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December 11, 2019 Sarah Strand, Senior Transportation Planner The

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December 11, 2019 Sarah Strand, Senior Transportation Planner The CITY COUNCIL AGENDA REPORT MEETING DATE: December 11, 2019 ITEM# SUBJECT: Cl'l'Y CONSIDERATION OF APPROVAL OF AN AMENDMENT TO THE CONTRACT WITH OF NOMAD TRANSIT LLC FOR THE WEST SACRAMENTO ON-DEMAND RIDESHARE WIST SACRAMENTO PROGRAM TO COMPLY WITH RE CE NTLY ENACTED LEGISLATION INITIATED OR REQUESTED BY: REPORT COORDINATED OR PREPARED BY: [ ] Council [x] Staff Sarah Strand, Senior Transportation Planner Capital Projects & Transportation Department [ ] Other ATTACHMENT [x] Yes [ ] No [ ] Information [ ] Direction [x] Action OBJECTIVE The purpose of this report is to request City Council authorization to proceed with an amendment to the contract with NoMad Transit LLC for the West Sacramento On-Demand Rideshare program to comply with Senate Bill (SB) 1376 Access for All Act and Assembly Bill (AB) 5 Worker Status: Employees and Independent Contractors. A status update on the rideshare program is also included as information. RECOMMENDED ACTION Staff respectfully recommends that the City Council: 1) Receive a written update on the West Sacramento On­ Demand Rideshare program and 2) Approve Amendment No.1 to the Amended and Restated Contract for Services with NoMad Transit LLC (Via) to comply with SB 1376 and AB5 by January 1, 2020, inclusive of staffs recommendation to proceed with Scenario 3 as described herein. BACKGROUND In January 2018, the City Council approved a professional services contract with NoMad Transit LLC, a wholly owned subsidiary of Via Transportation Inc., to deploy a Pilot on-demand rideshare program using independent contractor drivers. At that time, this employment relationship between Via, a Transportation Network Company (TNC), and independent contractor driver partners was valid per existing laws established in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), and per the "ABC test" resulting from that ruling, which established a framework for classifying independent contractors. Since then, two new state laws were enacted that require an amendment (see Attachment 1) to the City's contract with Via to remain in regulatory compliance: SB 1376 Access for All Act and AB 5 Worker Status: Employees and Independent Contractors, also referred to as the "Gig Worker Bill". At this time, staff is recommending a compliance strategy that would require no additional funds by reducing the total quantity of driver hours (the loaded cost per hours for a driver to operate on the platform) through June 2020. To be clear, the hours of operation are not proposed to change. Failure to execute an amendment bringing the City's rideshare contract with NoMad Transit LLC into compliance by January 1, 2020 would leave the NoMad Transit LLC (Via) and the City rideshare program legally vulnerable. A status report on the rideshare program is also submitted for City Council consideration (see Attachment 2). ANALYSIS In September 2018, the Governor signed the TNC Access for All Act into law, tasking the California Public Utilities Commission (CPUC) with establishing a program relating to accessibility for persons with disabilities as part of its regulation of TNCs. The intent of the bill was to compel TNCs, such as Uber and Lyft, to provide wheelchair accessible vehicles (WAVs) through the introduction of a user surcharge in an amount that would be determined through the CPUC rulemaking process. Implied in this policy decision was an assumption that surcharge costs would be passed along to Uber and Lyft users, who tend to be middle to upper income. During the CPUC rulemaking process in Spring 2019, it was not yet clear whether the law would apply to West Sacramento's program or what the precise fee structure would be, so a placeholder was included in the City's renewed contract with NoMad Transit LLC (executed on May 1, 2019) stating that "[s]hould it be determined that the California Public Utilities Commission Access for All per-ride fees are applicable to the Program, the Parties shall mutually agree upon how to amend the services and compensation terms in light of such additional fees." On-Demand Rideshare NoMad Transit LLC Contract Amendment December 11, 2019 Page 2 of 4 City staff concurrently participated on the CPUC TNC Access for All working group as part of the rulemaking process, wherein the CPUC determined that a 10 cent per ride surcharge would be collected from TNCs starting July 1, 2019. The funds would be pooled and later redistributed through a to-be-determined eligibility/application process to service providers in the region where the fees were collected. Eligible uses of the funds would be limited to introducing/expanding wheelchair accessible on-demand transportation services. City staff lobbied on numerous occasions for an exemption to the surcharge on the grounds that: 1) The City already provides wheelchair accessible vehicles and accommodations for disabled riders. 