Investors. The most recent funding was $600 Million on December 12, 2014. Lyft has received $332.5 Million in 6 rounds of funding from 15 investors. 2 Uber signed a 10-year lease in December 2014 for about 40,000 square feet at 1733 Ocean Avenue in Santa Monica. 1 entry for drivers is still much lower for the TNC drivers than for taxicab drivers. Also, TNCs are not restricted on how much they can charge as taxicab companies are. TNCs routinely use demand-based pricing, increasing prices during peak demand periods like New Year’s Eve. A taxicab driver may not change the rates established by the City.

However, TNCs typically charge lower rates than taxicabs on routine days. The taxicab industry argues that TNCs are able to charge less due to fewer regulatory burdens, particularly with regards to insurance requirements.

As a result of the death of a six year old girl in San Francisco who was struck by a vehicle being operated by an UberX driver, the CPUC received feedback from the insurance industry to clarify the insurance rules for these types of vehicles for hire. The incident also prompted the California State legislature to seek to increase insurance and background regulations on TNCs.

As a result, Assembly Bill 2293 was signed by the Governor on September 17, 2014. The bill requires TNCs to buy insurance to cover drivers when they are transporting passengers and when drivers are logged on to their computer dispatching program and ready to accept riders. The requirements go into effect July 1, 2015. The coverage will raise insurance requirements to the same levels required of Taxicab companies in Santa Monica.

In the San Francisco case, UberX’s insurance denied the claim because the child and her family were struck by the driver during a period of time when there was no passenger in the vehicle even though the driver was on-duty and available to accept a customer through the Uber app. The driver’s personal vehicle insurance denied the claim because the driver was conducting a commercial activity and his insurance is only for personal use of the vehicle. AB 2293 seeks to address this issue.

2 A second bill, Assembly Bill 612, which would have increased the background checking requirements, did not pass in the Assembly. The bill would have required a LiveScan background, which requires fingerprinting and is administered by the California Justice Department. Companies would have been barred from hiring a driver with a felony conviction less than 7 years old from the date of hire for felony convictions for such crimes as fraud, forgery, or larceny. The bill would have also required a DMV driving record review and participation in a drug screening program. These requirements would have brought background requirements more in line with what taxicab driver are subject to. To address concerns of safety, Uber recently announced that it is adding a a "panic button" as part of the Uber app that would be available in Chicago. The feasture is expected to be available in the Chicago market only before the end of 2015. The addition of this feature is in direct respond to an accusation against two Uber drivers in Chicago of sexually assaulting passengers in recent months. A similar feature was implemented in India by Uber for similar reasons after a driver was charged with raping a female passenger.

Additionally, TNC vehicle metering devices (i.e. the Smartphone apps) are not required to be inspected and approved by the local Commissioner of Weights & Measures, although these apps charge based on a per mile rate, just as taxicabs do.

As of December 23, 2014, the following companies were issued TNC permits to operate in California: • Lyft • Raiser-CA, LLC (dba UberX) • Sidecare • Tickengo dba Wingz • RideLabs, LLC • Shuddle

3 Attachment B – Taxicab Factors

The following factors contribute to the availability of taxicabs and are directly relevant when determining the total number of taxicabs that should be authorized to operate.

Trend in the Number of Taxicab Trips Santa Monica taxicabs have experienced a 27% reduction in trips in 2014 when compared to 2013. The chart below represents the change by company. Although it is not possible to know specifically the cause of the decline, it clearly coincides with the arrival of Transportation Network Companies (TNC), such as Uber and Lyft.

Percent Change in 2013 Compared to 2013 Trips 2014 Trips 2014 Bell Cab 69,806 48,987 -30% ITOA 156,279 115,127 -26% Metro 179,289 129,139 -28% Taxi! Taxi! 277,293 197,835 -29% Yellow Cab 93,196 76,325 -18% All Taxicab Companies 775,863 567,413 -27%

Percentage of full time vs. part time taxicab leases A factor that contributes to service levels is whether a driver has contracted with the taxicab company for a 24 hour lease or a 12 hour lease. The length of leases offered has an impact on availability because the vehicle with a 24 hour lease is not in service full time. The 24 hour lease gives one driver full control of the vehicle 24 hours per day. The driver does not turn the vehicle over to another driver at the end of a 12 hour period, as drivers with 12 hour leases must. A single driver is not able to keep a vehicle in service 24 hours a day due to legal and practical reasons. When a taxicab has a Los Angeles permit and a 24 hour lease, the impact on availability is compounded. The following breakdown of leases offered to drivers by company in 2012 provides a breakdown of 24 hour leases vs. 12 hour leases. On any given day, the 300 taxicabs

1 permitted in Santa Monica are available approximately 1,340 hours less than if all vehicles were on 12 hour leases. The chart below provides data collected in 2012 that demonstrates the effects of the full time vs. part time lease arrangements.

Total Daily 12 Daily Total Daily 24 Hour Franchisee Taxicabs Hours Hour Hours Hours Lease 1 Awarded Available Lease Available Available

Bell 58 55 550 3 60 610 ITOA 58 12 120 46 920 1,040 Metro 63 37 370 26 520 890 Taxi! Taxi! 63 10 100 53 1060 1,160 Yellow 58 20 200 38 760 960 Actual Totals 300 134 1,340 166 3,320 4,660

Potential Daily Hours That Would be Available if All Vehicles had 12 hour leases: 6,000

Difference between Actual and Potential Daily Hours Available Due to 24 Hour Leases: 1,340

The Effect of Los Angeles Licensed Taxicabs The 2008 Nelson/Nygaard study recommended between 210 and 310 taxis for Santa Monica. The lower fleet size assumed all taxis operated exclusively in Santa Monica, while the higher fleet size assumed that the number of jointly-permitted cabs (with Los Angeles) would spend one third of their time in Santa Monica. However, when the terms and conditions were written, no specific requirements were included to address how much time a specific taxicab that was also licensed in Los Angeles would have to devote to the Santa Monica market, nor how many taxicabs must be jointly-permitted vs. Santa Monica-permitted only.

Los Angeles’ 469 square mile area, as opposed to Santa Monica’s 8.3 square mile area, provides more opportunities for drivers to find fares, including popular areas such as Hollywood, City Walk, the Grove, downtown Los Angeles, and Los Angeles International Airport (LAX), where drivers are able to charge a $4.00 surcharge. The

1 By both rules taxicab drivers may not drive more than 10 hours in any given 24 hour period. 2 following table provides the breakdown of Santa Monica taxicabs that were also licensed in Los Angeles from 2012 (which is used to help illustrate the effects of the dual leases).

SM Taxicabs Number That Also Percent That Also Franchisee Awarded Hold LA Permits Hold LA Permits Bell 58 40 69% ITOA 58 0 0% Metro 63 0 0% Taxi! Taxi! 63 0 0% Yellow 58 58 100% Total 300 98 33%

Reporting from 2012 shows that Yellow Cab, which at the time had 100% of its vehicles licensed in Los Angeles, responded to orders for taxicab service within 15 minutes 54.6% of the time and has a high no-load2 rate of 34%. By comparison, this same company responded to calls within 15 minutes for its three Los Angeles service areas between 81.35% to 94.83% of the time3. Due to the response times, Yellow Cab has been incrementally converting dual licensed taxicabs to Santa Monica dedicated taxicabs. However, Yellow Cab has faced challenges in getting these vehicles deployed.

The 2008 Nelson/\Nygaard study noted that drivers who held Santa Monica permits but did not hold Los Angeles permits believed it was unfair that Los Angeles companies and drivers were able to both pick up and drop off passengers in Santa Monica while they were within the City limits, allowing them to earn additional revenue; while drivers that were licensed in Santa Monica, but not in Los Angeles could not do the same after dropping a passenger off at a Los Angeles location, since the driver is required to drive

2 No load/No show is reported as trips that are requested and dispatched but not completed. Some taxicab companies include cancellations as no load/no show. There are instances that may cause a trip to be designated as no load/no show; for example, cancellation by passenger, taxicab driver unable to arrive to pick up passenger at designated time, taxicab driver declined to pick up passenger, or taxicab driver arrived at designated location and passenger could not be located. 3 Source: Los Angeles Department of Transportation (LADOT) 2010 Taxicab Performance Report 3 back to Santa Monica to continue working. In addition to the feedback that staff has received from drivers who only operate in Santa Monica, a recent petition that was sent to the City by 19 drivers that do not have Los Angeles permits, made essentially the same complaint.

4 Attachment C

VIA EMAIL

Mr. Salvador Valles Chief Administrative Officer Planning and Committee Development City of Santa Monica 1685 Main Street Santa Monica, CA 90401

Re: Taxicab Industry Recommendations for Franchise Updates

Dear Mr. Valles,

Thank you for meeting with the taxicab industry on January 8 to discuss the upcoming review of the City’s taxicab franchises.