2) Unlike Uber/Lyft, the City's subsidized flat-fare program is heavily used by lower-income households, seniors and youth. Passing along the 10 cent surcharge would disrupt the City's current flat-fare structure and would make the service less affordable to dependent users. 3) To maintain the City's existing flat-fare structure, the Access for All fee would be paid by the City from the program's operations budget Transportation Development Act - Local Transportation Funds) to avoid passing the cost along to users. 4) Unless explicitly stated (which it currently is not), the surcharge costs passed along to the City and paid for using public funds could potentially become available for private TNCs, such as Uber and Lyft, to apply for and use to fund new or expanded wheelchair accessible services where they have previously neglected to do so. Staff expressed deep concerns to the CPUC that the impact of this policy, as currently stated, would have unintended impacts as it, in principal, exacts public funds from the City, which already voluntarily provides service for disabled riders, which could then potentially become available to private TNCs or other companies that have failed to perform in the same regard. The City and Via both emphasized in communications to the CPUC that these impacts do not seem aligned with the intent of the Access for All Act. CPUC staff acknowledged and agreed with this in spirit, however an exemption was not granted due to dissent from the broader working group. As such, the City's contract with NoMad Transit LLC requires an amendment to Section 4 Compensation to reflect the 10 cent surcharge as an ongoing cost to the City tha~ will be passed through from Via, unless or until an exemption is granted by the CPUC. The annual cost of the surcharge for FY 19/20 is estimated between $12,000 to $15,000. City staff will continue to lobby the CPUC for an exemption moving forward. In September 2019, Assembly Bill 5, or the "Gig Worker Bill", was signed by Governor Gavin Newsom, altering the way California law distinguishes between employees and independent contractors. Effective January 1, 2020, the bill codifies the decision of the aforementioned Dynamex ruling, clarifying and expanding its application to more workers and requiring many industries, including TNC platforms, to reclassify their independent contractor workers to employees. Although much of the bill's intent was focused on gig economy workers in service of gig economy companies such as Uber, Lyft, and DoorDash, the law applies broadly across various industries, except for those specifically exempted by the bill. Further clarification regarding the both interpretation and enforcement of AB 5 from the state will be needed and companies such as Uber and Lyft have explicitly taken an aggressive stance to fight the legislation. However, as a regulated TNC, Via's interpretation of the law has been more conservative. To comply with Ab 5, the City's rideshare program, operated by Via, is proposed to shift to an employee model starting January 1, 2020. This modification of Via's business model will result in a higher cost per driver hour to the City. Specifically, reclassifying the drivers as employees will raise the cost per driver hour from $38.62 to $49.93 starting in 2020. Via submitted a proposed compliance strategy and cost structure to the City on November 26, 2019. The strategy mitigates fiscal impacts to the City's existing contract to the greatest extent possible, while maintaining a high quality of service for residents. The funds allocated toward the FY19/20 rideshare contract were originally intended to support a total of 54,310 driver hours over the span of 13.5 months, which would be incrementally increased monthly to keep pace with projected growth in demand. Approximately 22,638 driver hours will be spent by the end of 2019, before the increased cost per driver hour goes into effect. Currently, 860 driver hours are utilized on a weekly basis to maintain today's level of service. Three scenarios are included for City Council's consideration in Table 1 below. With a limited program budget, the scenarios below illustrate the approximate cost to comply with ABS by either spending additional funds, reducing the total number of driver hours, or some combination of the two. Scenario 1 holds all things constant but applies the higher 2020 hourly rates and assumes significant growth in weekly service, which results in a significant additional funding need. Scenario 2 reduces the total number of driver hours, but would still require On-Demand Rideshare NoMad Transit LLC Contract Amendment December 11, 2019 Page 3 of4 additional funds to support the proposed growth in service. Scenario 3 reduces the total number of driver hours to fit the current budget (-930 hrs/week), which limits fiscal impacts and sets aside a modest budget for use toward CPUC TNC Access for All surcharges.
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