Thank you also for the opportunity to comment on the franchises and to propose changes to you, in light of the current state of the industry and as housekeeping items in the franchise system.

The signatories to this letter are four out of the five franchised taxicab companies. We have met and discussed the franchises and have put our heads together to come up with a list of changes that we think are fair, sensible, and reflect the realities of the market, while still protecting the taxi-riding public.

Before we explain our recommendations, however, we want to remind the City of the considerable investment our companies have made in the City and in our franchises since they went into effect four years ago. Three of our companies are membership organizations, where individual, hard-working families have had to invest many thousands of dollars of their savings in this business. The other company, Metro Cab, stepped in to bail out a franchise winner who had misrepresented its financial strength in the bidding process, and the City has benefited greatly from its investment. In all, our companies have invested millions of dollars, and in the short time since the franchises began, we have not yet had an opportunity to recoup our investment.

Franchise extension

For this reason, in spite of the market changes brought about by the TNCs, we would respectfully submit to you that the proper decision would be for the City to extend the franchises. Furthermore, in addition to the huge investment our companies have made in the City, extending the franchises would preserve Mr. Salvatore Valles January 27, 2015 Page 2

the competitive environment, and allow our industry the necessary time to regroup and confront the competitive challenge posed by the TNCs.

The truth is, the TNCs have had a large, negative, impact on the taxicab industry in urban centers across the country. While some of this impact may be attributed to the shortcomings of the taxicab industry, the vast bulk of this impact is due to the uneven playing field that has been created by the California Public Utilities Commission’s allowance of this almost entirely deregulated industry to compete directly against the heavily regulated taxicab industry. Controls on pricing, insurance, fleet size, vehicle type, vehicle inspections, driver background checks, and other franchise requirements have created an environment where it has been difficult for the taxi industry to compete. The TNCs simply can operate without much of our cost structure. Add to these issues the fact that the TNCs have been funded with incomprehensible amounts of money, and the situation may seem to some to be insurmountable.

We, however, are not that pessimistic. We believe that our industry can be retooled and can successfully compete against the TNCs. However, it is up to the City to be our partner and to work with us on changes that maintain the public safety and service while reducing the regulatory inequality between us and the TNCs.

This process requires time, including the dialogue that we are beginning with you now, and time to implement any changes that we all can agree to. It is our hope that you agree with us that a franchise extension of a minimum of three years is warranted at this time.

Parking vehicles

As referenced above, the taxicab industry has suffered a loss in business. The data we all provide to the City supports this conclusion. One problem presented by the current franchise structure is that the taxicab franchises have been forced to keep all authorized vehicles in service, and pay to insure them, even when we do not have drivers for them. Each of the five franchisees has had vehicles that have remained out of service for extended periods of time.

The laws of supply-and-demand economics come into play here. When our business is down, drivers will earn less, and we will lose drivers until we achieve equilibrium. When we grow our business, the drivers who we recruit can earn a decent living, and the vehicle stays on the road.

We propose to the City to allow each of the taxi franchises to park up to 25% of their fleets without losing operating authorities. By parking, we mean to say that the City would be formally notified that the vehicle is out of service, and we would not be required to maintain expensive auto insurance on the vehicle. Of course, we would stipulate that no vehicle may ever be driven as long as it is parked.

Mr. Salvatore Valles January 27, 2015 Page 3

This proposal would allow the City’s taxi fleet to ebb and flow with the overall state of the taxi industry’s business, and we would respectfully submit to you that it is a much more logical way for the City to manage its taxi fleet than to force vehicles in service regardless of the state of the market.

The concept of parking vehicles is not without precedent. In the economic slowdown for our industry that occurred after the September 11 attacks, the City of Los Angeles maintained a vehicle parking program for the taxicab industry for a period of two years. This allowed the industry to get back on its feet and place the vehicles in service as the business increased to support them.

Pricing Flexibility

As we have discussed together with you, one of the major ways that the TNCs have been able to take business from the taxi industry is by giving away promotional codes to be used on their apps, sometimes in large amounts. The TNCs are essentially buying our business.

We must have the right to fight back. We need to have the ability to discount fares and give away promo codes just like the TNCs do. This will only benefit the consumers in the City of Santa Monica, and we hope you agree. In any event, we look forward to discussing this with you further.

Housekeeping items

1. Business License Fee

When the franchises were originally bid, it was the understanding of all bidders that the franchise fees paid would be in lieu of business license taxes. This assumption was based on the fact that every other city with taxicab franchises in greater Los Angeles treats business license fees in this way. We believe that it was treated differently in Santa Monica merely as a matter of mistake or oversight. In any event, one item that we would like to include in our discussions is for the Council to take up the waiver of the $250.00 per cab business license fees for companies who pay franchise fees.

More generally, the City needs to address the issue of the value of the franchises themselves. The value of the franchises is based on the amount of business the franchise brings to the franchisee. The steep decline in business should reduce the value of the franchises, but moreover, the per vehicle franchise fees are now so high that they interfere with a driver’s ability to earn a living thus hampering our ability to deliver needed transportation.

Mr. Salvatore Valles January 27, 2015 Page 4

2. Driver permit issues

Two-Year Renewals. We recommend that the City adopt the same policy that Los Angeles and other cities in the region have adopted by allowing driver permit renewals for two years. This would cut considerably on staff time and would increase efficiency without sacrificing safety.

Prorated Driver Fees. We also recommend that driver permits be prorated as of the date the permit is granted. Each driver is an individual business person and the license fees are not trivial. As the year goes on, the current policy of charging drivers for a full year when the permit is only good for a few months strikes drivers as unfair and hinders our ability to recruit drivers and keep our cabs in service. Thus it gets in the way of us being able to transport people who need our services. In the alternative, we would propose allowing drivers to renew their permits on their anniversary dates.

Reduced Licensing Time. We request that the city revise the driver application and permitting process to enable us to put drivers in cabs faster. The TNCs have advertised that they can put a driver in a vehicle in two hours. We think that two hours is transparently unsafe, but it’s important to understand what our competition is doing. By contrast, the process for a new Santa Monica driver can take several weeks, sometimes as long as six or eight weeks. We would like to sit down and discuss with you revisions to the application process, testing process, and LiveScan process that would allow drivers to start working sooner without compromising public safety. For instance, most cities have a process where drivers can receive a temporary driving permit almost immediately after fingerprinting. If we are to compete, the time that it takes to put a driver to work must be reduced.

Drivers Who Take Leaves. As you know, ours is an industry with large immigrant populations from, literally, all over the world. Many of these drivers, when they return occasionally to their home countries, take extended leaves away from taxi driving in Santa Monica. However, if too much time passes, or if any of their supporting documentation expires while they are away (such as their drivers’ license or work permit), the permit is revoked and they have to go through the process of qualifying to become a taxi driver as if they were new. We recommend a rule change that would allow these drivers to provide the missing updated documentation and allow the drivers to retain their right to pick up their permit while their permits are still within their validity dates (keeping in mind our recommendation for two-year renewals, above). In other words, what we are requesting here is the ability to temporarily inactivate them while they take a vacation.

Mr. Salvatore Valles January 27, 2015 Page 5

3. Camera System, Recording and Storage Requirements / Other Revisions to the Taxicab Rulebook

We are attaching a list of proposed modifications to the Taxicab Rules of the City of Santa Monica. We look forward to discussing these topics with you further.

4. Taxicab Performance Index Revisions

We have some issues that we would like to discuss with you, along with our recommendations for some revisions.

As mentioned above, we remain confident that by working together, the City and the industry can arrive at a regulatory framework that will allow our industry the opportunity to succeed in the post-TNC world, thus preserving the many benefits of the taxicab industry for the local community.

We look forward to working with you further and invite you to contact us to set up a meeting to discuss these topics in more detail.

Sincerely,

William J. Rouse Shirley Pe Simon Momennasab Nettabai Ahmed General Manager General Manager Director of Operations President L.A. Taxi Cooperative, All Yellow Taxi, Inc. dba Bell Cab Company, Inc. Independent Taxi Inc. Metro Cab Owners Association

cc: Ms. Cheryl Shavers

Attachment D

January 27, 2015

City of Santa Monica City Council 1685 Main Street, Room 212 Santa Monica, CA 90401

Re: 2015 Taxicab Franchise Renewal in the City of Santa Monica

Dear Sir or Madam:

We write in response to the City’s request for feedback regarding the upcoming taxicab franchise renewal. Taxi! Taxi! has held a franchise with the City since the inception of the franchise system on November 23, 2010. Since this time, Taxi! Taxi! has consistently serviced the majority of customers in the City as compared to all of the other franchisees, while still maintaining the highest level of service. In 2012, Taxi! Taxi! serviced 212,845 out of 371,887 trips in the City, which equates to 57.2 % of the overall total trips. See 2013 TCPI. Similarly, in 2013, Taxi Taxi! serviced 193,357 out of 376,408 trips, which equals 51.3% of the overall total trips. However, the ever increasing presence of Transportation Network Companies (TNCs) like Uber, Sidecar and Lyft have led to a severe drop in the number of calls received by drivers. In 2014, Taxi! Taxi!’s total dispatched trips dropped to 134,230, which is 30% lower than in 2013 and 37% lower than in 2012. Based on these numbers, it is likely the total number of taxicab calls in the City also decreased by approximately 30% in 2014, which equates to only 260,000 calls. This has affected the ability of all Santa Monica taxi drivers to earn sufficient income to support their families and continue driving in the City. The influx of TNC drivers in the City has also led to overcapacity, congestion, and pollution. As outlined below, the only way to bring taxicab driver incomes back to a living wage, reduce emissions, adequately fulfill the City’s needs, reduce the amount of traffic, and decrease the amount of dedicated taxicab curbside spaces is to reduce the number of taxicabs and franchises. Taxi! Taxi! urges the City to reduce the number of taxicabs to a maximum of 125 and award franchises to only the two most qualified companies.

The Impact of Transportation Network Companies

“Companies such as Uber and Lyft are changing the vehicle-for-hire landscape and increasing competition felt by taxicab companies.” See Taxicab Franchise Program Update dated 6/6/13, pg. 10. All franchisees can attest to the fact that the demand for taxicab service has been rapidly decreasing in Santa Monica since the Nelson/Nygaard study was conducted in March of 2008. This drop in the number of service calls is directly attributable to the ever increasing use of rideshare companies like Uber, Lyft and Sidecar.

The original Nelson/Nygaard study estimated that the City needs between 210 and 310 taxicabs in order to fulfill its service demands. These estimates did not take into account the enormous number of rideshare drivers that freely pick up passengers throughout both Santa Monica and Los Angeles. Based on Uber’s administrative data, the number of Uber drivers has increased from zero in July 2012 to well over 160,000 in 2014. Historically, the number of Uber drivers has doubled every six months for the last two years. See Hall, et al., “An Analysis of the Labor Market for Uber’s Driver-Partners in the United States” (Jan. 22, 2015) (“Hall Article”). As shown in the chart below, the Los Angeles area has experienced the highest amount of growth in Uber drivers, with over 20,000 on the road at the end of 2014.

See Hall Article, pg. 15.

In an effort to determine the average number of Uber, Lyft and Sidecar drivers in the City of Santa Monica, Taxi! Taxi! monitored the mobile applications for each of the companies on a typical Saturday night. During this period, Taxi! Taxi! estimates that there were between 200 and 250 available drivers for hire between the Uber and Lyft platform at any given time. This does not include Sidecar drivers (or those working with other TNC companies), nor does it take into account the number TNC drivers that were already carrying customers throughout the City at the monitoring time. Uber alone offers six different services with various pricing tiers. A sampling of the photographs captured from the Uber and Lyft mobile applications on Saturday, January, 24 2014 is attached to this letter.

The influx of TNCs has severely impacted the ability of taxicab drivers to earn an income sufficient to support their families. As noted in the Nelson/Nygaard study, “the excessive number of cabs makes it hard for drivers to earn a living, results in them working more hours than is safe, and reduces service quality for the public.” See Nelson/Nygaard Taxi Study, Technical Memo., pg. 2-10.

The decrease in the number of calls received by drivers has made it impossible for most drivers to earn even a minimum living wage, much less support their families. See, e.g., Blasi, Gary, et al., “Driving Poor: Taxi Drivers and the Regulation of the Taxi Industry in Los Angeles” (2006). A study commissioned by Uber estimates that Uber drivers in the Los Angeles area earn over 30% more income per hour than taxicab drivers and chauffeurs. See Hall Article, pg. 23. In 2014, taxicab drivers wrote several letters to the City of Santa Monica complaining about their inability to earn a living wage, and protested for two hours by circling the City while honking their horns.

The Solution – Reduce the Number of Taxicabs and Franchises

The City has the authority to set the both number of franchises awarded and the number of taxicabs allotted to each franchise. See City of Santa Monica Franchise Ordinance. Taxi! Taxi! urges the City to exercise its discretion and reduce the number of franchises to two based on the Taxicab Company Performance Index. “The performance index is designed as a measurement to be used when considering the extension of franchises at the end of the five-year term of the franchise agreement, which is scheduled for December 31, 2015.” See 2013 TCPI, pg. 2. We further recommend that the number of taxicabs be reduced to 125 total.

The Nelson/Nygaard study was conducted under the assumption that only 45 non-local drivers (i.e., those jointly permitted with the City of Los Angeles) would be in service in the City of Santa Monica on any given day, and that they would account for 450 of the 1,595 trips per day (28%). See Nelson/Nygaard Study, pg. 4-4. As outlined above, this number has been rendered meaningless by the voluminous amount of TNC drivers that are not regulated by the City. Based on the reduction in calls experienced by Taxi! Taxi! (who has historically serviced the largest portion of the City’s passengers), these TNC drivers are likely servicing approximately 40% if not more of the passengers picked up daily in the City. See also, Hall Article, pg. 15 (estimating that there are over 20,000 Uber drivers in the Los Angeles area alone). The increase in TNC drivers has reduced the market for taxicabs in the City, and warrants a reduction in the number of franchises and taxicab permits. Reducing the number of taxicabs to 125 would increase driver income, reduce emissions and traffic, and alleviate congestion in taxicab zones.

The number of franchises granted by the City should be reduced to the two that have historically performed the best in the TCPI. See 2013 TCPI, pg. 2. Taxi! Taxi has consistently invested in making sure its performance meets and exceeds the City’s expectations, and has worked hard to maintain its franchise privilege for another term. Taxi!Taxi! has new and well-kept fleet of taxicabs, courteous drivers, and efficient dispatchers, all while maintaining its headquarters in the City of Santa Monica (despite the higher cost of operation). This equates to benefits for the City, its residents and its visitors. In addition to ease of service and prompt response times, Taxi! Taxi! also provides specialized amenities, including a lost & found procedure and child/infant seats when needed for a traveling family. As demonstrated by its volume of calls in 2012, Taxi! Taxi! is capable of servicing all of the City’s taxicab needs on its own. Reducing the number of franchises to a maximum of two will allow the City’s needs to be met, account for the presence of TNC drivers, and ensure that taxicab drivers are able to earn sufficient wages to provide for their families. If the City does not reduce the number of franchises and taxicabs in the City, the drivers cannot financially survive or meaningfully compete with Uber, Lyft and Sidecar. Taxi! Taxi! is a small local company that has remained dedicated to serving only the City of Santa Monica, and its operational costs will easily exceed its revenues if the City reduces the number of taxicabs in its fleet. It is simply not economically feasible to reduce the number of taxicabs across the existing five franchises. This is also unnecessary since Taxi! Taxi! alone has been able to fulfill well over 50% of the taxicab demand in the City, and is still capable of servicing many more passengers every day.

“Supply and Demand” is NOT a Solution

It has been suggested that the current number of taxicabs should be maintained, leaving it to “supply and demand” to regulate the City’s taxicab needs. This is not a viable option. As the City is aware, the co-op structure of most taxicab franchisees is such that the majority of drivers own their own vehicles. The companies with this co-op business model charge their drivers a fixed lease regardless of whether there is a “demand” or not. This require the owner-operators to either sublease his/her taxicab or to continue working longer and longer hours, while still earning less than a reasonable living wage. These companies have no control over whether the taxicab is off-duty when there is no “demand;” instead, this decision is left entirely to the owner-operator. Taxi! Taxi! owns all of its own vehicles, which alleviates this problem. Additionally, the City already knows that leaving the number of taxicabs to “supply and demand” does not work. This was precisely the situation prior to the institution of the taxicab franchise system, and caused low wages, higher emissions, overcrowding in taxicab zones, and an influx of taxicabs in the City. See Nelson/Nygaard Study.

Conclusion

The only way to account for the number of TNCs currently servicing the City, ensure that drivers can support their families, reduce emissions, and meet the City’s taxicab needs is to (1) reduce the number of taxicab franchises to two (using the TCPI “as a measurement”), and (2) reduce the number of taxicabs to a maximum of 125. The City’s residents and visitors deserve taxicab companies, like Taxi! Taxi!, that operate with the utmost safety and provide the best service. Taxi! Taxi! thanks the City for its consideration, and remains willing to provide additional information if needed.

Sincerely yours, Taxi! Taxi!

Ayman Radwan, CEO Uber X (Saturday 01/24/2015 at 7:38 PM) Uber Plus (Saturday 01/24/2015 at 7:38 PM) Uber Black (Saturday 01/24/2015 at 7:40 PM) Uber SUV (Saturday 01/24/2015 at 7:41 PM) Lyft at (Saturday 01/24/2015 at 9:05 PM)